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 September 30, 2022

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-30941

AXCELIS TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)


Delaware		34-1818596
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

108 Cherry Hill Drive

Beverly, Massachusetts 01915

(Address of principal executive offices, including zip code)

(978) 787-4000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, $0.001 par value	ACLS	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



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

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

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

As of October 31, 2022, there were 32,848,622 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, 2022 and 2021	3
	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2022 and 2021	4
	Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	5
	Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021	6
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	8
	Notes to Consolidated Financial Statements (Unaudited)	9
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	27
Item 4.	Controls and Procedures	27
PART II - OTHER INFORMATION		28
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	29

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,
	2022		2021		2022		2021
Revenue:
Product	$	221,540	$	169,151	$	631,998	$	435,916
Services		7,635		7,543		21,949		20,828
Total revenue		229,175		176,694		653,947		456,744
Cost of revenue:
Product		118,992		93,201		342,387		240,223
Services		6,862		6,981		19,291		19,560
Total cost of revenue		125,854		100,182		361,678		259,783
Gross profit		103,321		76,512		292,269		196,961
Operating expenses:
Research and development		20,563		16,707		56,267		49,015
Sales and marketing		14,573		11,415		38,567		33,979
General and administrative		14,983		11,996		41,163		33,226
Total operating expenses		50,119		40,118		135,997		116,220
Income from operations		53,202		36,394		156,272		80,741
Other (expense) income:
Interest income		1,111		51		1,558		124
Interest expense		(1,333)		(1,269)		(4,101)		(3,572)
Other, net		(7,971)		(963)		(14,640)		(2,131)
Total other expense		(8,193)		(2,181)		(17,183)		(5,579)
Income before income taxes		45,009		34,213		139,089		75,162
Income tax provision		4,726		6,698		13,002		12,261
Net income	$	40,283	$	27,515	$	126,087	$	62,901
Net income per share:
Basic	$	1.22	$	0.82	$	3.81	$	1.87
Diluted	$	1.21	$	0.81	$	3.75	$	1.83
Shares used in computing net income per share:
Basic weighted average common shares		33,011		33,537		33,116		33,643
Diluted weighted average common shares		33,389		34,089		33,638		34,339

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

Table of Contents

Axcelis Technologies, Inc.

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)


	Three months ended				Nine months ended
	September 30,				September 30,
	2022		2021		2022		2021
Net income	$	40,283	$	27,515	$	126,087	$	62,901
Other comprehensive loss:
Foreign currency translation adjustments		(3,690)		(949)		(7,561)		(1,769)
Amortization of actuarial net gain/(loss) and other adjustments from pension plan, net of tax		8		30		25		84
Total other comprehensive loss		(3,682)		(919)		(7,536)		(1,685)
Comprehensive income	$	36,601	$	26,596	$	118,551	$	61,216

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

Table of Contents

Axcelis Technologies, Inc.

Consolidated Balance Sheets

(In thousands, except per share amounts)

(Unaudited)


	September 30,		December 31,
	2022		2021
ASSETS
Current assets:
Cash and cash equivalents	$	308,552	$	294,923
Short-term investments		33,576		—
Accounts receivable, net		173,893		104,410
Inventories, net		226,507		194,984
Prepaid expenses and other current assets		32,614		24,929
Total current assets		775,142		619,246
Property, plant and equipment, net		38,778		34,972
Operating lease assets		11,893		9,242
Finance lease assets, net		18,265		19,238
Long-term restricted cash		749		757
Deferred income taxes		28,372		35,454
Other assets		33,062		34,331
Total assets	$	906,261	$	753,240
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	54,020	$	38,025
Accrued compensation		28,557		30,732
Warranty		8,482		6,424
Income taxes		540		887
Deferred revenue		101,169		60,454
Current portion of finance lease obligation		1,164		979
Other current liabilities		13,924		12,639
Total current liabilities		207,856		150,140
Long-term finance lease obligation		45,508		46,415
Long-term deferred revenue		21,420		7,982
Other long-term liabilities		16,587		9,744
Total liabilities		291,371		214,281
Commitments and contingencies (Note 17)
Stockholders’ equity:
Common stock, $0.001 par value, 75,000 shares authorized; 32,937 shares issued and outstanding at September 30, 2022; 33,240 shares issued and outstanding at December 31, 2021		33		33
Additional paid-in capital		549,735		559,883
Retained earnings (accumulated deficit)		70,893		(22,722)
Accumulated other comprehensive (loss) income		(5,771)		1,765
Total stockholders’ equity		614,890		538,959
Total liabilities and stockholders’ equity	$	906,261	$	753,240

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

Table of Contents

Axcelis Technologies, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)


								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		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)

Table of Contents

Axcelis Technologies, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)


						(Accumulated		Accumulated
				Additional		Deficit)		Other		Total
	Common Stock			Paid-in		Retained		Comprehensive		Stockholders’
	Shares	Amount		Capital		Earnings		Income (Loss)		Equity
Balance at December 31, 2021	33,240	$	33	$	559,883	$	(22,722)	$	1,765	$	538,959
Net income	—		—		—		41,614		—		41,614
Foreign currency translation adjustments	—		—		—		—		(1,186)		(1,186)
Change in pension obligation	—		—		—		—		9		9
Exercise of stock options	41		—		491		—				491
Issuance of common shares on restricted stock units, net of shares withheld	67		—		(3,315)		—		—		(3,315)
Stock-based compensation expense	—		—		2,701		—		—		2,701
Repurchase of common stock	(284)		—		(5,127)		(14,873)		—		(20,000)
Balance at March 31, 2022	33,064	$	33	$	554,633	$	4,019	$	588	$	559,273
Net income	—		—		—		44,189		—		44,189
Foreign currency translation adjustments	—		—		—		—		(2,685)		(2,685)
Change in pension obligation	—		—		—		—		8		8
Exercise of stock options	25		—		298		—		—		298
Issuance of shares under Employee Stock Purchase Plan	15		—		711		—		—		711
Issuance of common shares on restricted stock units, net of shares withheld	205		—		(5,896)		—		—		(5,896)
Stock-based compensation expense	—		—		3,527				—		3,527
Repurchase of common stock	(215)		—		(3,872)		(8,626)		—		(12,498)
Balance at June 30, 2022	33,094	$	33	$	549,401	$	39,582	$	(2,089)	$	586,927
Net income	—		—		—		40,283		—		40,283
Foreign currency translation adjustments	—		—		—		—		(3,690)		(3,690)
Change in pension obligation	—		—		—		—		8		8
Exercise of stock options	30		—		367		—		—		367
Issuance of common shares on restricted stock units, net of shares withheld	8		—		(70)		—		—		(70)
Stock-based compensation expense	—		—		3,562		—		—		3,562
Repurchase of common stock	(195)		—		(3,525)		(8,972)		—		(12,497)
Balance at September 30, 2022	32,937	$	33	$	549,735	$	70,893	$	(5,771)	$	614,890

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

Table of Contents

Axcelis Technologies, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Nine months ended
	September 30,
	2022		2021
Cash flows from operating activities
Net income	$	126,087	$	62,901
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		8,614		7,993
Deferred income taxes		6,416		11,558
Stock-based compensation expense		9,790		8,970
Provision for excess and obsolete inventory		3,292		2,773
Changes in operating assets and liabilities:
Accounts receivable		(77,449)		8,133
Inventories		(49,699)		(39,595)
Prepaid expenses and other current assets		(4,861)		(4,879)
Accounts payable and other current liabilities		17,695		17,933
Deferred revenue		54,814		35,189
Income taxes		(274)		(24)
Other assets and liabilities		(1,202)		1,129
Net cash provided by operating activities		93,223		112,081

Cash flows from investing activities
Expenditures for property, plant and equipment and capitalized software		(6,876)		(5,701)
Purchase of short-term investments		(33,576)		—
Net cash used in investing activities		(40,452)		(5,701)

Cash flows from financing activities
Net settlement on restricted stock grants		(9,281)		(6,543)
Repurchase of common stock		(44,995)		(37,493)
Proceeds from Employee Stock Purchase Plan purchases		711		509
Principal payments on finance lease obligation		(728)		(562)
Proceeds from exercise of stock options		1,156		3,419
Net cash used in financing activities		(53,137)		(40,670)

Effect of exchange rate changes on cash and cash equivalents		13,987		1,899
Net increase in cash, cash equivalents and restricted cash		13,621		67,609

Cash, cash equivalents and restricted cash at beginning of period		295,680		204,232
Cash, cash equivalents and restricted cash at end of period	$	309,301	$	271,841

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

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, 2021 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, 2021.

Note 2. Summary of Significant Accounting Policies

(a) Cash, Cash Equivalents and Short-term investments

Cash and cash equivalents consist of cash on hand and highly liquid investments with original maturities of ninety days or less. Cash equivalents consist primarily of money market funds, U.S. Government and Agency Securities and deposit accounts. Cash equivalents are carried on the balance sheet at fair market value. Short-term investments are highly liquid investments with original maturities of greater than 90 days but less than one year from date of purchase and are carried on the balance sheet at fair market value. Our short-term investments consist primarily of U.S. Government and Agency securities and are classified as held-to-maturity based on our positive intent and ability to hold the securities to maturity. Income related to these securities is recorded in interest income in the Consolidated Statements of Operations.

Note 3. Stock-Based Compensation

We maintain the Axcelis Technologies, Inc. 2012 Equity Incentive Plan, as amended (the “2012 Equity Plan”), an Internal Revenue Code Section 423 plan, which became effective on May 2, 2012, and permits the issuance of options, restricted stock, restricted stock units (“RSUs”) and performance awards to selected employees, directors and consultants of the Company.

The 2012 Equity Plan is more fully described in Note 13 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021.

We recognized stock-based compensation expense of $3.6 million and $3.2 million for the three-month periods ended September 30, 2022 and 2021, respectively. We recognized stock-based compensation expense of $9.8 million and $9.0 million for the nine-month periods ended September 30, 2022 and 2021, respectively. These amounts include compensation expense related to RSUs, non-qualified stock options and stock to be issued to participants under the 2020 Employee Stock Purchase Plan (the “2020 ESPP”).

In the three-month periods ended September 30, 2022 and 2021, we issued 38.0 thousand and 40.0 thousand shares of common stock, respectively, upon stock option exercises and vesting of RSUs. In the three-month periods ended

Table of Contents

September 30, 2022 and 2021, we received proceeds of $0.4 million and $0.3 million, respectively, in connection with the exercise of stock options.

In the nine-month periods ended September 30, 2022 and 2021, we issued 0.4 million and 0.7 million shares of common stock, respectively, upon stock option exercises, purchases under the 2020 ESPP and vesting of RSUs. In the nine-month periods ended September 30, 2022 and 2021, we received proceeds of $1.9 million and $3.9 million, respectively, in connection with the exercise of stock options and purchases under the 2020 ESPP.

Note 4. Leases

We have operating leases for office space, warehouse space, a manufacturing plant, computer and office equipment as well as 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 one to five 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	2022		2021

Assets		(in thousands)
Operating leases	Operating lease assets	$	11,893	$	9,242
Finance lease	Finance lease assets *		18,265		19,238
Total leased assets		$	30,158	$	28,480
Liabilities
Current
Operating	Other current liabilities	$	5,071	$	4,716
Finance	Current portion of finance lease obligation		1,164		979
Noncurrent
Operating	Other long-term liabilities		6,810		4,357
Finance	Finance lease obligation		45,508		46,415
Total lease liabilities		$	58,553	$	56,467

*Finance lease assets are recorded net of accumulated depreciation of $49.4 million and includes $0.6 million of prepaid financing costs as of September 30, 2022. Finance lease assets are recorded net of accumulated depreciation of $48.6 million and includes $0.7 million of prepaid financing costs as of December 31, 2021.

All of our operating lease office locations support selling and servicing functions. Our Axcelis Asia Operations Center facility in South Korea brings production capability closer to our Asia-based customers. Operating lease expense

Table of Contents

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, 2022 and 2021 as follows:


		Three months ended				Nine months ended
		September 30,				September 30,
Lease cost	Classification	2022		2021		2022		2021

Operating lease cost		(in thousands)
Product / Services*	Cost of revenue	$	1,462	$	790	$	3,978	$	2,074
Research and development	Operating expenses		54		114		186		366
Sales and marketing*	Operating expenses		369		414		1,155		1,169
General and administrative*	Operating expenses		253		254		773		714
Total operating lease cost		$	2,138	$	1,572	$	6,092	$	4,323
Finance lease cost
Depreciation of leased assets	Cost of revenue, R&D, Sales and marketing and G&A	$	325	$	326	$	973	$	981
Interest on lease liabilities	Interest expense		1,245		1,269		3,754		3,822
Total finance lease cost		$	1,570	$	1,595	$	4,727	$	4,803

Total lease cost		$	3,708	$	3,167	$	10,819	$	9,126

* Product / services, sales and marketing and general and administrative expense also includes short-term lease and variable lease costs of approximately $0.4 million and $1.4 million for the three and nine months ended September 30, 2022, respectively, and includes short-term and variable lease costs of approximately $0.6 million and $1.4 million for the three and nine months ended September 30, 2021, respectively.

The lease of our corporate headquarters, shown below under finance leases, had an original lease term of 22 years, beginning in January 2015 and expiring in January 2037, with renewal options. All other locations are treated as operating leases, with lease terms ranging from one to ten 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, 2022: