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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, 2023

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, 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, 2023, there were 32,747,459 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, 2023 and 2022

3

Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2023 and 2022

4

Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022

5

Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022

6

Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022

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, Use of Proceeds, and Issuer Purchases of Equity Securities

28

Item 3.

Defaults Upon Senior Securities

28

Item 4.

Mine Safety Disclosures

28

Item 5.

Other Information

28

Item 6.

Exhibits

29

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,

    

2023

    

2022

    

2023

    

2022

    

Revenue:

Product

$

283,367

$

221,540

$

795,047

$

631,998

Services

 

8,959

 

7,635

 

25,269

 

21,949

Total revenue

 

292,326

 

229,175

 

820,316

 

653,947

Cost of revenue:

Product

 

154,798

 

118,992

 

444,311

 

342,387

Services

 

7,844

 

6,862

 

22,600

 

19,291

Total cost of revenue

 

162,642

 

125,854

 

466,911

 

361,678

Gross profit

 

129,684

 

103,321

 

353,405

 

292,269

Operating expenses:

Research and development

 

24,093

 

20,563

 

71,996

 

56,267

Sales and marketing

 

16,465

 

14,573

 

46,146

 

38,567

General and administrative

 

17,446

 

14,983

 

48,519

 

41,163

Total operating expenses

 

58,004

 

50,119

 

166,661

 

135,997

Income from operations

 

71,680

 

53,202

 

186,744

 

156,272

Other income (expense):

Interest income

 

4,580

 

1,111

 

12,824

 

1,558

Interest expense

 

(1,325)

 

(1,333)

 

(4,027)

 

(4,101)

Other, net

 

(1,260)

 

(7,971)

 

(4,348)

 

(14,640)

Total other income (expense)

 

1,995

 

(8,193)

 

4,449

 

(17,183)

Income before income taxes

 

73,675

 

45,009

 

191,193

 

139,089

Income tax provision

 

7,744

 

4,726

 

15,986

 

13,002

Net income

$

65,931

$

40,283

$

175,207

$

126,087

Net income per share:

Basic

$

2.01

$

1.22

$

5.35

$

3.81

Diluted

$

1.99

$

1.21

$

5.28

$

3.75

Shares used in computing net income per share:

Basic weighted average shares of common stock

 

32,807

 

33,011

 

32,775

 

33,116

Diluted weighted average shares of common stock

 

33,159

 

33,389

 

33,208

 

33,638

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,

    

2023

    

2022

    

2023

    

2022

    

Net income

$

65,931

$

40,283

$

175,207

$

126,087

Other comprehensive loss:

Foreign currency translation adjustments

 

(1,231)

 

(3,690)

 

(2,192)

 

(7,561)

Amortization of actuarial net gain and other adjustments from pension plan, net of tax

 

 

8

 

 

25

Total other comprehensive loss

(1,231)

(3,682)

(2,192)

(7,536)

Comprehensive income

$

64,700

$

36,601

$

173,015

$

118,551

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,

 

2023

2022

 

ASSETS

Current assets:

Cash and cash equivalents

$

142,300

$

185,595

Short-term investments

 

318,710

 

246,571

Accounts receivable, net

 

192,327

 

169,773

Inventories, net

 

312,223

 

242,406

Prepaid expenses and other current assets

 

49,481

 

33,300

Total current assets

 

1,015,041

 

877,645

Property, plant and equipment, net

 

47,169

 

39,664

Operating lease assets

31,082

12,146

Finance lease assets, net

16,981

17,942

Long-term restricted cash

 

6,650

 

752

Deferred income taxes

44,323

31,701

Other assets

 

40,448

 

33,791

Total assets

$

1,201,694

$

1,013,641

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

60,061

$

62,346

Accrued compensation

 

26,535

 

35,540

Warranty

 

11,464

 

8,299

Income taxes

 

582

 

4,304

Deferred revenue

 

148,299

 

123,471

Current portion of finance lease obligation

 

1,438

 

1,229

Other current liabilities

 

12,799

 

12,943

Total current liabilities

 

261,178

 

248,132

Long-term finance lease obligation

 

44,070

 

45,185

Long-term deferred revenue

 

53,730

 

31,306

Other long-term liabilities

 

41,745

 

21,762

Total liabilities

 

400,723

 

346,385

Commitments and contingencies (Note 16)

Stockholders’ equity:

Common stock, $0.001 par value, 75,000 shares authorized; 32,772 shares issued and outstanding at September 30, 2023; 32,775 shares issued and outstanding at December 31, 2022

 

33

 

33

Additional paid-in capital

 

543,577

 

550,299

Retained earnings

 

261,521

 

118,892

Accumulated other comprehensive loss

 

(4,160)

 

(1,968)

Total stockholders’ equity

 

800,971

 

667,256

Total liabilities and stockholders’ equity

$

1,201,694

$

1,013,641

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

Accumulated

 

Additional

Deficit)

Other

Total

 

Common Stock

Paid-in

Retained

Comprehensive

Stockholders’

 

    

Shares

    

Amount

    

Capital

    

Earnings

    

Income

    

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 stock 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 stock under Employee Stock Purchase Plan

 

15

 

 

711

 

 

 

711

Issuance of common stock 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 stock on restricted stock units, net of stock 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)

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Axcelis Technologies, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Retained

Comprehensive

Stockholders’

    

Shares

    

Amount

    

Capital

    

Earnings

    

Loss

    

Equity

Balance at December 31, 2022

32,775

$

33

$

550,299

$

118,892

$

(1,968)

$

667,256

Net income

 

 

 

 

47,697

 

 

47,697

Foreign currency translation adjustments

 

 

 

 

 

50

 

50

Exercise of stock options

 

2

 

 

25

 

 

 

25

Issuance of common stock on restricted stock units, net of shares withheld

 

56

 

 

(3,907)

 

 

 

(3,907)

Stock-based compensation expense

 

 

3,199

 

 

 

3,199

Repurchase of common stock

 

(107)

 

 

(1,924)

 

(10,575)

 

 

(12,499)

Balance at March 31, 2023

 

32,726

$

33

$

547,692

$

156,014

$

(1,918)

$

701,821

Net income

 

 

 

 

61,579

 

 

61,579

Foreign currency translation adjustments

 

 

 

 

 

(1,011)

 

(1,011)

Issuance of stock under Employee Stock Purchase Plan

 

6

 

 

957

 

 

 

957

Issuance of common stock on restricted stock units, net of shares withheld

 

199

 

 

(11,558)

 

 

 

(11,558)

Stock-based compensation expense

 

 

 

4,749

 

 

 

4,749

Repurchase of common stock

(95)

(1,720)

(10,780)

(12,500)

Balance at June 30, 2023

 

32,836

$

33

$

540,120

$

206,813

$

(2,929)

$

744,037

Net income

 

 

 

 

65,931

 

 

65,931

Foreign currency translation adjustments

 

 

 

 

 

(1,231)

 

(1,231)

Issuance of common stock on restricted stock units, net of stock withheld

 

7

 

 

(349)

 

 

 

(349)

Stock-based compensation expense

 

 

5,082

 

 

 

5,082

Repurchase of common stock

 

(71)

 

 

(1,276)

 

(11,223)

 

 

(12,499)

Balance at September 30, 2023

 

32,772

$

33

$

543,577

$

261,521

$

(4,160)

$

800,971

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,

    

2023

    

2022

    

Cash flows from operating activities

Net income

$

175,207

$

126,087

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

 

9,488

 

8,614

Deferred income taxes

 

(12,623)

 

6,416

Stock-based compensation expense

 

13,030

 

9,790

Provision for doubtful accounts

749

Provision for excess and obsolete inventory

 

3,912

 

3,292

Accretion of discounts and premiums on marketable securities

(8,463)

Currency loss on foreign denominated transactions

7,487

Changes in operating assets and liabilities:

Accounts receivable

 

(26,674)

 

(77,449)

Inventories

 

(79,494)

 

(49,699)

Prepaid expenses and other current assets

 

(16,493)

 

(4,861)

Accounts payable and other current liabilities

 

(8,916)

 

17,695

Deferred revenue

 

47,704

 

54,814

Income taxes

 

(3,672)

 

(274)

Other assets and liabilities

 

(9,948)

 

(1,202)

Net cash provided by operating activities

 

91,294

 

93,223

Cash flows from investing activities

Expenditures for property, plant and equipment and capitalized software

 

(10,503)

 

(6,876)

Purchase of short-term investments

 

(271,583)

 

(33,576)

Maturities of short-term investments

 

207,907

 

Net cash used in investing activities

 

(74,179)

 

(40,452)

Cash flows from financing activities

Net settlement on restricted stock grants

 

(15,814)

 

(9,281)

Repurchase of common stock

 

(37,498)

 

(44,995)

Proceeds from Employee Stock Purchase Plan purchases

 

957

 

711

Principal payments on finance lease obligation

(915)

(728)

Proceeds from exercise of stock options

25

1,156

Net cash used in financing activities

 

(53,245)

 

(53,137)

Effect of exchange rate changes on cash and cash equivalents

 

(1,267)

 

13,987

Net (decrease) increase in cash, cash equivalents and restricted cash

 

(37,397)

 

13,621

Cash, cash equivalents and restricted cash at beginning of period

 

186,347

 

295,680

Cash, cash equivalents and restricted cash at end of period

$

148,950

$

309,301

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, 2022 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. As of September 30, 2023, there have been no material changes in the Company’s significant accounting policies. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Note 2.  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, 2022.

We recognized stock-based compensation expense of $5.1 million and $3.6 million for the three-month periods ended September 30, 2023 and 2022, respectively. We recognized stock-based compensation expense of $13.0 million and $9.8 million for the nine-month periods ended September 30, 2023 and 2022, respectively. These amounts include compensation expense related to RSUs, non-qualified stock options and stock issued to participants under the 2020 Employee Stock Purchase Plan (the “2020 ESPP”).

In the three-month period ended September 30, 2023, we issued 7,320 shares of common stock upon vesting of RSUs. In the three-month period ended September 30, 2022, we issued 38,507 shares of common stock upon vesting of RSUs and stock option exercises. In the three-month period ended September 30, 2023, we received no proceeds in connection with the exercise of stock options. In the three-month period ended September 30, 2022, we received proceeds of $0.4 million in connection with the exercise of stock options.

In the nine-month periods ended September 30, 2023 and 2022, we issued 0.3 million and 0.4 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, 2023 and 2022, we received proceeds of $1.0 million and $1.9 million, respectively, in connection with the exercise of stock options and purchases under the 2020 ESPP.

Note 3.  Leases

We have operating leases for manufacturing, office space, warehouse space, computer and office equipment and vehicles used in our business operations. We have a finance lease in relation to the 2015 sale-leaseback of our corporate headquarters in Beverly, Massachusetts. We review all agreements to determine if the agreement contains a lease

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component. An agreement contains a lease component if it provides for the use of a specific physical space or a specific physical item.

We recognize operating lease obligations under Accounting Standards Codification Topic 842, Leases (“Topic 842”). The guidance in Topic 842 requires recognition of lease assets and related liabilities 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 by one to three years. The exercise of lease renewal options is at our sole discretion. For lease extensions that are reasonably certain to occur, we have included the 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

2023

    

2022

    

 

Assets

(in thousands)

 

Operating leases

Operating lease assets

$

31,082

$

12,146

Finance lease

Finance lease assets*

 

16,981

 

17,942

Total leased assets

$

48,063

$

30,088

Liabilities

Current

Operating

Other current liabilities

$

5,001

$

5,367

Finance

Current portion of finance lease obligation

1,438

1,229

Non-current

Operating

Other long-term liabilities

25,850

6,931

Finance

Finance lease obligation

 

44,070

 

45,185

Total lease liabilities

$

76,359

$

58,712

*Finance lease assets are recorded net of accumulated depreciation of $46.7 million and include $0.6 million of prepaid financing costs as of September 30, 2023. Finance lease assets are recorded net of accumulated depreciation of $45.9 million and include $0.6 million of prepaid financing costs as of December 31, 2022.

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. Our state-of-the-art 98,500 square foot logistics and flex manufacturing center in Beverly, Massachusetts became fully operational in the third quarter of 2023.

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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, 2023 and 2022 as follows:

Three months ended

Nine months ended

 

September 30,

September 30,

Lease cost

Classification

2023

    

2022

    

2023

    

2022

 

Operating lease cost

(in thousands)

 

Product / services*

Cost of revenue

$

2,041

$

1,462

$

5,328

$

3,978

Research and development

Operating expenses

 

183

 

54

 

426

 

186

Sales and marketing*

Operating expenses

 

419

 

369

 

1,231

 

1,155

General and administrative*

Operating expenses

 

298

 

253

 

813

 

773

Total operating lease cost

$

2,941

$

2,138

$

7,798

$

6,092

Finance lease cost

Depreciation of leased assets

Cost of revenue, Research and development, Sales and marketing and General and administrative

$

324

$

325

$

961

$

973

Interest on lease liabilities

Interest expense

 

1,214

 

1,245

 

3,668

 

3,754

Total finance lease cost

$

1,538

$

1,570

$

4,629

$

4,727

Total lease cost

$

4,479

$

3,708

$

12,427

$

10,819

* Product / services, sales and marketing and general and administrative expense also includes short-term lease and variable lease costs of approximately $0.6 million and $1.6 million for the three and nine months ended September 30, 2023, respectively, and 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.

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 sixteen 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, 2023:

Finance

Operating

    

Total

 

Maturity of Lease Liabilities

Leases

Leases

Leases

(in thousands)

2023

$

1,531

$

2,117

$

3,648

2024

 

6,252

 

6,248

 

12,500

2025

 

5,930

 

4,761