Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024
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 ofincorporation or organization)
(IRS EmployerIdentification 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 July 29, 2024, there were 32,617,587 shares of the registrant’s common stock outstanding.
PART I - FINANCIAL INFORMATION
Item 1.
Financial Statements (Unaudited)
Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023
3
Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2024 and 2023
4
Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023
5
Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2024 and 2023
6
Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023
7
Notes to Consolidated Financial Statements (Unaudited)
8
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
20
Overview
Critical Accounting Estimates
Results of Operations
21
Liquidity and Capital Resources
27
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Controls and Procedures
28
PART II - OTHER INFORMATION
29
Legal Proceedings
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
30
2
PART 1—FINANCIAL INFORMATION
Item 1. Financial Statements.
Axcelis Technologies, Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three months ended
Six months ended
June 30,
2024
2023
Revenue:
Product
$
245,380
265,673
488,798
511,680
Services
11,132
8,297
20,085
16,310
Total revenue
256,512
273,970
508,883
527,990
Cost of revenue:
134,759
146,741
262,670
289,512
9,344
7,526
17,753
14,756
Total cost of revenue
144,103
154,267
280,423
304,268
Gross profit
112,409
119,703
228,460
223,722
Operating expenses:
Research and development
25,786
24,130
51,448
47,903
Sales and marketing
17,230
15,537
34,675
29,681
General and administrative
16,583
16,328
32,988
31,073
Total operating expenses
59,599
55,995
119,111
108,657
Income from operations
52,810
63,708
109,349
115,065
Other income (expense):
Interest income
6,051
4,307
11,566
8,243
Interest expense
(1,339)
(1,349)
(2,684)
(2,702)
Other, net
(257)
(2,050)
(1,968)
(3,088)
Total other income
4,455
908
6,914
2,453
Income before income taxes
57,265
64,616
116,263
117,518
Income tax provision
6,399
3,037
13,803
8,242
Net income
50,866
61,579
102,460
109,276
Net income per share:
Basic
1.56
1.88
3.14
3.34
Diluted
1.55
1.86
3.12
3.29
Shares used in computing net income per share:
Basic weighted average shares of common stock
32,598
32,775
32,618
32,759
Diluted weighted average shares of common stock
32,771
33,189
32,848
33,237
See accompanying Notes to these Consolidated Financial Statements (Unaudited)
Consolidated Statements of Comprehensive Income
(In thousands)
Other comprehensive loss:
Foreign currency translation adjustments
(913)
(1,011)
(2,644)
(961)
Amortization of actuarial net gain and other adjustments from pension plan, net of tax
—
10
Total other comprehensive loss
(908)
(2,634)
Comprehensive income
49,958
60,568
99,826
108,315
Consolidated Balance Sheets
December 31,
ASSETS
Current assets:
Cash and cash equivalents
145,166
167,297
Short-term investments
403,143
338,851
Accounts receivable, net
188,080
217,964
Inventories, net
283,090
306,482
Prepaid income taxes
4,107
-
Prepaid expenses and other current assets
54,741
49,397
Total current assets
1,078,327
1,079,991
Property, plant and equipment, net
52,417
53,971
Operating lease assets
28,918
30,716
Finance lease assets, net
15,989
16,632
Long-term restricted cash
6,651
6,654
Deferred income taxes
55,441
53,428
Other assets
50,662
40,575
Total assets
1,288,405
1,281,967
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
45,782
54,400
Accrued compensation
16,069
31,445
Warranty
14,502
14,098
Income taxes
6,164
Deferred revenue
148,390
164,677
Current portion of finance lease obligation
1,452
1,511
Other current liabilities
17,984
12,834
Total current liabilities
244,179
285,129
Long-term finance lease obligation
43,004
43,674
Long-term deferred revenue
25,621
46,208
Other long-term liabilities
40,653
42,074
Total liabilities
353,457
417,085
Commitments and contingencies (Note 17)
Stockholders’ equity:
Common stock, $0.001 par value, 75,000 shares authorized; 32,617 shares issued and outstanding at June 30, 2024; 32,685 shares issued and outstanding at December 31, 2023
33
Additional paid-in capital
542,677
547,189
Retained earnings
396,718
319,506
Accumulated other comprehensive loss
(4,480)
(1,846)
Total stockholders’ equity
934,948
864,882
Total liabilities and stockholders’ equity
Consolidated Statements of Stockholders’ Equity
Accumulated
Additional
Other
Total
Common Stock
Paid-in
Retained
Comprehensive
Stockholders’
Shares
Amount
Capital
Earnings
(Loss)
Equity
Balance at December 31, 2022
550,299
118,892
667,256
47,697
50
Exercise of stock options
25
Issuance of common stock on restricted stock units, net of shares withheld
56
(3,907)
Stock-based compensation expense
3,199
Repurchase of common stock
(107)
(1,924)
(10,575)
(12,499)
Balance at March 31, 2023
32,726
547,692
156,014
(1,918)
701,821
Issuance of stock under Employee Stock Purchase Plan
957
199
(11,558)
4,749
(95)
(1,720)
(10,780)
(12,500)
Balance at June 30, 2023
32,836
540,120
206,813
(2,929)
744,037
Balance at December 31, 2023
32,685
51,595
(1,731)
Change in pension obligation
42
(2,699)
4,690
(122)
(2,201)
(12,798)
(14,999)
Balance at March 31, 2024
32,605
546,979
358,303
(3,572)
901,743
1,242
143
(8,468)
5,469
(141)
(2,545)
(12,451)
(14,996)
Balance at June 30, 2024
32,617
Consolidated Statements of Cash Flows
Cash flows from operating activities
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
7,636
6,258
(2,013)
(7,413)
10,159
7,948
Provision for doubtful accounts
(459)
Provision for excess and obsolete inventory
2,846
2,494
Accretion of discounts and premiums on marketable securities
(6,623)
(5,753)
Currency loss on foreign denominated transactions
11,505
5,717
Changes in operating assets and liabilities:
Accounts receivable
25,009
8,173
Inventories
12,951
(63,294)
(5,849)
(5,095)
Accounts payable and other current liabilities
(18,541)
(18,266)
(35,957)
28,075
(8,391)
2,324
Other assets and liabilities
(12,443)
(3,170)
Net cash provided by operating activities
82,290
67,274
Cash flows from investing activities
Expenditures for property, plant and equipment and capitalized software
(3,624)
(5,202)
Purchase of short-term investments
(249,015)
(188,943)
Maturities of short-term investments
191,345
120,907
Net cash used in investing activities
(61,294)
(73,238)
Cash flows from financing activities
Net settlement on restricted stock grants
(11,167)
(15,465)
(29,995)
(24,999)
Proceeds from Employee Stock Purchase Plan purchases
Principal payments on finance lease obligation
(736)
(598)
Proceeds from exercise of stock options
Net cash used in financing activities
(40,656)
(40,080)
Effect of exchange rate changes on cash and cash equivalents
(2,474)
(1,147)
Net decrease in cash, cash equivalents and restricted cash
(22,134)
(47,191)
Cash, cash equivalents and restricted cash at beginning of period
173,951
186,347
Cash, cash equivalents and restricted cash at end of period
151,817
139,156
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, 2023 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 June 30, 2024, there have been no material changes in the Company’s significant accounting policies, other than with respect to the Company’s accounting policy for derivative financial instruments, which it had not held in prior periods, as described in Note 2 below. 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, 2023, filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2024, as amended by Amendment No. 1 thereto, filed with the SEC on February 28, 2024 (as so amended, the “2023 Form 10-K”).
Note 2. Significant Accounting Policies
Derivative instruments
We are exposed to certain risks relating to our ongoing business operations, including market risks relating to fluctuations in foreign currency exchange rates. We have entered into forward exchange contracts in order to mitigate risks associated with fluctuations in exchange rates on forecasted transactions denominated in foreign currencies and to minimize the impact of foreign currency fluctuations on our earnings and cash flows. These contracts have month-to-month settlement dates. As of June 30, 2024, we had open contracts with a notional value of $111 million. We measure these instruments at fair value and recognize assets or liabilities associated with the intrinsic value on these open contracts on the Consolidated Balance Sheets at the end of each reporting period. At June 30, 2024, the recognized unrealized loss on these forward exchange contracts was approximately $323 thousand. Unrealized gains and losses are shown in our cash flows from operating activities within our Consolidated Statement of Cash Flows. We have not designated these forward exchange contracts as hedging instruments and we record changes in the fair values at each measurement date in Other, net on the Consolidated Statements of Operations. For the three and six months ended June 30, 2024, we recorded $2.3 million and $3.8 million of gain on forward currency exchange contracts, respectively.
We do not offset fair value amounts of derivative instruments. We do not use derivative instruments for speculative purposes.
Note 3. 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.
The 2012 Equity Plan is more fully described in Note 13 to the consolidated financial statements in our 2023 Form 10-K.
We recognized stock-based compensation expense of $5.5 million and $4.7 million for the three-month periods ended June 30, 2024 and 2023, respectively. We recognized stock-based compensation expense of $10.2 million and $7.9 million for the six-month periods ended June 30, 2024 and 2023, 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 June 30, 2024 and 2023, respectively, we issued 0.2 million shares of common stock upon vesting of RSUs granted under the 2012 Equity Plan and purchases under the 2020 ESPP. In the three-month period ended June 30, 2024 and 2023, we received proceeds of $1.2 million and $1.0 million, respectively, from purchases under the 2020 ESPP.
In the six-month period ended June 30, 2024 and 2023, we issued 0.2 million and 0.3 million shares of common stock, respectively, upon vesting of RSUs granted under the 2012 Equity Plan and purchases under the 2020 ESPP. In the six-month period ended June 30, 2024 and 2023, we received proceeds of $1.2 million and $1.0 million, respectively, in connection with purchases under the 2020 ESPP.
Note 4. 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 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 sheets; (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:
9
Leases
Classification
Assets
(in thousands)
Operating leases
Finance lease
Finance lease assets*
Total leased assets
44,907
47,348
Liabilities
Current
Operating
4,637
4,978
Finance
Non-current
24,329
25,724
Finance lease obligation
Total lease liabilities
73,422
75,887
*Finance lease assets are recorded net of accumulated depreciation of $46.9 million and include $0.6 million of prepaid financing costs as of June 30, 2024. Finance lease assets are recorded net of accumulated depreciation of $46.4 million and include $0.6 million of prepaid financing costs as of December 31, 2023.
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 101,800 square foot logistics and flex manufacturing center was built to our specifications in Beverly, Massachusetts. Operating lease expense and depreciation and interest expense relating to our finance lease obligation are recognized within our Consolidated Statement of Operations for the three and six months ended June 30, 2024 and 2023 as follows:
Lease cost
Operating lease cost
Product / services*
Cost of revenue
1,694
1,821
3,522
3,287
Operating expenses
203
137
326
243
Sales and marketing*
451
417
902
813
General and administrative*
337
239
532
515
Total operating lease cost
2,685
2,614
5,282
4,858
Finance lease cost
Depreciation of leased assets
Cost of revenue, Research and development, Sales and marketing and General and administrative
321
318
643
637
Interest on lease liabilities
1,187
1,223
2,384
2,454
Total finance lease cost
1,508
1,541
3,027
3,091
Total lease cost
4,193
4,155
8,309
7,949
* Product / services, sales and marketing and general and administrative expense also includes short-term lease and variable lease costs of approximately $0.7 million and $1.3 million for the three and six months ended June 30, 2024, respectively, and includes short-term lease and variable lease costs of approximately $0.5 million and $1.0 million for the three and six months ended June 30, 2023, 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 16 years. The tables below reflect the minimum cash outflow regarding our current lease obligations as well as the weighted-average remaining lease term and weighted-average discount rates used in our calculation of our lease obligations and right-of-use assets as of June 30, 2024:
Maturity of Lease Liabilities
3,132
3,740
6,872
2025
5,930
6,113
12,043
2026
6,008
4,448
10,456
2027
6,128
2,863
8,991
2028
6,251
1,959
8,210
Thereafter
55,336
23,205
78,541
Total lease payments
82,785
42,328
125,113
Less interest portion*
(38,329)
(13,362)
(51,691)
Finance lease and operating lease obligations
44,456
28,966
* Finance lease interest calculated using the implied interest rate; operating lease interest calculated using estimated corporate borrowing rate.
The table above does not include options to renew lease terms that are not reasonably certain of being exercised.
11
Lease term and discount rate
Weighted-average remaining lease term (years):
11.5
Finance leases
12.6
Weighted-average discount rate:
5.5%
10.5%
Our cash outflows from our operating leases include rent expense and other charges associated with these leases. These cash flows are included within the operating activities section of our statement of cash flows. Our cash flows from our finance lease include both an interest component and a principal component. The table below shows our cash outflows by lease type and related section of our statement of cash flows, as well as the non-cash amount capitalized on our balance sheet in relation to our operating lease right-of-use assets for the six months ended June 30, 2024 and 2023, respectively:
Six months ended June 30,
Cash paid for amounts included in the measurement of lease liabilities
Operating cash outflows from operating leases
Operating cash outflows from finance leases
Financing cash outflows from finance leases
736
598
Operating lease assets obtained in exchange for operating lease liabilities
825
23,289
Finance lease assets obtained in exchange for new finance lease liabilities
Note 5. Revenue
To reflect the organization of our business operations, we divide revenue into two categories: revenue from sales of new systems and revenue arising from the sale of used systems, parts and labor to customers who own systems, which we refer to as “Aftermarket.”
Revenue by categories used by management are as follows:
Systems
198,645
215,174
394,076
410,372
Aftermarket
57,867
58,796
114,807
117,618
Total Revenue
12
We also consider revenue by geography. Revenue is allocated to geographic markets based upon the location to which our products are shipped and in which our services are performed. Revenue in our principal geographic markets is as follows:
North America
34,373
37,918
79,876
83,084
Asia Pacific
196,159
205,941
384,376
397,044
Europe
25,980
30,111
44,631
47,862
Our system sales revenue transactions give rise to contract liabilities (in the case of pre-payments and the fair value of goods and services to be delivered after the system delivery, such as installation and certain warranty obligations).
Contract liabilities are as follows:
Contract liabilities
174,011
210,885
Contract liabilities are reflected as deferred revenue on the consolidated balance sheets and include payments received in advance of system sales as well as deferral of revenue from systems sales for installation and other future performance obligations. Contract liabilities are recognized as revenue upon the fulfillment of performance obligations.
Balance, beginning of the period
208,418
201,725
154,777
Deferral of revenue*
19,625
34,977
55,227
107,556
Recognition of deferred revenue
(54,032)
(54,162)
(92,101)
(79,793)
Balance, end of the period
182,540
* Amount is net of a reclassification of $4.7 million from deferred revenue to refund liability for the three and six months ended June 30, 2024.
The majority of our system transactions have either (1) payment terms of 90% due upon shipment of the system and 10% due upon acceptance or (2) a pre-shipment deposit ranging from 20% to 60%, with the remainder due upon shipment, less 10% due at acceptance. Aftermarket transaction payment terms typically provide that payment is due either within 30 or 60 days after the service is provided or parts delivered.
Note 6. Receivables and Allowances for Credit Losses
All trade receivables are reported on the consolidated balance sheets at their amortized cost adjusted for any write-offs and net of allowances for credit losses.
We maintain an allowance for credit losses, which represents an estimate of expected losses over the remaining contractual life of our receivables, considering current market conditions and estimates for supportable forecasts when appropriate. The estimate is a result of our ongoing assessments and evaluations of collectability, historical loss experience, and future expectations in estimating credit losses in our receivable portfolio. We use historical loss experience rates and apply them to a related aging analysis while also considering customer and/or economic risk where appropriate. Determination of the proper amount of allowances requires management to exercise judgment about the timing, frequency and severity of credit losses that could materially affect the provision for credit losses and, as a result, net earnings. The
13
allowance takes into consideration numerous quantitative and qualitative factors that include receivable type, historical loss experience, loss migration, delinquency trends, collection experience, current economic conditions, trade restrictions, estimates for supportable forecasts, when appropriate, and credit risk characteristics.
We evaluate the credit risk of the customer when extending credit based on a combination of financial and qualitative factors that may affect our customers’ ability to pay. These factors may include the customer’s financial condition, past payment experience, and credit bureau report, as well as the value of the underlying collateral.
Management performs detailed reviews of our receivables on a quarterly basis to assess the adequacy of the allowances and to determine if any impairment has occurred. Amounts determined to be uncollectable are charged directly against the allowances, while amounts recovered on previously written-off accounts increase the allowances. Changes to the allowances for credit losses are maintained through adjustments to the provision for credit losses, which are charged to current period earnings. We did not incur any credit losses or recoveries for the three month period ended June 30, 2024. We recorded $0.5 million of recovery of bad debt expense for the six-month period ended June 30, 2024. We did not have any allowance or incur any credit losses or recoveries for the six-month period ended June 30, 2023. As of both June 30, 2024 and 2023, we had no provision for credit losses.
Note 7. Computation of Net Earnings per Share
Basic earnings per share is computed by dividing income available to common stockholders (the numerator) by the weighted-average number of shares of common stock outstanding (the denominator) for the period. The computation of diluted earnings per share is similar to basic earnings per share, except that the denominator is increased by the number of additional shares of common stock that would have been outstanding if the potentially dilutive shares of common stock issuable on exercise of stock options and vesting of RSUs had been issued, calculated using the treasury stock method.
The components of net earnings per share are as follows:
(in thousands, except per share amounts)
Net income available to common stockholders
Weighted average shares of common stock outstanding used in computing basic income per share
Incremental options and RSUs
173
414
230
478
Weighted average shares of common stock used in computing diluted net income per share
Net income per share
Diluted weighted average shares of common stock outstanding does not include 22,983 and 770 common equivalent shares issuable with respect to outstanding equity awards for the three-month periods ended June 30, 2024 and 2023, respectively, or 20,639 and 387 common equivalent shares issuable with respect to outstanding equity awards for the six-month periods ended June 30, 2024 and 2023, respectively, as their effect would have been anti-dilutive.
14
Note 8. Accumulated Other Comprehensive Loss
The following table presents the changes in accumulated other comprehensive loss, net of tax, by component, for the six months ended June 30, 2024:
Foreign
Defined benefit
currency
pension plan
(1,956)
110
Other comprehensive loss and pension reclassification
(4,600)
120
Note 9. Cash, cash equivalents and restricted cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets to the total of the amounts shown in the statement of cash flows:
Total cash, cash equivalents and restricted cash
As of June 30, 2024, we had $6.7 million in restricted cash representing the total of (i) a $5.9 million cash collateral relating to our lease for our headquarters in Beverly, Massachusetts, (ii) a $0.7 million letter of credit relating to workers’ compensation insurance and (iii) a $0.1 million deposit relating to customs activity. See Note 13 for further discussion on the $5.9 million cash collateral.
Note 10. Inventories, net
The components of inventories are as follows:
Raw materials
220,910
231,200
Work in process
40,481
45,373
Finished goods (completed systems)
21,699
29,909
When recorded, inventory reserves reduce the carrying value of inventories to their net realizable value. We establish inventory reserves when conditions exist that indicate inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future demand for our products or market conditions. We regularly evaluate the ability to realize the value of inventories based on a combination of factors including the following: forecasted sales or usage, estimated product end of life dates, estimated current and future market value and new product introductions. Purchasing and usage alternatives are also explored to mitigate inventory exposure.
Note 11. Product Warranty
We generally offer a one-year warranty for all of our systems, the terms and conditions of which vary depending upon the product sold. For all systems sold, we accrue a liability for the estimated cost of standard warranty at the time of system shipment and, if applicable, defer the portion of systems revenue attributable to non-standard warranty. Costs for non-standard warranty are expensed as incurred. Factors that affect our warranty liability include the number of installed units, historical and anticipated product failure rates, material usage and service labor costs. We periodically assess the adequacy of our recorded liability and adjust the amount as necessary.
15
The changes in our standard product warranty liability are as follows:
Balance at January 1 (beginning of year)
16,757
10,487
Warranties issued during the period
5,755
5,616
Settlements made during the period
(5,653)
(4,834)
Changes in estimate of liability for pre-existing warranties during the period
(444)
1,552
Balance at June 30 (end of period)
16,415
12,821
Amount classified as current
10,867
Amount classified as long-term (within other long-term liabilities)
1,913
1,954
Total warranty liability
Note 12. Fair Value Measurements
Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
(a) Fair Value Hierarchy
The accounting guidance for fair value measurement requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:
Level 1 - applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 - applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3 - applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
(b) Fair Value Measurements
Our money market funds and short-term investments with initial maturities of three months or less are included in cash and cash equivalents in the consolidated balance sheets. Other investments that have a maturity of greater than three months but less than one year are included within short-term investments in the consolidated balance sheets.
16
The following table sets forth our assets by level within the fair value hierarchy:
June 30, 2024
Fair Value Measurements
Level 1
Level 2
Level 3
Cash equivalents and other short-term investments:
Cash equivalents (money market funds, U.S. Government Securities and Agency Investments)
104,958
Short-term investments (U.S. Government Securities and Agency Investments)
402,820
Mark-to-market adjustment on forward exchange contracts
(323)
507,778
507,455
December 31, 2023
118,278
339,240
457,518
(c) Other Financial Instruments
The carrying amounts reflected in the consolidated balance sheets for accounts receivable, prepaid expenses, forward currency exchange contracts and other current assets and non-current assets, restricted cash, accounts payable and accrued expenses approximate fair value due to their short-term maturities.
(d) Forward Currency Exchange Contracts
Beginning in February 2024, we entered into forward currency exchange contracts to minimize the impact of foreign currency fluctuations on our earnings and cash flows. These contracts have month-to-month settlement dates. Any gains or losses on these contracts are reported within Other, net within our Consolidated Statement of Operations. Any open contracts at period end that have settlement dates within one month after the reported period end and any mark-to-market valuation adjustments related to these open contracts are recorded within the current asset or current liability account and any unrealized gain or loss recognized is recorded within Other, net within our Consolidated Statement of Operations. These contracts are measured at fair value using observable market inputs such as forward currency exchange rates and our counterparties’ credit risks. Based on these inputs, the derivative instruments are classified within Level 2 of the valuation hierarchy. At June 30, 2024, the recognized unrealized loss on these forward exchange contracts was approximately $323 thousand. Based on our continued ability to trade and enter into forward contracts, we consider the markets for our fair value instruments to be active. We evaluated the credit risk associated with the counterparties to these derivative instruments and determined that as of June 30, 2024, such credit risks have not had an adverse impact on the fair value of these instruments.
Note 13. Financing Arrangements
On January 30, 2015, we sold our corporate headquarters facility in Beverly, Massachusetts for $48.9 million. As part of the sale, we also entered into a 22-year lease agreement of our headquarters facility. This sale-leaseback is accounted for as a financing lease under generally accepted accounting principles and, as such, we have recorded a financing obligation of $44.5 million as of June 30, 2024. The associated lease payments include both an interest component and payment of principal, with the remaining liability being extinguished at the end of the original lease term.
17
As of June 30, 2024, we had a security deposit of $5.9 million related to this lease in the form of a cash collateralized letter of credit issued with UBS Bank USA, which is classified as long-term restricted cash on our balance sheet at June 30, 2024.
Note 14. Income Taxes
Income tax expense was $6.4 million for the three months ended June 30, 2024, compared to $3.0 million for the three months ended June 30, 2023. The $3.4 million increase was primarily due to a decrease in stock compensation deduction. Income tax expense was $13.8 million for the six months ended June 30, 2024, compared to $8.2 million for the six months ended June 30, 2023. The increase was primarily due to a decrease in stock compensation deduction.
The effective tax rate for the three and six months ended June 30, 2024 was less than the U.S. statutory rate of 21% due to a forecasted Foreign Derived Intangible Income deduction, Federal research and development tax credits and a favorable discrete item related to equity compensation that reduces the annual tax rate.
The deferred income taxes of $55.4 million and $53.4 million as of June 30, 2024 and December 31, 2023, respectively, reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. As of June 30, 2024, we have recorded a $11.3 million valuation allowance in the U.S. against certain tax credits due to the uncertainty of their realization. Realization of our net deferred tax assets is dependent on future taxable income. We believe it is more likely than not that such assets will be realized; however, ultimate realization could be impacted by market conditions and other variables not known or anticipated at this time.
Note 15. Concentration of Risk
For the three months ended June 30, 2024, one customer accounted for 11.5% of total revenue. For the three months ended June 30, 2023, no individual customer accounted for greater than ten percent of total revenue.
For the six months ended June 30, 2024, no individual customer accounted for greater than ten percent of total revenue. For the six months ended June 30, 2023, two customers accounted for 11.6% and 11.1% of total revenue, respectively.
At June 30, 2024, one customer accounted for 11.3% of accounts receivable. At December 31, 2023, one customer accounted for 12.2% of accounts receivable.
Note 16. Share Repurchase
In February 2022, our Board of Directors approved stock repurchases of up to $100 million of our common stock. In August 2023, our Board of Directors approved additional funding of $200 million for our stock repurchase program, to be available on full utilization of the $100 million repurchase funding approved in February 2022. During the six months ended June 30, 2024, we repurchased 0.3 million shares at an average cost of $114.07 per share. The timing and actual number of any additional shares to be repurchased under this program will depend on various factors including price, corporate and regulatory requirements, alternative investment opportunities and other market conditions.
Repurchased shares are accounted for when the transaction is settled and returned to the status of authorized but unissued shares. Accordingly, on our balance sheet, the repurchase price is deducted from common stock par value and from additional paid-in capital for the excess over par value. If additional paid-in capital has been exhausted, the excess over par value is deducted from retained earnings. Direct costs incurred to acquire the shares are included in the total cost of the shares.
Note 17. Contingencies
(a) Litigation
We are from time to time a party to litigation that arises in the normal course of our business operations. We are not presently a party to any litigation that we believe might have a material adverse effect on our business operations.
18
(b) Indemnifications
Our system sales agreements typically include provisions under which we agree to take certain actions, provide certain remedies and defend our customers against third-party claims of intellectual property infringement under specified conditions and indemnify customers against any damage and costs awarded in connection with such claims. We have not incurred any material costs as a result of such indemnifications and have not accrued any liabilities related to such obligations in the accompanying consolidated financial statements.
Note 18. Recent Accounting Guidance
In November 2023 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 is intended to enhance disclosures for significant segment expenses for all public entities required to report segment information in accordance with ASC Topic 280, Segment Reporting (“ASC 280”). ASC 280 requires a public entity to report for each reportable segment a measure of segment profit or loss that its chief operating decision maker (“CODM”) uses to assess segment performance and to make decisions about resource allocations. ASU 2023-07 is intended to improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more useful financial analyses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public entity should apply ASU 2023-07 retrospectively to all prior periods presented in the consolidated financial statements. We are currently evaluating the impact of ASU 2023-07 on our future consolidated financial statements and related disclosures.
In December 2023 the FASB issued Accounting Standards Update 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. ASU 2023-09 addresses investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. Early adoption is permitted. A public entity should apply ASU 2023-09 prospectively to all annual periods beginning after December 15, 2024. We are currently evaluating the impact of ASU 2023-09 on our future consolidated financial statements and related disclosures.
19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Certain statements within "Management's Discussion and Analysis of Financial Condition and Results of Operations" are forward-looking statements that involve risks and uncertainties. Words such as may, will, should, would, anticipates, expects, intends, plans, believes, seeks, estimates and similar expressions identify such forward-looking statements. The forward-looking statements contained herein are based on current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements. Factors that might cause such a difference include, among other things, those set forth under "Liquidity and Capital Resources" below and under “Risk Factors” in Part I, Item 1A to our 2023 Form 10-K, which discussion is incorporated herein by reference. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. We assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting forward-looking statements, except as may be required by law.
We are primarily 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 and maintenance services to the semiconductor industry. Our product development and manufacturing activities currently occur primarily in the United States and South Korea. Our equipment and service products are highly technical and are sold through a direct sales force in the United States, Europe, and Asia. Consolidation and partnering within the semiconductor manufacturing industry has resulted in a small number of customers representing a substantial portion of our business. Our ten largest customers accounted for 47.4% of total revenue for the six months ended June 30, 2024.
The first six months of 2024 exhibited continued strong demand for our capital equipment. The overall mature process segment represented 98% of our shipped systems revenue, with 1% of shipments to advanced logic and 1% of shipments to dynamic random-access memory (“DRAM”). Power device shipments comprised 59% of total systems revenue with the general mature segment representing 36%, and image sensors at 4%. Looking ahead, we expect demand from silicon carbide customers within the power segment to remain healthy in the second half, while in general mature, we may see some moderation in revenue in the second half, dependent on the macroeconomic environment and its impact on our customers’ spending patterns. In addition, we expect DRAM customers to start adding capacity as we exit 2024 and into 2025, while “NAND” spending is expected to begin picking up in 2025.
.
Management’s discussion and analysis of our financial condition and results of operations included herein and in our 2023 Form 10-K are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and assumptions. Management’s estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Management has not identified any need to make any material change in, and has not changed, any of our critical accounting estimates and judgments as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Form 10-K.
The following table sets forth our results of operations as a percentage of total revenue:
95.7
%
97.0
96.1
96.9
4.3
3.0
3.9
3.1
100.0
52.5
53.6
51.6
54.8
3.6
2.7
3.5
2.8
56.1
56.3
55.1
57.6
43.9
43.7
44.9
42.4
10.1
8.8
9.1
6.7
5.7
6.8
5.6
6.5
6.0
5.9
23.3
20.5
23.4
20.6
23.2
21.5
21.8
2.4
1.6
2.3
(0.5)
(0.1)
(0.7)
(0.4)
(0.6)
1.8
0.4
1.4
0.5
22.4
23.6
22.9
22.3
2.5
1.1
19.9
22.5
20.2
20.7
Revenue
The following table sets forth our product and services revenue:
Period-to-Period
Change
(dollars in thousands)
(20,293)
(7.6)
(22,882)
(4.5)
Percentage of revenue
2,835
34.2
3,775
23.1
(17,458)
(6.4)
(19,107)
(3.6)
Three months ended June 30, 2024 Compared with Three months ended June 30, 2023
Product revenue, which includes systems sales, sales of spare parts, product upgrades and used systems, was $245.4 million, or 95.7% of revenue, during the three months ended June 30, 2024, compared with $265.7 million, or 97.0% of revenue, for the three months ended June 30, 2023. The $20.3 million decrease in product revenue for the three-
month period ended June 30, 2024, in comparison to the same period in 2023, was primarily driven by a decrease in system sales.
Deferred revenue includes payments received in advance of system sales as well as deferral of revenue from systems sales for installation and other future performance obligations. The total amount of deferred revenue at June 30, 2024 and December 31, 2023 was $174.0 million and $210.9 million, respectively.
Services revenue, which includes the labor component of maintenance and service contracts and fees for service hours provided by on-site service personnel, was $11.1 million, or 4.3% of revenue, for the three months ended June 30, 2024, compared with $8.3 million, or 3.0% of revenue, for the three months ended June 30, 2023. Although services revenue typically increases with the expansion of the installed base of systems, it can fluctuate from period to period based on capacity utilization at customers’ manufacturing facilities, which affects the need for equipment service.
Six months ended June 30, 2024 Compared with Six months ended June 30, 2023
Product revenue was $488.8 million, or 96.1% of revenue, during the six months ended June 30, 2024, compared with $511.7 million, or 96.9% of revenue, for the six months ended June 30, 2023. The $22.9 million decrease in product revenue for the six-month period ended June 30, 2024, in comparison to the same period in 2023, was primarily driven by a decrease in system sales.
Services revenue was $20.1 million, or 3.9% of revenue, for the six months ended June 30, 2024, compared with $16.3 million, or 3.1% of revenue, for the six months ended June 30, 2023.
Revenue Categories used by Management
In addition to the line item revenue categories discussed above, management also regularly disaggregates revenue in the following categories, which it finds relevant and useful:
(Aftermarket purchases reflect current fab utilization as opposed to Systems purchases which reflect capital investment decisions by our customers, which have differing economic drivers);
22
Aftermarket and Systems Revenue
Included in total revenue of $256.5 million during the three months ended June 30, 2024 is revenue from our Aftermarket business of $57.9 million, compared with $58.8 million of Aftermarket revenue for the three months ended June 30, 2023. Aftermarket revenue fluctuates from period to period based on capacity utilization at customers’ manufacturing facilities, which affects the sale of spare parts and demand for equipment service. Aftermarket revenue can also fluctuate from period to period based on the demand for system upgrades or used equipment. The remaining $198.6 million of revenue for the three months ended June 30, 2024 was systems revenue, compared with $215.2 million of systems revenue for the three months ended June 30, 2023. Systems revenue fluctuates from period to period based on our customers’ capital spending.
Included in total revenue of $508.9 million during the six months ended June 30, 2024 is revenue from our Aftermarket business of $114.8 million, compared with $117.6 million of Aftermarket revenue for the six months ended June 30, 2023. The remaining $394.1 million of revenue for the six months ended June 30, 2024 was systems revenue, compared with $410.4 million of systems revenue for the six months ended June 30, 2023.
Gross Profit / Gross Margin
The following table sets forth our gross profit / gross margin:
Gross Profit:
110,621
118,932
(8,311)
(7.0)
226,128
222,168
3,960
Product gross margin
45.1
44.8
46.3
43.4
1,788
771
1,017
131.9
2,332
1,554
778
50.1
Services gross margin
16.1
9.3
11.6
9.5
Total gross profit
(7,294)
(6.1)
4,738
2.1
Gross margin
Gross margin from product revenue was 45.1% for the three months ended June 30, 2024, compared to 44.8% for the three months ended June 30, 2023. The increase in gross margin primarily resulted from a favorable mix of system revenue.
Gross margin from services revenue was 16.1% for the three months ended June 30, 2024, compared to 9.3% for the three months ended June 30, 2023. The increase in gross margin is attributable to changes in the mix of service contracts.
23
Gross margin from product revenue was 46.3% for the six months ended June 30, 2024, compared to 43.4% for the six months ended June 30, 2023. The increase in gross margin primarily resulted from a favorable mix of system revenue.
Gross margin from services revenue was 11.6% for the six months ended June 30, 2024, compared to 9.5% for the six months ended June 30, 2023. The increase in gross margin is attributable to changes in the mix of service contracts.
Operating Expenses
The following table sets forth our operating expenses:
1,656
6.9
3,545
7.4
1,693
10.9
4,994
16.8
255
1,915
6.2
3,604
6.4
10,454
9.6
Our operating expenses consist primarily of personnel costs, including wages, commissions, incentive-based compensation, stock-based compensation and related benefits and taxes; project material costs related to the design and development of new products and enhancement of existing products; and professional fees, travel and depreciation expenses.
Personnel costs are our largest expense, representing $35.3 million, or 59.2%, of our total operating expenses for the three months ended June 30, 2024, compared to $33.8 million, or 60.4%, of our total operating expenses for the three months ended June 30, 2023. Personnel costs were $71.7 million, or 60.2%, of our total operating expenses for the six months ended June 30, 2024, compared to $64.5 million, or 59.3%, of our total operating expenses for the six months ended June 30, 2023. The higher personnel costs for the three and six months ended June 30, 2024 are primarily due to increases in wages and headcount as well as stock compensation expense, partially offset by a decrease in bonus expense.
Research and Development
Our ability to remain competitive depends largely on continuously developing innovative technology, with new and enhanced features and systems and introducing them at competitive prices on a timely basis. Accordingly, based on our strategic plan, we establish annual research and development budgets to fund programs that we expect will solve customers’ high value, high impact, ion implantation challenges.
24
Research and development expense was $25.8 million during the three months ended June 30, 2024, an increase of $1.7 million, or 6.9%, compared with $24.1 million during the three months ended June 30, 2023. The increase is primarily due to higher personnel expenses associated with increases in wages and headcount.
Research and development expense was $51.4 million during the six months ended June 30, 2024, an increase of $3.5 million, or 7.4%, compared with $47.9 million during the six months ended June 30, 2023. The increase is primarily due to higher personnel expenses associated with an increase in headcount.
Sales and Marketing
Our sales and marketing expenses result primarily from the sale of our equipment and services through our direct sales force.
Sales and marketing expense was $17.2 million during the three months ended June 30, 2024, an increase of $1.7 million, or 10.9%, compared with $15.5 million during the three months ended June 30, 2023. The increase is primarily due to higher personnel expenses associated with increases in wages and headcount.
Sales and marketing expense was $34.7 million during the six months ended June 30, 2024, an increase of $5.0 million, or 16.8%, compared with $29.7 million during the six months ended June 30, 2023. The increase is primarily due to higher personnel expenses associated with increases in wages and headcount.
General and Administrative
Our general and administrative expenses result primarily from the costs associated with our executive, finance, information technology, legal and human resource functions.
General and administrative expense was $16.6 million during the three months ended June 30, 2024, an increase of $0.3 million, or 1.6%, compared with $16.3 million during the three months ended June 30, 2023. The increase is primarily due to higher personnel expenses associated with an increase in headcount offset by a decrease in bonus expense.
General and administrative expense was $33.0 million during the six months ended June 30, 2024, an increase of $1.9 million, or 6.2%, compared with $31.1 million during the six months ended June 30, 2023. The increase is primarily due to higher personnel expenses associated with an increase in headcount.
Other Income (Expense)
Period-to-period
change
3,547
390.6
4,461
181.9
Other income (expense) consists of interest earned and accretion on our invested cash balances, interest expense relating to the finance lease obligation we incurred in connection with the 2015 sale of our headquarters facility and other financing obligations as well as foreign exchange gains and losses attributable to both fluctuations of the U.S. dollar against local currencies of the countries in which we operate and forward currency exchange contracts.
Other income was $4.5 million for the three months ended June 30, 2024, compared with other income of $0.9 million for the three months ended June 30, 2023. The $3.5 million increase in other income (expense) compared to the same prior year period was primarily due to an increase in interest income of $1.7 million and foreign exchange gains of $2.3 million from forward currency exchange contracts partially offset by foreign exchange losses of $2.5 million. Other income was $6.9 million for the six months ended June 30, 2024, compared with other income of $2.5 million for the six months ended June 30, 2023. The $4.5 million increase in other income (expense) compared to the same prior year period was primarily due to an increase in interest income of $3.3 million and foreign exchange gains of $3.8 million from forward currency exchange contracts partially offset by foreign exchange losses of $5.9 million.
Income Tax Provision
3,362
110.7
5,561
67.5
26
At June 30, 2024, we had $145.2 million in unrestricted cash and cash equivalents and $403.1 million in short-term investments, in addition to $6.7 million in restricted cash. Management believes that maintaining a strong cash balance is necessary to fund a continuing ramp in our business which can require significant cash investment to meet sudden demand. Additionally, we are using cash to repurchase shares as part of our stock repurchase program and are considering both organic and inorganic opportunities to drive future growth, for which cash resources will be necessary.
Our liquidity is affected by many factors. Some of these relate specifically to the operations of our business, for example, the rate of sales of our products, and others relate to the uncertainties of global economic conditions, including the availability of credit and the condition of the overall semiconductor equipment industry. Our industry requires ongoing investments in operations and research and development that are not easily adjusted to reflect changes in revenue. As a result, profitability and cash flows can fluctuate more widely than revenue. Stock repurchases, as discussed below, also reduce our cash balances.
During the six months ended June 30, 2024 and 2023, we generated $82.3 million and $67.3 million, respectively, of cash related to operating activities.
Investing activities for the six months ended June 30, 2024 resulted in cash outflows of $61.3 million, $3.6 million of which was used for capital expenditures and $249.0 million of which was used to purchase short-term investments, offset by $191.3 million related to maturities of short-term investments. Investing activities for the six months ended June 30, 2023 resulted in cash outflows of $73.2 million, $5.2 million of which was used for capital expenditures and $188.9 million of which was used to purchase short-term investments, offset by $120.9 million related to maturities of short-term investments.
Financing activities for the six months ended June 30, 2024 resulted in a cash usage of $40.7 million. During the first six months of 2024, $30.0 million in cash was used to repurchase our common stock and $11.2 million was used for payments to government tax authorities for income tax withholding on employee compensation arising from the vesting of RSUs, where units are withheld by us to cover taxes, as well as $0.7 million relating to the reduction of the liability under the finance lease of our corporate headquarters. These amounts were partially offset by $1.2 million of proceeds related to the purchase of shares under our 2020 ESPP during the first six months of 2024. In comparison, financing activities for the six months ended June 30, 2023 resulted in cash usage of $40.1 million, $25.0 million of which related to the repurchase of our common stock and $15.5 million of which related to payments made to government tax authorities for income tax withholding on employee compensation arising from the vesting of RSUs, as well as $0.6 million relating to the reduction of our financing lease liability. These amounts were partially offset by $1.0 million of proceeds related to the purchase of shares under our 2020 ESPP and exercise of stock options during the first six months of 2023.
As of June 30, 2024, we had a security deposit of $5.9 million related to the lease of our corporate headquarters in the form of a cash collateralized letter of credit issued with UBS Bank USA, which is classified as long-term restricted cash on our balance sheet.
We believe that based on our current market, revenue, expense and cash flow forecasts, our existing cash and cash equivalents will be sufficient to satisfy our anticipated cash requirements for the short- and long-term.
Commitments and Contingencies
Significant commitments and contingencies at June 30, 2024 are consistent with those discussed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Note 16 to the consolidated financial statements included in our 2023 Form 10-K.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
As of June 30, 2024, there have been no material changes to the quantitative information about market risk disclosed in Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” included in our 2023 Form 10-K.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of the Evaluation Date, these disclosure controls and procedures are effective.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) identified in connection with the evaluation of our internal control that occurred during the three months ended June 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We are, from time to time, a party to litigation that arises in the normal course of our business operations. We are not presently a party to any litigation that we believe might have a material adverse effect on our business operations.
Item 1A. Risk Factors.
As of June 30, 2024, there have been no material changes to the risk factors described in Item 1A, “Risk Factors” included in our 2023 Form 10-K.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.
In February 2022, our Board of Directors authorized a share repurchase program for up to $100 million of the Company’s common stock. This program was announced on March 1, 2022. In August 2023, our Board of Directors approved additional funding of $200 million for our stock repurchase program, to be available upon the full utilization of the $100 million repurchase funding approved in February 2022. This additional funding was announced on September 12, 2023. The Company’s share repurchase program does not have an expiration date.
The following table summarizes the stock repurchase activity, based upon settlement date, for the three months ended June 30, 2024 as well as the approximate dollar value of shares that may yet be purchased pursuant to our stock repurchase program:
Total Number of Shares Purchased
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Program
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
(in thousands except per share amounts)
April 1 through April 30
78
$103.33
166,999
May 1 through May 31
63
$110.03
160,011
June 1 through June 30
141
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
During the quarter ended June 30, 2024, no director or officer adopted or terminated any contract, instrument or written plan for the purchase or sale of Axcelis securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any non-Rule 10b5-1 trading arrangement as defined in Item 408(c) of Regulation S-K.
Item 6. Exhibits.
The following exhibits are filed herewith:
ExhibitNo
Description
Restated Certificate of Incorporation of the Company filed November 2, 2017. Incorporated by reference to Exhibit 3.1 of the Company’s Form 10-Q filed with the Commission on November 3, 2017.
3.2
Certificate of Amendment to the Restated Certificate of Incorporation of the Company filed May 9, 2024. Incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K filed with the Commission on May 9, 2024.
3.3
Bylaws of the Company, as amended as of May 11, 2022. Incorporated by reference to Exhibit 3.2 of the Company’s Form 8-K filed with the SEC on May 11, 2022.
31.1*
Certification of the Principal Executive Officer under Exchange Act Rule 13a-14(a)/15d-14(a) (Section 302 of the Sarbanes-Oxley Act), dated August 1, 2024.
31.2*
Certification of the Principal Financial Officer under Exchange Act Rule 13a-14(a)/15d-14(a) (Section 302 of the Sarbanes-Oxley Act), dated August 1, 2024.
32.1**
Certification of the Principal Executive Officer pursuant to Section 1350 of Chapter 63 of title 18 of the United States Code (Section 906 of the Sarbanes-Oxley Act), dated August 1, 2024.
32.2**
Certification of the Principal Financial Officer pursuant to Section 1350 of Chapter 63 of title 18 of the United States Code (Section 906 of the Sarbanes-Oxley Act), dated August 1, 2024.
101*
The following materials from the Company’s Form 10-Q for the quarter ended June 30, 2024, formatted in inline eXtensible Business Reporting Language (iXBRL): (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements (Unaudited). Filed herewith.
104*
Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101).
* Filed herewith
** This exhibit is being furnished rather than filed, and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DATED: August 1, 2024
By:
/s/ JAMES G. COOGAN
James G. Coogan
Executive Vice President and Chief Financial Officer
Duly Authorized Officer and Principal Financial Officer
31