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, 20202021

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, $.001$0.001 par value

ACLS

Nasdaq Global Select Market

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

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

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

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company

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

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

As of July 31, 2020August 3, 2021 there were 33,465,17033,574,743 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 six months ended June 30, 20202021 and 20192020

3

Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 20202021 and 20192020

4

Consolidated Balance Sheets as of June 30, 20202021 and December 31, 20192020

5

Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 20202021 and 20192020

6

Consolidated Statements of Cash Flows for the six months ended June 30, 20202021 and 20192020

7

Notes to Consolidated Financial Statements (Unaudited)

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Overview

19

Critical Accounting Estimates

2019

Results of Operations

2120

Liquidity and Capital Resources

2726

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

2928

Item 4.

Controls and Procedures

2928

PART II - OTHER INFORMATION

3029

Item 1.

Legal Proceedings

3029

Item 1A.

Risk Factors

3029

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

3029

Item 3.

Defaults Upon Senior Securities

3029

Item 4.

Mine Safety Disclosures

3029

Item 5.

Other Information

3029

Item 6.

Exhibits

3130

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

Six months ended

Three months ended

Six months ended

June 30,

June 30,

June 30,

June 30,

    

2020

    

2019

    

2020

    

2019

    

    

2021

    

2020

    

2021

    

2020

    

Revenue:

Product

$

117,194

$

68,714

$

229,327

$

152,911

$

140,156

$

117,194

$

266,765

$

229,327

Services

 

5,771

 

5,591

 

12,629

 

12,871

 

7,118

 

5,771

 

13,285

 

12,629

Total revenue

 

122,965

 

74,305

 

241,956

 

165,782

 

147,274

 

122,965

 

280,050

 

241,956

Cost of revenue:

Product

 

65,519

 

37,188

 

132,691

 

84,518

 

76,688

 

65,519

 

147,022

 

132,691

Services

 

5,547

 

5,368

 

11,817

 

12,009

 

6,572

 

5,547

 

12,579

 

11,817

Total cost of revenue

 

71,066

 

42,556

 

144,508

 

96,527

 

83,260

 

71,066

 

159,601

 

144,508

Gross profit

 

51,899

 

31,749

 

97,448

 

69,255

 

64,014

 

51,899

 

120,449

 

97,448

Operating expenses:

Research and development

 

16,040

 

13,720

 

30,646

 

27,405

 

16,623

 

16,040

 

32,308

 

30,646

Sales and marketing

 

9,437

 

8,436

 

17,641

 

17,354

 

12,177

 

9,437

 

22,564

 

17,641

General and administrative

 

10,041

 

7,583

 

19,077

 

15,390

 

11,217

 

10,041

 

21,230

 

19,077

Total operating expenses

 

35,518

 

29,739

 

67,364

 

60,149

 

40,017

 

35,518

 

76,102

 

67,364

Income from operations

 

16,381

 

2,010

 

30,084

 

9,106

 

23,997

 

16,381

 

44,347

 

30,084

Other (expense) income:

Interest income

 

70

 

845

 

552

 

1,686

 

40

 

70

 

73

 

552

Interest expense

 

(1,299)

 

(1,311)

 

(2,602)

 

(2,541)

 

(1,274)

 

(1,299)

 

(2,303)

 

(2,602)

Other, net

 

421

 

(189)

 

(199)

 

(362)

 

(15)

 

421

 

(1,168)

 

(199)

Total other expense

 

(808)

 

(655)

 

(2,249)

 

(1,217)

 

(1,249)

 

(808)

 

(3,398)

 

(2,249)

Income before income taxes

 

15,573

 

1,355

 

27,835

 

7,889

 

22,748

 

15,573

 

40,949

 

27,835

Income tax provision

 

2,271

 

799

 

3,312

 

1,271

 

3,842

 

2,271

 

5,563

 

3,312

Net income

$

13,302

$

556

$

24,523

$

6,618

$

18,906

$

13,302

$

35,386

$

24,523

Net income per share:

Basic

$

0.40

$

0.02

$

0.74

$

0.20

$

0.56

$

0.40

$

1.05

$

0.74

Diluted

$

0.39

$

0.02

$

0.72

$

0.19

$

0.55

$

0.39

$

1.03

$

0.72

Shares used in computing net income per share:

Basic weighted average common shares

 

33,116

 

32,729

 

32,998

 

32,706

 

33,677

 

33,116

 

33,696

 

32,998

Diluted weighted average common shares

 

33,958

 

33,901

 

34,023

 

34,064

 

34,311

 

33,958

 

34,473

 

34,023

See accompanying Notes to these Consolidated Financial Statements

3

Table of Contents

Axcelis Technologies, Inc.

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

Three months ended

Six months ended

Three months ended

Six months ended

June 30,

June 30,

June 30,

June 30,

    

2020

    

2019

    

2020

    

2019

    

    

2021

    

2020

    

2021

    

2020

    

Net income

$

13,302

$

556

$

24,523

$

6,618

$

18,906

$

13,302

$

35,386

$

24,523

Other comprehensive income (loss):

Foreign currency translation adjustments

 

836

 

(219)

 

(276)

 

(714)

 

552

 

836

 

(820)

 

(276)

Amortization of actuarial loss and other adjustments from pension plan

 

57

 

29

 

114

 

59

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

 

34

 

57

 

54

 

114

Total other comprehensive income (loss)

893

(190)

(162)

(655)

586

893

(766)

(162)

Comprehensive income

$

14,195

$

366

$

24,361

$

5,963

$

19,492

$

14,195

$

34,620

$

24,361

See accompanying Notes to these Consolidated Financial Statements

4

Table of Contents

Axcelis Technologies, Inc.

Consolidated Balance Sheets

(In thousands, except per share amounts)

(Unaudited)

    

June 30,

    

December 31,

 

    

June 30,

    

December 31,

 

2020

2019

 

2021

2020

 

ASSETS

Current assets:

Cash and cash equivalents

$

190,340

$

139,881

$

219,731

$

203,479

Accounts receivable, net

 

64,909

 

83,753

 

79,544

 

86,865

Inventories, net

 

149,178

 

140,364

 

192,321

 

161,076

Prepaid expenses and other current assets

 

16,272

 

11,681

 

22,535

 

19,371

Total current assets

 

420,699

 

375,679

 

514,131

 

470,791

Property, plant and equipment, net

 

27,997

 

25,328

 

30,683

 

29,840

Operating lease assets

5,033

5,849

7,626

4,542

Finance lease assets, net

21,200

21,880

19,889

20,544

Long-term restricted cash

 

6,676

 

6,653

 

755

 

753

Deferred income taxes

64,615

68,060

51,386

57,851

Other assets

 

42,344

 

44,645

 

36,170

 

40,303

Total assets

$

588,564

$

548,094

$

660,640

$

624,624

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

30,270

$

25,341

$

40,695

$

24,013

Accrued compensation

 

14,221

 

7,631

 

14,906

 

24,562

Warranty

 

3,942

 

2,759

 

4,690

 

4,280

Income taxes

 

298

 

294

 

622

 

654

Deferred revenue

 

29,181

 

24,601

 

34,112

 

21,221

Current portion of finance lease obligation

 

654

 

399

 

864

 

756

Other current liabilities

 

8,193

 

7,639

 

10,585

 

8,945

Total current liabilities

 

86,759

 

68,664

 

106,474

 

84,431

Long-term finance lease obligation

 

47,787

 

48,149

 

46,923

 

47,393

Long-term deferred revenue

 

1,236

 

4,650

 

1,406

 

1,837

Other long-term liabilities

 

7,758

 

7,204

 

11,735

 

9,361

Total liabilities

 

143,540

 

128,667

 

166,538

 

143,022

Commitments and contingencies (Note 16)

Stockholders’ equity:

Common stock, $0.001 par value, 75,000 shares authorized; 33,433 shares issued and outstanding at June 30, 2020; 32,585 shares issued and outstanding at December 31, 2019

 

33

 

33

Common stock, $0.001 par value, 75,000 shares authorized; 33,657 shares issued and outstanding at June 30, 2021; 33,633 shares issued and outstanding at December 31, 2020

 

34

 

34

Additional paid-in capital

 

562,839

 

559,878

 

561,680

 

570,102

Accumulated deficit

 

(117,428)

 

(140,226)

 

(70,281)

 

(91,969)

Accumulated other comprehensive loss

 

(420)

 

(258)

Accumulated other comprehensive income

 

2,669

 

3,435

Total stockholders’ equity

 

445,024

 

419,427

 

494,102

 

481,602

Total liabilities and stockholders’ equity

$

588,564

$

548,094

$

660,640

$

624,624

See accompanying Notes to these Consolidated Financial Statements

5

Table of Contents

Axcelis Technologies, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

Accumulated

 

Additional

Other

Total

 

Common Stock

Paid-in

Accumulated

Comprehensive

Stockholders’

 

    

Shares

    

Amount

    

Capital

    

Deficit

    

Income (Loss)

    

Equity

 

Balance at December 31, 2018

32,558

$

33

$

565,116

$

(157,260)

$

448

$

408,337

Net income

 

 

 

 

6,062

 

 

6,062

Foreign currency translation adjustments

 

 

 

 

 

(495)

 

(495)

Change in pension obligation

 

 

 

 

 

30

 

30

Exercise of stock options

 

288

 

 

1,828

 

 

 

1,828

Issuance of restricted common shares,
net of shares withheld

 

35

 

 

(281)

 

 

 

(281)

Stock-based compensation expense

 

 

 

1,672

 

 

 

1,672

Balance at March 31, 2019

 

32,881

$

33

$

568,335

$

(151,198)

$

(17)

$

417,153

Net income

 

 

 

 

556

 

 

556

Foreign currency translation adjustments

 

 

 

 

 

(219)

 

(219)

Change in pension obligation

 

 

 

 

 

29

 

29

Exercise of stock options

 

104

 

 

567

 

 

 

567

Issuance of shares under Employee Stock Purchase Plan

 

32

 

 

479

 

 

 

479

Issuance of restricted common shares,
net of shares withheld

 

165

 

 

(1,310)

 

 

 

(1,310)

Stock-based compensation expense

 

 

2,246

 

 

 

2,246

Repurchase of common stock

 

(885)

 

(1)

 

(14,034)

 

 

 

(14,035)

Balance at June 30, 2019

 

32,297

$

32

$

556,283

$

(150,642)

$

(207)

$

405,466

Accumulated

 

Additional

Other

Total

 

Common Stock

Paid-in

Accumulated

Comprehensive

Stockholders’

 

    

Shares

    

Amount

    

Capital

    

Deficit

    

Income (Loss)

    

Equity

 

Balance at December 31, 2019

32,585

$

33

$

559,878

$

(140,226)

$

(258)

$

419,427

Net income

 

 

 

 

11,221

 

 

11,221

Foreign currency translation adjustments

 

 

 

 

 

(1,112)

 

(1,112)

Change in pension obligation

 

 

 

 

 

57

 

57

Exercise of stock options

 

540

 

1

 

4,498

 

 

 

4,499

Issuance of shares under Employee Stock Purchase Plan

 

1

 

 

19

 

 

 

19

Issuance of restricted common shares,
net of shares withheld

 

69

 

 

(1,162)

 

 

 

(1,162)

Stock-based compensation expense

1,724

1,724

Repurchase of common stock

 

(358)

 

(1)

 

(5,775)

 

(1,725)

 

 

(7,501)

Balance at March 31, 2020

 

32,837

$

33

$

559,182

$

(130,730)

$

(1,313)

$

427,172

Net income

 

 

 

 

13,302

 

 

13,302

Foreign currency translation adjustments

 

 

 

 

 

836

 

836

Change in pension obligation

 

 

 

 

 

57

 

57

Exercise of stock options

 

343

 

 

2,783

 

 

 

2,783

Issuance of shares under Employee Stock Purchase Plan

 

21

 

 

490

 

 

 

490

Issuance of restricted common shares,
net of shares withheld

 

232

 

 

(2,698)

 

 

 

(2,698)

Stock-based compensation expense

 

 

3,082

 

 

 

3,082

Balance at June 30, 2020

 

33,433

$

33

$

562,839

$

(117,428)

$

(420)

$

445,024

Accumulated

Accumulated

Additional

Other

Total

Additional

Other

Total

Common Stock

Paid-in

Accumulated

Comprehensive

Stockholders’

Common Stock

Paid-in

Accumulated

Comprehensive

Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

Income (Loss)

    

Equity

    

Shares

    

Amount

    

Capital

    

Deficit

    

Income (Loss)

    

Equity

Balance at December 31, 2019

32,585

$

33

$

559,878

$

(140,226)

$

(258)

$

419,427

Balance at December 31, 2020

33,633

$

34

$

570,102

$

(91,969)

$

3,435

$

481,602

Net income

 

 

 

 

16,480

 

 

16,480

Foreign currency translation adjustments

 

 

 

 

 

(1,372)

 

(1,372)

Change in pension obligation

 

 

 

 

 

20

 

20

Exercise of stock options

 

268

 

 

2,512

 

 

 

2,512

Issuance of restricted common shares,
net of shares withheld

 

81

 

 

(2,354)

 

 

 

(2,354)

Stock-based compensation expense

 

 

2,407

 

 

 

2,407

Repurchase of common stock

 

(303)

 

 

(5,468)

 

(6,167)

 

 

(11,635)

Balance at March 31, 2021

 

33,679

$

34

$

567,199

$

(81,656)

$

2,083

$

487,660

Net income

 

 

 

 

11,221

 

 

11,221

 

 

 

 

18,906

 

 

18,906

Foreign currency translation adjustments

 

 

 

 

 

(1,112)

 

(1,112)

 

 

 

 

 

552

 

552

Change in pension obligation

 

 

 

 

 

57

 

57

 

 

 

 

 

34

 

34

Exercise of stock options

 

540

 

1

 

4,498

 

 

 

4,499

 

72

 

 

563

 

 

 

563

Issuance of shares under Employee Stock Purchase Plan

 

1

 

 

19

 

 

 

19

 

15

 

 

509

 

 

 

509

Issuance of restricted common shares,
net of shares withheld

 

69

 

 

(1,162)

 

 

 

(1,162)

 

214

 

 

(4,141)

 

 

 

(4,141)

Stock-based compensation expense

 

 

1,724

 

 

 

1,724

 

 

 

3,377

 

 

 

3,377

Repurchase of common stock

 

(358)

 

(1)

 

(5,775)

 

(1,725)

 

 

(7,501)

(323)

(5,827)

(7,531)

(13,358)

Balance at March 31, 2020

 

32,837

$

33

$

559,182

$

(130,730)

$

(1,313)

$

427,172

Net income

 

 

 

 

13,302

 

 

13,302

Foreign currency translation adjustments

 

 

 

 

 

836

 

836

Change in pension obligation

 

 

 

 

 

57

 

57

Exercise of stock options

 

343

 

 

2,783

 

 

 

2,783

Issuance of shares under Employee Stock Purchase Plan

 

21

 

 

490

 

 

 

490

Issuance of restricted common shares,
net of shares withheld

 

232

 

 

(2,698)

 

 

 

(2,698)

Stock-based compensation expense

3,082

3,082

Balance at June 30, 2020

 

33,433

$

33

$

562,839

$

(117,428)

$

(420)

$

445,024

Balance at June 30, 2021

 

33,657

$

34

$

561,680

$

(70,281)

$

2,669

$

494,102

See accompanying Notes to these Consolidated Financial Statements

6

Table of Contents

Axcelis Technologies, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Six months ended

Six months ended

June 30,

June 30,

    

2020

    

2019

    

    

2021

    

2020

    

Cash flows from operating activities

Net income

$

24,523

$

6,618

$

35,386

$

24,523

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

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

Depreciation and amortization

 

4,829

 

3,600

 

5,336

 

4,829

Deferred income taxes

 

3,035

 

1,341

 

5,107

 

3,035

Stock-based compensation expense

 

4,806

 

3,989

 

5,784

 

4,806

Provision for excess and obsolete inventory

 

1,708

 

1,329

 

1,888

 

1,708

Changes in operating assets & liabilities:

Changes in operating assets and liabilities:

Accounts receivable

 

18,752

 

16,346

 

7,091

 

18,752

Inventories

 

(9,123)

 

(11,161)

 

(32,418)

 

(9,123)

Prepaid expenses and other current assets

 

(4,206)

 

(433)

 

(3,309)

 

(4,206)

Accounts payable and other current liabilities

 

11,808

 

(21,559)

 

7,282

 

11,808

Deferred revenue

 

1,167

 

(8,498)

 

12,460

 

1,167

Income taxes

 

5

 

(129)

 

(27)

 

5

Other assets and liabilities

 

(729)

 

(11,769)

 

1,341

 

(729)

Net cash provided by (used in) operating activities

 

56,575

 

(20,326)

Net cash provided by operating activities

 

45,921

 

56,575

Cash flows from investing activities

Expenditures for property, plant and equipment and capitalized software

 

(2,975)

 

(8,757)

 

(2,392)

 

(2,975)

Net cash used in investing activities

 

(2,975)

 

(8,757)

 

(2,392)

 

(2,975)

Cash flows from financing activities

Net settlement on restricted stock grants

 

(3,860)

 

(1,591)

 

(6,495)

 

(3,860)

Repurchase of common stock

 

(7,501)

 

(14,035)

 

(24,993)

 

(7,501)

Proceeds from Employee Stock Purchase Plan

 

509

 

407

 

508

 

509

Principal payments on finance lease obligation

(108)

(362)

(108)

Proceeds from exercise of stock options

7,282

2,396

3,075

7,282

Net cash used in financing activities

 

(3,678)

 

(12,823)

 

(28,267)

 

(3,678)

Effect of exchange rate changes on cash and cash equivalents

 

560

 

168

 

992

 

560

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

 

50,482

 

(41,738)

Net increase in cash, cash equivalents and restricted cash

 

16,254

 

50,482

Cash, cash equivalents and restricted cash at beginning of period

 

146,534

 

184,902

 

204,232

 

146,534

Cash, cash equivalents and restricted cash at end of period

$

197,016

$

143,164

$

220,486

$

197,016

See accompanying Notes to these Consolidated Financial Statements

7

Table of Contents

Axcelis Technologies, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Note 1.  Nature of Business

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

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

The balance sheet at December 31, 20192020 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in Axcelis Technologies, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019.2020.

Note 2.  Stock-Based Compensation

We maintain the Axcelis Technologies, Inc. 2012 Equity Incentive Plan, as amended (the “2012 Equity Plan”), which became effective on May 2, 2012, and permits the issuance of options, restricted stock, restricted stock units (“RSUs”) and performance awards to selected employees, directors and consultants of the Company. Our 2000 Stock Plan (the “2000 Stock Plan”) expired on May 1, 2012 and 0 new grants may be made under that plan after that date. However, unexpired options granted under the 2000 Stock Plan, which have a 10 year10-year term, remain outstanding and subject to the terms of the 2000 Stock Plan. We also maintain the Axcelis Technologies, Inc. 2020 Employee Stock Purchase Plan (the “ESPP”“2020 ESPP”), an Internal Revenue Code Section 423 plan. The Company’s Employee Stock Purchase Plan, which was effective in June 2000 (the “2000 ESPP”), expired in June 2020.

The 2012 Equity Plan and the ESPP areis 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, 2019.2020.

We recognized stock-based compensation expense of $3.1$3.4 million and $2.3$3.1 million for the three monththree-month periods ended June 30, 20202021 and 2019,2020, respectively. We recognized stock-based compensation expense of $4.8$5.8 million and $4.0$4.8 million for the six monthsix-month periods ended June 30, 20202021 and 2019,2020, respectively. These amounts include compensation expense related to RSUs, non-qualified stock options and stock to be issued to participants under the 2020 ESPP and 2000 ESPP.

In the three monththree-month periods ended June 30, 20202021 and 2019,2020, we issued 0.6 million and 0.3 million shares of common stock, respectively, upon stock option exercises, purchases under the ESPP and vesting of RSUs. In the three month periods ended June 30, 2020 and 2019, we received proceeds of $3.3 million and $1.0 million, respectively, in connection with the exercise of stock options and ESPP purchases.

In the six month periods ended June 30, 2020 and 2019, we issued 1.2 million and 0.6 million shares of common stock, respectively, upon stock option exercises, purchases under the ESPPemployee stock purchase plans and vesting of RSUs. In the six monththree-month periods ended June 30, 20202021 and 2019,2020, we received proceeds of $7.8$1.1 million and $2.8$3.3 million, respectively, in connection with the exercise of stock options and ESPP purchases.purchases under the employee stock purchase plans.

In the six-month periods ended June 30, 2021 and 2020, we issued 0.7 million and 1.2 million shares of common stock, respectively, upon stock option exercises, purchases under the employee stock purchase plans and vesting of RSUs. In the six-month periods ended June 30, 2021 and 2020, we received proceeds of $3.6 million and $7.8 million, respectively, in connection with the exercise of stock options and purchases under the employee stock purchase plans.

8

Table of Contents

Note 3.  Leases

We have operating leases for office space, warehouse space, computer and office equipment and vehicles used in our business operations. We have a finance lease as a result of the 2015 sale-leaseback of our corporate headquarters in

8

Table of Contents

Beverly, Massachusetts. All new agreements are reviewed to determine if they contain a lease component. A lease is a contract or part of a contract that conveys the right to control the use of identified property, plant or equipment forover a period of time in exchange for consideration. We recognize the lease obligation on a discounted basis using the explicit or implicit discount rate stated within the agreement. We recognize a corresponding right-of-use asset, which is initially determined based upon the net present value of the associated liability and is adjusted for deferred costs and possible impairment, if any. For those lease agreements that do not indicate the applicable discount rate, we use our incremental borrowing rate. We have made the following policy elections: (i) operating leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet; (ii) we recognize lease expense for operating leases on a straight-line basis over the lease term; and (iii) we account for lease components and non-lease components that are fixed payments as one component. Some of our operating leases include one or more options to renew, with renewal terms that can extend the respective lease term 1 to 3 years. The exercise of lease renewal options are at our sole discretion. For lease extensions that are reasonably certain to occur, we have included these renewal periods in our calculation of the net present value of the lease obligation and related right-of-use asset. Certain leases also include options to purchase the leased property. The depreciable life of certain assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The amounts of operating and finance lease right-of-use assets and related lease obligations recorded within our consolidated balance sheets are as follows:

June 30,

December 31,

June 30,

December 31,

Leases

Classification

2020

    

2019

    

Classification

2021

    

2020

Assets

(in thousands)

(in thousands)

Operating lease

Operating lease assets

$

5,033

$

5,849

Operating leases

Operating lease assets

$

7,626

$

4,542

Finance lease

Finance lease assets *

 

21,200

 

21,880

Finance lease assets *

 

19,889

 

20,544

Total leased assets

$

26,233

$

27,729

$

27,515

$

25,086

Liabilities

Current

Operating

Other current liabilities

$

2,989

$

3,144

Other current liabilities

$

3,215

$

2,573

Finance

Current portion of finance lease obligation

654

399

Current portion of finance lease obligation

864

756

Noncurrent

Operating

Other long-term liabilities

2,035

2,553

Other long-term liabilities

4,398

1,949

Finance

Finance lease obligation

 

47,787

 

48,149

Finance lease obligation

 

46,923

 

47,393

Total lease liabilities

$

53,465

$

54,245

$

55,400

$

52,671

* Finance lease assets are recorded net of accumulated depreciation of $47.9 million and include $0.7 million of prepaid financing costs as of June 30, 2020. Finance lease assets are recorded net of accumulated depreciation of $47.4 million and include $0.7 million of prepaid financing costs as of December 31, 2019.

* Finance lease assets are recorded net of accumulated depreciation of $48.9 million and include $0.7 million of prepaid financing costs as of June 30, 2021. Finance lease assets are recorded net of accumulated depreciation of $48.4 million and include $0.7 million of prepaid financing costs as of December 31, 2020.

* Finance lease assets are recorded net of accumulated depreciation of $48.9 million and include $0.7 million of prepaid financing costs as of June 30, 2021. Finance lease assets are recorded net of accumulated depreciation of $48.4 million and include $0.7 million of prepaid financing costs as of December 31, 2020.

All of our operating lease office locations support selling and servicing functions. Operating lease expense, and depreciation and interest expense relating to our finance lease obligation, are recognized within our consolidated statement of operations for the three and six months ended June 30, 20202021 and 20192020 as follows:

9

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Three months ended

Six months ended

 

Three months ended

Six months ended

 

June 30,

June 30,

June 30,

June 30,

Lease cost

Classification

2020

    

2019

    

2020

    

2019

 

Classification

2021

    

2020

    

2021

    

2020

 

Operating lease cost

(in thousands)

 

(in thousands)

 

Service

Cost of revenue

$

624

$

583

$

1,174

$

1,180

Cost of revenue

$

644

$

624

$

1,283

$

1,174

Research and development

Operating expenses

 

128

 

86

 

209

 

152

Operating expenses

 

122

 

128

 

252

 

209

Sales and marketing*

Operating expenses

 

346

 

345

 

678

 

699

Operating expenses

 

376

 

346

 

755

 

678

General and administrative*

Operating expenses

 

220

 

193

 

435

 

402

Operating expenses

 

201

 

220

 

461

 

435

Total operating lease cost

$

1,318

$

1,207

$

2,496

$

2,433

$

1,343

$

1,318

$

2,751

$

2,496

Finance lease cost

Depreciation of leased assets

Cost of revenue, R&D, Sales and marketing and G&A

$

328

$

332

$

681

$

665

Cost of revenue, R&D, Sales and marketing and G&A

$

328

$

328

$

656

$

681

Interest on lease liabilities

Interest expense

 

1,299

 

1,311

 

2,602

 

2,541

Interest expense

 

1,274

 

1,299

 

2,553

 

2,602

Total finance lease cost

$

1,627

$

1,643

$

3,283

$

3,206

$

1,602

$

1,627

$

3,209

$

3,283

Total lease cost

$

2,945

$

2,850

$

5,779

$

5,639

$

2,945

$

2,945

$

5,960

$

5,779

* Sales and marketing, general and administrative expense includes short-term lease and variable lease costs of approximately $0.3 million and $0.5 million for the three and six months ended June 30, 2020, respectively and includes short-term lease and variable lease costs of approximately $0.2 million and $0.4 million for the three and six months ended June 30, 2019, respectively.

* Sales and marketing and general and administrative expense also includes short-term lease and variable lease costs of approximately $0.4 million and $0.9 million for the three and six months ended June 30, 2021, respectively, and includes short-term and variable lease costs of approximately $0.3 million and $0.5 million for the three and six months ended June 30, 2020, respectively.

* Sales and marketing and general and administrative expense also includes short-term lease and variable lease costs of approximately $0.4 million and $0.9 million for the three and six months ended June 30, 2021, respectively, and includes short-term and variable lease costs of approximately $0.3 million and $0.5 million for the three and six months ended June 30, 2020, respectively.

OurThe lease of our corporate headquarters, shown below under finance leases, hashad an original lease term of 22 years.years, beginning in January 2015. All other locations are treated as operating leases, with lease terms ranging from 1 to 10 years. The tables below reflect the minimum cash outflow regarding our current lease obligations as well as the weighted-average remaining lease term and weighted-average discount rates used in our calculation of our lease obligations and right-of-use assets as of June 30, 2020:2021:

Finance

Operating

    

Total

Finance

Operating

    

Total

 

Maturity of Lease Liabilities

Leases

Leases

Leases

Leases

Leases

Leases

(in thousands)

(in thousands)

2020

$

2,865

$

1,843

$

4,708

2021

 

5,848

 

2,242

 

8,090

$

2,929

$

1,827

$

4,756

2022

 

5,980

 

945

 

6,925

 

5,980

 

3,053

 

9,033

2023

 

6,114

 

219

 

6,333

 

6,114

 

1,544

 

7,658

2024

6,252

86

6,338

 

6,252

 

794

 

7,046

2025

5,930

712

6,642

Thereafter

79,653

210

79,863

73,723

545

74,268

Total lease payments

$

106,712

$

5,545

$

112,257

$

100,928

$

8,475

$

109,403

Less interest portion*

(58,271)

(521)

(58,792)

(53,141)

(862)

(54,003)

Finance lease and operating lease obligations

$

48,441

$

5,024

$

53,465

$

47,787

$

7,613

$

55,400

* Finance lease interest calculated using the implied interest rate; operating lease interest calculated using estimated corporate borrowing rate.

* Finance lease interest calculated using the implied interest rate; operating lease interest calculated using estimated corporate borrowing rate.

* Finance lease interest calculated using the implied interest rate; operating lease interest calculated using estimated corporate borrowing rate.

10

Table of Contents

June 30,

Lease term and discount rate

    

20202021

Weighted-average remaining lease term (years):

Operating leases

1.73.0

Finance leases

 

16.615.6

Weighted-average discount rate:

Operating leases

 

4.5%

Finance leases

 

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 payment of principal component. The table below shows our cash outflows,

10

Table of Contents

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:assets for the six months ending June 30, 2021 and 2020, respectively:

Six months ended

Six months ended

June 30,

June 30,

Cash paid for amounts included in the measurement of lease liabilities

    

2020

2019

    

2021

2020

(in thousands)

(in thousands)

Operating cash outflows from operating leases

$

2,496

$

2,433

$

2,751

$

2,496

Operating cash outflows from finance leases

 

2,746

 

2,792

 

2,556

 

2,746

Financing cash outflows from finance leases

108

362

108

Operating lease assets obtained in exchange for operating lease liabilities

 

1,038

 

6,431

 

4,192

 

1,038

Finance lease assets obtained in exchange for new finance lease liabilities

$

$

$

$

Note 4. 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:

Three months ended

Six months ended

Three months ended

Six months ended

June 30,

June 30,

June 30,

June 30,

2020

2019

2020

2019

2021

2020

2021

2020

(in thousands)

(in thousands)

Systems

$

76,815

$

37,224

$

159,152

$

94,316

$

100,138

$

76,815

$

181,129

$

159,152

Aftermarket

46,150

37,081

82,804

71,466

47,136

46,150

98,921

82,804

$

122,965

$

74,305

$

241,956

$

165,782

Total Revenue

$

147,274

$

122,965

$

280,050

$

241,956

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:

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019

(in thousands)

North America

$

8,915

$

9,380

$

19,576

$

20,988

Asia Pacific

106,604

49,717

203,432

112,643

Europe

7,446

15,208

18,948

32,151

$

122,965

$

74,305

$

241,956

$

165,782

11

Table of Contents

Three months ended

Six months ended

June 30,

June 30,

2021

2020

2021

2020

(in thousands)

North America

$

10,204

$

8,915

$

19,712

$

19,576

Asia Pacific

116,642

106,604

220,033

203,432

Europe

20,428

7,446

40,305

18,948

Total Revenue

$

147,274

$

122,965

$

280,050

$

241,956

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:

June 30,

December 31,

June 30,

December 31,

2020

2019

2021

2020

(in thousands)

(in thousands)

Contract liabilities

$

30,417

$

29,251

$

35,518

$

23,058

Contract liabilities are reflected as deferred revenue on the consolidated balance sheet and relate to payments invoiced or received in advance of completion of performance obligations under a contract. Contract liabilities are recognized as revenue upon the fulfillment of performance obligations.

Three months ended

Six months ended

Three months ended

Six months ended

June 30,

   

June 30,

June 30,

   

June 30,

2020

2019

2020

2019

2021

2020

2021

2020

(in thousands)

(in thousands)

Balance, beginning of the period

$

34,106

$

20,481

$

29,251

$

22,584

$

22,142

$

34,106

$

23,058

$

29,251

Deferral of revenue

6,248

3,943

10,724

6,225

21,893

6,248

30,117

10,724

Recognition of deferred revenue

(9,937)

(10,344)

(9,558)

(14,729)

(8,517)

(9,937)

(17,657)

(9,558)

Balance, ending of the period

$

30,417

$

14,080

$

30,417

$

14,080

Balance, end of the period

$

35,518

$

30,417

$

35,518

$

30,417

The majority of our system transactions have payment terms of 90% due upon shipment of the tool and 10% due upon acceptance. Aftermarket transaction payment terms usually provide that payment is due either within 30 or 60 days after the service is provided or parts delivered.

Note 5. 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.

Axcelis maintains an allowance for credit losses, which represent an estimate of expected losses over the remaining contractual life of itsour receivables, considering current market conditions and estimates for supportable forecasts when appropriate. The estimate is a result of the Company’s ongoing assessments and evaluations of collectability, historical loss experience, and future expectations in estimating credit losses in itsour receivable portfolio. Axcelis uses historical loss experience rates and applies 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 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, estimates for supportable forecasts, when appropriate, and credit risk characteristics.

12

Table of Contents

Axcelis evaluates the credit risk of the customer when extending credit based on a combination of various financial and qualitative factors that may affect itsour 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 itsAxcelis’ 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

12

Table of Contents

allowances for credit losses are maintained through adjustments to the provision for credit losses, which are charged to current period earnings.

The following table shows changes of the allowances for credit losses related to trade receivables for the three and six months ended June 30, 2020:2021 and 2020, respectively:

Three months ended

Six months ended

Three months ended

Six months ended

June 30,

June 30,

June 30,

June 30,

2020

2020

2021

2020

2021

2020

(in thousands)

(in thousands)

Balance at January 1 (beginning of year)

$

$

818

Balance, beginning of period

$

$

$

$

818

Provision for credit losses

Charge-offs

(818)

(818)

Recoveries

Balance at June 30 (end of period)

$

$

Balance, end of period

$

$

$

$

Note 6.  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 common shares 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 common shares that would have been outstanding if the potentially dilutive common shares 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:

Three months ended

Six months ended

Three months ended

Six months ended

June 30,

June 30,

June 30,

June 30,

    

2020

    

2019

    

2020

    

2019

    

    

2021

    

2020

    

2021

    

2020

    

(in thousands, except per share amounts)

(in thousands, except per share amounts)

Net income available to common stockholders

$

13,302

$

556

$

24,523

$

6,618

$

18,906

$

13,302

$

35,386

$

24,523

Weighted average common shares outstanding used in computing basic income per share

 

33,116

 

32,729

 

32,998

 

32,706

 

33,677

 

33,116

 

33,696

 

32,998

Incremental options and RSUs

 

842

 

1,172

 

1,025

 

1,358

 

634

 

842

 

777

 

1,025

Weighted average common shares used in computing diluted net income per share

 

33,958

 

33,901

 

34,023

 

34,064

 

34,311

 

33,958

 

34,473

 

34,023

Net income per share

Basic

$

0.40

$

0.02

$

0.74

$

0.20

$

0.56

$

0.40

$

1.05

$

0.74

Diluted

$

0.39

$

0.02

$

0.72

$

0.19

$

0.55

$

0.39

$

1.03

$

0.72

Diluted weighted average common shares outstanding does not include 3,1381,800 and 239,3143,138 common equivalent shares issuable with respect to outstanding equity awards for the three monththree-month periods ended June 30, 20202021 and 2019,2020, respectively, or 5,0061,352 and 12,2135,006 common equivalent shares issuable with respect to outstanding equity awards for the six monthsix-month periods ending June 30, 20202021 and 2019,2020, respectively, as their effect would have been anti-dilutive.

13

Table of Contents

Note 7.  Accumulated Other Comprehensive LossIncome

The following table presents the changes in accumulated other comprehensive loss,income, net of tax, by component, for the six months ended June 30, 2020:2021:

    

Foreign

    

Defined benefit

    

 

    

Foreign

    

Defined benefit

    

 

currency

pension plan

Total

 

currency

pension plan

Total

 

(in thousands)

 

(in thousands)

 

Balance at December 31, 2019

$

518

$

(776)

$

(258)

Balance at December 31, 2020

$

3,945

$

(510)

$

3,435

Other comprehensive loss and pension reclassification

 

(276)

 

114

 

(162)

 

(820)

 

54

 

(766)

Balance at June 30, 2020

$

242

$

(662)

$

(420)

Balance at June 30, 2021

$

3,125

$

(456)

$

2,669

Note 8. Cash, cash equivalents and restricted cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheetsheets to the total of the amounts shown in the statement of cash flows:

June 30,

December 31,

June 30,

December 31,

2020

2019

2021

2020

(in thousands)

(in thousands)

Cash and cash equivalents

$

190,340

$

139,881

$

219,731

$

203,479

Long-term restricted cash

6,676

6,653

755

753

Total cash, cash equivalents and restricted cash

$

197,016

$

146,534

$

220,486

$

204,232

As of June 30, 2020,2021, we had $6.7$0.8 million in restricted cash representing the total of (i) cash collateral for a $5.9 million letter of credit serving as security for the lease of our corporate headquarters in Beverly, Massachusetts, (ii) cash collateral for a $0.7 million letter of credit relating to workers’ compensation insurance and (iii)(ii) a $0.1 million deposit relating to customs activity.

Note 9.  Inventories, net

The components of inventories are as follows:

June 30,

December 31,

June 30,

December 31,

    

2020

    

2019

    

    

2021

    

2020

    

(in thousands)

(in thousands)

Raw materials

$

92,208

$

95,867

$

109,795

$

100,254

Work in process

 

35,550

 

32,131

 

40,233

 

33,867

Finished goods (completed systems)

 

21,420

 

12,366

 

42,293

 

26,955

Inventories, net

$

149,178

$

140,364

$

192,321

$

161,076

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 the Company’s 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 10.  Product Warranty

We generally offer a one yearone-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 defer the portion of systems revenue attributable to the fair value of 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.

14

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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.

The changes in our standard product warranty liability are as follows:

Six months ended

Six months ended

June 30,

June 30,

    

2020

    

2019

    

    

2021

    

2020

    

(in thousands)

(in thousands)

Balance at January 1 (beginning of year)

$

3,244

$

5,091

$

4,612

$

3,244

Warranties issued during the period

 

2,635

 

1,693

 

3,013

 

2,635

Settlements made during the period

 

(1,913)

 

(2,900)

 

(1,991)

 

(1,913)

Changes in estimate of liability for pre-existing warranties during the period

 

177

 

399

 

(372)

 

177

Balance at June 30 (end of period)

$

4,143

$

4,283

$

5,262

$

4,143

Amount classified as current

$

3,942

$

4,045

$

4,690

$

3,942

Amount classified as long-term

 

201

 

238

 

572

 

201

Total warranty liability

$

4,143

$

4,283

$

5,262

$

4,143

Note 11.  Fair Value Measurements

Certain assets on our balance sheets are reported at their fair value. 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 are included in cash and cash equivalents in the consolidated balance sheets.

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The following table sets forth our assets by level within the fair value hierarchy:

June 30, 2020

 

June 30, 2021

 

Fair Value Measurements

 

Fair Value Measurements

 

    

Level 1

    

Level 2

    

Level 3

    

Total

 

    

Level 1

    

Level 2

    

Level 3

    

Total

 

(in thousands)

 

(in thousands)

 

Assets

Cash equivalents:

Money market funds, U.S. Government Securities and Agency Investments

$

166,377

$

$

$

166,377

$

190,731

$

$

$

190,731

December 31, 2019

 

December 31, 2020

 

Fair Value Measurements

 

Fair Value Measurements

 

    

Level 1

    

Level 2

    

Level 3

    

Total

 

    

Level 1

    

Level 2

    

Level 3

    

Total

 

(in thousands)

 

(in thousands)

 

Assets

Cash equivalents:

Money market funds, U.S. Government Securities and Agency Investments

$

92,872

$

24,000

$

$

116,872

$

172,119

$

$

$

172,119

(c)  Other Financial Instruments

The carrying amounts reflected in the consolidated balance sheets for accounts receivable, prepaid expenses and other current assets and non-current assets, restricted cash, accounts payable and accrued expenses approximate fair value due to their short-term maturities.

Note 12.  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 $48.4$47.8 million as of June 30, 2020.2021. 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. We posted a security deposit of $5.9 million in the form of an irrevocable letter of credit at the time of the closing. This letter of credit is cash collateralizedreduces our availability under our credit facility, as described in the next paragraph.

On July 31, 2020, we entered into a Senior Secured Credit Facilities Credit Agreement (the “Credit Agreement”) with Silicon Valley Bank, in its capacity as administrative agent and collateral agent for itself and as a lender, and such other banks and financial institutions or entities that from time to time join as lenders under the associated cash is includedCredit Agreement. The Credit Agreement provides for a revolving credit facility in long-term restricted cash.an aggregate principal amount not to exceed $40.0 million. Our obligations under the Credit Agreement are secured by a security interest, senior to any current and future debts and to any security interest, in all of our rights, title, and interest in, to and under substantially all of our assets, subject to limited exceptions, including permitted liens. The revolving credit facility terminates on July 31, 2023. As of June 30, 2021, we were in compliance with all covenant requirements of the Credit Agreement. As of such date, 0 borrowings had been made under the Credit Agreement, although a letter of credit for $5.9 million reduces the funds available for borrowing under the credit line. We entered into a First Amendment to the Credit Agreement with Silicon Valley Bank in March 2021 to (i) align the covenants with our 2021 stock repurchase program, and (ii) established terms to transition from a Eurodollar based interest rate option to an interest rate benchmark using a secured overnight financing rate (known as “SOFR”) published by the Federal Reserve Bank of New York.

Note 13.  Income Taxes

Income tax expense was $3.8 million for the three months ended June 30, 2021, compared to $2.3 million for the three months ended June 30, 2020, compared to $0.8 million for the three months ended June 30, 2019.2020. The $1.5 million increase was primarily due to a $14.2$7.2 million increase in pretax income. The incomeIncome tax provisionexpense was $3.3$5.6 million during the six months ended June 30, 2020,2021, compared to $1.3with $3.3 million for the six months ended June 30, 2019.2020. The $2.0$2.3 million increase was primarily due to a $19.9$13.1 million increase in pretax income.

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The effective tax rate for the three and six months ended June 30, 20202021 and 2019,2020, respectively, was less than the U.S. statutory rate of 21% due to favorable discrete items related to equity compensation in those periods and Federal research and development tax credits that reduce the annual tax rate.

We had $64.6$51.4 million and $68.1$57.9 million of net deferred tax assets worldwide relating to net operating loss carryforwards, tax credit carryforwards and other temporary differences, as of June 30, 20202021 and December 31, 2019,2020, respectively. These deferred tax assets are available to reduce income taxes in future years. We have a $9.2$9.1 million valuation allowance in the U.S. against certain tax credits and state net operating losses due to the uncertainty of their realization based on long-term Company forecasts and the expiration dates on these tax assets. If future operating results of the Company within the U.S. or these foreign jurisdictions are significantly less than our expectations, it is reasonably possible that we would be required to record an additional valuation allowance on our deferred tax assets in the future.

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Note 14.  Concentration of Risk

For the three months ended June 30, 2021, 2 customers accounted for 19.7% and 10.2% of total revenue, respectively. For the three months ended June 30, 2020, 3 customers accounted for 22.5%, 22.2% and 11.6% of total revenue, respectively. For the three months ended June 30, 2019, 4 customers accounted for 15.7%, 14.2%, 12.7% and 12.5% of total revenue, respectively.

For the six months ended June 30, 2021, 1 customer accounted for 24.4% of total revenue. For the six months ended June 30, 2020, 3 customers accounted for 19.7%, 18.5% and 16.2% of total revenue, respectively. For the six months ended June 30, 2019, 4 customers accounted for 14.8%, 14.4%, 11.4% and 11.2% of total revenue respectively.

At June 30, 2020,2021, 2 customers accounted for 30.3%11.7% and 21.8%10.0% of accounts receivable, respectively. At December 31, 2019, 32020, 2 customers accounted for 24.9%, 15.3%23.8% and 11.1%11.9% of accounts receivable, respectively.

Note 15. Share Repurchase

TheIn December 2020, our Board hasof Directors approved stock repurchases of up to $50$100 million of our common stock through the end of 2020. At2021. During the endsix months ended June 30, 2021, we purchased 0.6 million shares at an average cost of the first quarter of 2020, we suspended the repurchase program in light of the economic uncertainty relating to the COVID-19 pandemic. We continue to invest cash in our business and to evaluate whether to recommence stock repurchases. If we do so, the$39.92 per share. The timing and actual number of shares repurchased in 2020 beyond those acquired in the first quarter,under this program will depend on various factors including the price, of our common stock, general business corporate and market conditions, andregulatory requirements, alternative investment opportunities orand other uses of cash.market conditions.

Shares repurchased by us are accounted for when the transaction is settled. There were 0 unsettled share repurchases at June 30, 2020.Shares repurchased and retired are deducted from common stock for 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 16.  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.

(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.

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Table of Contents

Note 17.  Recent Accounting Guidance

i.Accounting Standards Update 2019-12 Income Taxes (Topic 740)

We adopted Financial Accounting Standards Board ASU No. 2019-04 2019-12 ““Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments”Income Taxes (Topic 740) as of January 1, 2020, using the modified-retrospective approach resulting in no cumulative adjustment to retained earnings.2021 on a prospective basis. The amendments in this Update clarifyASU simplify the accounting for income taxes by removing certain exceptions from the previous standard as well as requiring entities to include franchise tax partially based on income as an income based tax and to account for an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The guidance within Topic 326 relating to credit losses. Topic 326 replaces the current incurred loss impairment methodologyin ASU 2019-12 is required for financial assets measured at amortized cost with a methodology that reflects expected credit losses and requires considerationannual reporting periods beginning after December 15, 2020. Adoption of a broader range of reasonable and supportable information, including forecasted information, to develop credit loss estimates. Due to the requirements of Topic 326, management reviews the average annual write-off rate along with an assessment of current micro and macro-economic factors to determine any expected losses. The adoption of this Update did not have anyASU 2019-12 had no material impacteffect on our results of operations or cash flows. See Note 5 above for further discussion.consolidated financial statements and disclosures.

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Note 18. Subsequent Event – Revolving Credit Agreement

On July 31, 2020, we entered into a Senior Secured Credit Facilities Credit Agreement (the “Credit Agreement”) with Silicon Valley Bank, in its capacity as administrative agent and collateral agent for itself and as a lender, and such other banks and financial institutions or entities who from time to time join as lenders under the Credit Agreement. The Credit Agreement provides for a revolving credit facility in an aggregate principal amount not to exceed $40.0 million. Our obligations under the Credit Agreement are secured by a security interest, senior to any current and future debts and to any security interest, in all of our rights, title, and interest in, to and under substantially all of our assets, subject to limited exceptions, including permitted liens. The revolving credit facility terminates on August 3, 2023.

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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 annual report on Form 10-K for the year ended December 31, 20192020,inPart II, Item 1A of our Form 10-Q for the quarter ended March 31, 2020, and in Part II, Item 1A to this report on Form 10-Q, 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.

Overview

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.States although we are adding additional manufacturing capacity in South Korea that should come online by year end 2021. 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 80.3%71.1% of total revenue for the six months ended June 30, 2020.2021.

In the first half of 2020,2021, we delivered strong financial performance driven by strong semiconductor industry fundamentals and an increasing demand for our Purion systems. The semiconductor supply chain was identified as a critical infrastructure sectorproducts, especially in the Advisory Memorandum issued by the U.S. Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (“CISA”) on March 19, 2020 and updated on March 28, 2020. CISA’s list has been incorporated in orders by the Governor of Massachusetts and other states, which urge critical infrastructure sector businesses to continue to operate despite governmental restrictions imposed on general business operations during the COVID-19 pandemic. Accordingly, Axcelis has continued to operate throughout 2020, with a combination of work from home and the implementation of protocols for social distancing and other practices in our facilities, as recommended by the U.S. Centers for Disease Control and Prevention. Business travel has been substantially curtailed. Operations outsidehigh growth power device market. The rapid acceleration of the U.S. have also been conducted in accordance with applicable local governmental laws and public health recommendations. We are closely monitoring the impactelectrification of the pandemic on our businessautomotive industry is creating substantial demand for power devices and will adjust operations as needed.image sensors, which is driving sustainable growth for the Purion product extensions specifically developed for these markets.

The ultimate consequence ofDespite the pandemicmany difficult logistical challenges brought on by trade tensions between the semiconductor industry will be the aggregation of both positiveUnited States and negative forces on various customer market segments. For example, the pandemic is driving enhanced investment in PCs, video streamingChina and communications technologies. On the other hand, it is dampening the demand for semiconductors for automotive and aviation applications. Our customers will be adapting to the changes in the volumes of different types of semiconductors demanded by the market. These adaptations could cause delay and uncertainty that could impact Axcelis. However,COVID-19, we are continuing to work closely with our customers across market segments even during this difficult time, to provide them with the best ion implant solutions for their specific manufacturing challenges.

Currently implemented, and potential additional disruptions and restrictions on our operations and ability to travel, including similar disruptions and restrictions impacting our suppliers or customers, could adversely affect our sales and operating results. Axcelis’ products rely on an extensive global supply chain, and shortages of certain parts could impact our ability to meet customers’ shipment expectations, negatively affecting our revenues. The COVID-19 pandemic may drive changes inIn December 2020, the demand for certainUnited States Commerce Department placed one of our customers’ products, resulting inmajor Chinese customers, Semiconductor Manufacturing International Corporation (“SMIC”), on the U.S. export controls Entity List. As a delay or cancelation of purchases from us. Travel restrictions imposed by various countries during the pandemic may also impact our ability, and our customers’ readiness, to have purchased systems installed on planned schedules, causing delays. The extent to which COVID-19 may impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including the severity and durationresult of the current pandemic. We managedEntity List classification, we are required to achieve strong performanceobtain export controls licenses for all U.S. shipments to this customer. Although we have begun receiving these licenses, this situation did delay some shipments to this customer in the first half of 2020, despite

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the pandemic-related business risks described in this paragraph. At this time, however, there can be no assurance that these risks will not affect our future performance.2021.

Critical Accounting Estimates

Management’s discussion and analysis of our financial condition and results of operations included herein and in our Annual Report on Form 10-K for the year ended December 31, 20192020 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 on-goingongoing 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.

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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 ConditionsCondition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2019.2020.

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Results of Operations

The following table sets forth our results of operations as a percentage of total revenue:

Three months ended

Six months ended

Three months ended

Six months ended

June 30,

June 30,

June 30,

June 30,

    

2020

    

2019

    

2020

    

2019

    

    

    

2021

    

2020

    

2021

    

2020

    

    

Revenue:

Product

95.3

%

92.5

%

94.8

%

92.2

%

95.2

%

95.3

%

95.3

%

94.8

%

Services

 

4.7

 

7.5

 

5.2

 

7.8

 

 

 

4.8

 

4.7

 

4.7

 

5.2

 

 

Total revenue

 

100.0

 

100.0

 

100.0

 

100.0

 

 

 

100.0

 

100.0

 

100.0

 

100.0

 

 

Cost of revenue:

Product

 

53.3

 

50.0

 

54.8

 

51.0

 

 

 

52.1

 

53.3

 

52.5

 

54.8

 

 

Services

 

4.5

 

7.2

 

4.9

 

7.2

 

 

 

4.5

 

4.5

 

4.5

 

4.9

 

 

Total cost of revenue

 

57.8

 

57.2

 

59.7

 

58.2

 

 

 

56.6

 

57.8

 

57.0

 

59.7

 

 

Gross profit

 

42.2

 

42.8

 

40.3

 

41.8

 

 

 

43.4

 

42.2

 

43.0

 

40.3

 

 

Operating expenses:

Research and development

 

13.0

 

18.5

 

12.7

 

16.5

 

 

 

11.3

 

13.0

 

11.5

 

12.7

 

 

Sales and marketing

 

7.7

 

11.4

 

7.3

 

10.5

 

 

 

8.3

 

7.7

 

8.1

 

7.3

 

 

General and administrative

 

8.2

 

10.2

 

7.9

 

9.3

 

 

 

7.6

 

8.2

 

7.6

 

7.9

 

 

Total operating expenses

 

28.9

 

40.1

 

27.9

 

36.3

 

 

 

27.2

 

28.9

 

27.2

 

27.9

 

 

Income from operations

 

13.3

 

2.7

 

12.4

 

5.5

 

 

 

16.2

 

13.3

 

15.8

 

12.4

 

 

Other (expense) income:

Interest income

 

0.1

 

1.1

 

0.2

 

1.0

 

 

 

 

0.1

 

 

0.2

 

 

Interest expense

 

(1.1)

 

(1.8)

 

(1.1)

 

(1.5)

 

 

 

(0.9)

 

(1.1)

 

(0.8)

 

(1.1)

 

 

Other, net

 

0.3

 

(0.3)

 

(0.1)

 

(0.2)

 

 

 

 

0.3

 

(0.4)

 

(0.1)

 

 

Total other expense

 

(0.7)

 

(1.0)

 

(1.0)

 

(0.7)

 

 

 

(0.9)

 

(0.7)

 

(1.2)

 

(1.0)

 

 

Income before income taxes

 

12.6

 

1.7

 

11.4

 

4.8

 

 

 

15.3

 

12.6

 

14.6

 

11.4

 

 

Income tax provision

 

1.8

 

1.1

 

1.4

 

0.8

 

 

 

2.6

 

1.8

 

2.0

 

1.4

 

 

Net income

10.8

%

0.6

%

10.0

%

4.0

%

12.7

%

10.8

%

12.6

%

10.0

%

Revenue

The following table sets forth our product and services revenue:

Three months ended

Period-to-Period

Six months ended

Period-to-Period

 

Three months ended

Period-to-Period

Six months ended

Period-to-Period

 

June 30,

Change

June 30,

Change

 

June 30,

Change

June 30,

Change

 

2020

2019

$

%  

2020

2019

$

%  

 

2021

2020

$

%  

2021

2020

$

%  

 

(dollars in thousands)

(dollars in thousands)

Revenue:

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

Product

$

117,194

$

68,714

$

48,480

70.6

%  

$

229,327

$

152,911

$

76,416

50.0

%

$

140,156

$

117,194

$

22,962

19.6

%  

$

266,765

$

229,327

$

37,438

16.3

%

Percentage of revenue

95.3

%  

92.5

%  

94.8

%  

92.2

%  

95.2

%  

95.3

%  

95.3

%  

94.8

%  

Services

 

5,771

 

5,591

180

3.2

%  

 

12,629

 

12,871

(242)

(1.9)

%

 

7,118

 

5,771

1,347

23.3

%  

 

13,285

 

12,629

656

5.2

%

Percentage of revenue

4.7

%  

7.5

%  

5.2

%  

7.8

%  

4.8

%  

4.7

%  

4.7

%  

5.2

%  

Total revenue

$

122,965

$

74,305

$

48,660

65.5

%  

$

241,956

$

165,782

$

76,174

45.9

%

$

147,274

$

122,965

$

24,309

19.8

%  

$

280,050

$

241,956

$

38,094

15.7

%

20

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Three months ended June 30, 20202021 Compared with Three months ended June 30, 20192020

Product

Product revenue, which includes systems sales, sales of spare parts, product upgrades and used systems was $117.2$140.2 million, or 95.3%95.2% of revenue during the three months ended June 30, 2020,2021, compared with $68.7$117.2 million, or 92.5%

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95.3% of revenue for the three months ended June 30, 2019.2020. The $48.5$23.0 million increase in product revenue for the three monththree-month period ending June 30, 2020,2021, in comparison to the same period in 2019,2020, was primarily driven by an increase in the number of systems sold.

A portion of our revenue from systems sales is deferred until installation and other services related to future performance obligations are performed. The total amount of deferred revenue at June 30, 20202021 and December 31, 20192020 was $30.4$35.5 million and $29.3$23.1 million, respectively. The net increase in deferred revenue was primarily due to the collection of advance payments oncustomer prepayments for systems.

Services

Services revenue, which includes the labor component of maintenance and service contracts and fees for service hours provided by on-site service personnel, was $7.1 million, or 4.8% of revenue for the three months ended June 30, 2021, compared with $5.8 million, or 4.7% of revenue for the three months ended June 30, 2020, compared with $5.6 million, or 7.5% of revenue for the three months ended June 30, 2019.2020. 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, 20202021 Compared with Six months ended June 30, 20192020

Product

Product revenue was $229.3$266.8 million, or 94.8%95.3% of revenue during the six months ended June 30, 2020,2021, compared with $152.9$229.3 million, or 92.2%94.8% of revenue for the six months ended June 30, 2019.2020. The $76.4$37.4 million increase in product revenue for the six monthsix-month period endedending June 30, 2020,2021, in comparison to the same period in 2019,2020, was primarily driven by an increase in the number of systems sold.sold and to a lesser extent revenue increases in spare parts, product upgrades and used systems.

Services

Services revenue was $13.3 million, or 4.7% of revenue for the six months ended June 30, 2021, compared with $12.6 million, or 5.2% of revenue for the six months ended June 30, 2020, compared with $12.9 million, or 7.8% of revenue for the six months ended June 30, 2019.2020.

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:

Ion implant revenue separate from revenue from legacy non-implant product lines, given that ion implantation systems are the primary driver of our growth and strategic objectives;
Systems and Aftermarket revenues, in which “Aftermarket” is
A.the portion of Product revenue relating to spare parts, product upgrades and used equipment combined with
B.Services revenue, which is the labor component of Aftermarket revenues;
Ion implant revenue separate from revenue from legacy non-ion implant product lines, given that ion implantation systems are the primary driver of our growth and strategic objectives;
Systems and Aftermarket revenues, in which “Aftermarket” is:
A.The portion of Product revenue relating to spare parts, product upgrades and used equipment, combined with
B.Services revenue, which is the labor component of Aftermarket revenues

(Aftermarket purchases reflect current fab utilization as opposed to Systems purchases which reflect capital investment decisions by our customers, which have differing economic drivers;drivers);

Revenue by geographic regions, since economic factors impacting customer purchasing decisions may vary by geographic region; and
Revenue by our customer market segments, since they can be subject to different economic drivers at different periods of time, impacting a customer’s likelihood of purchasing capital equipment during any particular period. Currently, management references three customer market segments: memory, mature technology processes and leading edge foundry and logic.

2221

Table of Contents

Revenue by geographic regions, since economic factors impacting customer purchasing decisions may vary by geographic region; and
Revenue by our customer market segments, since they can be subject to different economic drivers at different periods of time, impacting a customer’s likelihood of purchasing capital equipment during any particular period. Currently, management references three customer market segments: memory, mature technology processes and leading edge foundry and logic.

The ion implant and Aftermarket revenue categories for recent periods are discussed below.

Three months ended June 30, 20202021 Compared with Three months ended June 30, 20192020

Ion Implant

Included in total revenue of $123.0$147.3 million during the three months ended June 30, 20202021 is revenue from sales of ion implant products and services of $118.7$142.9 million, or 96.6%97.0% of total revenue, compared with $70.2$118.7 million, or 94.5%96.6%, of total revenue for the three months ended June 30, 2019.2020. The remaining $4.3$4.4 million of revenue for the three months ended June 30, 20202021 was non-ion implant parts and services.

Aftermarket

Included in total revenue of $123.0$147.3 million during the three months ended June 30, 20202021 is revenue from our Aftermarket business of $46.2$47.1 million, compared to $37.1$46.2 million for the three months ended June 30, 2019.2020. The remaining $76.8$100.2 million of revenue for the three months ended June 30, 20202021 was from system sales. 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.

Six months ended June 30, 20202021 Compared with Six months ended June 30, 20192020

Ion Implant

Included in total revenue of $242.0$280.1 million during the six months ended June 30, 20202021 is revenue from sales of ion implant products and services of $233.8$271.6 million, or 96.6%97.0% of total revenue, compared with $157.2$233.8 million, or 94.8%96.6%, of total revenue for the six months ended June 30, 2019.2020. The remaining $8.2$8.5 million of revenue for the six months ended June 30, 20202021 was non-ion implant parts and services.

Aftermarket

Included in total revenue of $242.0$280.1 million during the six months ended June 30, 20202021 is revenue from our Aftermarket business of $82.8$98.9 million, compared to $71.5$82.8 million for the six months ended June 30, 2019.2020. The remaining $159.2$181.2 million of revenue for the six months ended June 30, 20202021 was from system sales.

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Gross Profit / Gross Margin

The following table sets forth our gross profit / gross margin:

Three months ended

Period-to-Period

Six months ended

Period-to-Period

 

Three months ended

Period-to-Period

Six months ended

Period-to-Period

 

June 30,

Change

June 30,

Change

 

June 30,

Change

June 30,

Change

 

    

2020

    

2019

    

$

%  

    

2020

    

2019

    

$

%  

 

    

    

2021

    

2020

    

$

%  

    

2021

    

2020

    

$

%  

 

    

(dollars in thousands)

(dollars in thousands)

Gross Profit:

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

Product

$

51,675

$

31,526

$

20,149

63.9

 

$

96,636

$

68,393

$

28,243

41.3

%

$

63,468

$

51,675

$

11,793

22.8

 

$

119,743

$

96,636

$

23,107

23.9

%

Product gross margin

44.1

 

45.9

 

42.1

 

44.7

 

45.3

 

44.1

 

44.9

 

42.1

 

Services

 

224

 

223

1

(0.4)

 

 

812

862

(50)

(5.8)

%

 

546

 

224

322

(143.8)

 

 

706

812

(106)

(13.1)

%

Services gross margin

3.9

 

4.0

 

6.4

 

6.7

 

7.7

 

3.9

 

5.3

 

6.4

 

Total gross profit

$

51,899

$

31,749

$

20,150

63.5

 

$

97,448

$

69,255

$

28,193

40.7

%

$

64,014

$

51,899

$

12,115

23.3

 

$

120,449

$

97,448

$

23,001

23.6

%

Gross margin

42.2

 

42.8

 

40.3

 

41.8

 

43.4

 

42.2

 

43.0

 

40.3

 

23

Table of Contents

Three months ended June 30, 20202021 Compared with Three months ended June 30, 20192020

Product

Gross margin from product revenue was 45.3% for the three months ended June 30, 2021, compared to 44.1% for the three months ended June 30, 2020, compared to 45.9% for the three months ended June 30, 2019.2020. The decrease in gross marginincrease resulted from a decreased mix of higher marginimproved gross margins on parts and upgrades partially offset by improved margins on and

Purion systems.

Services

Gross margin from services revenue was 3.9% for the three month periods ended June 30, 2020, compared to 4.0%7.7% for the three months ended June 30, 2019.2021, compared to 3.9% for the three months ended June 30, 2020. The decreaseincrease in gross margin is attributable to changes in the mix of service contracts.

Six months ended June 30, 20202021 Compared with Six months ended June 30, 20192020

Product

Gross margin from product revenue was 44.9% for the six months ended June 30, 2021, compared to 42.1% for the six months ended June 30, 2020, compared to 44.7% for the six months ended June 30, 2019.2020. The decreaseincrease in gross margin resulted from a decreasedan increased mix of higher margin parts and upgrades partially offset byand improved margins on Purion systems.

Services

Gross margin from services revenue was 5.3% for the six months ended June 30, 2021, compared to 6.4% for the six months ended June 30, 2020, compared to 6.7% for the six months ended June 30, 2019.2020. The decrease in gross margin is attributable to changes in the mix of service contracts.

23

Table of Contents

Operating Expenses

The following table sets forth our operating expenses:

Three months ended

Period-to-Period

Six months ended

Period-to-Period

 

Three months ended

Period-to-Period

Six months ended

Period-to-Period

 

June 30,

Change

June 30,

Change

 

June 30,

Change

June 30,

Change

 

2020

2019

$

%  

2020

2019

$

%  

 

2021

2020

$

%  

2021

2020

$

%  

 

(dollars in thousands)

(dollars in thousands)

Research and development

    

$

16,040

    

$

13,720

    

$

2,320

    

16.9

%

$

30,646

    

$

27,405

    

$

3,241

    

11.8

%

    

    

$

16,623

    

$

16,040

    

$

583

    

3.6

%

$

32,308

    

$

30,646

    

$

1,662

    

5.4

%

    

Percentage of revenue

13.0

%

18.5

%

12.7

%

16.5

%

11.3

%

13.0

%

11.5

%

12.7

%

Sales and marketing

 

9,437

 

8,436

1,001

11.9

%

 

17,641

 

17,354

287

1.7

%

 

12,177

 

9,437

2,740

29.0

%

 

22,564

 

17,641

4,923

27.9

%

Percentage of revenue

7.7

%

11.4

%

7.3

%

10.5

%

8.3

%

7.7

%

8.1

%

7.3

%

General and administrative

 

10,041

 

7,583

2,458

32.4

%

 

19,077

 

15,390

3,687

24.0

%

 

11,217

 

10,041

1,176

11.7

%

 

21,230

 

19,077

2,153

11.3

%

Percentage of revenue

8.2

%

10.2

%

7.9

%

9.3

%

7.6

%

8.2

%

7.6

%

7.9

%

Total operating expenses

$

35,518

$

29,739

$

5,779

19.4

%

$

67,364

$

60,149

$

7,215

12.0

%

$

40,017

$

35,518

$

4,499

12.7

%

$

76,102

$

67,364

$

8,738

13.0

%

Percentage of revenue

28.9

%

40.1

%

27.9

%

36.3

%

27.2

%

28.9

%

27.2

%

27.9

%

Our operating expenses consist primarily of personnel costs, including salaries, commissions, expected incentive plan payouts,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 $25.4 million or 63.5% of our total operating expenses for the three months ended June 30, 2021, compared to $22.8 million or 64.3% of our total operating expenses for the three month periodmonths ended June 30, 2020, compared to $17.82020. Personnel costs were $47.5 million or 59.9%62.4% of our total operating expenses for the three month periodsix months ended June 30, 2019. Personnel costs were2021, compared to $42.8 million or 63.5% of our total operating expenses for the six month periodmonths ended June 30, 2020, compared to $35.6 million or 59.2% of our total operating expenses for the six month period ended June 30, 2019.2020. The higher personnel costs for the three and six month periodsmonths ended June 30, 20202021 is primarily due to higher incentive based pay expense.an increase in personnel expenses to support growth.

24

Table of Contents

Research and Development

Three months ended

Period-to-Period

Six months ended

Period-to-Period

 

Three months ended

Period-to-Period

Six months ended

Period-to-Period

 

June 30,

Change

June 30,

Change

 

June 30,

Change

June 30,

Change

 

2020

2019

$

%  

2020

2019

$

%  

 

2021

2020

$

%  

2021

2020

$

%  

 

(dollars in thousands)

(dollars in thousands)

Research and development

    

$

16,040

    

$

13,720

    

$

2,320

16.9

%

$

30,646

    

$

27,405

    

$

3,241

    

11.8

%

    

    

$

16,623

    

$

16,040

    

$

583

3.6

%

$

32,308

    

$

30,646

    

$

1,662

    

5.4

%

    

Percentage of revenue

13.0

%

18.5

%

12.7

%

16.5

%

11.3

%

13.0

%

11.5

%

12.7

%

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 R&D budgets to fund programs that we expect will solve customers’ high value, high impact, ion implantation challenges.

Three months ended June 30, 20202021 Compared with Three months ended June 30, 20192020

Research and development expense was $16.6 million during the three months ended June 30, 2021, an increase of $0.6 million, or 3.6%, compared with $16.0 million during the three months ended June 30, 2020, an increase of $2.3 million, or 16.9%, compared with $13.7 million during the three months ended June 30, 2019.2020. The increase is primarily due to higher personnel expenses and incentive based pay expense.

Six months ended June 30, 2021 Compared with Six months ended June 30, 2020

Research and development expense was $32.3 million during the six months ended June 30, 2021, an increase of $1.7 million, or 5.4%, compared with $30.6 million during the six months ended June 30, 2020. The increase is primarily due to higher personnel expenses, supplies and materials costs for ongoing projects and increased depreciation associated with capital additions.

Six months ended June 30, 2020 Compared with Six months ended June 30, 201924

Research and development expense was $30.6 million during the six months ended June 30, 2020, an increaseTable of $3.2 million, or 11.8%, compared with $27.4 million during the six months ended June 30, 2019. The increase is primarily due to higher incentive based pay expense, supplies and materials costs for ongoing projects and increased depreciation associated with capital additions.Contents

Sales and Marketing

Three months ended

Period-to-Period

Six months ended

Period-to-Period

 

Three months ended

Period-to-Period

Six months ended

Period-to-Period

 

June 30,

Change

June 30,

Change

 

June 30,

Change

June 30,

Change

 

2020

2019

$

%  

2020

2019

$

%  

 

2021

2020

$

%  

2021

2020

$

%  

 

(dollars in thousands)

(dollars in thousands)

Sales and marketing

    

$

9,437

    

$

8,436

    

 $

1,001

11.9

%  

$

17,641

    

$

17,354

    

 $

287

    

1.7

%

    

    

$

12,177

    

$

9,437

    

 $

2,740

29.0

%  

$

22,564

    

$

17,641

    

 $

4,923

    

27.9

%

    

Percentage of revenue

7.7

%

11.4

%

7.3

%

10.5

%

8.3

%

7.7

%

8.1

%

7.3

%

Our sales and marketing expenses result primarily from the sale of our equipment and services through our direct sales force.

Three months ended June 30, 20202021 Compared with Three months ended June 30, 20192020

Sales and marketing expense was $12.2 million during the three months ended June 30, 2021, an increase of $2.7 million, or 29.0%, compared with $9.4 million during the three months ended June 30, 2020, an increase of $1.0 million, or 11.9%, compared with $8.4 million during the three months ended June 30, 2019.2020. The increase is primarily due to increases in freight expense and project material costs as well as higher incentive based pay expense.personnel related expenses.

Six months ended June 30, 20202021 Compared with Six months ended June 30, 20192020

Sales and marketing expense was $22.6 million during the six months ended June 30, 2021, an increase of $4.9 million, or 27.9%, compared with $17.6 million during the six months ended June 30, 2020, an increase of $0.3 million, or 1.7%, compared with $17.4 million during the six months ended June 30, 2019.2020. The increase is primarily due to increases in freight expense and project material costs as well as higher incentive based pay expense.personnel related expenses.

25

Table of Contents

General and Administrative

Three months ended

Period-to-Period

Six months ended

Period-to-Period

 

Three months ended

Period-to-Period

Six months ended

Period-to-Period

 

June 30,

Change

June 30,

Change

 

June 30,

Change

June 30,

Change

 

2020

2019

$

%  

2020

2019

$

%  

 

2021

2020

$

%  

2021

2020

$

%  

 

(dollars in thousands)

(dollars in thousands)

General and administrative

    

$

10,041

    

$

7,583

    

 $

2,458

    

32.4

%  

$

19,077

    

$

15,390

    

$

3,687

    

24.0

%

    

    

$

11,217

    

$

10,041

    

 $

1,176

    

11.7

%  

$

21,230

    

$

19,077

    

$

2,153

    

11.3

%

    

Percentage of revenue

8.2

%

10.2

%

7.9

%

9.3

%

7.6

%

8.2

%

7.6

%

7.9

%

Our general and administrative expenses result primarily from the costs associated with our executive, finance, information technology, legal and human resource functions.

Three months ended June 30, 20202021 Compared with Three months ended June 30, 20192020

General and administrative expense was $11.2 million during the three months ended June 30, 2021, an increase of $1.2 million, or 11.7%, compared with $10.0 million during the three months ended June 30, 2020, an increase of $2.5 million, or 32.4%, compared with $7.6 million during the three months ended June 30, 2019.2020. The increase is primarily due to an increase in personnel expenses and incentive based pay expense.

Six months ended June 30, 20202021 Compared with Six months ended June 30, 20192020

General and administrative expense was $21.2 million during the six months ended June 30, 2021, an increase of $2.2 million, or 11.3%, compared with $19.1 million during the six months ended June 30, 2020, an increase of $3.7 million, or 24.0%, compared with $15.4 million during the six months ended June 30, 2019.2020. The increase is primarily due to an increase in personnel expenses and incentive based pay expense.

Other (Expense) Income

Three months ended

Period-to-period

 

Six months ended

Period-to-period

 

Three months ended

Period-to-period

 

Six months ended

Period-to-period

 

June 30,

change

 

June 30,

change

 

June 30,

change

 

June 30,

change

 

2020

2019

$

%

 

2020

2019

$

%

 

2021

2020

$

%

 

2021

2020

$

%

 

(dollars in thousands)

(dollars in thousands)

Other expense

 

$

(808)

 

$

(655)

 

$

(153)

 

(23.4)

%

 

$

(2,249)

 

$

(1,217)

 

$

(1,032)

 

(84.8)

%

 

$

(1,249)

 

$

(808)

 

$

441

 

54.6

%

 

$

(3,398)

 

$

(2,249)

 

$

1,149

 

51.1

%

Percentage of revenue

 

(0.7)

%

 

(1.0)

%

 

(1.0)

%

 

(0.7)

%

 

(0.9)

%

 

(0.7)

%

 

(1.2)

%

 

(1.0)

%

25

Table of Contents

Other (expense) income consists primarily of interest expense relating to the finance lease obligation we incurred in connection with the 2015 sale of our headquarters facility and other financing obligations, foreign exchange gains and losses attributable to fluctuations of the USU.S. dollar against local currencies of certain of the countries in which we operate as well as interest earned on our invested cash balances.

Other expense was $1.2 million for the three months ended June 30, 2021, compared with $0.8 million for the three months ended June 30, 2020, compared with $0.7 million for the three months ended June 30, 2019.2020. The increase in other expense of $0.1 million for the three month period ended June 30, 2020 compared to the three month period ended June 30, 2019, was primarily due to higheran increase in foreign currency exchange losses in the current year period compared to the prior year.losses. Other expense was $3.4 million for the six months ended June 30, 2021, compared with $2.2 million for the six months ended June 30, 2020, compared with $1.2 million for the six months ended June 30, 2019.2020. The increase in other expense was primarily due to an increase in foreign currency exchange losses of $1.0$0.6 million foras well as a reduction of $0.5 million in interest income when compared to the six monthsix-month period ended June 30, 2020 compared to the six month period ended June 30, 2019, was primarily due to higher foreign currency exchange losses in the current year period compared to the prior year.2020.

During the six monthsix-month periods ended June 30, 20202021 and 2019,2020, we had no significant off-balance-sheet risk such as exchange contracts, option contracts or other hedging arrangements.

26

Table of Contents

Income Tax Provision

Three months ended

Period-to-period

 

Six months ended

Period-to-period

 

Three months ended

Period-to-period

 

Six months ended

Period-to-period

 

June 30,

change

 

June 30,

change

 

June 30,

change

 

June 30,

change

 

2020

2019

$

%

 

2020

2019

$

%

 

2021

2020

$

%

 

2021

2020

$

%

 

(dollars in thousands)

(dollars in thousands)

Income tax provision

 

$

2,271

 

$

799

 

$

1,472

 

184.2

%

 

$

3,312

 

$

1,271

 

$

2,041

 

160.6

%

 

$

3,842

 

$

2,271

 

$

1,571

 

(69.2)

%

 

$

5,563

 

$

3,312

 

$

2,251

 

68.0

%

Percentage of revenue

 

1.8

%

 

1.1

%

 

1.4

%

 

0.8

%

 

2.6

%

 

1.8

%

 

2.0

%

 

1.4

%

Income tax expense was $3.8 million for the three months ended June 30, 2021, compared to $2.3 million for the three months ended June 30, 2020, compared to $0.8 million for the three months ended June 30, 2019.2020. The $1.5 million increase was primarily due to a $14.2$7.2 million increase in pretax income. The incomeIncome tax provisionexpense was $3.3$5.6 million during the six months ended June 30, 2020,2021, compared to $1.3$3.3 million for the six months ended June 30, 2019.2020. The $2.0$2.3 million increase was primarily due to a $19.9$13.1 million increase in pretax income. The effective tax rate for the three and six months ended June 30, 20202021 and 2019,2020, respectively, was less than the U.S. statutory rate of 21% due to favorable discrete items related to equity compensation in those periods andas well as Federal research and development tax credits that reduce the annual tax rate.

We had $64.6$51.4 million and $68.1$57.9 million of net deferred tax assets worldwide relating to net operating loss carryforwards, tax credit carryforwards and other temporary differences, as of June 30, 20202021 and December 31, 2019,2020, respectively. These deferred tax assets are available to reduce income taxes in future years. We have a $9.2$9.1 million valuation allowance in the U.S. against certain tax credits and state net operating losses due to the uncertainty of their realization based on long-term Company forecasts and the expiration dates on these tax assets. If future operating results of the Company within the U.S. or these foreign jurisdictions are significantly less than our expectations, it is reasonably possible that we would be required to record an additional valuation allowance on our deferred tax assets in the future.

On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief, and Economic

Security Act ("CARES Act"). The CARES Act, among other things, includes certain income tax provisions for individuals and corporations, however, these benefits do not materially impact our income tax provision.

Liquidity and Capital Resources

We had $190.3$219.7 million in unrestricted cash and cash equivalents at June 30, 2020,2021, in addition to $6.7$0.8 million in restricted cash, primarily comprised of the $5.9 million security deposit for the lease of our corporate headquarters.cash. Management believes that maintaining a strong cash balance is necessary to provide funding for potential ramps in our business which can require significant cash investment to meet sudden demand. Additionally, we are using cash in our 2021 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 sale 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 established cost structure, other than cost of goods sold, does not vary significantly with changes in volume. We experience fluctuations in operating results and cash flows depending on these factors. We may also engage in stockStock repurchases, as discussed below.below, also reduce our cash balances.

26

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During the six months ended June 30, 2021, we generated $45.9 million of cash related to operating activities. During the six months ended June 30, 2020, we generated $56.6 million of cash related to operating activities. In comparison, during the six months ended June 30, 2019, we used $20.3 million of cash from operations.

Investing activities for the six months ended June 30, 20202021 and 20192020 resulted in cash outflows of $3.0$2.4 million and $8.8$3.0 million, respectively, used for capital expenditures.

Financing activities for the six months ended June 30, 20202021 resulted in a net cash usage of $3.7$28.3 million. During the first halfsix months of 2020, $7.52021, $25.0 million in cash was used to repurchase our common stock and $3.9$6.5 million was used for payments to government tax authorities for income tax withholding on employee compensation arising from the vesting of RSUs, where shares are withheld by the Company, as well as $0.4 million relating to the reduction of the liability under the finance lease of our corporate headquarters. These amounts were partially offset by $3.6 million of proceeds from the exercise of stock options and purchase of shares under our 2020 ESPP during the first six months of 2021. In comparison, financing activities for the six months ended June 30, 2020 resulted in cash usage of $3.7 million, $7.5 million of which related to the repurchase of our common stock and $3.9 million related to payments made to government tax authorities for income tax withholding on employee compensation arising from the vesting of RSUs, as well as $0.1 million relating to the reduction of our financing lease liability. These amounts were partially offset by $7.8 million of proceeds from the exercise of stock options and purchases under the ESPP, during the first half of 2020. Financing activities for the six months ended June 30, 2019 resulted in a net cash usage of $12.8 million, $14.0 million of which related to the repurchase of our common stock and $1.6 million related to payments

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made to government tax authorities for income tax withholding on employee compensation arising from the vesting of RSUs. These amounts were partially offset by $2.8 million of proceeds related to the exercise of stock options and purchase of shares under our ESPPprior employee stock purchase plan during the first halfsix months of 2019.2020.

Under the rules of the U.S. Securities and Exchange Commission (the “SEC”), we qualify as a “well-known seasoned issuer,” which allows us to file shelf registration statements to register an unspecified amount of securities that are effective upon filing. On May 29, 2020, we filed such a shelf registration statement with the SEC for the issuance of an unspecified amount of common stock, preferred stock, various series of debt securities and/or warrants to purchase any of such securities, either individually or in units, from time to time at prices and on terms to be determined at the time of any such offering. This registration statement was effective upon filing and will remain in effect for up to three years from filing, prior to which time we may file another shelf registration statement to maintain the availability of this financing option.

On July 31, 2020, we entered into a Senior Secured Credit Facilities Credit Agreement (the “Credit Agreement”) with Silicon Valley Bank. The Credit Agreement provides for a revolving credit facility in an aggregate principal amount not to exceed $40.0 million. Our obligations under the Credit Agreement are secured by a security interest, senior to any current and future debts and to any security interest, in all of our rights, title, and interest in, to and under substantially all of our assets, subject to limited exceptions, including permitted liens. The revolving credit facility terminates on August 3, 2023. No borrowing is outstanding on this facility asJuly 31, 2023. As of June 30, 2021, we were in compliance with all covenant requirements of the filingCredit Agreement. As of this Form 10-Q.such date, no borrowings had been made under the Credit Agreement, although a letter of credit for $5.9 million reduces the funds available for borrowing under the credit line. We have no immediate plans to borrow under the Credit Agreement, but we will use the facility for letters of credit, for ongoing working capital needs and to fund general corporate purposes, as desired. See Note 18We entered into a First Amendment to the financial statements included elsewhereCredit Agreement with Silicon Valley Bank in this Quarterly Report.March 2021 to (i) align the covenants with our 2021 stock repurchase program, and (ii) establish terms to transition from a Eurodollar based interest rate option to an interest rate benchmark using a secured overnight financing rate (known as “SOFR”) published by the Federal Reserve Bank of New York.

We believe that based on our current market, revenue, expense and cash flow forecasts, our existing cash, cash equivalents and borrowingequity and debt financing capacity will be sufficient to satisfy our anticipated cash requirements for the short and long-term.

In December 2019, our Board of Directors authorized an increase and extension of the share repurchase program, of up to $50 million of the Company's common stock through 2020. These shares could be purchased in the open market or through privately negotiated transactions. At the end of the first quarter of 2020, we suspended the repurchase program in light of the economic uncertainty relating to the COVID-19 pandemic. As of June 30, 2020, we had approximately $24.8 million remaining under the share repurchase program.

We continue to invest cash in our business and to evaluate whether to recommence stock repurchases. Consideration of whether to do so includes an evaluation of the known and anticipated effects of the COVID-19 pandemic on our business and industry. See Note 15 to the financial statements included elsewhere in this Quarterly Report. If we do recommence stock purchases, the timing and actual number of shares repurchased in 2020 beyond those acquired in the first quarter, will depend on various factors, including the price of our common stock, general business and market conditions, and alternative investment opportunities or other uses of cash. See Part II, Item 2 of this report for purchases under this program during the second quarter of 2020.

Commitments and Contingencies

Significant commitments and contingencies at June 30, 20202021 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 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.2020.

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Item 3.  Quantitative and Qualitative Disclosures about Market Risk.

As of June 30, 2020,2021, there have been no material changes to the quantitative information about market risk disclosed in Item 7A to our Annual Report on Form 10-K for the year ended December 31, 2019.2020.

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, 20202021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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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, 2020,2021, there have been no material changes to the risk factors described in Item 1A to our Annual Report on Form 10-K for the year ended December 31, 2019, other than the addition of the risk factor included in Part II, Item 1A of our Form 10-Q for the quarter ended March 31, 2020.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

OurIn December 2020, our Board of Directors authorized a share repurchase program covering calendar years 2019 and 20202021 for up to $50$100 million of the Company's common stock. This program was announced on December 3, 2019. As discussed in Management’s Discussion and Analysis—Liquidity above, and in Note 15 to the financial statements contained elsewhere in this Quarterly Report, this program was suspended at the end of the first quarter of 2020, but not terminated.

The following table summarizes the stock repurchase activity, based upon settlement date, for the three months ended June 30, 2020 and2021 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

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)

(in thousands except per share amounts)

April 1, 2020 through April 30, 2020

$0.00

$

24,756

May 1, 2020 through May 31, 2020

$0.00

24,756

June 1, 2020 through June 30, 2020

$0.00

24,756

April 1, 2021 through April 30, 2021

117

$43.35

117

$

83,286

May 1, 2021 through May 31, 2021

100

$39.74

100

79,312

June 1, 2021 through June 30, 2021

106

$40.74

106

$

75,006

Total

323

323

Item 3.  Defaults Upon Senior Securities.

None.

Item 4.  Mine Safety Disclosures.

Not Applicable.

Item 5.  Other Information.

None.

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Item 6.  Exhibits.

The following exhibits are filed herewith:

Exhibit
No

    

Description

3.1

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

Bylaws of the Company, as amended as of May 13, 2014. Incorporated by reference to Exhibit 3.2 of the Company’s Form 8-K filed with the Commission on May 19, 2014.

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 5, 2020.6, 2021. Filed herewith.

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 5, 2020.6, 2021. Filed herewith.

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 5, 2020.6, 2021. Filed herewith.

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 5, 2020.6, 2021. Filed herewith.

101

The following materials from the Company’s Form 10-Q for the quarter ended June 30, 2020,2021, 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).

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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.

AXCELIS TECHNOLOGIES, INC.

DATED: August 5, 20206, 2021

By:

/s/ KEVIN J. BREWER

Kevin J. Brewer

Executive Vice President and Chief Financial Officer

Duly Authorized Officer and Principal Financial Officer

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