Axcelis(US:ACLS)2024-08-01 19:48PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents Axcelis Technologies' unaudited consolidated financial statements, including operations, comprehensive income, balance sheets, equity, and cash flows, with detailed notes Consolidated Statements of Operations Total revenue decreased by 6.4% and net income by 17.4% for the three months ended June 30, 2024, with similar declines for the six-month period | Metric (in thousands) | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenue | $256,512 | $273,970 | $508,883 | $527,990 | | Gross Profit | $112,409 | $119,703 | $228,460 | $223,722 | | Income from Operations| $52,810 | $63,708 | $109,349 | $115,065 | | Net Income | $50,866 | $61,579 | $102,460 | $109,276 | | Basic EPS | $1.56 | $1.88 | $3.14 | $3.34 | | Diluted EPS | $1.55 | $1.86 | $3.12 | $3.29 | - Total revenue decreased by 6.4% for the three months ended June 30, 2024, and by 3.6% for the six months ended June 30, 2024, compared to the respective prior year periods5 - Net income decreased by 17.4% for the three months ended June 30, 2024, and by 6.2% for the six months ended June 30, 2024, compared to the respective prior year periods5 Consolidated Statements of Comprehensive Income Comprehensive income for the three months ended June 30, 2024, was $49.96 million, a decrease from $60.57 million in the prior year, primarily due to lower net income and foreign currency translation adjustments | Metric (in thousands) | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income | $50,866 | $61,579 | $102,460 | $109,276 | | Foreign Currency Translation Adjustments | $(913) | $(1,011) | $(2,644) | $(961) | | Amortization of actuarial net gain and other adjustments from pension plan, net of tax | $5 | — | $10 | — | | Total Other Comprehensive Loss | $(908) | $(1,011) | $(2,634) | $(961) | | Comprehensive Income | $49,958 | $60,568 | $99,826 | $108,315 | - Comprehensive income decreased by 17.5% for the three months ended June 30, 2024, and by 7.8% for the six months ended June 30, 2024, compared to the respective prior year periods7 Consolidated Balance Sheets As of June 30, 2024, total assets increased slightly to $1.288 billion, while total liabilities decreased by 15.2% to $353.46 million, and total stockholders' equity increased by 8.1% to $934.95 million | Metric (in thousands) | June 30, 2024 | December 31, 2023 | | :-------------------- | :------------ | :---------------- | | ASSETS | | | | Cash and cash equivalents | $145,166 | $167,297 | | Short-term investments | $403,143 | $338,851 | | Accounts receivable, net | $188,080 | $217,964 | | Inventories, net | $283,090 | $306,482 | | Total current assets | $1,078,327 | $1,079,991 | | Total assets | $1,288,405 | $1,281,967 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Total current liabilities | $244,179 | $285,129 | | Total liabilities | $353,457 | $417,085 | | Total stockholders' equity | $934,948 | $864,882 | - Total liabilities decreased by $63.6 million (15.2%) from December 31, 2023, to June 30, 202410 - Total stockholders' equity increased by $70.07 million (8.1%) from December 31, 2023, to June 30, 202410 Consolidated Statements of Stockholders' Equity Stockholders' equity increased from $864.88 million at December 31, 2023, to $934.95 million at June 30, 2024, driven by net income and stock-based compensation, partially offset by share repurchases | Metric (in thousands) | December 31, 2023 | June 30, 2024 | | :-------------------- | :---------------- | :------------ | | Total Stockholders' Equity | $864,882 | $934,948 | | Net Income | N/A | $102,460 | | Stock-based compensation expense | N/A | $10,159 | | Repurchase of common stock | N/A | $(29,995) | | Foreign currency translation adjustments | N/A | $(2,644) | - Net income contributed $102.46 million to retained earnings for the six months ended June 30, 202411 - The company repurchased common stock totaling $29.995 million during the six months ended June 30, 202411 Consolidated Statements of Cash Flows For the six months ended June 30, 2024, net cash provided by operating activities increased to $82.29 million, while net cash used in investing activities decreased to $61.29 million, and financing activities remained stable at $40.66 million | Metric (in thousands) | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $82,290 | $67,274 | | Net cash used in investing activities | $(61,294) | $(73,238) | | Net cash used in financing activities | $(40,656) | $(40,080) | | Net decrease in cash, cash equivalents and restricted cash | $(22,134) | $(47,191) | | Cash, cash equivalents and restricted cash at end of period | $151,817 | $139,156 | - Operating cash flow increased by $15.02 million (22.3%) year-over-year for the six months ended June 30, 202412 - Share repurchases accounted for $29.995 million of cash used in financing activities during the first six months of 2024117 Notes to Consolidated Financial Statements (Unaudited) The notes provide detailed disclosures on the company's business, accounting policies, stock-based compensation, leases, revenue, and other financial details Note 1. Nature of Business Axcelis Technologies, Inc. produces ion implantation equipment for semiconductor chip fabrication and provides extensive worldwide aftermarket service and support - Axcelis Technologies, Inc. produces ion implantation equipment for semiconductor chip fabrication and provides aftermarket service and support globally15 Note 2. Significant Accounting Policies The company adopted a new accounting policy for derivative financial instruments in 2024 to mitigate foreign currency exchange rate risks, with $111 million in open forward exchange contracts - The company adopted a new accounting policy for derivative financial instruments in 2024 to mitigate foreign currency exchange rate risks1718 - As of June 30, 2024, Axcelis had open forward exchange contracts with a notional value of $111 million, resulting in an unrealized loss of approximately $323 thousand18 - Gains of $2.3 million and $3.8 million from forward currency exchange contracts were recorded for the three and six months ended June 30, 2024, respectively18 Note 3. Stock-Based Compensation Stock-based compensation expense increased to $5.5 million for the three months and $10.2 million for the six months ended June 30, 2024, compared to the prior year periods | Metric (in millions) | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Stock-based compensation expense | $5.5 | $4.7 | $10.2 | $7.9 | - The company issued 0.2 million shares of common stock upon vesting of RSUs and purchases under the 2020 ESPP for both the three and six months ended June 30, 20242223 Note 4. Leases The company holds operating leases for various facilities and a finance lease for its corporate headquarters, with total leased assets of $44.91 million and total lease liabilities of $73.42 million as of June 30, 2024 | Metric (in thousands) | June 30, 2024 | December 31, 2023 | | :-------------------- | :------------ | :---------------- | | Operating lease assets | $28,918 | $30,716 | | Finance lease assets | $15,989 | $16,632 | | Total leased assets | $44,907 | $47,348 | | Total lease liabilities | $73,422 | $75,887 | | Lease Cost (in thousands) | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total operating lease cost | $2,685 | $2,614 | $5,282 | $4,858 | | Total finance lease cost | $1,508 | $1,541 | $3,027 | $3,091 | | Total lease cost | $4,193 | $4,155 | $8,309 | $7,949 | - The weighted-average remaining lease term for operating leases is 11.5 years with a discount rate of 5.5%, and for finance leases is 12.6 years with a discount rate of 10.5% as of June 30, 202433 Note 5. Revenue Total revenue for the three months ended June 30, 2024, was $256.51 million, with Systems revenue at $198.65 million and Aftermarket revenue at $57.87 million, with Asia Pacific remaining the largest geographic market | Revenue Category (in thousands) | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Systems | $198,645 | $215,174 | $394,076 | $410,372 | | Aftermarket | $57,867 | $58,796 | $114,807 | $117,618 | | Total Revenue | $256,512 | $273,970 | $508,883 | $527,990 | | Geographic Market (in thousands) | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | North America | $34,373 | $37,918 | $79,876 | $83,084 | | Asia Pacific | $196,159 | $205,941 | $384,376 | $397,044 | | Europe | $25,980 | $30,111 | $44,631 | $47,862 | | Total Revenue | $256,512 | $273,970 | $508,883 | $527,990 | | Contract Liabilities (in thousands) | June 30, 2024 | December 31, 2023 | | :---------------------------------- | :------------ | :---------------- | | Contract liabilities | $174,011 | $210,885 | Note 6. Receivables and Allowances for Credit Losses Trade receivables are reported net of allowances for credit losses, with $0.5 million in recovery of bad debt expense recorded for the six months ended June 30, 2024 - The company recorded $0.5 million in recovery of bad debt expense for the six-month period ended June 30, 202447 - No credit losses or recoveries were incurred for the three-month period ended June 30, 2024, or for the six-month period ended June 30, 202347 Note 7. Computation of Net Earnings per Share Basic EPS for the three months ended June 30, 2024, was $1.56, and diluted EPS was $1.55, with similar figures for the six-month period | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $1.56 | $1.88 | $3.14 | $3.34 | | Diluted EPS | $1.55 | $1.86 | $3.12 | $3.29 | | Basic weighted average shares | 32,598 | 32,775 | 32,618 | 32,759 | | Diluted weighted average shares | 32,771 | 33,189 | 32,848 | 33,237 | - Diluted weighted average shares of common stock outstanding for the three and six months ended June 30, 2024, did not include 22,983 and 20,639 common equivalent shares, respectively, as their effect would have been anti-dilutive49 Note 8. Accumulated Other Comprehensive Loss Accumulated other comprehensive loss increased to $(4.48) million as of June 30, 2024, from $(1.85) million at December 31, 2023, primarily due to foreign currency translation adjustments | Component (in thousands) | December 31, 2023 | June 30, 2024 | | :----------------------- | :---------------- | :------------ | | Foreign currency | $(1,956) | $(4,600) | | Defined benefit pension plan | $110 | $120 | | Total | $(1,846) | $(4,480) | - The increase in accumulated other comprehensive loss was mainly driven by foreign currency translation adjustments, which moved from $(1,956) thousand to $(4,600) thousand50 Note 9. Cash, cash equivalents and restricted cash As of June 30, 2024, total cash, cash equivalents, and restricted cash amounted to $151.82 million, with $6.65 million in restricted cash for various collateral purposes | Metric (in thousands) | June 30, 2024 | December 31, 2023 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $145,166 | $167,297 | | Long-term restricted cash | $6,651 | $6,654 | | Total cash, cash equivalents and restricted cash | $151,817 | $173,951 | - Restricted cash of $6.7 million as of June 30, 2024, includes $5.9 million for the headquarters lease, $0.7 million for workers' compensation insurance, and $0.1 million for customs activity52 Note 10. Inventories, net Net inventories decreased to $283.09 million as of June 30, 2024, from $306.48 million at December 31, 2023, primarily due to reductions in raw materials and finished goods | Component (in thousands) | June 30, 2024 | December 31, 2023 | | :----------------------- | :------------ | :---------------- | | Raw materials | $220,910 | $231,200 | | Work in process | $40,481 | $45,373 | | Finished goods (completed systems) | $21,699 | $29,909 | | Inventories, net | $283,090 | $306,482 | - Inventory reserves are established based on forecasted sales, product end-of-life dates, market value, and new product introductions to reduce inventory carrying value to net realizable value53 Note 11. Product Warranty The standard product warranty liability increased to $16.42 million as of June 30, 2024, from $10.49 million at January 1, 2023, reflecting new warranties and changes in estimates | Metric (in thousands) | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :-------------------- | :----------------------------- | :----------------------------- | | Balance at January 1 | $16,757 | $10,487 | | Warranties issued during the period | $5,755 | $5,616 | | Settlements made during the period | $(5,653) | $(4,834) | | Changes in estimate of liability for pre-existing warranties during the period | $(444) | $1,552 | | Balance at June 30 | $16,415 | $12,821 | - The company generally offers a one-year warranty for all systems, accruing estimated costs at shipment54 Note 12. Fair Value Measurements As of June 30, 2024, cash equivalents and short-term investments, primarily U.S. Government Securities, totaled $507.78 million (Level 1), while forward currency exchange contracts (Level 2) had an unrealized loss of $323 thousand | Asset (in thousands) | Level 1 (June 30, 2024) | Level 2 (June 30, 2024) | Total (June 30, 2024) | | :------------------- | :---------------------- | :---------------------- | :-------------------- | | Cash equivalents | $104,958 | — | $104,958 | | Short-term investments | $402,820 | — | $402,820 | | Mark-to-market adjustment on forward exchange contracts | — | $(323) | $(323) | | Total | $507,778 | $(323) | $507,455 | - Forward currency exchange contracts, initiated in February 2024 to mitigate foreign currency fluctuations, are measured at fair value using observable market inputs and classified within Level 2 of the valuation hierarchy63 Note 13. Financing Arrangements The company has a financing lease obligation of $44.5 million as of June 30, 2024, related to the 2015 sale-leaseback of its corporate headquarters, secured by a $5.9 million cash collateralized letter of credit - As of June 30, 2024, Axcelis had a financing obligation of $44.5 million from the sale-leaseback of its corporate headquarters64 - A $5.9 million cash collateralized letter of credit is held as a security deposit for the headquarters lease, classified as long-term restricted cash66 Note 14. Income Taxes Income tax expense increased to $6.4 million for the three months and $13.8 million for the six months ended June 30, 2024, primarily due to a decrease in stock compensation deduction | Metric (in millions) | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax expense | $6.4 | $3.0 | $13.8 | $8.2 | - The increase in income tax expense was primarily due to a decrease in stock compensation deduction67 - The effective tax rate was less than the U.S. statutory rate of 21% due to a forecasted Foreign Derived Intangible Income deduction, Federal R&D tax credits, and a favorable discrete item related to equity compensation67 Note 15. Concentration of Risk For the three months ended June 30, 2024, one customer accounted for 11.5% of total revenue, and one customer represented 11.3% of accounts receivable at period-end - One customer accounted for 11.5% of total revenue for the three months ended June 30, 202468 - No individual customer accounted for greater than ten percent of total revenue for the six months ended June 30, 202468 - One customer accounted for 11.3% of accounts receivable at June 30, 202468 Note 16. Share Repurchase During the six months ended June 30, 2024, the company repurchased 0.3 million shares at an average cost of $114.07 per share under its $200 million stock repurchase program - The Board of Directors approved an additional $200 million for the stock repurchase program in August 202369 - During the six months ended June 30, 2024, 0.3 million shares were repurchased at an average cost of $114.07 per share69 Note 17. Contingencies The company is not currently involved in any litigation expected to have a material adverse effect on its business, and no material costs have been incurred for intellectual property indemnification provisions - The company is not currently involved in any litigation that is expected to have a material adverse effect on its business operations70125 - System sales agreements include intellectual property indemnification provisions, but no material costs have been incurred or accrued72 Note 18. Recent Accounting Guidance The company is evaluating the impact of recently issued FASB Accounting Standards Updates: ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Taxes), effective for fiscal years beginning after December 15, 2023, and December 15, 2024, respectively - ASU 2023-07 (Segment Reporting) is effective for fiscal years beginning after December 15, 2023, and aims to enhance disclosures for significant segment expenses73 - ASU 2023-09 (Income Taxes) is effective for annual periods beginning after December 15, 2024, and seeks to improve income tax disclosures, particularly for rate reconciliation and taxes paid74 - The company is currently evaluating the impact of both ASUs on its future consolidated financial statements and related disclosures7374 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, highlighting revenue trends, gross profit, operating expenses, and liquidity, noting strong demand in the mature process segment Overview Axcelis Technologies, a leading producer of ion implantation equipment, saw strong demand in the first half of 2024, with 98% of shipped systems revenue from the mature process segment, primarily power devices - Axcelis is a primary producer of ion implantation equipment for semiconductor chips and provides extensive worldwide aftermarket service and support77 - The first six months of 2024 exhibited continued strong demand for capital equipment, with the mature process segment representing 98% of shipped systems revenue78 - Power device shipments comprised 59% of total systems revenue, general mature 36%, and image sensors 4%78 - Demand from silicon carbide customers within the power segment is expected to remain healthy in the second half of 2024, with DRAM and NAND spending projected to pick up in 202578 Critical Accounting Estimates Management's financial reporting relies on continuous evaluation of estimates and judgments, with no material changes identified since the 2023 Form 10-K - The preparation of financial statements requires management to make estimates and judgments that affect reported amounts79 - No material changes have been made to critical accounting estimates and judgments as described in the 2023 Form 10-K80 Results of Operations This section details the company's financial performance, including revenue breakdown by product and service, gross profit margins, and operating expenses, highlighting a decrease in product revenue but an increase in service revenue Revenue Total revenue decreased by 6.4% to $256.51 million for the three months and by 3.6% to $508.88 million for the six months ended June 30, 2024, primarily due to a decrease in system sales, while services revenue increased significantly | Revenue Category (in thousands) | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Period-to-Period Change ($) | Period-to-Period Change (%) | | :------------------------------ | :------------------------------- | :------------------------------- | :-------------------------- | :-------------------------- | | Product | $245,380 | $265,673 | $(20,293) | (7.6)% | | Services | $11,132 | $8,297 | $2,835 | 34.2% | | Total revenue | $256,512 | $273,970 | $(17,458) | (6.4)% | | Revenue Category (in thousands) | Six months ended June 30, 2024 | Six months ended June 30, 2023 | Period-to-Period Change ($) | Period-to-Period Change (%) | | :------------------------------ | :----------------------------- | :----------------------------- | :-------------------------- | :-------------------------- | | Product | $488,798 | $511,680 | $(22,882) | (4.5)% | | Services | $20,085 | $16,310 | $3,775 | 23.1% | | Total revenue | $508,883 | $527,990 | $(19,107) | (3.6)% | - The decrease in product revenue for both periods was primarily driven by a decrease in system sales8487 Aftermarket and Systems Revenue For the three months ended June 30, 2024, Aftermarket revenue was $57.9 million, a slight decrease from $58.8 million in the prior year, while Systems revenue decreased to $198.6 million from $215.2 million - Aftermarket revenue for the three months ended June 30, 2024, was $57.9 million, compared to $58.8 million in the prior year90 - Systems revenue for the three months ended June 30, 2024, was $198.6 million, down from $215.2 million in the prior year90 - Aftermarket revenue for the six months ended June 30, 2024, was $114.8 million, compared to $117.6 million in the prior year91 - Systems revenue for the six months ended June 30, 2024, was $394.1 million, compared to $410.4 million in the prior year91 Gross Profit / Gross Margin Total gross profit decreased by 6.1% to $112.41 million for the three months but increased by 2.1% to $228.46 million for the six months, with improved product and services gross margins due to favorable mix changes | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Product Gross Profit (in thousands) | $110,621 | $118,932 | $226,128 | $222,168 | | Product Gross Margin (%) | 45.1% | 44.8% | 46.3% | 43.4% | | Services Gross Profit (in thousands) | $1,788 | $771 | $2,332 | $1,554 | | Services Gross Margin (%) | 16.1% | 9.3% | 11.6% | 9.5% | | Total Gross Profit (in thousands) | $112,409 | $119,703 | $228,460 | $223,722 | | Total Gross Margin (%) | 43.9% | 43.7% | 44.9% | 42.4% | - The increase in product gross margin was primarily due to a favorable mix of system revenue9396 - The increase in services gross margin was attributable to changes in the mix of service contracts9496 Operating Expenses Total operating expenses increased by 6.4% to $59.6 million for the three months and by 9.6% to $119.11 million for the six months ended June 30, 2024, primarily due to higher personnel costs | Operating Expense (in thousands) | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $25,786 | $24,130 | $51,448 | $47,903 | | Sales and marketing | $17,230 | $15,537 | $34,675 | $29,681 | | General and administrative | $16,583 | $16,328 | $32,988 | $31,073 | | Total operating expenses | $59,599 | $55,995 | $119,111 | $108,657 | - Personnel costs, the largest expense, increased due to higher wages and headcount, partially offset by a decrease in bonus expense98 Research and Development Research and development expense increased by 6.9% to $25.8 million for the three months and by 7.4% to $51.4 million for the six months ended June 30, 2024, primarily due to higher personnel expenses | Metric (in thousands) | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $25,786 | $24,130 | $51,448 | $47,903 | - The increase in R&D expense is primarily due to higher personnel expenses associated with increases in wages and headcount101 Sales and Marketing Sales and marketing expense increased by 10.9% to $17.2 million for the three months and by 16.8% to $34.7 million for the six months ended June 30, 2024, mainly due to higher personnel expenses | Metric (in thousands) | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sales and marketing | $17,230 | $15,537 | $34,675 | $29,681 | - The increase in sales and marketing expense is primarily due to higher personnel expenses associated with increases in wages and headcount103 General and Administrative General and administrative expense increased by 1.6% to $16.6 million for the three months and by 6.2% to $33.0 million for the six months ended June 30, 2024, driven by higher personnel expenses | Metric (in thousands) | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | General and administrative | $16,583 | $16,328 | $32,988 | $31,073 | - The increase in G&A expense is primarily due to higher personnel expenses associated with an increase in headcount, offset by a decrease in bonus expense for the three-month period105107 Other Income (Expense) Total other income significantly increased to $4.5 million for the three months and $6.9 million for the six months ended June 30, 2024, primarily due to higher interest income and foreign exchange gains | Metric (in thousands) | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total other income | $4,455 | $908 | $6,914 | $2,453 | - The $3.5 million increase in other income for the three months was primarily due to a $1.7 million increase in interest income and $2.3 million in foreign exchange gains from forward currency exchange contracts, partially offset by $2.5 million in foreign exchange losses109 - The $4.5 million increase in other income for the six months was primarily due to a $3.3 million increase in interest income and $3.8 million in foreign exchange gains from forward currency exchange contracts, partially offset by $5.9 million in foreign exchange losses109 Income Tax Provision Income tax expense increased to $6.4 million for the three months and $13.8 million for the six months ended June 30, 2024, primarily due to a decrease in stock compensation deduction, with the effective tax rate remaining below the U.S. statutory rate of 21% | Metric (in thousands) | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax provision | $6,399 | $3,037 | $13,803 | $8,242 | - The increase in income tax expense was primarily due to a decrease in stock compensation deduction110 - The effective tax rate was less than the U.S. statutory rate of 21% due to a forecasted Foreign Derived Intangible Income deduction, Federal R&D tax credits, and a favorable discrete item related to equity compensation111 Liquidity and Capital Resources As of June 30, 2024, Axcelis maintained strong liquidity with $145.2 million in unrestricted cash and cash equivalents and $403.1 million in short-term investments, with operating activities generating $82.3 million in cash - As of June 30, 2024, the company had $145.2 million in unrestricted cash and cash equivalents and $403.1 million in short-term investments114 - Net cash provided by operating activities was $82.3 million for the six months ended June 30, 2024, an increase from $67.3 million in the prior year115 - Investing activities resulted in $61.3 million in cash outflows, including $3.6 million for capital expenditures and $249.0 million for short-term investments, partially offset by $191.3 million from maturities of short-term investments116 - Financing activities used $40.7 million, primarily for common stock repurchases ($30.0 million) and tax withholdings on restricted stock grants ($11.2 million)117 - Management believes current cash and cash equivalents are sufficient to meet anticipated short- and long-term cash requirements118 Commitments and Contingencies Significant commitments and contingencies as of June 30, 2024, remain consistent with those disclosed in the 2023 Form 10-K - Significant commitments and contingencies at June 30, 2024, are consistent with those discussed in the 2023 Form 10-K119 Item 3. Quantitative and Qualitative Disclosures About Market Risk As of June 30, 2024, there have been no material changes to the quantitative and qualitative disclosures about market risk previously reported in the 2023 Form 10-K - No material changes to market risk disclosures have occurred as of June 30, 2024, compared to the 2023 Form 10-K120 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2024, with no material changes in internal control over financial reporting identified during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2024122 - No material changes in internal control over financial reporting were identified during the three months ended June 30, 2024123 PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any litigation that is expected to have a material adverse effect on its business operations - The company is not presently a party to any litigation that is believed to have a material adverse effect on its business operations125 Item 1A. Risk Factors As of June 30, 2024, there have been no material changes to the risk factors described in the company's 2023 Form 10-K - No material changes to the risk factors described in Item 1A of the 2023 Form 10-K have occurred as of June 30, 2024126 Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities The company's Board of Directors approved a $200 million additional funding for its stock repurchase program in August 2023, with 141 thousand shares repurchased during the three months ended June 30, 2024 - The Board of Directors approved an additional $200 million for the stock repurchase program in August 2023, with no expiration date126 | Period (three months ended June 30, 2024) | Total Number of Shares Purchased (in thousands) | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in thousands) | | :---------------------------------------- | :---------------------------------------------- | :--------------------------- | :------------------------------------------------------------------------------------------ | | April 1 through April 30 | 78 | $103.33 | $166,999 | | May 1 through May 31 | 63 | $110.03 | $160,011 | | June 1 through June 30 | — | — | $160,011 | | Total | 141 | N/A | N/A | Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the period - No defaults upon senior securities occurred129 Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company129 Item 5. Other Information During the quarter ended June 30, 2024, no director or officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements - No director or officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2024130 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including organizational documents, certifications from executive officers, and iXBRL formatted financial statements - Exhibits include Restated Certificate of Incorporation, Certificate of Amendment, Bylaws, and certifications from Principal Executive Officer and Principal Financial Officer under Exchange Act Rule 13a-14(a)/15d-14(a) and Section 1350 of Chapter 63 of title 18 of the United States Code132 - The financial statements (Consolidated Statements of Operations, Comprehensive Income, Balance Sheets, Cash Flows, and Notes) are filed in inline eXtensible Business Reporting Language (iXBRL) format132 SIGNATURES