# Axcelis Technologies Inc: Form 10-Q for the period ended Sep 30, 2023

- Company: [Axcelis Technologies Inc](/companies/acls.md) (CIK 1113232)
- Form: 10-Q
- Filed: 2023-11-02
- Accepted by EDGAR: Nov 2, 2023, 16:56 ET
- Period: 2023-09-30
- Accession: 0001558370-23-017452
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1113232/000155837023017452/acls-20230930x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1113232/000155837023017452/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $292.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $820.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $162.6m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $466.9m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-07-01 to 2023-09-30 | $129.7m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-01-01 to 2023-09-30 | $353.4m | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $24.1m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $72.0m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $71.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $186.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $1.3m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $4.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $7.7m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $16.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $65.9m | us-gaap:NetIncomeLossAvailableToCommonStockholdersBasic |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $175.2m | us-gaap:ProfitLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $1.99 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $5.28 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $2.01 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $5.35 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 33,159,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 33,208,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $91.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $10.5m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $37.5m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-09-30 | $142.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $1.02bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $1.20bn | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $261.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $400.7m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $801.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 31,604 characters.

*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, 2022, 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 and South Korea. Our equipment and service products are highly technical and are sold through a direct sales force in the United States, Europe, and Asia. Consolidation and partnering within the semiconductor manufacturing industry has resulted in a small number of customers representing a substantial portion of our business. Our ten largest customers accounted for 55.1% of total revenue for the nine months ended September 30, 2023.

The first nine months of 2023 exhibited continued strong demand for our capital equipment, despite a downturn in the memory segment of our industry that is causing other semiconductor equipment makers to experience lower revenues than the same period in the prior year. Supply chain performance has improved from challenges experienced during the global pandemic between 2020 and 2022, but has not completely recovered. Axcelis’ strong results in 2023 demonstrate our ability to meet demand and manage supply chain difficulties. Our performance is closely related to the growing mature process technology market, with 94% of shipments during the first nine months of 2023 going to mature foundry/logic customers.

### 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, 2022 are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and assumptions. Management’s estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Management has not identified any need to make any material change in, and has not changed, any of our critical accounting estimates and judgments as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2022.

### Results of Operations

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

| ​ ​ ​ ​ Revenue: | ​ ​ ​ ​ | ​ ​ Three months ended September 30, 2023 ​ ​ | ​ ​ ​ ​ 2022 ​ ​ | ​ ​ ​ ​ | ​ ​ Nine months ended September 30, 2023 ​ ​ | ​ ​ ​ ​ 2022 ​ ​ | ​ ​ ​ ​ |
| --- | --- | ---: | ---: | --- | ---: | ---: | --- |
| Product | ​ | 96.9% | 96.7% | ​ | 96.9% | 96.6% | ​ |
| Services |  | 3.1 | 3.3 |  | 3.1 | 3.4 |  |
| Total revenue |  | 100.0 | 100.0 |  | 100.0 | 100.0 |  |
| Cost of revenue: | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ |
| Product |  | 53.0 | 51.9 |  | 54.2 | 52.4 |  |
| Services |  | 2.7 | 3.0 |  | 2.8 | 2.9 |  |
| Total cost of revenue |  | 55.7 | 54.9 |  | 57.0 | 55.3 |  |
| Gross profit |  | 44.3 | 45.1 |  | 43.0 | 44.7 |  |
| Operating expenses: | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ |
| Research and development |  | 8.2 | 9.0 |  | 8.8 | 8.6 |  |
| Sales and marketing |  | 5.6 | 6.4 |  | 5.6 | 5.9 |  |
| General and administrative |  | 6.0 | 6.5 |  | 5.9 | 6.3 |  |
| Total operating expenses |  | 19.8 | 21.9 |  | 20.3 | 20.8 |  |
| Income from operations |  | 24.5 | 23.2 |  | 22.7 | 23.9 |  |
| Other income (expense): | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ |
| Interest income |  | 1.6 | 0.5 |  | 1.6 | 0.2 |  |
| Interest expense |  | (0.5) | (0.6) |  | (0.5) | (0.6) |  |
| Other, net |  | (0.4) | (3.5) |  | (0.5) | (2.2) |  |
| Total other income (expense) |  | 0.7 | (3.6) |  | 0.6 | (2.6) |  |
| Income before income taxes |  | 25.2 | 19.6 |  | 23.3 | 21.3 |  |
| Income tax provision |  | 2.6 | 2.0 |  | 1.9 | 2.0 |  |
| Net income | ​ | 22.6% | 17.6% | ​ | 21.4% | 19.3% | ​ |

### Revenue

The following table sets forth our product and services revenue:

*(dollars in thousands)*

| ​ ​ ​ ​ ​ Revenue: | ​ ​ ​ ​ ​ | ​ ​ ​ Three months ended September 30, 2023 ​ ​ | ​ ​ ​ ​ ​ 2022 ​ ​ | ​ ​ Period-to-Period Change $​% ​ | ​ | ​ ​ ​ ​ ​ | ​ ​ ​ Nine months ended September 30, 2023 ​ ​ | ​ ​ ​ ​ ​ 2022 ​ ​ | ​ ​ Period-to-Period Change $​% ​ | ​ ​ | ​ ​ ​ | ​ ​ ​ ​ ​ |
| --- | --- | ---: | ---: | --- | --- | ---: | ---: | ---: | --- | --- | ---: | --- |
| Product | ​ | $283,367 ​ | $221,540 ​ | $61,827 | ​ | 27.9% | $795,047 ​ | $631,998 ​ | $163,049 | ​ | 25.8% | ​ |
| Percentage of revenue | ​ | ​ 96.9% | ​ 96.7% | ​ ​ | ​ | ​ ​ | ​ 96.9% | ​ 96.6% | ​ ​ | ​ | ​ ​ | ​ |
| Services | ​ | 8,959 ​ | 7,635 ​ | ​ 1,324 | ​ | 17.3% | 25,269 ​ | 21,949 ​ | ​ 3,320 | ​ | 15.1% | ​ |
| Percentage of revenue | ​ | ​ 3.1% | ​ 3.3% | ​ ​ | ​ | ​ ​ | ​ 3.1% | ​ 3.4% | ​ ​ | ​ | ​ ​ | ​ |
| Total revenue | ​ | $292,326 ​ | $229,175 ​ | $63,151 | ​ | 27.6% | $820,316 ​ | $653,947 ​ | $166,369 | ​ | 25.4% | ​ |

#### Three months ended September 30, 2023 Compared with Three months ended September 30, 2022

#### Product

Product revenue, which includes systems sales, sales of spare parts, product upgrades and used systems, was $283.4 million, or 96.9% of revenue, during the three months ended September 30, 2023, compared with $221.5 million, or 96.7% of revenue, for the three months ended September 30, 2022. The $61.8 million increase in product revenue for the three-month period ended September 30, 2023, in comparison to the same period in 2022, was primarily driven by an increase in the number of systems sold.

Deferred revenue includes payments received in advance of system sales as well as deferral of revenue from systems sales for installation and other future performance obligations. The total amount of deferred revenue at September 30, 2023 and December 31, 2022 was $202.0 million and $154.7 million, respectively. The increase in deferred revenue was primarily due to payments received in advance of sales.

#### 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 $9.0 million, or 3.1% of revenue, for the three months ended September 30, 2023, compared with $7.6 million, or 3.3% of revenue, for the three months ended September 30, 2022. 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.

#### Nine months ended September 30, 2023 Compared with Nine months ended September 30, 2022

#### Product

Product revenue was $795.0 million, or 96.9% of revenue, during the nine months ended September 30, 2023, compared with $632.0 million, or 96.6% of revenue, for the nine months ended September 30, 2022. The $163.0 million increase in product revenue for the nine-month period ended September 30, 2023, in comparison to the same period in 2022, was primarily driven by an increase in the number of systems sold.

#### Services

Services revenue was $25.3 million, or 3.1% of revenue, for the nine months ended September 30, 2023, compared with $21.9 million, or 3.4% of revenue, for the nine months ended September 30, 2022.

### 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:

- 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);

- 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 process technology and leading edge foundry and logic.

#### Aftermarket and Systems Revenue

#### Three months ended September 30, 2023 Compared with Three months ended September 30, 2022

Included in total revenue of $292.3 million during the three months ended September 30, 2023 is revenue from our Aftermarket business of $60.9 million, compared with $58.1 million of Aftermarket revenue for the three months ended September 30, 2022. Aftermarket revenue fluctuates from period to period based on capacity utilization at customers’ manufacturing facilities, which affects the sale of spare parts and demand for equipment service. Aftermarket revenue can also fluctuate from period to period based on the demand for system upgrades or used equipment. The remaining $231.4 million of revenue for the three months ended September 30, 2023 was from system sales, compared with $171.1 million of systems revenue for the three months ended September 30, 2022. Systems revenue fluctuates from period to period based on our customers’ capital spending.

#### Nine months ended September 30, 2023 Compared with Nine months ended September 30, 2022

Included in total revenue of $820.3 million during the nine months ended September 30, 2023 is revenue from our Aftermarket business of $178.5 million, compared with $165.7 million of Aftermarket revenue for the nine months ended September 30, 2022. The remaining $641.8 million of revenue for the nine months ended September 30, 2023 was from system sales, compared with $488.2 million of systems revenue for the nine months ended September 30, 2022.

### Gross Profit / Gross Margin

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

*(dollars in thousands)*

| ​ ​ ​ ​ ​ Gross Profit: | ​ ​ ​ ​ | ​ ​ ​ Three months ended September 30, 2023 ​ | ​ ​ ​ ​ ​ 2022 ​ | ​ ​ Period-to-Period Change $​% ​ | ​ | ​ ​ ​ ​ | ​ ​ ​ Nine months ended September 30, ​ 2023 ​ | ​ ​ ​ ​ ​ ​ 2022 ​ | ​ ​ Period-to-Period Change $​% ​ | ​ ​ | ​ ​ ​ | ​ ​ ​ ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Product | ​ | $128,569 ​ | $102,548 ​ | $26,021 | ​ | 25.4% | $350,736 ​ | $289,611 ​ | $61,125 | ​ | 21.1% | ​ |
| Product gross margin | ​ | ​ 45.4% | ​ 46.3% | ​ ​ | ​ | ​ ​ | ​ 44.1% | ​ 45.8% | ​ ​ | ​ | ​ ​ | ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ | ​ | ​ ​ | ​ |
| Services | ​ | 1,115 ​ | 773 ​ | ​ 342 | ​ | 44.2% | 2,669 ​ | ​ 2,658 ​ | ​ 11 | ​ | 0.4% | ​ |
| Services gross margin | ​ | ​ 12.4% | ​ 10.1% | ​ ​ | ​ | ​ ​ | ​ 10.6% | ​ 12.1% | ​ ​ | ​ | ​ ​ | ​ |
| Total gross profit | ​ | $129,684 ​ | $103,321 ​ | $26,363 | ​ | 25.5% | $353,405 ​ | $292,269 ​ | $61,136 | ​ | 20.9% | ​ |
| Gross margin | ​ | ​ 44.3% | ​ 45.1% | ​ ​ | ​ | ​ ​ | ​ 43.0% | ​ 44.7% | ​ ​ | ​ | ​ ​ | ​ |

#### Three months ended September 30, 2023 Compared with Three months ended September 30, 2022

#### Product

Gross margin from product revenue was 45.4% for the three months ended September 30, 2023, compared to 46.3% for the three months ended September 30, 2022. The decrease in gross margin primarily resulted from a less favorable mix of system revenue.

#### Services

Gross margin from services revenue was 12.4% for the three months ended September 30, 2023, compared to 10.1% for the three months ended September 30, 2022. The increase in gross margin is attributable to changes in the mix of service contracts.

#### Nine months ended September 30, 2023 Compared with Nine months ended September 30, 2022

#### Product

Gross margin from product revenue was 44.1% for the nine months ended September 30, 2023, compared to 45.8% for the nine months ended September 30, 2022. The decrease in gross margin primarily resulted from a less favorable mix of system revenue.

#### Services

Gross margin from services revenue was 10.6% for the nine months ended September 30, 2023, compared to 12.1% for the nine months ended September 30, 2022. The decrease in gross margin is attributable to changes in the mix of service contracts.

### Operating Expenses

The following table sets forth our operating expenses:

*(dollars in thousands)*

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ Three months ended September 30, 2023 ​ | ​ ​ ​ ​ ​ 2022 ​ | ​ ​ Period-to-Period Change $​% | ​ | ​ ​ ​ ​ ​ | ​ ​ ​ Nine months ended September 30, 2023 ​ | ​ ​ ​ ​ ​ 2022 ​ | ​ ​ Period-to-Period Change $​% | ​ | ​ ​ | ​ ​ ​ ​ ​ |
| --- | --- | ---: | ---: | --- | --- | ---: | ---: | ---: | --- | --- | ---: | --- |
| Research and development |  | $24,093 | $20,563 | $3,530 |  | 17.2% | $71,996 | $56,267 | $15,729 |  | 28.0% |  |
| Percentage of revenue | ​ | ​ 8.2% | ​ 9.0% | ​ ​ | ​ | ​ ​ | ​ 8.8% | ​ 8.6% | ​ ​ | ​ | ​ ​ | ​ |
| Sales and marketing | ​ | 16,465 ​ | 14,573 ​ | ​ 1,892 | ​ | 13.0% | 46,146 ​ | 38,567 ​ | ​ 7,579 | ​ | 19.7% | ​ |
| Percentage of revenue | ​ | ​ 5.6% | ​ 6.4% | ​ ​ | ​ | ​ ​ | ​ 5.6% | ​ 5.9% | ​ ​ | ​ | ​ ​ | ​ |
| General and administrative | ​ | 17,446 ​ | 14,983 ​ | ​ 2,463 | ​ | 16.4% | 48,519 ​ | 41,163 ​ | ​ 7,356 | ​ | 17.9% | ​ |
| Percentage of revenue | ​ | ​ 6.0% | ​ 6.5% | ​ ​ | ​ | ​ ​ | ​ 5.9% | ​ 6.3% | ​ ​ | ​ | ​ ​ | ​ |
| Total operating expenses | ​ | $58,004 ​ | $50,119 ​ | $7,885 | ​ | 15.7% | $166,661 ​ | $135,997 ​ | $30,664 | ​ | 22.5% | ​ |
| Percentage of revenue | ​ | ​ 19.8% | ​ 21.9% | ​ ​ | ​ | ​ ​ | ​ 20.3% | ​ 20.8% | ​ ​ | ​ | ​ ​ | ​ |

Our operating expenses consist primarily of personnel costs, including salaries, commissions, incentive-based compensation, stock-based compensation and related benefits and taxes; project material costs related to the design and development of new products and enhancement of existing products; and professional fees, travel and depreciation expenses.

Personnel costs are our largest expense, representing $34.8 million, or 60.0%, of our total operating expenses for the three months ended September 30, 2023, compared to $31.4 million, or 62.6%, of our total operating expenses for the three months ended September 30, 2022. Personnel costs were $99.3 million, or 59.6%, of our total operating expenses for the nine months ended September 30, 2023, compared to $83.0 million, or 61.0%, of our total operating expenses for the nine months ended September 30, 2022. The higher personnel costs for the three and nine months ended September 30, 2023 are primarily due to increases in personnel-related expenses to support growth.

### Research and Development

*(dollars in thousands)*

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ Three months ended September 30, 2023 ​ | ​ ​ ​ ​ 2022 ​ | ​ ​ Period-to-Period Change ​ $​% | ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ ​ Nine months ended September 30, 2023 ​ | ​ ​ ​ ​ ​ 2022 ​ | ​ ​ ​ ​ | ​ ​ ​ Period-to-Period ​ Change ​ $​% | ​ | ​ ​ | ​ ​ ​ ​ ​ |
| --- | --- | ---: | ---: | ---: | --- | ---: | --- | ---: | ---: | --- | ---: | --- | ---: | --- |
| Research and development |  | $24,093 | $20,563 | $3,530 | ​ | 17.2% | ​ | $71,996 | $56,267 | ​ | $15,729 |  | 28.0% |  |
| Percentage of revenue | ​ | ​ 8.2% | ​ 9.0% | ​ ​ | ​ | ​ ​ | ​ | ​ 8.8% | ​ 8.6% | ​ | ​ ​ | ​ | ​ ​ | ​ |

Our ability to remain competitive depends largely on continuously developing innovative technology, with new and enhanced features and systems and introducing them at competitive prices on a timely basis. Accordingly, based on our strategic plan, we establish annual research and development budgets to fund programs that we expect will solve customers’ high value, high impact, ion implantation challenges.

#### Three months ended September 30, 2023 Compared with Three months ended September 30, 2022

Research and development expense was $24.1 million during the three months ended September 30, 2023, an increase of $3.5 million, or 17.2%, compared with $20.6 million during the three months ended September 30, 2022. The increase is primarily due to higher personnel expenses as well as an increase in the cost of project materials and related services for ongoing projects.

#### Nine months ended September 30, 2023 Compared with Nine months ended September 30, 2022

Research and development expense was $72.0 million during the nine months ended September 30, 2023, an increase of $15.7 million, or 28.0%, compared with $56.3 million during the nine months ended September 30, 2022. The increase is primarily due to higher personnel expenses as well as an increase in the cost of project materials and related services for ongoing projects.

### Sales and Marketing

*(dollars in thousands)*

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ Three months ended September 30, 2023 ​ | ​ ​ ​ ​ ​ 2022 ​ | ​ ​ Period-to-Period Change $​% | ​ | ​ ​ ​ ​ ​ | ​ ​ ​ Nine months ended September 30, 2023 ​ | ​ ​ ​ ​ ​ 2022 ​ | ​ ​ Period-to-Period Change $​% | ​ | ​ ​ | ​ ​ ​ ​ ​ |
| --- | --- | ---: | ---: | ---: | --- | ---: | ---: | ---: | ---: | --- | ---: | --- |
| Sales and marketing |  | $16,465 | $14,573 | $1,892 | ​ | 13.0% | $46,146 | $38,567 | $7,579 |  | 19.7% |  |
| Percentage of revenue | ​ | ​ 5.6% | ​ 6.4% | ​ ​ | ​ | ​ ​ | ​ 5.6% | ​ 5.9% | ​ ​ | ​ | ​ ​ | ​ |

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

#### Three months ended September 30, 2023 Compared with Three months ended September 30, 2022

Sales and marketing expense was $16.5 million during the three months ended September 30, 2023, an increase of $1.9 million, or 13.0%, compared with $14.6 million during the three months ended September 30, 2022. The increase is primarily due to higher personnel expenses.

#### Nine months ended September 30, 2023 Compared with Nine months ended September 30, 2022

Sales and marketing expense was $46.1 million during the nine months ended September 30, 2023, an increase of $7.6 million, or 19.7%, compared with $38.6 million during the nine months ended September 30, 2022. The increase is primarily due to higher personnel expenses and travel-related expense.

### General and Administrative

*(dollars in thousands)*

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ Three months ended September 30, 2023 ​ | ​ ​ ​ ​ ​ 2022 ​ | ​ ​ Period-to-Period Change $​% | ​ | ​ ​ ​ ​ ​ | ​ ​ ​ Nine months ended September 30, 2023 ​ | ​ ​ ​ ​ ​ 2022 ​ | ​ ​ Period-to-Period Change $​% | ​ | ​ ​ | ​ ​ ​ ​ ​ |
| --- | --- | ---: | ---: | ---: | --- | ---: | ---: | ---: | ---: | --- | ---: | --- |
| General and administrative |  | $17,446 | $14,983 | $2,463 |  | 16.4% | $48,519 | $41,163 | $7,356 |  | 17.9% |  |
| Percentage of revenue | ​ | ​ 6.0% | ​ 6.5% | ​ ​ | ​ | ​ ​ | ​ 5.9% | ​ 6.3% | ​ ​ | ​ | ​ ​ | ​ |

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 September 30, 2023 Compared with Three months ended September 30, 2022

General and administrative expense was $17.4 million during the three months ended September 30, 2023, an increase of $2.5 million, or 16.4%, compared with $15.0 million during the three months ended September 30, 2022. The increase is primarily due to an increase in personnel expenses.

#### Nine months ended September 30, 2023 Compared with Nine months ended September 30, 2022

General and administrative expense was $48.5 million during the nine months ended September 30, 2023, an increase of $7.4 million, or 17.9%, compared with $41.2 million during the nine months ended September 30, 2022. The increase is primarily due to an increase in personnel expenses.

### Other Income (Expense)

*(dollars in thousands)*

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ Three months ended September 30, 2023 ​ | ​ ​ ​ ​ ​ 2022 ​ | ​ ​ Period-to-period change $​% | ​ | ​ ​ | ​ ​ ​ ​ | ​ ​ ​ Nine months ended September 30, 2023 ​ | ​ ​ ​ ​ ​ 2022 ​ | ​ ​ Period-to-period change $​% | ​ | ​ ​ | ​ ​ ​ ​ ​ |
| --- | --- | ---: | ---: | ---: | --- | ---: | --- | ---: | ---: | ---: | --- | ---: | --- |
| Other income (expense): |  | $1,995 | $(8,193) | $(10,188) |  | 124.4% |  | $4,449 | $(17,183) | $(21,632) |  | 125.9% | ​ |
| Percentage of revenue | ​ | 0.7% | (3.6)% | ​ ​ | ​ | ​ ​ | ​ | 0.6% | (2.6)% | ​ ​ | ​ | ​ ​ | ​ |

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

Other income was $2.0 million for the three months ended September 30, 2023, compared with other expense of $8.2 million for the three months ended September 30, 2022. The $10.2 million change in other income (expense) compared to the same prior year period was primarily due to an increase in interest income of $3.5 million and a decrease in foreign exchange loss of $6.7 million. Other income was $4.4 million for the nine months ended September 30, 2023, compared with other expense of $17.2 million for the nine months ended September 30, 2022. The $21.6 million change in other income (expense) compared to the same prior year period was primarily due to an increase in interest income of $11.3 million and a decrease in foreign exchange loss of $10.2 million.

During the nine-month periods ended September 30, 2023 and 2022, we had no significant off-balance sheet risk such as exchange contracts, option contracts or other hedging arrangements.

### Income Tax Provision

*(dollars in thousands)*

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ Three months ended September 30, 2023 ​ | ​ 2022 | ​ ​ ​ ​ ​ ​ | ​ ​ Period-to-period change $​% | ​ | ​ ​ | ​ ​ ​ ​ | ​ ​ ​ Nine months ended September 30, 2023 ​ | ​ 2022 | ​ ​ ​ ​ ​ ​ | ​ ​ Period-to-period change $​% | ​ | ​ ​ | ​ ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | ---: | --- | ---: | --- | ---: | --- | ---: | ---: | --- | ---: | --- |
| Income tax provision |  | $7,744 ​ |  | $4,726 | $3,018 |  | 63.9% |  | $15,986 ​ |  | $13,002 | $2,984 |  | 23.0% | ​ |
| Percentage of revenue | ​ | 2.6% | ​ | 2.0% | ​ ​ | ​ | ​ ​ | ​ | 1.9% | ​ | 2.0% | ​ ​ | ​ | ​ ​ | ​ |

Income tax expense was $7.7 million for the three months ended September 30, 2023, compared to $4.7 million for the three months ended September 30, 2022. The $3.0 million increase was primarily due to an increase in pre-tax income partially offset by the tax deduction related to foreign sales taxed at a lower rate. Income tax expense was $16.0 million for the nine months ended September 30, 2023, compared to $13.0 million for the nine months ended September 30, 2022. The $3.0 million increase was primarily due to an increase in pre-tax income partially offset by the tax deduction related to stock based compensation and additional research and development tax credit.

The effective tax rate for the three and nine months ended September 30, 2023 was less than the U.S. statutory rate of 21% due to a forecasted Foreign Derived Intangible Income deduction, Federal research and development tax credits and a favorable discrete item related to equity compensation that reduces the annual tax rate.

The deferred income taxes of $44.3 million and $31.7 million as of September 30, 2023 and December 31, 2022, respectively, reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. As of September 30, 2023, we have recorded a $10.6 million valuation allowance in the U.S. against certain tax credits and state net operating losses due to the uncertainty of their realization. Realization of our net deferred tax assets is dependent on future taxable income. We believe it is more likely than not that such assets will be realized; however, ultimate realization could be impacted by market conditions and other variables not known or anticipated at this time.

### Liquidity and Capital Resources

At September 30, 2023, we had $142.3 million in unrestricted cash and cash equivalents and $318.7 million in short-term investments, in addition to $6.7 million in restricted cash. Management believes that maintaining a strong cash balance is necessary to fund a continuing ramp in our business which can require significant cash investment to meet sudden demand. Additionally, we are using cash to repurchase shares as part of our stock repurchase program and are considering both organic and inorganic opportunities to drive future growth, for which cash resources will be necessary.

Our liquidity is affected by many factors. Some of these relate specifically to the operations of our business, for example, the rate of sales of our products, and others relate to the uncertainties of global economic conditions, including the availability of credit and the condition of the overall semiconductor equipment industry. Our industry requires ongoing investments in operations and research and development that are not easily adjusted to reflect changes in revenue. As a result, profitability and cash flows can fluctuate more widely than revenue. Stock repurchases, as discussed below, also reduce our cash balances.

During the nine months ended September 30, 2023 and 2022, we generated $91.3 million and $93.2 million, respectively, of cash related to operating activities.

Investing activities for the nine months ended September 30, 2023 resulted in cash outflows of $74.2 million, $10.5 million of which was used for capital expenditures and $271.6 million of which was used to purchase short-term investments, offset by $207.9 million related to maturities of short-term investments. Investing activities for the nine months ended September 30, 2022 resulted in cash outflows of $40.5 million, $6.9 million of which was used for capital expenditures and $33.6 million used to purchase short-term investments.

Financing activities for the nine months ended September 30, 2023 resulted in a cash usage of $53.2 million. During the first nine months of 2023, $37.5 million in cash was used to repurchase our common stock and $15.8 million was used for payments to government tax authorities for income tax withholding on employee compensation arising from the vesting of RSUs, where units are withheld by the Company to cover taxes, as well as $0.9 million relating to the reduction of the liability under the finance lease of our corporate headquarters. These amounts were partially offset by $1.0 million of proceeds related to the purchase of shares under our 2020 ESPP and exercise of stock options during the first nine months of 2023. In comparison, financing activities for the nine months ended September 30, 2022 resulted in cash usage of $53.1 million, $45.0 million of which related to the repurchase of our common stock and $9.3 million of which related to payments made to government tax authorities for income tax withholding on employee compensation arising from the vesting of RSUs, as well as $0.7 million relating to the reduction of our financing lease liability. These amounts were partially offset by $1.9 million of proceeds related to the purchase of shares under our ESPP and exercise of stock options during the first nine months of 2022.

On April 5, 2023, we terminated the Senior Secured Credit Facilities Credit Agreement, as amended (the “Credit Agreement”), with Silicon Valley Bank that we entered into on July 31, 2020. The Credit Agreement provided for a revolving credit facility covering borrowings and letters of credit in an aggregate principal amount not to exceed $40.0 million. Our obligations under the Credit Agreement were 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. Upon termination, these liens and all other obligations under the credit agreement, were released. A letter of credit issued by Silicon Valley Bank, a division of First Citizens Bank & Trust

Company (successor by purchase to the Federal Deposit Insurance Corporation as Receiver for Silicon Valley Bridge Bank, N.A.) as successor to Silicon Valley Bank, remains outstanding in the amount of $5.9 million, securing our lease on our corporate headquarters. This letter of credit was transitioned to a cash collateral arrangement on March 30, 2023, and was classified as long-term restricted cash on our balance sheet at September 30, 2023.

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

### Commitments and Contingencies

Significant commitments and contingencies at September 30, 2023 are consistent with those discussed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Note 16 to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

## Market risk

As filed, 275 characters.

As of September 30, 2023, there have been no material changes to the quantitative information about market risk disclosed in Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” included in our Annual Report on Form 10-K for the year ended December 31, 2022.

## Controls and procedures

As filed, 1,038 characters.

### 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 September 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 199 characters.

As of September 30, 2023, there have been no material changes to the risk factors described in Item 1A, “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2022.

Filed Nov 2, 2023.
Source: SEC EDGAR, the filing index for accession 0001558370-23-017452. Last ingested by Listed: Nov 5, 2026, 17:37 ET. No prices; not investment advice.