AXCELIS TECHNOLOGIES INC

Axcelis Technologies, Inc. designs, manufactures and services ion implantation and other processing equipment used in the fabrication of semiconductor chips. The semiconductor capital equipment industry has historically been cyclical as global chip production capacities successively exceed, then lag behind, global chip demand. The demand for chips continues to increase as a result of the electrification of vehicles, the evolution of digital communications, artificial intelligence, large language models, data analytics and visualization, and the growth in the Internet of Things. The top 20 semiconductor chip manufacturers accounted for approximately 86.4% of total semiconductor capital equipment spending in 2025, down from 87.6% in 2024. Axcelis sells to leading semiconductor chip manufacturers worldwide, and the ion implantation business represented 98.2% of revenue in 2025, with the remaining 1.8% of revenue derived from aftermarket sales associated with other legacy processing systems.

In the market for ion implantation systems, Axcelis mainly competes against Applied Materials, Inc., and both are the only ion implant system manufacturers with a full range of implant products. Other implantation equipment manufacturers include Sumitomo Heavy Industries Ion Technology Co. Ltd. and Nissin Ion Equipment Co., Ltd in Japan, Advanced Ion Beam Technology, Inc. in Taiwan, as well as Kingstone Semiconductor and CETC Electronics Equipment Group Co., Ltd. in the People's Republic of China. Axcelis believes its Purion family of products offers the most innovative implanters available on the market today. The Company is in a strong competitive position, and a focused strategy on ion implant enabled it to achieve critical milestones in its drive to market leadership. Axcelis was named to the 2024 editions of Forbes' List of America's Best Mid-Cap Companies and to Fortune Magazine's 2024 lists of the Top 100 Fastest Growing Companies.

Axcelis generates revenue through the design, manufacture, and servicing of ion implantation and other processing equipment used in the fabrication of semiconductor chips. The Company sells to leading semiconductor chip manufacturers worldwide. In addition to equipment, it provides extensive aftermarket lifecycle products and services, including used tools, spare parts, equipment upgrades, maintenance services and customer training. Revenue is disaggregated into product revenue (94.4% of total revenue in 2025) and services revenue (5.6% of total revenue in 2025). Management also reviews revenue in two categories: new systems revenue and aftermarket (Customer Solutions & Innovation, or CS&I) revenue. The aftermarket business generated $268.0 million ¹ in 2025, representing 31.9% of total revenue.

Axcelis offers a complete line of high energy, high current, and medium current implanters for all application requirements. The Purion flagship systems are all based on a common platform enabling a unique combination of implant purity, precision, and productivity. Specific products include the Purion H, Purion Dragon, and Purion H200 high current systems; the Purion XE, EXE, and other Purion high energy systems; and the Purion M Si and SiC medium current systems. The Company also offers the Ovation family of multi-wafer, or 'batch' implanters, extending the GSD platform. The Axcelis Purion Power Series provides full recipe coverage for power device applications critical to electric vehicles and industrial applications. The power device segment accounted for 55% of the value of 2025 system shipments ². The aftermarket business, through CS&I, offers used tools, spare parts, equipment upgrades, and maintenance services, with approximately 3,400 ³ of its products in use in 27 ⁴ countries worldwide.

Revenue from the aftermarket business was $268.0 million ⁵ in 2025, compared to $235.3 million ⁶ in 2024 and $247.0 million ⁷ in 2023, representing 31.9% ⁸, 23.1% ⁹, and 21.8% ¹⁰ of total revenue, respectively. Systems revenue for 2025 was $571.0 million ¹¹, compared to $782.6 million ¹² in 2024. The Company has four Purion evaluation systems in the field at strategic customer sites in key market segments. Axcelis received 16 ¹³ customer satisfaction awards in 2025.

During 2025, Axcelis repurchased 1,827 ¹⁴ shares of common stock for $121.1 million ¹⁵ under its stock repurchase program. The Company had $110.0 million ¹⁶ remaining under the program as of December 31, 2025. In March 2025, additional funding was authorized under the program. The Company also had a pending merger with Veeco Instruments Inc., announced on September 30, 2025, under which each share of Veeco common stock will be converted into 0.3575 ¹⁷ shares of Axcelis common stock. The Company incurred merger-related professional and filing fees of $16.3 million ¹⁸ in 2025. Cash used in financing activities for 2025 was $124.5 million ¹⁹, which included $121.1 million ²⁰ for stock repurchases, $4.5 million ²¹ for net settlement of restricted stock issuances, and $1.4 million ²² for principal reduction on the finance lease, partially offset by $2.5 million ²³ in proceeds from the employee stock purchase plan.

Revenue for 2025 was $839.0 million ²⁴, compared to $1,017.9 million ²⁵ in 2024, a decrease of 17.6% ²⁶. Systems revenue for 2025 was $571.0 million ²⁷, compared to $782.6 million ²⁸ in 2024. Gross margin percent for 2025 was 44.9% ²⁹ compared to 44.7% ³⁰ in 2024. Operating profit for 2025 was $119.3 million ³¹, compared to $210.8 million ³² in 2024. Net income for 2025 was $120.2 million ³³, compared to $201.0 million ³⁴ in 2024. Diluted earnings per share for 2025 was $3.80 ³⁵, compared to $6.15 ³⁶ in 2024. Cash provided by operating activities was $118.3 million ³⁷ in 2025, compared to $140.8 million ³⁸ in 2024.

Axcelis' 2026 strategic goals include continuing to build the foundation on its long-term implant-only business model, winning new customers with Purion products and aftermarket offerings, improving customer satisfaction, executing on identified growth opportunities in Japan and advanced logic, and delivering CS&I target business model revenues of approximately 25% of total revenues. The Company also aims to drive profitable growth by focusing on key customers and targeted market/geographic segments, achieve market share leadership across all served markets, deliver attractive earnings per share and cash generation as defined in targeted business models, monitor spending in line with growth initiatives and industry trends, and execute a capital strategy that allows for appropriate business investments while returning value to shareholders. Additionally, the Company plans to increase gross margins by deriving maximum value from enabling upgrades, system specials and product extensions while lowering cost through 'Design for X' principles, right sourcing, and providing the industry's best products and services, and to expand beyond ion implant by launching identified corporate development growth initiatives.

Axcelis is working to expand its footprint with existing and new customers and currently has four Purion evaluation systems in the field at strategic customer sites in key market segments. The Company continued its investment in its Customer Solutions & Innovation aftermarket business to drive financial growth and increased customer satisfaction levels, including the 'Digital Tool Box,' an innovative service offering with online training, remote diagnosis and install, and automated troubleshooting guide. The Company is executing on identified growth opportunities in Japan and advanced logic. The power device segment, which accounted for 55% of the value of 2025 system shipments ³⁹, represents a key growth vector as the Purion Power Series provides full recipe coverage for power device applications critical to electric vehicles and industrial applications.

Axcelis' gross margin percent for 2025 was 44.9% ⁴⁰ compared to 44.7% ⁴¹ in 2024. The increase in product gross margin to 47.9% ⁴² from 46.3% ⁴³ resulted from an increased mix of higher margin parts and upgrades. The Company's 2026 strategic goals include increasing gross margins by deriving maximum value from enabling upgrades, system specials and product extensions while lowering cost through 'Design for X' principles, right sourcing, and providing the industry's best products and services. The Company continues to work diligently to ensure that manufacturing and operating expense levels remain well aligned to business conditions.

Axcelis manufactures products at its 417,000 ⁴⁴ square feet ISO 9001:2015, ISO 4001:2015 and ISO 45001:2018 certified plant in Beverly, Massachusetts, its 38,000 ⁴⁵ square feet ISO 4001:2015 and ISO 45001:2018 certified Axcelis Asia Operations Center in South Korea, and its 101,800 ⁴⁶ square feet state-of-the-art logistics and flex manufacturing Axcelis Logistics Center in Beverly, Massachusetts. The Company's facilities employ best in class manufacturing techniques, including lean manufacturing, six sigma controls and advanced inventory management, purchasing and quality systems. The Company's core competency in manufacturing and supply chain management is built around system assembly and testing, which remains an in-house capability. Non-core work is sourced to global partners. The Company continuously pursues outsourcing opportunities where the economics are justified, with a goal of enabling quality and margin improvement.

Research and development expenses were $109.0 million ⁴⁷ in 2025, $105.5 million ⁴⁸ in 2024, and $96.9 million ⁴⁹ in 2023, representing 13.0% ⁵⁰, 10.4% ⁵¹, and 8.6% ⁵² of revenue, respectively. Total capital expenditures for 2026 are projected to be approximately $18 million ⁵³. The Company's capital strategy allows for appropriate business investments while returning value to shareholders. During 2025, the Company repurchased 1,827 ⁵⁴ shares for $121.1 million ⁵⁵ under its stock repurchase program, and as of December 31, 2025, had $110.0 million ⁵⁶ remaining under the program. The Company does not pay a dividend.

The semiconductor capital equipment industry is subject to cyclical swings in capital spending by semiconductor chip manufacturers, and the Company's revenue may fluctuate from year to year and period to period. U.S. export controls impact the Company's ability to sell to certain customers in China, a country that has represented a significant portion of sales in recent years. In October 2022 (with modifications in 2023), the U.S. Commerce Department established an export controls regulatory framework for U.S. exports of semiconductor equipment to China, and further regulatory changes were implemented in December 2024, creating a new Export Controls Classification Number for certain 300mm ion implanters and adding certain Chinese customers to the U.S. Entity List. While these regulations have further excluded exports to certain Chinese customers, the Company currently is able to continue to ship to substantially all of its Chinese customers. The Company cannot predict whether these policies will continue, or if new policies will be enacted, or the impact, if any, that any policy changes could have on its business.

The Company faces risks from operating internationally, as international sales accounted for 83.7% ⁵⁷ of total revenue in 2025. Customers based in Asia dominate international sales, and ion implanter system shipments to customers in Asia represented 76.0% ⁵⁸ of total system revenue in 2025. The Company expects that sales to Chinese customers will continue to represent a significant portion of total sales, creating both risk and opportunity. The Company is also subject to risks related to tariffs, as in August 2025 the U.S. Court of Appeals for the Federal Circuit ruled that tariffs imposed by the current Federal administration exceed presidential authority, and in February 2026 the U.S. Supreme Court affirmed such decision. Following the ruling, the current Federal administration signed an executive order imposing a 10% 'global tariff' and later indicated an intention to increase such tariff to 15%. The Company cannot predict what additional changes to trade policy will be made.

The semiconductor capital equipment industry is cyclical, and if semiconductor chip manufacturers do not make sufficient capital expenditures, the Company's sales and profitability will be harmed. The Company is substantially dependent on sales outside the United States, with international sales accounting for 83.7% ⁵⁹ of total revenue in 2025, and customers based in Asia dominating international sales. U.S. export controls on shipments to Chinese customers have been notably increasing since 2020, and while the Company currently can ship to substantially all of its Chinese customers, continuing revenue from Chinese customers is at higher risk due to trade tensions. The Company's top ten customers accounted for 55.2% ⁶⁰ of net sales in 2025, and the loss of a significant customer or any reduction in orders could materially affect sales. The Company's financial results may fluctuate significantly, as selling prices on ion implant systems range from approximately $2.6 million ⁶¹ to $12.0 million ⁶², and each sale or failure to make a sale may have a significant effect in a particular quarter. The Company is also exposed to risks related to the pending merger with Veeco, including that the exchange ratio is fixed at 0.3575 ⁶³ shares of Axcelis common stock per share of Veeco common stock and will not be adjusted for changes in stock price, and that the merger may be delayed or may not be completed.

Management's message emphasizes that the Company is in a strong competitive position, with a focused strategy on ion implant enabling critical milestones in the drive to market leadership. Key accomplishments highlighted include delivering revenue of $839.0 million ⁶⁴ and earnings per share of $3.80 ⁶⁵ in 2025, remaining a technology leader and supplier of choice in the implant-intensive power device segment which accounted for 55% ⁶⁶ of the value of 2025 system shipments, and having four Purion evaluation systems in the field at strategic customer sites. Management states that the most fundamental interest of stockholders is consistent, profitable financial performance, which the Company expects to continue to deliver in 2026. Strategic priorities for 2026 include continuing to build the foundation on the long-term implant-only business model, driving profitable growth by focusing on key customers and targeted market/geographic segments, increasing gross margins, and expanding beyond ion implant by launching identified corporate development growth initiatives. Management also notes that the Company continues to work diligently to ensure that manufacturing and operating expense levels remain well aligned to business conditions.