Axcelis Announces Financial Results for Fourth Quarter and Full Year 2017

February 6, 2018 at 4:01 PM EST
Annual Systems Revenues Increased by 89%; Reversed Deferred Tax Valuation Allowance

BEVERLY, Mass., Feb. 6, 2018 /PRNewswire/ -- Axcelis Technologies, Inc. (Nasdaq: ACLS) today announced financial results for the fourth quarter and full year ended December 31, 2017.

The Company reported fourth quarter revenue of $116.4 million, compared to $104.5 million for the third quarter of 2017. Operating profit for the quarter was $10.8 million, compared to $13.8 million for the third quarter. Net income for the quarter was $91.7 million, or $2.68 per diluted share, compared to net income for the third quarter of 2017 of $11.8 million, or $0.35 per diluted share. Cash, cash equivalents and restricted cash were $140.9 million at December 31, 2017, compared to $120.7 million on September 30, 2017. In the fourth quarter, the Company recorded an excess inventory reserve of $6.2 million associated with its Legacy business, and reversed the valuation allowance on its deferred tax assets, which, together with related impacts, resulted in a benefit provisionally determined to be $81.6 million. Adjusting for these events, on a non-GAAP basis, quarter over quarter, the Company grew operating profit to $16.9 million, an increase of 22% over the third quarter, and increased diluted earnings per share to $0.47, an increase of 24% over the non-GAAP diluted earnings per share in the third quarter.

For the full year 2017, the Company reported revenue of $410.6 million, compared with $267.0 million for the full year 2016. Systems revenue for the year was $262.7 million, compared to $139.3 million in 2016. Operating profit was $47.8 million in 2017, compared to $16.6 million in 2016. Net income for the year was $127.0 million, compared to net income of $11.0 million in 2016. Diluted earnings per share for the full year was $3.80, in comparison to $0.36 in 2016. Adjusting for the two fourth quarter accounting events discussed above, on a non-GAAP basis, year over year, the Company's operating profit was $54.0 million, an increase of 225% over 2016, and increased diluted earnings per share to $1.48, an increase of 311% over 2016.

"We are very pleased with our 2017 results and expect continued market strength and growth in 2018," said President and CEO Mary Puma. "Regaining market share leadership in ion implantation remains our primary objective. With Purion now a tool of record at 7 of the top 10 semiconductor CAPEX spenders, we have confidence we can achieve this."

Chief Financial Officer and Executive Vice President Kevin Brewer commented, "We are pleased to announce the reversal of our valuation allowance on our deferred tax assets as a direct result of our thirteen consecutive quarters of profitability, combined with our positive outlook for 2018 and beyond."

Q4 2017 Financial Highlights:








GAAP

Non-GAAP







Period-to-Period Change

Q4 2017

Q3 2017

Q4 2017 (1)

Q3 2017 (2)

$

%

Total revenue ($M)

$116.4

$104.5

$116.4

$104.5

$11.9

11.4%

Gross profit ($M)

$36.7

$39.8

$42.9

$39.8

$3.1

7.8%

Gross profit (% of total revenue)

31.5%

38.0%

36.8%

38.0%


Income from operations ($M)

$10.8

$13.8

$16.9

$13.8

$3.1

22.5%

Net income ($M)

$91.7

$11.8

$16.2

$12.7

$3.5

27.6%

Net income per share (diluted)

$2.68

$0.35

$0.47

$0.38

$0.09

23.7%


















Full Year 2017 Financial Highlights:








GAAP

Non-GAAP







Period-to-Period Change

2017

2016

2017 (1)

2016

$

%

Total revenue ($M)

$410.6

$267.0

$410.6

$267.0

$143.6

53.8%

Gross profit ($M)

$150.2

$99.6

$156.4

$99.6

$56.8

57.0%

Gross profit (% of total revenue)

36.6%

37.3%

38.1%

37.3%


Income from operations ($M)

$47.8

$16.6

$54.0

$16.6

$37.4

225.3%

Net income ($M)

$127.0

$11.0

$49.5

$11.0

$38.5

350.0%

Net income per share (diluted)

$3.80

$0.36

$1.48

$0.36

$1.12

311.1%


















(1) A reconciliation of the fourth quarter and full year ending December 31, 2017 GAAP and non-GAAP results is provided in the financial tables included in this release. See also "Use of Non-GAAP Adjusted Financial Measures" below.

(2) Non-GAAP Q3 2017 net income and diluted earnings per share eliminate the effects of Accounting Standards Update No. 2016-09, which decreased net income by $0.8 million and decreased diluted earnings per share by $0.03.

On December 22, 2017, the Tax Cuts and Jobs Act ("TCJA") was enacted. The TCJA significantly revised the U.S. federal corporate income tax by, among other things, lowering the corporate income tax rate to 21%.  U.S. GAAP accounting for income taxes requires that Axcelis record the impacts of any tax law change in the quarter that the tax law change is enacted. Due to the complexities involved in accounting for the enactment of TCJA, as permitted by SEC Staff Accounting Bulletin ("SAB") 118, we have determined a provisional estimate of the impacts of the TCJA in our financial statements for the fourth quarter and year ending December 31, 2017.  Accordingly, Axcelis' estimate of the effects of the TCJA, based on currently available information, are presented above and reflected on the balance sheet and income statement for the fourth quarter and year ending December 31, 2017 included in this press release. Axcelis recorded a $1.0 million tax expense as a result of the TCJA, primarily from the net impact of the revaluation of our deferred tax assets utilizing the enacted tax rate at the time they are anticipated to be realized less the estimated United States toll charge associated with undistributed accumulated foreign earnings. This reflects our current estimate of the U.S. income tax effects of the TCJA, however these are provisional amounts subject to adjustment during the one year measurement period. Taking into account the estimated impacts of the TCJA, we currently expect the 2018 effective tax rate to be approximately 22%. The impact of the TCJA may differ from these estimates, possibly materially, due to, among other things, changes in interpretations and assumptions we have made, federal tax regulations and guidance that may be issued by the U.S. Department of the Treasury and actions we may take as a result of the Tax Act. Axcelis will continue to analyze the effects of the TCJA on its financial statements and operations. Adjustments to these provisional estimates and additional impacts, if any, from the enactment of the TCJA will be recorded as they are identified during the measurement period as provided for in SAB 118.

Use of Non-GAAP Adjusted Financial Measures
In this press release, Axcelis provides investors with certain non-GAAP adjusted financial measures, which are adjusted to exclude the impact of two events in the fourth quarter of 2017 discussed above: a significant excess inventory reserve adjustment associated with our Legacy business; and the reversal of the valuation allowance on the Company's deferred tax assets. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables included in this release. In addition, Axcelis provides non-GAAP adjusted net income and earnings per diluted share for the third quarter of 2017, which exclude the impact of Accounting Standard Update 2016-09. This ASU addresses accounting for equity compensation expense and related tax effects.  These non-GAAP third quarter items are reconciled in the footnote to the Q4 2017 Financial Highlights table above.

Management uses these non-GAAP adjusted financial measures to evaluate the Company's operating and financial performance and for planning purposes. Axcelis believes these measures enhance an overall understanding of our performance and investors' ability to review the Company's business from the same perspective as the Company's management, and facilitate comparisons of this period's results with prior periods on a consistent basis by excluding items that we do not believe are indicative of our ongoing operating performance. There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles, may be different from non-GAAP financial measures used by other companies, and may exclude certain items that may have a material impact upon our reported financial results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP.

Business Outlook
For the first quarter ending March 31, 2018, Axcelis expects revenues of between $115 and $120 million dollars. Gross margin in the first quarter is expected to be around 38%. First quarter operating profit is forecasted to be approximately $16-17 million. With the reversal of the valuation allowance on our deferred tax asset, Axcelis will become a taxpayer for accounting purposes in 2018. Therefore, earnings per share is expected to be between $0.34 and $0.37, which includes $0.10 of non-cash tax expense.

Fourth Quarter 2017 Conference Call
The Company will host a conference call today at 5:00 pm ET to discuss the Company's results for the fourth quarter and full year. The call will be available to interested listeners via an audio webcast on the Investors page of Axcelis' website at www.axcelis.com, or by dialing 866.588.8911 (707.294.1561 outside North America).  Participants calling into the conference call will be requested to provide the company name, Axcelis Technologies, and pass code: 5651308. Webcast replays will be available for 30 days following the call.

Safe Harbor Statement
This press release and the conference call contain forward-looking statements under the Private Securities Litigation Reform Act safe harbor provisions. These statements, which include our expectations for spending in our industry and guidance for future financial performance, are based on management's current expectations and should be viewed with caution. They are subject to various risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, many of which are outside the control of the Company, including that customer decisions to place orders or our product shipments may not occur when we expect, that orders may not be converted to revenue in any particular quarter, or at all, whether demand will continue for the semiconductor equipment we produce or, if not, whether we can successfully meet changing market requirements, and whether we will be able to maintain continuity of business relationships with and purchases by major customers. Increased competitive pressure on sales and pricing, increases in material and other production costs that cannot be recouped in product pricing and instability caused by changing global economic, political or financial conditions could also could cause actual results to differ materially from those in our forward-looking statements. These risks and other risk factors relating to Axcelis are described more fully in the most recent Form 10-K filed by Axcelis and in other documents filed from time to time with the Securities and Exchange Commission.

About Axcelis:

Axcelis (Nasdaq: ACLS), headquartered in Beverly, Mass., has been providing innovative, high-productivity solutions for the semiconductor industry for over 40 years. Axcelis is dedicated to developing enabling process applications through the design, manufacture and complete life cycle support of ion implantation systems, one of the most critical and enabling steps in the IC manufacturing process. Learn more about Axcelis at www.axcelis.com.

Company Contacts

Investor Relations:
Doug Lawson
978.787.9552

Editorial/Media:
Maureen Hart
978.787.4266

 








Axcelis Technologies, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

 





Three months ended

December 31,

Twelve months ended

December 31,




2017

2016

2017

2016











Revenue:











Product

$

110,446

$

63,959

$

387,124

$

244,295

Services

5,950

5,399

23,437

22,685


Total revenue

116,396

69,358

410,561

266,980

Cost of Revenue:













Product

72,390

37,745

234,932

149,007

Services

7,286

4,666

25,382

18,375


Total cost of revenue

79,676

42,411

260,314

167,382















Gross profit

36,720

26,947

150,247

99,598















Operating expenses:











Research and development

10,917

8,795

43,071

34,402

Sales and marketing

7,197

6,097

28,532

23,839

General and administrative

7,842

6,190

30,802

24,452

Restructuring charges

—

—

—

282


Total operating expenses

25,956

21,082

102,405

82,975















Income from operations

10,764

5,865

47,842

16,623















Other (expense) income:













Interest income

315

77

714

238

Interest expense

(1,337)

(1,346)

(5,121)

(5,073)

Other, net

396

(412)

396

(764)


Total other expense

(626)

(1,681)

(4,011)

(5,599)















Income before income taxes

10,138

4,184

43,831

11,024












Income tax (benefit) provision

(81,542)

219

(83,128)

23












Net income

$

91,680

$

3,965

$

126,959

$

11,001















Net income per share:












Basic

$

2.88

$

0.13

$

4.11

$

0.38


Diluted

$

2.68

$

0.13

$

3.80

$

0.36















Shares used in computing net income per share:












Basic weighted average common shares

31,801

29,423

30,866

29,195


Diluted weighted average common shares

34,198

31,436

33,436

30,947



































 

 

 



Axcelis Technologies, Inc.
Consolidated Balance Sheets
(In thousands, except per share amounts)
(Unaudited)







December 31,

December 31,


2017

2016








ASSETS






Cash and cash equivalents

$

133,407

$

70,791

Accounts receivable, net

75,302

50,573

Inventories, net

120,544

113,853

Prepaid expenses & other assets

32,176

28,327

Property, plant and equipment, net

36,168

30,840

Restricted cash

7,473

6,864

Deferred income taxes

83,148

983


Total assets

$

488,218

$

302,231









LIABILITIES AND STOCKHOLDERS' EQUITY






Accounts payable

$

32,642

$

24,996

Accrued compensation

20,955

5,142

Warranty

4,502

2,668

Income taxes

273

240

Deferred revenue

18,145

11,009

Sale leaseback obligation

47,714

47,586

Other liabilities

10,377

9,135


Total liabilities

134,608

100,776









Commitments and contingencies





Stockholders' equity:






Common stock, $0.001 par value, 75,000 shares authorized; 32,048 shares issued and  outstanding at December 31, 2017; 29,518 shares issued and outstanding at December 31, 2016

32

 

 

30

Additional paid-in capital

556,147

535,408

Accumulated deficit

(204,745)

(331,704)

Accumulated other comprehensive income (loss)

2,176

(2,279)


Total stockholders' equity

353,610

201,455


Total liabilities and stockholders' equity

$

488,218

$

302,231













 

 

Reconciliation of GAAP Cost of Revenue, Gross Profit, Income From Operations and Net Income to

Non-GAAP Cost of Revenue, Gross Profit, Income From Operations and Net Income

 (In thousands, except per share amounts)

(unaudited)




























Three months ended

December 31,

Twelve months ended

December 31, 


2017

2016

2017

2016

Total cost of revenue:







GAAP total cost of revenue

$

79,676

$

42,411

$

260,314

$

167,382

Excess inventory reserve

(6,168)

—

(6,168)

—

Non-GAAP total cost of revenue

$

73,508

$

42,411

$

254,146

$

167,382













Gross profit:











GAAP gross profit

$

36,720

$

26,947

$

150,247

$

99,598

Excess inventory reserve

6,168

—

6,168

—

Non-GAAP gross profit

$

42,888

$

26,947

$

156,415

$

99,598









Income from operations:











GAAP income from operations

$

10,764

$

5,865

$

47,842

$

16,623

Excess inventory reserve

6,168

—

6,168

—

Non-GAAP income from operations

$

16,932

$

5,865

$

54,010

$

16,623













Net income:











GAAP net income

$

91,680

$

3,965

$

126,959

$

11,001

Excess inventory reserve

6,168

—

6,168

—

Tax valuation release

(81,641)

(1)

—

(83,642)

(2)

—

Non-GAAP net income

$

16,207

$

3,965

$

49,485

$

11,001













Net income per share (diluted):











GAAP net income per share 

$

2.68

$

0.13

$

3.80

$

0.36

   Excess inventory reserve

0.18

—

0.18

—

   Tax valuation release 

(2.39)

(1)

—

(2.50)

(2)

—

Non-GAAP net income per share

$

0.47

$

0.13

$

1.48

$

0.36


























(1) Principally due to the release of our deferred tax assets valuation allowance and related impacts. 













(2) Principally due to the release of our deferred tax assets valuation allowance and related impacts. Also includes prior quarter tax benefits associated with the effect of Accounting Standards Update No. 2016-09.

 

 

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SOURCE Axcelis Technologies, Inc.