What changed in this filing

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Item 1. Financial Statements

2023-05-05 compared with 2022-11-03 · 88 added, 173 removed, 331 unchanged (44% of the section changed)

4 unchanged sentences

Three months ended

Nine months ended

September 30,

Total revenue

7 unchanged sentences

Income from operations

Other (expense) income:

Other income (expense):

Interest income

Interest expense

Total other expense

Total other income (expense)

Income before income taxes

2 unchanged sentences

Shares used in computing net income per share:

Basic weighted average common shares

Diluted weighted average common shares

Basic weighted average shares of common stock

Diluted weighted average shares of common stock

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

3 unchanged sentences

Three months ended

Nine months ended

September 30,

Other comprehensive loss:

Other comprehensive income (loss):

Foreign currency translation adjustments

Amortization of actuarial net gain/(loss) and other adjustments from pension plan, net of tax

Total other comprehensive loss

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

Total other comprehensive income (loss)

Comprehensive income

3 unchanged sentences

(In thousands, except per share amounts)

September 30,

Current assets:

25 unchanged sentences

Common stock, $ 0.001 par value, 75,000 shares authorized;

32,937 shares issued and outstanding at September 30, 2022;

32,726 shares issued and outstanding at March 31, 2023;

32,775 shares issued and outstanding at December 31, 2022

Additional paid-in capital

Retained earnings (accumulated deficit)

Accumulated other comprehensive (loss) income

Retained earnings

Accumulated other comprehensive loss

Total stockholders’ equity

6 unchanged sentences

Stockholders’

Income (Loss)

Balance at December 31, 2021

2 unchanged sentences

Exercise of stock options

Issuance of common shares on restricted stock units, net of shares withheld

Issuance of common stock on restricted stock units, net of shares withheld

Stock-based compensation expense

1 unchanged sentence

Balance at March 31, 2022

Foreign currency translation adjustments

Change in pension obligation

Exercise of stock options

Issuance of shares under Employee Stock Purchase Plan

Issuance of common shares on restricted stock units, net of shares withheld

Stock-based compensation expense

Repurchase of common stock

Balance at June 30, 2021

Foreign currency translation adjustments

Change in pension obligation

Exercise of stock options

Issuance of common shares on restricted stock units, net of shares withheld

Stock-based compensation expense

Repurchase of common stock

Balance at September 30, 2021

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

Axcelis Technologies, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands)

Comprehensive

Stockholders’

Income (Loss)

Balance at December 31, 2022

Foreign currency translation adjustments

Change in pension obligation

Exercise of stock options

Issuance of common shares on restricted stock units, net of shares withheld

Issuance of common stock on restricted stock units, net of shares withheld

Stock-based compensation expense

1 unchanged sentence

Balance at March 31, 2023

Foreign currency translation adjustments

Change in pension obligation

Exercise of stock options

Issuance of shares under Employee Stock Purchase Plan

Issuance of common shares on restricted stock units, net of shares withheld

Stock-based compensation expense

Repurchase of common stock

Balance at June 30, 2022

Foreign currency translation adjustments

Change in pension obligation

Exercise of stock options

Issuance of common shares on restricted stock units, net of shares withheld

Stock-based compensation expense

Repurchase of common stock

Balance at September 30, 2022

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

2 unchanged sentences

(In thousands)

Nine months ended

September 30,

Three months ended

Cash flows from operating activities

4 unchanged sentences

Provision for excess and obsolete inventory

Accretion of discounts and premiums on marketable securities

Currency loss on foreign denominated transactions

Changes in operating assets and liabilities:

8 unchanged sentences

Purchase of short-term investments

Maturities of short-term investments

Net cash used in investing activities

2 unchanged sentences

Repurchase of common stock

Proceeds from Employee Stock Purchase Plan purchases

Principal payments on finance lease obligation

18 unchanged sentences

The balance sheet at December 31, 2022 has been derived from the audited consolidated financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in Axcelis Technologies, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2021.

Summary of Significant Accounting Policies

(a) Cash, Cash Equivalents and Short-term investments

Cash and cash equivalents consist of cash on hand and highly liquid investments with original maturities of ninety days or less.

Cash equivalents consist primarily of money market funds, U.S.

Government and Agency Securities and deposit accounts.

Cash equivalents are carried on the balance sheet at fair market value.

Short-term investments are h ighly liquid investments with original maturities of greater than 90 days but less than one year from date of purchase and are carried on the balance sheet at fair market value.

Our short-term investments consist primarily of U.S.

Government and Agency securities and are classified as held-to-maturity based on our positive intent and ability to hold the securities to maturity.

Income related to these securities is recorded in interest income in the Consolidated Statements of Operations .

As of March 31, 2023, there have been no material changes in the Company’s significant accounting policies.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Stock-Based Compensation

2 unchanged sentences

The 2012 Equity Plan is more fully described in Note 13 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022.

We recognized stock-based compensation expense of $ 3.6 million and $ 3.2 million for the three-month periods ended September 30, 2022 and 2021, respectively.

We recognized stock-based compensation expense of $ 9.8 million and $ 9.0 million for the nine-month periods ended September 30, 2022 and 2021, respectively.

These amounts include compensation expense related to RSUs, non-qualified stock options and stock to be issued to participants under the 2020 Employee Stock Purchase Plan (the “2020 ESPP”).

In the three-month periods ended September 30, 2022 and 2021, we issued 38.0 thousand and 40.0 thousand shares of common stock, respectively, upon stock option exercises and vesting of RSUs.

In the three-month periods ended

September 30, 2022 and 2021, we received proceeds of $ 0.4 million and $ 0.3 million, respectively, in connection with the exercise of stock options.

In the nine-month periods ended September 30, 2022 and 2021, we issued 0.4 million and 0.7 million shares of common stock, respectively, upon stock option exercises, purchases under the 2020 ESPP and vesting of RSUs.

In the nine-month periods ended September 30, 2022 and 2021, we received proceeds of $ 1.9 million and $ 3.9 million, respectively, in connection with the exercise of stock options and purchases under the 2020 ESPP.

We have operating leases for office space, warehouse space, a manufacturing plant, computer and office equipment as well as vehicles used in our business operations.

We have a finance lease as a result of the 2015 sale-leaseback of our corporate headquarters in Beverly, Massachusetts.

All new agreements are reviewed to determine if they contain a lease component.

A lease is a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment over a period of time in exchange for consideration.

We recognize the lease obligation on a discounted basis using the explicit or implicit discount rate stated within the agreement.

We recognize a corresponding right-of-use asset, which is initially determined based upon the net present value of the associated liability and is adjusted for deferred costs and possible impairment, if any.

We recognized stock-based compensation expense of $ 3.2 million and $ 2.7 million for the three-month periods ended March 31, 2023 and 2022, respectively.

These amounts include compensation expense related to RSUs and non-qualified stock options.

In the three-month periods ended March 31, 2023 and 2022, we issued 58.0 thousand and 0.1 million shares of common stock, respectively, upon stock option exercises and vesting of RSUs.

In the three-month periods ended March 31, 2023 and 2022, we received proceeds of $ 25.0 thousand and $ 0.5 million, respectively, in connection with the exercise of stock options.

We have operating leases for manufacturing, office space, warehouse space, computer and office equipment and vehicles used in our business operations.

We have a finance lease in relation to the 2015 sale-leaseback of our corporate headquarters in Beverly, Massachusetts.

We review all agreements to determine if the agreement contains a lease component.

An agreement contains a lease component if it provides for the use of a specific physical space or a specific physical item.

We recognize operating lease obligations under Accounting Standards Codification Topic 842, Leases .

The guidance in Topic 842 requires recognition of lease assets and related liabilities on a discounted basis using the explicit or implicit discount rate stated within the agreement.

We recognize a corresponding right-of-use asset, which is initially

determined based upon the net present value of the associated liability and is adjusted for deferred costs and possible impairment, if any.

For those lease agreements that do not indicate the applicable discount rate, we use our incremental borrowing rate.

3 unchanged sentences

and (iii) we account for lease components and non-lease components that are fixed payments as one component.

Some of our operating leases include one or more options to renew, with renewal terms that can extend the respective lease term one to five years .

Some of our operating leases include one or more options to renew , with renewal terms that can extend the respective lease term by one to three years .

The exercise of lease renewal options is at our sole discretion.

For lease extensions that are reasonably certain to occur, we have included these renewal periods in our calculation of the net present value of the lease obligation and related right-of-use asset.

For lease extensions that are reasonably certain to occur, we have included the renewal periods in our calculation of the net present value of the lease obligation and related right-of-use asset.

Certain leases also include options to purchase the leased property.

2 unchanged sentences

The amounts of operating and finance lease right-of-use assets and related lease obligations recorded within our consolidated balance sheets are as follows:

September 30,

Classification

10 unchanged sentences

Total lease liabilities

*Finance lease assets are recorded net of accumulated depreciation of $ 49.4 million and includes $ 0.6 million of prepaid financing costs as of September 30, 2022.

*Finance lease assets are recorded net of accumulated depreciation of $ 46.2 million and includes $ 0.6 million of prepaid financing costs as of March 31, 2023.

Finance lease assets are recorded net of accumulated depreciation of $ 45.9 million and includes $ 0.6 million of prepaid financing costs as of December 31, 2022.

1 unchanged sentence

Our Axcelis Asia Operations Center facility in South Korea brings production capability closer to our Asia-based customers.

Operating lease expense

and depreciation and interest expense relating to our finance lease obligation are recognized within our consolidated statement of operations for the three and nine months ended September 30, 2022 and 2021 as follows:

Operating lease expense and depreciation and interest expense relating to our finance lease obligation are recognized within our consolidated statement of operations for the three months ended March 31, 2023 and 2022 as follows:

Three months ended

Nine months ended

September 30,

Classification

17 unchanged sentences

Total lease cost

* Product / services, sales and marketing and general and administrative expense also includes short-term lease and variable lease costs of approximately $ 0.4 million and $ 1.4 million for the three and nine months ended September 30, 2022, respectively, and includes short-term and variable lease costs of approximately $ 0.6 million and $ 1.4 million for the three and nine months ended September 30, 2021, respectively.

* Product / services, sales and marketing and general and administrative expense also includes short-term lease and variable lease costs of approximately $ 0.5 million for both the three months ended March 31, 2023 and 2022.

The lease of our corporate headquarters, shown below under finance leases, had an original lease term of 22 years , beginning in January 2015 and expiring in January 2037, with renewal options.

All other locations are treated as operating leases, with lease terms ranging from one to ten years .

The tables below reflect the minimum cash outflow regarding our current lease obligations as well as the weighted-average remaining lease term and weighted-average discount rates used in our calculation of our lease obligations and right-of-use assets as of September 30, 2022:

Maturity of Lease Liabilities

5 unchanged sentences

operating lease interest calculated using estimated corporate borrowing rate.

September 30,

The table above does not include options to renew lease terms that are not reasonably certain of being exercised, nor leases signed but not yet commenced as of March 31, 2023.

As of March 31, 2023, total estimated future minimum lease payments for leases signed but not yet commenced, which consists only of the lease of property in Beverly, Massachusetts, on which a state-of-the-art logistics and flex manufacturing center with 98,000 square feet is being built to our specifications and has an expected commencement date in 2023, is estimated to be $ 32.5 million.

Lease term and discount rate

8 unchanged sentences

Our cash flows from our finance lease include both an interest component and a principal component.

The table below shows our cash outflows, by lease type and related section of our statement of cash flows, as well as the non-cash amount capitalized on our balance sheet in relation to our operating lease right-of-use assets for the nine months ending September 30, 2022 and 2021, respectively:

Nine months ended September 30,

The table below shows our cash outflows by lease type and related section of our statement of cash flows, as well as the non-cash amount capitalized on our balance sheet in relation to our operating lease right-of-use assets for the three months ended March 31, 2023 and 2022, respectively:

Three months ended March 31,

Cash paid for amounts included in the measurement of lease liabilities

9 unchanged sentences

Three months ended

Nine months ended

September 30,

(in thousands)

4 unchanged sentences

Three months ended

Nine months ended

September 30,

(in thousands)

3 unchanged sentences

Contract liabilities are as follows:

September 30,

(in thousands)

3 unchanged sentences

Three months ended

Nine months ended

September 30,

(in thousands)

4 unchanged sentences

The majority of our system transactions have payment terms of 90 % due upon shipment of the system and 10 % due upon acceptance.

Aftermarket transaction payment terms usually provide that payment is due either within 30 or 60 days after the service is provided or parts delivered.

Aftermarket transaction payment terms typically provide that payment is due either within 30 or 60 days after the service is provided or parts delivered.

Receivables and Allowances for Credit Losses

All trade receivables are reported on the consolidated balance sheets at their amortized cost adjusted for any write-offs and net of allowances for credit losses.

Axcelis maintains an allowance for credit losses, which represent an estimate of expected losses over the remaining contractual life of our receivables, considering current market conditions and estimates for supportable forecasts when appropriate.

The estimate is a result of the Company’s ongoing assessments and evaluations of collectability, historical loss experience, and future expectations in estimating credit losses in our receivable portfolio.

Axcelis uses historical loss experience rates and applies them to a related aging analysis while also considering customer and/or economic risk where appropriate.

We maintain an allowance for credit losses, which represent an estimate of expected losses over the remaining contractual life of our receivables, considering current market conditions and estimates for supportable forecasts when appropriate.

The estimate is a result of our ongoing assessments and evaluations of collectability, historical loss experience, and future expectations in estimating credit losses in our receivable portfolio.

We use historical loss experience rates and apply them to a related aging analysis while also considering customer and/or economic risk where appropriate.

Determination of the proper amount of allowances requires management to exercise judgment about the timing, frequency and severity of credit losses that could materially affect the provision for credit losses and, as a result, net earnings.

The allowance takes into consideration numerous quantitative and qualitative factors that include receivable type, historical loss experience, loss migration, delinquency trends, collection experience, current

economic conditions, trade restrictions, estimates for supportable forecasts, when appropriate, and credit risk characteristics.

Axcelis evaluates the credit risk of the customer when extending credit based on a combination of various financial and qualitative factors that may affect our customers’ ability to pay.

The allowance takes into consideration numerous quantitative and qualitative factors that include receivable type, historical loss

experience, loss migration, delinquency trends, collection experience, current economic conditions, trade restrictions, estimates for supportable forecasts, when appropriate, and credit risk characteristics.

We evaluate the credit risk of the customer when extending credit based on a combination of financial and qualitative factors that may affect our customers’ ability to pay.

These factors may include the customer’s financial condition, past payment experience, and credit bureau report, as well as the value of the underlying collateral.

Management performs detailed reviews of Axcelis’ receivables on a quarterly basis to assess the adequacy of the allowances and to determine if any impairment has occurred.

Management performs detailed reviews of our receivables on a quarterly basis to assess the adequacy of the allowances and to determine if any impairment has occurred.

Amounts determined to be uncollectable are charged directly against the allowances, while amounts recovered on previously written-off accounts increase the allowances.

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

The following table shows changes of the allowances for credit losses related to trade receivables for the three and nine months ended September 30, 2022 and 2021, respectively:

The following table shows changes of the allowances for credit losses related to trade receivables for the three months ended March 31, 2023 and 2022, respectively:

Three months ended

Nine months ended

September 30,

(in thousands)

3 unchanged sentences

Computation of Net Earnings per Share

Basic earnings per share is computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period.

The computation of diluted earnings per share is similar to basic earnings per share, except that the denominator is increased by the number of additional common shares that would have been outstanding if the potentially dilutive common shares issuable on exercise of stock options and vesting of RSUs had been issued, calculated using the treasury stock method.

Basic earnings per share is computed by dividing income available to common stockholders (the numerator) by the weighted-average number of shares of common stock outstanding (the denominator) for the period.

The computation of diluted earnings per share is similar to basic earnings per share, except that the denominator is increased by the number of additional shares of common stock that would have been outstanding if the potentially dilutive shares of common stock issuable on exercise of stock options and vesting of RSUs had been issued, calculated using the treasury stock method.

The components of net earnings per share are as follows:

Three months ended

Nine months ended

September 30,

(in thousands, except per share amounts)

Net income available to common stockholders

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

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

Incremental options and RSUs

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

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

Net income per share

Diluted weighted average common shares outstanding does not include 5,046 and 347 common equivalent shares issuable with respect to outstanding equity awards for the three-month periods ended September 30, 2022 and 2021, respectively, or 6,692 and 413 common equivalent shares issuable with respect to outstanding equity awards for the nine-month periods ended September 30, 2022 and 2021, respectively, as their effect would have been anti-dilutive.

Accumulated Other Comprehensive (Loss) Income

The following table presents the changes in accumulated other comprehensive (loss) income, net of tax, by component, for the nine months ended September 30, 2022:

Diluted weighted average shares of common stock outstanding does not include 1,120 and 4,706 common equivalent shares issuable with respect to outstanding equity awards for the three-month periods ended March 31, 2023 and 2022, respectively, as their effect would have been anti-dilutive.

Accumulated Other Comprehensive Loss

The following table presents the changes in accumulated other comprehensive (loss) income, net of tax, by component, for the three months ended March 31, 2023:

Defined benefit

1 unchanged sentence

Balance at December 31, 2022

Other comprehensive loss and pension reclassification

Balance at September 30, 2022

Other comprehensive income and pension reclassification

Balance at March 31, 2023

Cash, cash equivalents and restricted cash

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

September 30,

(in thousands)

2 unchanged sentences

Total cash, cash equivalents and restricted cash

As of September 30, 2022, we had $ 0.8 million in restricted cash representing the total of (i) cash collateral for a $ 0.7 million letter of credit relating to workers’ compensation insurance and (ii) a $ 0.1 million deposit relating to customs activity.

As of March 31, 2023, we had $ 6.7 million in restricted cash representing the total of (i) a $ 5.9 million cash collateral relating to our lease for our headquarters in Beverly, Massachusetts, (ii) a $ 0.7 million letter of credit relating to workers’ compensation insurance and (iii) a $ 0.1 million deposit relating to customs activity.

Inventories, net

The components of inventories are as follows:

September 30,

(in thousands)

15 unchanged sentences

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

Nine months ended

September 30,

Three months ended

(in thousands)

3 unchanged sentences

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

Balance at September 30 (end of period)

Balance at March 31 (end of period)

Amount classified as current

2 unchanged sentences

Fair Value Measurements

Certain assets on our balance sheets are reported at their fair value.

Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

11 unchanged sentences

Our money market funds and short-term investments with initial maturities of three months or less are included in cash and cash equivalents in the consolidated balance sheets.

Other investments have a maturity of greater than three months but less than one year are included within short-term investments in the consolidated balance sheets.

Other investments that have a maturity of greater than three months but less than one year are included within short-term investments in the consolidated balance sheets.

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

September 30, 2022

March 31, 2023

Fair Value Measurements

8 unchanged sentences

(in thousands)

Cash equivalents:

Money market funds, U.S.

Cash equivalents and other short-term investments:

Cash equivalents (money market funds, U.S.

Government Securities and Agency Investments)

Short-term investments (U.S.

Government Securities and Agency Investments)

3 unchanged sentences

As part of the sale, we also entered into a 22-year lease agreement of our headquarters facility.

This sale-leaseback is accounted for as a financing lease under generally accepted accounting principles and, as such, we have recorded a financing obligation of $ 46.7 million as of September 30, 2022.

This sale-leaseback is accounted for as a financing lease under generally accepted accounting principles and, as such, we have recorded a financing obligation of $ 46.1 million as of March 31, 2023.

The associated lease payments include both an interest component and payment of principal, with the remaining liability being extinguished at the end of the original lease term.

We posted a security deposit of $ 5.9 million in the form of an irrevocable letter of credit at the time of the closing.

This letter of credit reduces our availability under our credit facility, as described in the next paragraph.

On July 31, 2020, we entered into a Senior Secured Credit Facilities Credit Agreement (the “Credit Agreement”) with Silicon Valley Bank, in its capacity as administrative agent and collateral agent for itself and as a lender, and such other banks and financial institutions or entities that from time to time join as lenders under the Credit Agreement.

The Credit Agreement provides for a revolving credit facility in an aggregate principal amount not to exceed $ 40.0 million.

Our obligations under the Credit Agreement are secured by a security interest, senior to any current and future debts and to any security interest, in all of our rights, title, and interest in, to and under substantially all of our assets, subject to limited exceptions, including permitted liens.

The revolving credit facility terminates on July 31, 2023.

As of September 30, 2022, we were in compliance with all covenant requirements of the Credit Agreement.

As of such date, no borrowings had been made under the Credit Agreement, although a letter of credit for $ 5.9 million reduces the funds available for borrowing under the credit line.

We entered into a First Amendment to the Credit Agreement with Silicon Valley Bank in March 2021 to (i) align the covenants with our stock repurchase program, and (ii) establish terms to transition from a Eurodollar based interest rate option to an interest rate benchmark using a secured overnight financing rate (known as “SOFR”) published by the Federal Reserve Bank of New York.

Income tax expense was $ 4.7 million for the three months ended September 30, 2022, compared to $ 6.7 million for the three months ended September 30, 2021.

The $ 2.0 million decrease was primarily due to the Foreign Derived Intangible Income (“FDII”) deduction on export sales.

Income tax expense was $ 13.0 million during the nine months ended September 30, 2022, compared with $ 12.3 million for the nine months ended September 30, 2021.

The $ 0.7 million increase was primarily due to a $ 63.9 million increase in pretax income offset by the FDII deduction on export sales.

The effective tax rate for the three and nine months ended September 30, 2022 was less than the U.S.

statutory rate of 21 % due to forecasted FDII, Federal research and development tax credits and a favorable discrete item related to equity compensation that reduces the annual tax rate.

The effective tax rate for the three and nine months ended September 30, 2021 was less than the U.S.

statutory rate of 21 % due to favorable discrete items related to equity compensation in the period and Federal research and development tax credits that reduce the annual tax rate.

The deferred income taxes of $ 28.4 million and $ 35.5 million as of September 30, 2022 and December 31, 2021, 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.

We have recorded a $ 9.3 million valuation allowance in the U.S.

As of March 31, 2023, we have a security deposit of $ 5.9 million related to this lease.

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 remained at 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, in the amount of $ 5.9 million, securing our lease on our corporate headquarters.

This letter of credit was transitioned to a cash collateral arrangment on March 30, 2023, and is classified as long-term restricted cash on our balance sheet at March 31, 2023.

Income tax expense was $ 5.2 million for the three months ended March 31, 2023, compared to $ 4.3 million for the three months ended March 31, 2022.

The $ 0.9 million increase was primarily due to an increase in taxable income.

The effective tax rate for the three months ended March 31, 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 $ 35.4 million and $ 31.7 million as of March 31, 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 March 31, 2023, we have recorded a $ 10.9 million valuation allowance in the U.S.

against certain tax credits and state net operating losses due to the uncertainty of their realization.

3 unchanged sentences

Concentration of Risk

For the three months ended September 30, 2022, one customer accounted for 13.8 % of total revenue.

For the three months ended September 30, 2021, one customer accounted for 26.7 % of total revenue.

For the nine months ended September 30, 2022, one customer accounted for 14.8 % of total revenue.

For the nine months ended September 30, 2021, two customers accounted for 18.5 % and 14.1 % of total revenue, respectively.

At September 30, 2022, one customer accounted for 13.2 % of accounts receivable.

For the three months ended March 31, 2023, two customers accounted for 15.2 % and 12.9 % of total revenue, respectively.

For the three months ended March 31, 2022, two customers accounted for 15.0 % and 11.1 % of total revenue, respectively.

At March 31, 2023, two customers accounted for 14.0 % and 13.4 % of accounts receivable, respectively.

At December 31, 2022, two customers accounted for 19.4 % and 11.5 % of accounts receivable, respectively.

Share Repurchase

In February 2022, our Board of Directors approved stock repurchases of up to $ 100 million of our common stock, beginning in March 2022.

During the nine months ended September 30, 2022, we purchased 0.7 million shares at an average cost of $ 64.85 per share.

The timing and actual number of shares repurchased under this program will depend on various factors including price, corporate and regulatory requirements, alternative investment opportunities and other market conditions.

Shares repurchased by us are accounted for when the transaction is settled.

Shares repurchased are returned to the status of authorized but unissued shares.

In February 2022, our Board of Directors approved stock repurchases of up to $ 100 million of our common stock.

During the three months ended March 31, 2023, we purchased 0.1 million shares at an average cost of $ 117.23 per share.

The timing and actual number of any additional shares to be repurchased under this program will depend on various factors including price, corporate and regulatory requirements, alternative investment opportunities and other market conditions.

Repurchased shares are accounted for when the transaction is settled and returned to the status of authorized but unissued shares.

Accordingly, the repurchases are deducted from common stock for par value and from additional paid-in capital for the excess over par value.

9 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements