What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-05 compared with 2025-05-06 · 103 added, 43 removed, 135 unchanged (52% of the section changed)

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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 67.3% of total revenue for the three months ended March 31, 2025.

Sales of our systems in the first three months of 2025 were down compared to the same period in the prior year, as customers have moderated the pace of investments into mature process node technologies.

The overall mature process segment represented 86% of our shipped systems revenue, with 14% of shipments to dynamic random-access memory (“DRAM”) applicaitons.

Power device shipments comprised 39% of total systems revenue with the general mature segment representing 47%, which includes image sensor applications starting with first quarter 2025 results.

For the three months ending March 31, 2025, the geopolitical environment surrounding trade and tariffs did not have a meaningful impact on our financial results.

Our ten largest customers accounted for 55.5% of total revenue for the six months ended June 30, 2025.

Sales of our systems in the first six months of 2025 were down compared to the same period in the prior year, as customers have moderated the pace of investments into mature process node technologies.

The overall mature process segment represented 92% of our shipped systems revenue, with 8% of shipments to dynamic random-access memory (“DRAM”) applications.

Of the mature process segment, power device shipments comprised 47% of total systems revenue with the general mature segment representing 45%, which includes image sensor applications starting with first quarter 2025 results.

For the six months ending June 30, 2025, the geopolitical environment surrounding trade and tariffs did not have a meaningful impact on our financial results.

It is difficult to predict the exact timing and magnitude of the tariffs, the duration for which the tariffs will be in place, and the impact the tariffs will have on our customers and suppliers.

We are in the process of developing plans to reduce the potential impact of these tariffs by leveraging our global supply chain and manufacturing footprint.

We continue to develop plans to reduce the potential impact of these tariffs by leveraging our global supply chain and manufacturing footprint.

Critical Accounting Estimates

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Total revenue

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Total revenue

Product revenue, which includes systems sales, sales of spare parts, product upgrades and used systems, was $182.8 million, or 94.9% of revenue, during the three months ended March 31, 2025, compared with $243.4 million, or 96.5% of revenue, for the three months ended March 31, 2024.

The $60.6 million decrease in product revenue for the three-month period ended March 31, 2025, in comparison to the same period in 2024, was primarily driven by a decrease in system sales.

Three months ended June 30, 2025 Compared with Three months ended June 30, 2024

Product revenue, which includes systems sales, sales of spare parts, product upgrades and used systems, was $183.4 million, or 94.3% of revenue, during the three months ended June 30, 2025, compared with $245.4 million, or 95.7% of revenue, for the three months ended June 30, 2024.

The $62.0 million decrease in product revenue for the three-

month period ended June 30, 2025, in comparison to the same period in 2024, was primarily driven by a decrease in system sales.

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 March 31, 2025 and December 31, 2024 was $139.3 million and $138.2 million, respectively.

Services revenue, which includes the labor component of maintenance and service contracts and fees for service hours provided by on-site service personnel, was $9.7 million, or 5.1% of revenue, for the three months ended March 31, 2025, compared with $9.0 million, or 3.5% of revenue, for the three months ended March 31, 2024.

The total amount of deferred revenue at June 30, 2025 and December 31, 2024 was $129.7 million and $138.2 million, respectively.

Services revenue, which includes the labor component of maintenance and service contracts and fees for service hours provided by on-site service personnel, was $11.1 million, or 5.7% of revenue, for the three months ended June 30, 2025, relatively flat compared with $11.1 million, or 4.3% of revenue, for the three months ended June 30, 2024.

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.

Six months ended June 30, 2025 Compared with Six months ended June 30, 2024

Product revenue was $366.2 million, or 94.6% of revenue, during the six months ended June 30, 2025, compared with $488.8 million, or 96.1% of revenue, for the six months ended June 30, 2024.

The $122.6 million decrease in product revenue for the six-month period ended June 30, 2025, in comparison to the same period in 2024, was primarily driven by a decrease in system sales.

Services revenue was $20.9 million, or 5.4% of revenue, for the six months ended June 30, 2025, compared with $20.1 million, or 3.9% of revenue, for the six months ended June 30, 2024.

Revenue Categories used by Management

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Currently, management references three customer market segments:

memory, mature process technology and leading edge foundry and logic.

memory, mature process technology and advanced logic.

Aftermarket and Systems Revenue

Included in total revenue of $192.6 million during the three months ended March 31, 2025 is revenue from our Aftermarket business of $55.0 million, compared with $56.9 million of Aftermarket revenue for the three months ended March 31, 2024.

Three months ended June 30, 2025 Compared with Three months ended June 30, 2024

Included in total revenue of $194.5 million during the three months ended June 30, 2025 is revenue from our Aftermarket business of $61.3 million, compared with $57.9 million of Aftermarket revenue for the three months ended June 30, 2024.

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 $137.6 million of revenue for the three months ended March 31, 2025 was systems revenue, compared with $195.5 million of systems revenue for the three months ended March 31, 2024.

The remaining $133.2 million of revenue for the three months ended June 30, 2025 was systems revenue, compared with $198.6 million of systems revenue for the three months ended June 30, 2024.

Systems revenue fluctuates from period to period based on our customers’ capital spending.

Six months ended June 30, 2025 Compared with Six months ended June 30, 2024

Included in total revenue of $387.1 million during the six months ended June 30, 2025 is revenue from our Aftermarket business of $116.2 million, compared with $114.8 million of Aftermarket revenue for the six months ended June 30, 2024.

The remaining $270.9 million of revenue for the six months ended June 30, 2025 was systems revenue, compared with $394.1 million of systems revenue for the six months ended June 30, 2024.

Gross Profit / Gross Margin

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Total gross profit

Gross margin from product revenue was 48.3% for the three months ended March 31, 2025, compared to 47.5% for the three months ended March 31, 2024.

The increase in gross margin primarily resulted from a favorable mix of system revenue.

Gross margin from services revenue was 4.6% for the three months ended March 31, 2025, compared to 6.1% for the three months ended March 31, 2024.

Three months ended June 30, 2025 Compared with Three months ended June 30, 2024

Gross margin from product revenue was 47.9% for the three months ended June 30, 2025, compared to 45.1% for the three months ended June 30, 2024.

The increase in gross margin primarily resulted from improved margins on Purion systems and a favorable mix of parts and upgrades.

Gross margin from services revenue was (5.3)% for the three months ended June 30, 2025, compared to 16.1% for the three months ended June 30, 2024.

The decrease in gross margin is attributable to changes in the mix of service contracts .

Six months ended June 30, 2025 Compared with Six months ended June 30, 2024

Gross margin from product revenue was 48.1% for the six months ended June 30, 2025, compared to 46.3% for the six months ended June 30, 2024.

The increase in gross margin primarily resulted from improved margins on Purion systems and a favorable mix of parts and upgrades.

Gross margin from services revenue was (0.7)% for the six months ended June 30, 2025, compared to 11.6% for the six months ended June 30, 2024.

The decrease in gross margin is attributable to changes in the mix of service contracts .

Operating Expenses

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and professional fees, travel and depreciation expenses.

Personnel costs are our largest expense, representing $35.4 million, or 59.4%, of our total operating expenses for the three months ended March 31, 2025, compared to $36.4 million, or 61.2%, of our total operating expenses for the three months ended March 31, 2024.

The lower personnel costs for the three months ended March 31, 2025 are primarily due to a decrease in variable compensation expense and commissions, partially offset by increases in wages, stock-based compensation, and separation program expenses.

Personnel costs are our largest expense, representing $35.9 million, or 61.5%, of our total operating expenses for the three months ended June 30, 2025, compared to $35.3 million, or 59.2%, of our total operating expenses for the three months ended June 30, 2024.

Personnel costs were $71.3 million, or 60.4%, of our total operating expenses for the six months ended June 30, 2025, compared to $71.7 million, or 60.2%, of our total operating expenses for the six months ended June 30, 2024.

The higher personnel costs for the three months ended June 30, 2025 are primarily due to an increase in variable compensation expense, partially offset by decreases in expatriate expenses, stock-based compensation, and separation program expenses.

The lower personnel costs for the six months ended June 30, 2025 are primarily due to a decrease in variable compensation expense and expatriate expenses, partially offset by increases in wages and separation program expenses.

Research and Development

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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.

Research and development expense was $27.1 million during the three months ended March 31, 2025, an increase of $1.5 million, or 5.7%, compared with $25.7 million during the three months ended March 31, 2024.

The increase is primarily due to higher project and consulting expenses and depreciation expense.

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 June 30, 2025 Compared with Three months ended June 30, 2024

Research and development expense was $27.1 million during the three months ended June 30, 2025, an increase of $1.3 million, or 5.0%, compared with $25.8 million during the three months ended June 30, 2024.

The increase is primarily due to higher personnel expenses, driven by increases in variable compensation and stock-based compensation, and increases in depreciation and amortization expense.

Six months ended June 30, 2025 Compared with Six months ended June 30, 2024

Research and development expense was $54.2 million during the six months ended June 30, 2025, an increase of $2.7 million, or 5.3%, compared with $51.4 million during the six months ended June 30, 2024.

The increase is primarily due to higher personnel payroll expense, stock-based compensation, separation program expense, and an increase in depreciation and amortization expense.

Sales and Marketing

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

Sales and marketing expense was $15.1 million during the three months ended March 31, 2025, a decrease of $2.3 million, or 13.3%, compared with $17.4 million during the three months ended March 31, 2024.

The decrease is primarily due to a decrease in variable compensation and tool evaluation costs.

Three months ended June 30, 2025 Compared with Three months ended June 30, 2024

Sales and marketing expense was $15.0 million during the three months ended June 30, 2025, a decrease of $2.2 million, or 12.9%, compared with $17.2 million during the three months ended June 30, 2024.

The decrease is primarily due to a decrease in expatriate expenses and tool evaluation costs.

Six months ended June 30, 2025 Compared with Six months ended June 30, 2024

Sales and marketing expense was $30.1 million during the six months ended June 30, 2025, a decrease of $4.5 million, or 13.1%, compared with $34.7 million during the six months ended June 30, 2024.

The decrease is primarily due to a decrease in expatriate expenses and tool evaluation costs.

General and Administrative

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Our general and administrative expenses result primarily from the costs associated with our executive, finance, information technology, legal and human resource functions.

General and administrative expense was $17.4 million during the three months ended March 31, 2025, an increase of $1.0 million, or 5.8%, compared with $16.4 million during the three months ended March 31, 2024.

Three months ended June 30, 2025 Compared with Three months ended June 30, 2024

General and administrative expense was $16.3 million during the three months ended June 30, 2025, a decrease of $0.3 million, or 1.6%, compared with $16.6 million during the three months ended June 30, 2024.

The decrease is primarily due to a decrease in project and consulting expenses and travel expenses.

Six months ended June 30, 2025 Compared with Six months ended June 30, 2024

General and administrative expense was $33.7 million during the six months ended June 30, 2025, an increase of $0.7 million, or 2.1%, compared with $33.0 million during the six months ended June 30, 2024.

The increase is primarily due to professional fees and the recovery of a previously written-off receivable in the prior year period.

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dollar against local currencies of the countries in which we operate and forward currency exchange contracts.

Other income was $3.9 million for the three months ended March 31, 2025, compared with other income of $2.5 million for the three months ended March 31, 2024.

Three months ended June 30, 2025 Compared with Three months ended June 30, 2024

Other income was $6.0 million for the three months ended June 30, 2025, compared with other income of $4.5 million for the three months ended June 30, 2024.

The $1.6 million increase in other income (expense) compared to the same prior year period was primarily due to a decrease in net foreign exchange losses of $1.8 million.

Net foreign exchange losses for the three months ended March 31, 2025 includes $1.2 million of losses related to forward currency exchange contracts, partially offset by foreign exchange gains of $0.8 million.

Net foreign exchange losses for the three months ended March 31, 2024 includes foreign exchange losses of $3.3 million, partially offset by foreign exchange gains of $1.5 million from forward currency exchange contracts.

Net foreign exchange losses for the three months ended June 30, 2025 includes $5.8 million of losses related to forward currency exchange contracts, partially offset by foreign exchange gains of $7.3 million.

Net foreign exchange losses for the three months ended June 30, 2024 includes foreign exchange losses of $2.5 million, partially offset by foreign exchange gains of $2.3 million from forward currency exchange contracts.

Six months ended June 30, 2025 Compared with Six months ended June 30, 2024

Other income was $10.0 million for the six months ended June 30, 2025, compared with other income of $6.9 million for the six months ended June 30, 2024.

The $3.0 million increase in other income (expense) compared to the same prior year period was primarily due to a decrease in net foreign exchange losses of $3.2 million.

Net foreign exchange losses for the six months ended June 30, 2025 includes $7.0 million of losses related to forward currency exchange contracts, partially offset by foreign exchange gains of $8.1 million.

Net foreign exchange losses for the six months ended June 30, 2024 includes foreign exchange losses of $5.9 million, partially offset by foreign exchange gains of $3.8 million from forward currency exchange contracts.

Income Tax Provision

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Percentage of revenue

Income tax expense was $4.5 million for the three months ended March 31, 2025, compared to $7.4 million for the three months ended March 31, 2024.

The $2.9 million decrease was primarily due to a decrease in pre-tax book income.

The ETR for the three months ended March 31, 2025 was less than the U.S.

Income tax expense was $3.6 million for the three months ended June 30, 2025, compared to $6.4 million for the three months ended June 30, 2024.

The $2.8 million decrease was primarily due to the decrease in pre-tax book income and an increased Foreign Derived Intangible Income deduction.

The ETR for the six months ended June 30, 2025 was less than the U.S.

statutory rate of 21% primarily attributable to Foreign Derived Intangible Income deduction and Federal research and development tax credits.

The reported ETR for the three months ended March 31, 2025 was 13.6% compared to 12.5% for the respective 2024 period.

The increase in the reported ETR is primarily related to a decrease in pre-tax book income and stock-based compensation.

The reported ETR for the three months ended June 30, 2025 was 10.3% compared to 11.2% for the three months ended June 30, 2024.

On July 4, 2025, U.S tax legislation known as the One Big Beautiful Bill Act (the “OBBBA”) was signed into law.

The OBBBA makes permanent many of the tax provisions enacted as part of the Tax Cuts and Jobs Act of 2017 that were originally set to expire at the end of 2025.

In addition, the OBBBA makes changes to certain U.S.

corporate tax provisions, many of which are not effective until 2026.

The Company is currently evaluating the impact of this new legislation.

Liquidity and Capital Resources

At March 31, 2025, we had $184.0 million in unrestricted cash and cash equivalents and $403.1 million in short-term investments, in addition to $7.6 million in restricted cash.

At June 30, 2025, we had $173.6 million in unrestricted cash and cash equivalents, $376.2 million in short-term investments and $31.1 million in long-term investments, in addition to $7.6 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.

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Stock repurchases, as discussed below, also reduce our cash balances.

During the three months ended March 31, 2025 and 2024, we generated $39.8 million and $42.2 million, respectively, of cash related to operating activities.

Investing activities for the three months ended March 31, 2025 resulted in cash generated of $40.5 million, $5.0 million of which was used for capital expenditures and $252.5 million of which was used to purchase short-term

investments, offset by $297.9 million related to maturities and sales of short-term investments.

Investing activities for the three months ended March 31, 2024 resulted in cash outflows of $55.7 million, $1.6 million of which was used for capital expenditures and $145.1 million of which was used to purchase short-term investments, offset by $91.1 million related to maturities of short-term investments.

Financing activities for the three months ended March 31, 2025 resulted in a cash usage of $20.1 million.

During the first three months of 2025, (i) $18.2 million in cash was used to repurchase our common stock, (ii) $1.6 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 us to cover taxes, and (iii) $0.3 million was used to reduce the liability under the finance lease of our corporate headquarters.

In comparison, financing activities for the three months ended March 31, 2024 resulted in cash usage of $18.1 million, of which (i) $15.0 million related to the repurchase of our common stock (ii) $2.7 million related to payments made to government tax authorities for income tax withholding on employee compensation arising from the vesting of RSUs, and (iii) $0.4 million relating to the reduction of our finance lease liability.

As of March 31, 2025, we had a security deposit of $5.9 million related to the lease of our corporate headquarters in the form of a cash collateralized letter of credit issued with UBS Bank USA, which is classified as long-term restricted cash on our balance sheet.

During the six months ended June 30, 2025 and 2024, we generated $79.5 million and $82.3 million, respectively, of cash related to operating activities.

Investing activities for the six months ended June 30, 2025 resulted in cash generated of $35.9 million, $6.9 million of which was used for capital expenditures and $345.2 million of which was used to purchase short-term and long-term investments, offset by $388.0 million related to maturities and sales of short-term investments.

Investing activities for the six months ended June 30, 2024 resulted in cash outflows of $61.3 million, $3.6 million of which was used for capital expenditures and $249.0 million of which was used to purchase short-term investments, offset by $191.3 million related to maturities of short-term investments.

Financing activities for the six months ended June 30, 2025 resulted in a cash usage of $67.1 million.

During the first six months of 2025, (i) $63.5 million in cash was used to repurchase our common stock, (ii) $4.2 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 us to cover taxes, and (iii) $0.7 million was used to reduce the liability under the finance lease of our corporate headquarters.

These amounts were partially offset by $1.2 million of proceeds related to the purchase of shares under our 2020 ESPP during the first six months of 2025.

In comparison, financing activities for the six months ended June 30, 2024 resulted in cash usage of $40.7 million, of which (i) $30.0 million related to the repurchase of our common stock (ii) $11.2 million related to payments made to government tax authorities for income tax withholding on employee compensation arising from the vesting of RSUs, and (iii) $0.7 million relating to the reduction of our finance

lease liability.

These amounts were partially offset by $1.2 million of proceeds related to the purchase of shares under our 2020 ESPP during the first six months of 2024.

As of June 30, 2025, we had a security deposit of $5.9 million related to the lease of our corporate headquarters in the form of a cash collateralized letter of credit, which is classified as long-term restricted cash on our balance sheet.

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 March 31, 2025 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 2024 Form 10-K.

Significant commitments and contingencies at June 30, 2025 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 2024 Form 10-K.

Quantitative and Qualitative Disclosures about Market Risk.

As of March 31, 2025, 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 2024 Form 10-K.

As of June 30, 2025, 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 2024 Form 10-K.

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 2. Management’s Discussion and Analysis