Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Certain statements within "Management's Discussion and Analysis of Financial Condition and Results of Operations" are forward-looking statements that involve risks and uncertainties. Words such as may, will, should, would, anticipates, expects, intends, plans, believes, seeks, estimates and similar expressions identify such forward-looking statements. The forward-looking statements contained herein are based on current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements. Factors that might cause such a difference include, among other things, those set forth under "Liquidity and Capital Resources" below and under “Risk Factors” in Part I, Item 1A to our 2024 Form 10-K , which discussion is incorporated herein by reference. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. We assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting forward-looking statements, except as may be required by law.
Overview
We are primarily a producer of ion implantation equipment used in the fabrication of semiconductor chips in the United States, Europe, and Asia. In addition, we provide extensive worldwide aftermarket service and support, including spare parts, equipment upgrades and maintenance services to the semiconductor industry. Our product development and manufacturing activities currently occur primarily in the United States and South Korea. Our equipment and service products are highly technical and are sold through a direct sales force in the United States, Europe, and Asia. Consolidation and partnering within the semiconductor manufacturing industry has resulted in a small number of customers representing a substantial portion of our business. Our ten largest customers accounted for 55.5% 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 continue to develop plans to reduce the potential impact of these tariffs by leveraging our global supply chain and manufacturing footprint.
Critical Accounting Estimates
Management’s discussion and analysis of our financial condition and results of operations included herein and in our 2024 Form 10-K are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and assumptions. Management’s estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Management has not identified any need to make any material change in, and has not changed, any of our critical accounting estimates and judgments as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2024 Form 10-K.
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Results of Operations
The following table sets forth our results of operations as a percentage of total revenue:
Three months ended
Six months ended
June 30,
June 30,
2025
2024
2025
2024
Revenue:
Product
94.3
%
95.7
%
94.6
%
96.1
%
Services
5.7
4.3
5.4
3.9
Total revenue
100.0
100.0
100.0
100.0
Cost of revenue:
Product
49.1
52.5
49.1
51.6
Services
6.0
3.6
5.4
3.5
Total cost of revenue
55.1
56.1
54.5
55.1
Gross profit
44.9
43.9
45.5
44.9
Operating expenses:
Research and development
13.9
10.1
14.0
10.1
Sales and marketing
7.7
6.7
7.8
6.8
General and administrative
8.4
6.5
8.7
6.5
Total operating expenses
30.0
23.3
30.5
23.4
Income from operations
14.9
20.6
15.0
21.5
Other income (expense):
Interest income
2.8
2.4
2.9
2.3
Interest expense
(0.7)
(0.5)
(0.7)
(0.5)
Other, net
1.0
(0.1)
0.4
(0.4)
Total other income
3.1
1.8
2.6
1.4
Income before income taxes
18.0
22.4
17.6
22.9
Income tax provision
1.9
2.5
2.1
2.7
Net income
16.1
%
19.9
%
15.5
%
20.2
%
Revenue
The following table sets forth our product and services revenue:
Three months ended
Period-to-Period
Six months ended
Period-to-Period
June 30,
Change
June 30,
Change
2025
2024
$
%
2025
2024
$
%
(dollars in thousands)
Revenue:
Product
$
183,402
$
245,380
$
(61,978)
(25.3)
%
$
366,226
$
488,798
$
(122,572)
(25.1)
%
Percentage of revenue
94.3
%
95.7
%
94.6
%
96.1
%
Services
11,142
11,132
10
0.1
%
20,881
20,085
796
4.0
%
Percentage of revenue
5.7
%
4.3
%
5.4
%
3.9
%
Total revenue
$
194,544
$
256,512
$
(61,968)
(24.2)
%
$
387,107
$
508,883
$
(121,776)
(23.9)
%
Three months ended June 30, 2025 Compared with Three months ended June 30, 2024
Product
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-
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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 June 30, 2025 and December 31, 2024 was $129.7 million and $138.2 million, respectively.
Services
Services revenue, which includes the labor component of maintenance and service contracts and fees for service hours provided by on-site service personnel, was $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
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
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
In addition to the line item revenue categories discussed above, management also regularly disaggregates revenue in the following categories, which it finds relevant and useful:
● Systems and Aftermarket revenues, in which “Aftermarket” is:
A. The portion of Product revenue relating to spare parts, product upgrades and used equipment, combined with
B. Services revenue, which is the labor component of Aftermarket revenues;
(Aftermarket purchases reflect current fab utilization as opposed to Systems purchases which reflect capital investment decisions by our customers, which have differing economic drivers);
● Revenue by geographic regions, since economic factors impacting customer purchasing decisions may vary by geographic region; and
● Revenue by our customer market segments, since they can be subject to different economic drivers at different periods of time, impacting a customer’s likelihood of purchasing capital equipment during any particular period. Currently, management references three customer market segments: memory, mature process technology and advanced logic.
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Aftermarket and Systems Revenue
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 $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
The following table sets forth our gross profit / gross margin:
Three months ended
Period-to-Period
Six months ended
Period-to-Period
June 30,
Change
June 30,
Change
2025
2024
$
%
2025
2024
$
%
(dollars in thousands)
Gross Profit:
Product
$
87,940
$
110,621
$
(22,681)
(20.5)
%
$
176,264
$
226,128
$
(49,864)
(22.1)
%
Product gross margin
47.9
%
45.1
%
48.1
%
46.3
%
Services
(597)
1,788
(2,385)
(133.4)
%
(153)
2,332
(2,485)
(106.6)
%
Services gross margin
(5.4)
%
16.1
%
(0.7)
%
11.6
%
Total gross profit
$
87,343
$
112,409
$
(25,066)
(22.3)
%
$
176,111
$
228,460
$
(52,349)
(22.9)
%
Gross margin
44.9
%
43.9
%
45.5
%
44.9
%
Three months ended June 30, 2025 Compared with Three months ended June 30, 2024
Product
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.
Services
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 .
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Six months ended June 30, 2025 Compared with Six months ended June 30, 2024
Product
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.
Services
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
The following table sets forth our operating expenses:
Three months ended
Period-to-Period
Six months ended
Period-to-Period
June 30,
Change
June 30,
Change
2025
2024
$
%
2025
2024
$
%
(dollars in thousands)
Research and development
$
27,064
$
25,786
$
1,278
5.0
%
$
54,192
$
51,448
$
2,744
5.3
%
Percentage of revenue
13.9
%
10.1
%
14.0
%
10.1
%
Sales and marketing
15,003
17,230
(2,227)
(12.9)
%
30,127
34,675
(4,548)
(13.1)
%
Percentage of revenue
7.7
%
6.7
%
7.8
%
6.8
%
General and administrative
16,311
16,583
(272)
(1.6)
%
33,668
32,988
680
2.1
%
Percentage of revenue
8.4
%
6.5
%
8.7
%
6.5
%
Total operating expenses
$
58,378
$
59,599
$
(1,221)
(2.0)
%
$
117,987
$
119,111
$
(1,124)
(0.9)
%
Percentage of revenue
30.0
%
23.3
%
30.5
%
23.4
%
Our operating expenses consist primarily of personnel costs, including wages, commissions, incentive-based compensation, stock-based compensation and related benefits and taxes; project material costs related to the design and development of new products and enhancement of existing products; and professional fees, travel and depreciation expenses.
Personnel costs are our largest expense, representing $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
Three months ended
Period-to-Period
Six months ended
Period-to-Period
June 30,
Change
June 30,
Change
2025
2024
$
%
2025
2024
$
%
(dollars in thousands)
Research and development
$
27,064
$
25,786
$
1,278
5.0
%
$
54,192
$
51,448
$
2,744
5.3
%
Percentage of revenue
13.9
%
10.1
%
14.0
%
10.1
%
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
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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
Three months ended
Period-to-Period
Six months ended
Period-to-Period
June 30,
Change
June 30,
Change
2025
2024
$
%
2025
2024
$
%
(dollars in thousands)
Sales and marketing
$
15,003
$
17,230
$
(2,227)
(12.9)
%
$
30,127
$
34,675
$
(4,548)
(13.1)
%
Percentage of revenue
7.7
%
6.7
%
7.8
%
6.8
%
Our sales and marketing expenses result primarily from the sale of our equipment and services through our direct sales force.
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
Three months ended
Period-to-Period
Six months ended
Period-to-Period
June 30,
Change
June 30,
Change
2025
2024
$
%
2025
2024
$
%
(dollars in thousands)
General and administrative
$
16,311
$
16,583
$
(272)
(1.6)
%
$
33,668
$
32,988
$
680
2.1
%
Percentage of revenue
8.4
%
6.5
%
8.7
%
6.5
%
Our general and administrative expenses result primarily from the costs associated with our executive, finance, information technology, legal and human resource functions.
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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.
Other Income (Expense)
Three months ended
Period-to-period
Six months ended
Period-to-period
June 30,
change
June 30,
change
2025
2024
$
%
2025
2024
$
%
(dollars in thousands)
Other income (expense):
$
6,032
$
4,455
$
1,577
35.4
%
$
9,957
$
6,914
$
3,043
44.0
%
Percentage of revenue
3.1
%
1.8
%
2.6
%
1.4
%
Other income (expense) consists of interest earned and accretion on our invested cash balances, interest expense relating to the finance lease obligation we incurred in connection with the 2015 sale of our headquarters facility and other financing obligations as well as foreign exchange gains and losses attributable to both fluctuations of the U.S. dollar against local currencies of the countries in which we operate and forward currency exchange contracts.
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 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.
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Income Tax Provision
Three months ended
Period-to-period
Six months ended
Period-to-period
June 30,
change
June 30,
change
2025
2024
$
%
2025
2024
$
%
(dollars in thousands)
Income tax provision
$
3,621
$
6,399
$
(2,778)
(43.4)
%
$
8,126
$
13,803
$
(5,677)
(41.1)
%
Percentage of revenue
1.9
%
2.5
%
2.1
%
2.7
%
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 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 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. Additionally, we are using cash to repurchase shares as part of our stock repurchase program and are considering both organic and inorganic opportunities to drive future growth, for which cash resources will be necessary.
Our liquidity is affected by many factors. Some of these relate specifically to the operations of our business, for example, the rate of sales of our products, and others relate to the uncertainties of global economic conditions, including tariff programs implemented in countries in which we operate as well as the availability of credit and the condition of the overall semiconductor equipment industry. Our industry requires ongoing investments in operations and research and development that are not easily adjusted to reflect changes in revenue. As a result, profitability and cash flows can fluctuate more widely than revenue. Stock repurchases, as discussed below, also reduce our cash balances.
During the 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
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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 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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
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.
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