Axcelis' recovery runs on what happens after a machine is sold
Nearly all of the chip-equipment maker's third-quarter revenue growth came from its aftermarket business. New system sales are starting to improve too.
Axcelis Technologies delivered $237.8 million of third-quarter revenue, above the $230 million it forecast in August.
Research by Ticker Byline shows that the aftermarket business supplied about 94% of the latest quarter's $24.2 million revenue increase from a year earlier. Parts, upgrades, used equipment and services added $22.7 million. New systems contributed the remaining $1.5 million.
Two different demand signals
Axcelis makes ion implantation machines, which help set the electrical properties of materials in a semiconductor chip. It also earns revenue by supporting equipment already in use.
Aftermarket revenue rose to $92.6 million from $69.9 million a year earlier. Management links this business partly to how busy customers' factories are. Demand for spare parts and service can rise as existing machines work harder, while upgrades and used equipment also contribute.
New system sales depend on customers' capital spending. They reached $145.1 million, up about 1% from a year earlier and nearly 10% from the June quarter. The company also reported a strong increase in bookings and said demand was improving across more of its markets.
Better results, with a softer margin
Adjusted earnings of $1.26 a share exceeded the $1.11 Axcelis forecast in August. The measure excludes stock-based compensation, merger-related expenses and selected other items, with tax adjustments.
Operating profit rose to $27.3 million from $25.0 million. Gross margin, the share of sales left after direct production costs, slipped to 41% from 41.6%. Axcelis attributed that decline to currency effects and a less favorable mix of new systems, partly offset by more higher-margin aftermarket revenue.
Net income rose to $37.8 million from $26.0 million, helped by a tax-audit settlement. Operating cash flow fell to $40.2 million from $45.4 million.
A stronger sales target while the merger waits
The fourth-quarter outlook calls for about $275 million of revenue and adjusted earnings of $1.50 a share. The company expects further growth in 2027.
Its proposed combination with Veeco remains pending. The companies recently moved the expected closing into the first quarter of 2027. Our earlier analysis of the merger delay explains the remaining regulatory steps.
The Axcelis company profile follows the quarterly recovery, earlier forecasts, cash resources and merger timetable.