0001104659-26-057725
SEC filingRevenue grew 3.3% to $199M, but gross margin fell 560 bps to 40.5% due to mix shift and services loss; merger costs squeezed operating margin.
For the three months ended March 31, 2026, Axcelis reported total revenue of $199.0 million, up 3.3% from $192.6 million in the same period last year. Product revenue increased 2.8% to $188.0 million, partially offset by a $4.9 million customer settlement. Services revenue grew 12.4% to $10.9 million. Despite revenue growth, gross profit fell 9.2% to $80.6 million, and gross margin contracted sharply from 46.1% to 40.5%. The decline was driven by a less favorable product mix (product margin down to 43.8% from 48.3%) and a negative services gross margin of (15.5%) versus 4.6% due to unfavorable contract mix.
Operating expenses rose 21.8% to $72.6 million, primarily due to a 54.2% increase in general and administrative expenses to $26.8 million, largely attributable to merger-related professional fees. Research and development and sales and marketing also increased. As a result, income from operations dropped to 4.0% of revenue (from 15.1%). Other income declined to $2.7 million on lower interest income. The income tax provision fell to $1.4 million, with an effective tax rate of 13.3%. Net income margin was 4.7% (approximately $9.4 million) versus 14.8% in the prior year.
Management tracks two key revenue categories: Systems and Aftermarket. Systems revenue (new equipment sales) was $126.4 million, down 8.1% from $137.6 million, as customers moderated investments in mature process nodes. Within systems, mature process represented 68% of shipments (power devices 35%, general mature 33%) and DRAM 32%. Aftermarket revenue (spare parts, upgrades, used equipment, and services labor) surged 32% to $72.6 million from $55.0 million, reflecting higher fab utilization. The aftermarket segment now accounts for 36.5% of total revenue, up from 28.6% a year ago.
Axcelis provided no specific financial guidance in the MD&A. However, management confirmed that the pending merger with Veeco, approved by stockholders in February 2026, remains on track to close in the second half of 2026, subject to final regulatory approval from China. The company highlighted its strong liquidity position ($150.8 million cash, $215.8 million short-term investments, $203.3 million long-term investments) to support organic growth, share repurchases, and strategic opportunities. No other forward-looking statements were made.
As of March 31, 2026, Axcelis held $150.8 million in cash and cash equivalents, plus $419.1 million in marketable securities (short-term and long-term investments), providing substantial liquidity. Total debt was limited to $42.0 million, all in finance lease obligations related to the sale-leaseback of its headquarters. Stockholders' equity stood at $1.04 billion, reflecting a slight increase from year-end 2025. Inventory totaled $326.1 million, with raw materials comprising $265.7 million. Contract liabilities (deferred revenue) were $109.6 million, relatively flat sequentially.
Operating lease liabilities totaled $28.5 million, with $9.5 million due within one year. Finance lease obligations were $42.0 million. No other material purchase commitments were disclosed. The company has a $5.9 million restricted cash letter of credit as a security deposit on its headquarters lease.
During Q1 2026, Axcelis did not repurchase any shares. As of March 31, 2026, the company had $110 million remaining under its $215 million share repurchase authorization. No dividends were declared. Capital expenditures were $1.8 million for the quarter (from the cash flow statement, not repeated in notes). The company's merger with Veeco, announced September 2025, remains pending regulatory approval and is expected to close in the second half of 2026.
Axcelis operates as a single segment. Revenue for Q1 2026 was $199.0 million, up 3.3% YoY. Revenue by product: Systems $126.3 million (63.5% of total), Aftermarket $72.6 million (36.5%). Geographically, Asia Pacific contributed $144.4 million (72.6%), Europe $31.8 million (16.0%), and North America $22.8 million (11.4%). Customer concentration was notable: three customers accounted for 19.8%, 13.7%, and 10.7% of revenue.
Net income for Q1 2026 was $9.2M, while operating cash flow was $18.1M, resulting in a cash flow from operations (CFO) to net income ratio of approximately 1.97x, indicating strong cash generation relative to earnings. However, CFO declined sharply from $39.8M in Q1 2025, primarily due to unfavorable working capital changes. The most significant working capital swings were a $10.1M increase in prepaid expenses and other current assets (versus a $1.3M decrease last year), and a $5.0M decrease in accounts receivable (versus a $38.6M decrease last year). Inventories also increased, consuming $3.1M (versus $12.4M last year).
Capital expenditures (capex) dropped to $1.8M from $5.0M in the prior year, reflecting lower investment in property, plant, and equipment. Free cash flow (not explicitly stated) would be CFO minus capex, but we do not compute it as per guidelines. The company did not repurchase any shares this quarter, compared to $18.2M in buybacks last year, and paid no dividends.
Overall, the cash flow statement shows a conservative capital allocation with reduced capex and no share repurchases, while the decline in CFO is largely attributable to working capital timing differences rather than operational deterioration. The cash position still increased by $5.4M, ending at $161.5M.