Item 1A. Risk Factors.
Risks Related to Our Business and Industry
Set forth below and elsewhere in this Annual Report on Form 10-K and in other documents we file with the SEC are risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements contained in this Annual Report on Form 10-K. It is not possible to predict or identify all such risk factors. Consequently, the following is not a complete discussion of all potential risks or uncertainties.
If semiconductor chip manufacturers do not make sufficient capital expenditures, our sales and profitability will be harmed.
New systems orders and used tool sales depend upon demand from semiconductor chip manufacturers who build or expand fabrication facilities. When the rate of construction or expansion of fabrication facilities declines, demand for our systems will decline, reducing our revenue. In addition, all or a portion of the demand for increased capacity may be satisfied by a semiconductor chip manufacturer’s ability to reconfigure and re-use equipment they already own. Revenue decline also hurts our profitability because our established cost structure and our continued investments in engineering, research and development, and marketing necessary to develop new products and to maintain extensive customer service and support capabilities, limit our ability to reduce expenses in proportion to declining sales.
If we fail to develop and introduce reliable new or enhanced products and services that meet the needs of semiconductor chip manufacturers, our results will suffer.
Rapid technological changes in semiconductor chip manufacturing processes require us to respond quickly to changing customer requirements. Our future success will depend in part upon our ability to develop, manufacture and successfully introduce new systems and product lines with improved capabilities. This will depend upon a variety of factors, including new product selection, timely and efficient completion of product design and development as well as manufacturing and assembly processes, product performance in the field and effective sales and marketing. In particular:
We must continue to develop competitive technical specifications for new systems, or enhancements to our existing systems, and manufacture and ship these systems or enhancements in volume in a timely manner.
We will need to accurately predict the schedule on which our customers will be ready to transition to new products, in order to accurately forecast demand for new products while managing the transition from older products.
We will need to effectively manage product reliability or quality problems that often exist with new systems, in order to avoid higher manufacturing costs, delays in acceptance and payment and additional service and warranty expenses, and ultimately, a lack of repeat orders.
Our new products must be accepted in the marketplace.
Our failure to meet any of these requirements will have a material adverse effect on our operating results and profitability.
Axcelis is subject to the risks of operating internationally: we derive a substantial portion of our revenue from outside the United States, especially from Asia.
We are substantially dependent on sales of our products and services to customers outside the United States. International sales, including export sales from our U.S. manufacturing facilities to non-U.S. customers and sales by our non-U.S. subsidiaries, accounted for 83.7% of total revenue in 2025. Customers based in Asia dominate our international sales. Ion implanter system shipments to customers in Asia represented 76.0% of total system revenue in 2025. We anticipate that international sales will continue to account for a significant portion of our revenue. In particular, we expect
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that sales to Chinese customers (both global and domestic Chinese chip manufacturers) will continue to represent a significant portion of our total sales, creating both risk and opportunity.
U.S. export controls on shipments to Chinese customers have been notably increasing since 2020. Since the placement of SMIC on the U.S. Entity List in 2020, we are required to obtain export control licenses to ship to mature process SMIC fabs, which to date, we have been able to obtain. Other chipmakers have been placed on the Entity List, some with, and some without, a similar policy allowing licensed shipments on specified conditions. An export controls regulatory framework issued by the U.S. in October 2022 and supplemented in 2023, prohibits all semiconductor equipment shipments to Chinese customers (other than certain multi-nationals) who are producing or developing logic, DRAM and NAND chips meeting specific advanced parameters. While these regulations have further excluded exports to certain Chinese customers, we currently are able to continue to ship to the majority of our Chinese customers. In general, however, continuing revenue from Chinese customers is at higher risk than continuing revenue from customers in other international locations because of trade tensions between the United States government and the Chinese government, and other challenges reflecting China’s stage of development and rapid growth.
Increased U.S. export controls and other political and trade tensions exacerbate the risk that Chinese customers will change suppliers to non-U.S. vendors, such as Advanced Ion Beam Technology, Inc., Nissin Ion Equipment Co., Ltd. and Sumitomo Heavy Industries Ion Technology Co., Ltd. In addition, two Chinese entities, known as Kingstone Semiconductor and CETC Electronics Equipment Group Co., Ltd., continue to develop ion implanters for the Chinese domestic market. The loss of a significant customer or any reduction or delays in our ability to ship to any significant customer will adversely affect us.
We source a substantial portion of our materials from outside of the United States. Because of our dependence upon international sales and our global supply chain, our results and prospects may be adversely affected by a number of factors, including:
changes in laws or regulations resulting in more burdensome governmental controls, tariffs, restrictions, embargoes or export license requirements;
volatility in currency exchange rates;
political and economic instability;
global health emergencies, such as pandemics have the potential to disrupt our manufacturing operations and those of our supply chain, as well as cause our customers to delay or cancel shipments;
difficulties in accounts receivable collections;
extended payment terms beyond those customarily offered in the United States;
difficulties in managing suppliers, service providers or representatives outside of the United States;
difficulties in staffing and managing foreign subsidiary operations; and
potential adverse tax consequences.
The impact of tariffs on our business is difficult to predict, and may change substantially and without notice .
The U.S. government has proposed or enacted tariffs and substantial changes to trade policies, which could adversely affect our business. In August 2025, the U.S. Court of Appeals for the Federal Circuit ruled that the tariffs imposed by the current Federal administration exceed presidential authority and therefore are invalid, and in February 2026, the U.S. Supreme Court affirmed such decision. Following the ruling, the current Federal administration signed an executive order imposing a 10% “global tariff” and later indicated an intention to increase such “global tariff” to 15%, effective immediately, using presidential powers under certain U.S. trade laws. If implemented, such tariffs can remain in effect for up to 150 days, which may be extended by the U.S. Congress. The current Federal administration may continue to impose additional tariffs under other U.S. trade laws. The Company cannot predict what additional changes to trade policy will be made by the current Federal administration or Congress, including whether existing tariff policies will be maintained or modified, what materials or products may be subject to such policies or whether the entry into new bilateral or multilateral trade agreements, or the amendment or termination of existing trade agreements, will occur, nor can we predict the effects that any such changes would have on our business.
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Our dependence upon suppliers for many components and sub-assemblies could result in increased costs or delays in the manufacture and sale of our products.
We rely to a substantial extent on outside vendors to manufacture many of the components and sub-assemblies of our products. We obtain many of these components and sub-assemblies from a limited group of suppliers. Accordingly, based on situations outside of our control, we may be unable to obtain an adequate supply of required components on a timely basis, on price and other terms acceptable to us, or at all. In addition, we often quote prices to our customers and accept customer orders for our products before purchasing components and sub-assemblies from our suppliers. If our suppliers increase the cost of components or sub-assemblies, we may not have alternative sources of supply and may not be able to raise the price of our products to cover all or part of the increased cost of components, negatively impacting our gross margin.
The manufacture of some of these components and sub-assemblies is an extremely complex process and requires long lead times. As a result, we could experience delays or shortages. If we are unable to obtain adequate and timely deliveries of our required components or sub-assemblies, we may have to seek alternative sources of supply or manufacture these components internally. This could delay our ability to manufacture or to ship our systems on a timely basis, causing us to lose sales, incur additional costs, delay new product introductions, and suffer harm to our reputation.
Moreover, if actual demand for Axcelis’ products is different than expected, Axcelis may purchase more or fewer parts than necessary or incur costs for canceling, postponing, or expediting delivery of parts. If Axcelis purchases inventory in anticipation of customer demand that does not materialize, or if customers reduce or delay orders, Axcelis may incur excess inventory charges.
A significant portion of our revenue depends on customers electing to buy aftermarket products and services from Axcelis.
Historically, a significant portion of our product revenue and all of our service revenue relates to our sale of “aftermarket” products and services, which include parts, consumables, upgrades, service contracts, and time and materials billings. Some of our customers purchase fewer aftermarket products and services, often training their own staff to maintain and service semiconductor capital equipment rather than relying on the equipment manufacturer for these services. In addition, we compete against third-party parts suppliers for the sale of parts and consumables that are not protected by patents or otherwise proprietary. To the extent our customers purchase parts and services from other vendors or provide their own system maintenance labor, our revenue and profitability will be reduced.
If we fail to compete successfully in the highly competitive semiconductor capital equipment industry, our sales and profitability will decline.
The ion implant segment is highly competitive and includes one company with substantially greater financial, engineering, manufacturing, marketing and customer service and support resources that may better position it to compete successfully than we can, as well as several smaller companies that could provide innovative systems with technology that may have performance advantages. We expect our competitors to continue to improve the design and performance of their existing products and processes and to introduce new products and processes with improved price and performance characteristics. If we are unable to improve or introduce competing products when demanded by the markets, our business will be harmed. Finally, if we must lower prices to remain competitive without commensurate cost of goods savings, our gross margin and profitability will be adversely affected.
We are dependent on sales to a limited number of large customers; the loss of a significant customer or any reduction in orders from them could materially affect our sales.
Historically, we have sold a significant portion of our products and services to a limited number of semiconductor chip manufacturers. In 2025, our top ten customers accounted for 55.2% of our net sales, in comparison to 45.9% and 51.7% in 2024 and 2023, respectively. None of our customers have entered into a long-term agreement requiring it to purchase our products. Our customers located in China represent a significant portion of our revenue, and are subject to
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U.S. export controls restrictions, as discussed above. Although the composition of the group comprising our largest customers has varied from year to year, the loss of a significant customer or any reduction or delays in orders from any significant customer will adversely affect us. Consolidation of semiconductor chip manufacturers may result in the loss of a customer.
Our international operations involve currency risk.
Substantially all of our system sales are billed in U.S. dollars. We also pay almost all non-U.S. vendors providing materials, components, and subassemblies to our U.S. factory in U.S. dollars. Aftermarket revenues of our non-U.S. subsidiaries are denominated in both local currency and U.S. dollars. The majority of operating expenses of these non-U.S. subsidiaries, are received and incurred in local currencies. The establishment of the Axcelis Asia Operations Center in South Korea has increased the volume of our transactions in non-U.S. dollar currencies and increased the impact of foreign exchange gain / loss on the Company’s financial results. The Company experiences translation adjustments when local currency accounts payable on non-U.S. subsidiary books are re-measured for consolidated financial reporting. Similarly, the translation of long-term asset and liability values to U.S. dollars are recorded in stockholders’ equity as an element of accumulated other comprehensive income (loss). The value of the asset or liability in U.S. dollars will increase or decrease relative to the local currency based on changes in the exchange rate between the two currencies over the period. As a result, any unplanned non-cash gains or losses are recorded in the Company’s consolidated financial statements. Accordingly, fluctuations in exchange rates can impact reported revenues, expense, and and asset values in our Consolidated Financial Statements. During the year ended December 31, 2025, approximately 11.4% of our revenue was derived in local currencies from foreign operations with this inherent risk. In addition, at December 31, 2025, our operations outside of the United States accounted for approximately 11.9% of our total assets, the majority of which was denominated in currencies other than the U.S. dollar.
We may not be able to maintain and expand our business if we are not able to hire, retain and integrate qualified personnel.
Our business depends on our ability to attract and retain qualified, experienced employees. There is substantial competition for experienced engineering, technical, financial, sales and marketing personnel in our industry. In particular, we must attract and retain highly skilled design and process engineers. Competition for such personnel is intense, both in the Boston metropolitan area and in other locations around the world. If we are unable to retain our existing key personnel, or attract and retain additional qualified personnel, we may experience insufficient levels of staffing to fully develop, manufacture and market our products and perform services for our customers. As a result, our growth could be limited or we could fail to meet our delivery commitments or experience deterioration in service levels or decreased customer satisfaction, all of which could adversely affect our financial results.
Our financial results may fluctuate significantly.
We derive our new systems revenue from the sale of a small number of expensive products to a relatively small number of customers. The selling prices on our ion implant systems range from approximately $2.6 million to $12.0 million. We also sell used equipment in our aftermarket business. Each sale, or failure to make a sale, may have a significant effect on us in a particular quarter. In a given quarter, a number of factors can adversely affect our revenue and results, including changes in our product mix, increased fixed expenses per unit due to reductions in the number of products manufactured, and higher fixed costs due to increased levels of research and development and expansion of our worldwide sales and marketing organization. Our financial results also fluctuate based on gross profit realized on sales. A variety of factors may cause gross profit as a percentage of revenue to vary, including the mix and average selling prices of products sold, costs to manufacture and customize systems, warranty costs and the impact of changes to inventory reserves. New product introductions may also affect our gross margin. Fluctuations in our financial results may have an adverse effect on the price of our common stock.
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Our financial results may fall short of anticipated levels because forecasting revenue and profitability is complex and may be inaccurate.
Management may from time to time provide financial forecasts to investors. These forecasts are based on assumptions, which are believed to be reasonable when made, of the timing of system orders, system shipments, system acceptance and aftermarket revenue. Any of these assumptions can prove erroneous and the level of revenue recognizable in a particular quarter may vary from the forecast. Our lengthy sales cycle, coupled with customers’ competing capital budget considerations, make revenue difficult to predict. In addition, our backlog at the beginning of a quarter typically does not include all orders required to achieve our sales objectives for that quarter and is not a reliable indicator of our future sales. As a result, our revenue and operating results for a quarter depend on our shipping systems on previous orders as scheduled during that quarter, receiving customer acceptance of previously shipped products, and obtaining new orders for products and services to be provided within that same quarter. Any delay in, or cancellation of, scheduled shipments and customer acceptances or in revenue from new orders, including aftermarket revenue, could materially affect our financial results.
Accounting rules addressing revenue recognition add more complexity in forecasting quarterly revenue and profitability. Orders for our products usually contain multiple performance obligations that result in revenue deferral under generally accepted accounting principles. Due to the foregoing factors, investors should understand that our actual financial results for a quarter may vary significantly from our forecasts of financial performance for that quarter. Failure to meet forecasted financial performance may have an adverse effect on the price of our common stock.
The semiconductor equipment industry is cyclical, and we expect that demand for our products will increase and decrease, making it difficult to manage the business and potentially causing harm to our sales and profitability.
The semiconductor industry is cyclical, experiencing upturns when the demand for our products is high and downturns when our customers are not investing in new or expanded fabrication facilities. From time to time, inventory buildups in the semiconductor device industry produce an oversupply of semiconductors. This can cause a reduced demand for capital equipment such as our products, negatively impacting our sales and level of profitability. Our revenue can vary significantly from one point in the cycle to another, making it difficult to manage the business, both when revenue is increasing and when it is decreasing. In addition, a substantial portion of our operating expenses do not fluctuate with changes in volume. Significant decreases in revenue can therefore have a disproportionate effect on profitability. In addition, reduced demand for our products and services may require Axcelis to implement cost reduction efforts, including restructuring activities, which may adversely affect Axcelis’ ability to capitalize on that arise in the future.
Axcelis is exposed to risks related to cybersecurity threats and incidents.
In the conduct of our business, Axcelis collects, uses, transmits, and stores data on information technology systems. This data includes confidential information belonging to Axcelis, our employees or our customers or other business partners, some of which is personally-identifiable information of individuals. As reported in the 2025 Verizon Data Breach Investigation Report, cyber-attacks in the manufacturing industries are mostly financially motivated with another major motive being espionage. Axcelis has been and expects to continue to be subject to cybersecurity threats and incidents, including through employee error or misuse; individual attempts to gain unauthorized access to information systems; and sophisticated and targeted measures known as advanced persistent threats, none of which have had a material impact on the Company to date.
Axcelis implements a “Layered Security Strategy” that aligns with National Institute of Standards and Technology Cybersecurity Framework. To do so, we devote resources to network security, data encryption, employee training and other measures to protect our systems and data from unauthorized access or misuse. This includes continuously monitoring and reacting to the cybersecurity environment, by implementing best-in-class solutions from several vendors. On an on-going basis, we engage a cybersecurity consultant to validate and advise on the Company’s cyber landscape and to drive employee vigilance through employee cyber training and messaging. We continually replace less secure legacy systems to improve internal and external cyber defenses and maintain a cyber incident response plan including reporting and recovery processes. See Item 1C “Cybersecurity” below. In addition, as discussed in our proxy statement, the Audit Committee and
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the full Board of Directors receive quarterly reports on cybersecurity risks and annual reports on management initiatives to promote cybersecurity.
However, depending on their nature and scope, cybersecurity incidents could result in business disruption; the misappropriation, corruption or loss of confidential information and critical data (Axcelis’ and that of third parties); reputational damage; unnecessary expense; litigation with third parties; diminution in the value of Axcelis’ investment in research, development, and engineering; data privacy issues; and increased cybersecurity protection and remediation costs. These adverse outcomes could negatively impact our revenues, expenses, profitability, and asset values.
Axcelis is subject to risks associated with compliance with environmental, health and safety regulations.
Axcelis is subject to environmental, health and safety regulations in connection with its global business operations, including but not limited to: regulations related to the development, manufacture, shipping, and use of its products; handling, discharge, recycling and disposal of hazardous materials used in its products or in producing its products; the operation of its facilities; and the use of its real property. The failure or inability to comply with existing or future environmental and safety regulations could result in: significant remediation or other legal liabilities; the imposition of penalties and fines; restrictions on the development, manufacture, sale, shipment or use of certain of its products; limitations on the operation of its facilities or ability to use its real property; and a decrease in the value of its real property. Axcelis could be required to alter its manufacturing and operations and incur substantial expense in order to comply with environmental, health and safety regulations. Any failure to comply with these regulations could subject Axcelis to significant costs and liabilities that could adversely affect Axcelis’ business, financial condition, and results of operations.
Our financial condition and results of operations could be adversely affected by global pandemics.
Global pandemics have in the past and may again in the future cause disruptions and restrictions on our operations and ability to travel, and similar disruptions and restrictions impacting our suppliers or customers could adversely affect our sales and operating results. Axcelis’ products rely on an extensive global supply chain, and shortages of certain parts could impact our ability to meet customers’ shipment expectations, negatively affecting our revenues. Such pandemics may drive changes in the demand for certain of our customers’ products, resulting in their delay or cancelation of purchases from us. The extent to which pandemics may impact our results will depend on future developments, which are highly uncertain and cannot be predicted.
Our proprietary technology may be vulnerable to efforts by competitors to challenge or design around, potentially reducing our market share.
We rely on a combination of patents, copyrights, trademark and trade secret laws, non-disclosure agreements and other intellectual property protection methods to protect our proprietary technology. Despite our efforts to protect our intellectual property, our competitors may be able to challenge, design around or legitimately use the proprietary technology embedded in our systems or other technology or information used in our business. If this occurs, the value of our proprietary technology will be diminished. Our means of protecting our proprietary rights may not be adequate and our patents may not be sufficient to prevent others from using technology that is similar to or the same as our technology. Patents issued to us may be challenged and might be invalidated or circumvented and any rights granted under our patents may not provide adequate protection to us. Our competitors may independently develop similar technology, duplicate features of our products or design around patents that may be issued to us. As a result of these threats to our proprietary technology, we may have to resort to costly to enforce or our intellectual property rights. Finally, all patents expire after a period of time (in the U.S., patents expire 20 years from the date of filing of the patent application). Our market share could be impacted by the or expiration of a patent which had created a for our competitors.
Axcelis also has agreements with third parties for licensing of patented or proprietary technology with Axcelis as the licensor or the licensee. Termination of license agreements or claims of infringement with respect to such technology could have an adverse impact on our financial performance or ability to ship products with existing configurations.
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We (or customers that we indemnify) might face intellectual property infringement claims or patent disputes that may be costly to resolve and, if resolved against us, could be very costly to us and prevent us from making and selling our systems.
From time to time, claims and proceedings may be asserted against us relative to patent validity or infringement matters. We typically agree to indemnify our customers from liability to third parties for intellectual property infringement arising from the use of our products in their intended manner. Therefore, we may receive notification from customers who believe that we owe them indemnification or other obligations related to infringement claims made against the customers by third parties. Our involvement in any patent dispute or other intellectual property dispute or action to protect trade secrets, even if the claims are without merit, could be very expensive and could divert the attention of our management. Adverse determinations in any litigation could subject us to significant liabilities to third parties, require us to remove certain features from our products or seek licenses from third parties or prevent us from manufacturing and selling our systems. In addition, indemnification clauses in system sale agreements may require us to take other actions or require us to provide certain remedies to customers who are to indemnified liabilities. Any of these situations could have a material effect on our business results.
If operations were to be disrupted at Axcelis’ manufacturing facilities, it would have a negative impact on our business.
Our primary manufacturing facility is located in Massachusetts, with a smaller facility located in South Korea. Our operations could be subject to disruption for a variety of reasons, including, but not limited to severe weather events, other effects of climate change, natural disasters, work stoppages, operational facility constraints and terrorism. Such disruption could cause delays in shipments of products to our customers and could result in cancellation of orders or loss of customers, which could seriously harm our business.
If we do not have access to capital on favorable terms, on the timeline we anticipate, or at all, our financial condition and results of operations could be materially adversely affected.
We require a substantial amount of capital to meet our operating requirements and remain competitive. We routinely incur significant costs to purchase inventory to meet expected system sales, to develop and introduce new products, and to place evaluation systems at new customer sites. There can be no assurance that we will realize a return on the capital expended. Although our current cash levels and borrowing capacity are expected to be adequate for our foreseeable cash requirements, if our operating results falter, or our cash flow or capital resources prove inadequate, we may incur debt to fund these requirements. Significant volatility or disruption in the global financial markets may result in us not being able to obtain additional financing on favorable terms, on the timeline we anticipate, or at all, and we may not be able to refinance, if necessary, any outstanding debt when due, all of which could have a material adverse effect on our financial condition. Any inability to obtain financing on favorable terms, on the timeline we anticipate, or at all, may cause us to our operations significantly, reduce planned capital expenditures and research and development, or obtain funds through arrangements that management does not currently anticipate, including disposing of our assets and rights to certain technologies, the occurrence of any of which may significantly our ability to remain competitive, and materially and affect our results of operations and financial condition.
The market price of our common stock may be volatile, which could result in substantial losses for investors.
The stock markets in general, and the markets for semiconductor equipment stocks in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. The market price of the common stock may also fluctuate significantly in response to the following factors, among others, some of which are beyond our control:
variations in our quarterly results;
the issuance or repurchase of shares of our common stock;
changes in securities analysts’ estimates of our financial performance;
changes in market valuations of similar companies;
announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint
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ventures, capital commitments, new products or product enhancements;
loss of a major customer or failure to complete significant transactions;
additions or departures of key personnel; and
new positions adopted by investor stewardship groups and proxy advisory firms regarding desired environmental, social and governance disclosures, policies, ranking systems, and other initiatives.
The trading price of our common stock in the past has been significantly volatile, and we cannot accurately predict every potential risk that may materially and adversely affect our stock price.
We operate in jurisdictions with complex and changing tax laws.
We are also subject to laws and regulations in various jurisdictions that determine how much profit has been earned and when it is subject to taxation in that jurisdiction. In the United States, for example, the One Big Beautiful Bill Act (“OB3”) was enacted in the third quarter of 2025. For the year ended December 31, 2025, the OB3 did not have a material impact on our effective tax rate or tax expense.
Corporate tax reform, anti-base-erosion rules and tax transparency continue to be high legislative and regulatory priorities in many jurisdictions. Changes in laws and regulations regarding these matters could impact us in the jurisdictions where we are deemed to earn income, which could in turn adversely affect our tax liability and results of operations.
Risks Related to the Merger
The exchange ratio is fixed and will not be adjusted in the event of any change in either Axcelis’ or Veeco’s stock price.
Upon completion of the merger, each share of Veeco common stock issued and outstanding immediately prior to the Merger will be converted into and become exchangeable for 0.3575 shares of Axcelis common stock. This exchange ratio is fixed in the Merger Agreement and will not be adjusted for changes in the market price of either Axcelis common stock or Veeco common stock. The market prices of Axcelis common stock and Veeco common stock have fluctuated prior to and after the date of the announcement of the Merger Agreement and may continue to fluctuate from the date hereof to the date the Merger is consummated.
Stock price changes may result from a variety of factors, including, among others, general market and economic conditions, changes in Axcelis’ or Veeco’s respective businesses, operations and prospects, short-selling activity, changes in and speculation regarding Axcelis’ and Veeco’s respective businesses, operations and prospects, reductions or changes in U.S. government spending or budgetary policies, market assessments of the likelihood that the merger will be completed and/or expectations regarding the timing thereof, interest rates, general market, industry and economic conditions, including the impact of continued inflation and associated changes in monetary policy, and other factors generally affecting the respective prices of Axcelis’ or Veeco’s common stock, federal, state and local legislation, governmental regulation and legal developments in the industry segments in which Axcelis or Veeco operate, and the timing of the Merger.
Many of these factors are beyond Axcelis’ and Veeco’s control, and neither Axcelis nor Veeco are permitted to terminate the Merger Agreement solely due to a decline in the market price of the common stock of the other party.
The Merger may be delayed or may not be completed and the Merger Agreement may be terminated in accordance with its terms, which could materially and adversely effect Axcelis and/or Veeco.
The Merger is subject to a number of conditions that must be satisfied, some of which are beyond the control of Axcelis and Veeco, may not be satisfied or waived in a timely manner or at all, and, accordingly, the merger may be delayed or not completed. These conditions include: approval for listing on Nasdaq of the shares of Axcelis common stock to be issued in connection with the merger (subject to official notice of issuance), the absence of governmental restraints or prohibitions preventing the consummation of the Merger and the approval of the Merger by the State
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Administration for Market Regulation in the People’s Republic of China. The obligation of each of Axcelis and Veeco to consummate the merger is also conditioned on, among other things, the absence of a material adverse effect on the other party, the truth and correctness of the representations and warranties made by the other party on the date of the merger agreement and on the closing date (subject to certain materiality qualifiers), and the performance by the other party in all material respects of its obligations under the merger agreement. No assurance can be given that the required consents and approvals will be obtained or that the required conditions to closing will be satisfied, and, if all required consents and approvals are obtained and the conditions are satisfied, no assurance can be given as to the terms, conditions and timing of such consents and approvals. Any delay in completing the Merger could cause the combined company not to realize, or to be delayed in realizing, some or all of the benefits that Axcelis and Veeco expect to achieve if the Merger is completed within its expected time frame. Additionally, Axcelis and Veeco may incur significant additional costs in connection with any in completing the merger or of the Merger Agreement, in addition to significant transaction costs, including legal, financial advisory, accounting and other costs Axcelis and Veeco have already incurred.
If the Merger is not completed for any reason, the ongoing businesses of Axcelis and Veeco may be adversely affected and, without realizing any of the benefits of having completed the Merger, Axcelis and Veeco would be subject to a number of risks, including the following:
each company may experience negative reactions from the financial markets, including negative impacts on its stock price;
each company may experience negative reactions from its suppliers, customers and employees;
each company will be required to pay their respective costs relating to the Merger, such as financial advisory, legal and accounting costs and associated fees and expenses, including, if applicable, a termination fee (with certain exceptions), whether or not the Merger is completed;
matters relating to the Merger (including integration planning) will require substantial commitments of time and resources by Axcelis management and Veeco management, which could otherwise have been devoted to day-to-day operations, other strategic opportunities or to other opportunities that may have been beneficial to Axcelis or Veeco, as applicable, as an independent company.
Uncertainty regarding completion of the Merger may also cause customers, suppliers, vendors, strategic partners or others that deal with Axcelis or Veeco to delay or defer entering into contracts with Axcelis or Veeco or making other decisions concerning Axcelis or Veeco or could cause such customers, suppliers, vendors, strategic partners or others to seek to change or cancel existing business relationships with Axcelis or Veeco, which could negatively affect their respective businesses. Any delay or deferral of those decisions or changes in existing agreements could have a material adverse impact on the respective businesses of Axcelis and Veeco, regardless of whether the Merger is ultimately completed.
The market price for shares of common stock of the combined company following the completion of the merger may be affected by factors different from, or in addition to, those that historically have affected or currently affect the market prices of shares of Axcelis common stock and Veeco common stock.
Upon consummation of the Merger, Axcelis stockholders and Veeco stockholders will both hold shares of common stock in the combined company. The businesses of Axcelis and Veeco differ from each other, and, accordingly, the results of operations of the combined company will be affected by some factors that are different from those currently or historically affecting the separate results of operations, as well as the market price of the common stock, of Axcelis and Veeco. Additionally, the market price of the combined company’s common stock may fluctuate significantly following completion of the Merger.
Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or that cannot be met.
Consummation of the Merger is conditioned upon, among other things, the approval of the Merger by the State Administration for Market Regulation in the People’s Republic of China. Any such requirements or restrictions may
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prevent or delay completion of the Merger or may reduce the anticipated benefits of the Merger, which could also have a material adverse effect on the combined company’s business and cash flows, financial condition and results of operations.
Axcelis stockholders and Veeco stockholders will each have reduced ownership and voting interest in the combined company as compared to ownership and voting interest in each of Axcelis and Veeco on a standalone basis.
Upon consummation of the Merger, each Axcelis stockholder and each Veeco stockholder will become a stockholder of the combined company with a percentage ownership of the combined company that is smaller than such stockholder’s percentage ownership of Axcelis or Veeco, as applicable, immediately prior to the effective time of the Merger.
Because of this, each share of Axcelis common stock and each share of Veeco common stock will represent a smaller percentage ownership of the combined company than it represented in Axcelis or Veeco, respectively. Accordingly, Axcelis stockholders and Veeco stockholders will have less voting power in the combined company than they now have in Axcelis or Veeco and will be able to exercise less influence over the management and policies of the combined company following the consummation of the Merger than they are able to exercise over Axcelis or Veeco, as applicable, immediately prior to the consummation of the Merger.
The Merger Agreement may prevent Axcelis and Veeco from entering into certain transactions and taking certain actions that might otherwise be beneficial to Axcelis or Veeco and their respective stockholders
Until the completion of the Merger or the termination of the Merger Agreement in accordance with its terms, Axcelis and Veeco are each prohibited from entering into certain transactions and taking certain actions that might otherwise be beneficial to Axcelis or Veeco and their respective stockholders.
From and after the date of the Merger Agreement and prior to completion of the Merger, the Merger Agreement restricts Axcelis and Veeco from taking specified actions without the consent of the other party and requires that the business of each company and its respective subsidiaries be conducted in all material respects in the ordinary course of business consistent with past practice. These restrictions, which could be in place for an extended period of time if the completion of the Merger is delayed, may prevent Axcelis or Veeco from making appropriate changes to their respective businesses or organizational structures or from pursuing attractive business opportunities that may arise prior to the completion of the Merger, and could have the effect of delaying or preventing other strategic transactions. Adverse effects arising from the pendency of the Merger could be exacerbated by any delays in consummation of the Merger or termination of the Merger Agreement.
Litigation against Axcelis and Veeco could prevent or delay the completion of the Merger or result in the payment of damages following completion of the Merger.
Axcelis stockholders and Veeco stockholders may file lawsuits challenging the Merger or the other transactions contemplated by the Merger Agreement, which may name Axcelis, Veeco and/or members of their respective boards of directors as defendants. The results of any such potential legal proceedings are difficult to predict, and could delay or prevent the Merger from becoming effective in a timely manner. The existence of litigation related to the Merger could affect the likelihood of obtaining the required approval from Axcelis stockholders or Veeco stockholders. Further, one of the conditions to the completion of the Merger is that no law or order by any governmental entity of competent jurisdiction, such as a court, is in effect that prohibits, restrains or makes illegal the consummation of the Merger. As such, if any future legal actions result in a law or order prohibiting the consummation of the Merger, then such law or order may prevent the consummation of the Merger on the agreed terms, within the expected timeframe or at all, any of which could substantially harm Axcelis’ and Veeco’s respective businesses. Moreover, any could be time consuming and expensive, could Axcelis and Veeco’s management’s attention away from their regular business and, if any lawsuit is resolved either Axcelis, Veeco, or members of their respective boards of directors (each of whom Axcelis and Veeco is required to indemnify pursuant to indemnification agreements), could have a material effect on Axcelis or Veeco’s financial condition.
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Failure to attract, motivate and retain executives and other key employees could diminish the anticipated benefits of the Merger.
The success of the Merger will depend in part on the retention of personnel critical to the business and operations of the combined company due to, for example, their technical skills or management expertise. Current and prospective employees of Axcelis and Veeco may experience uncertainty about their future role with Axcelis and Veeco until strategies with regard to these employees’ roles in the combined company are announced or executed, which may impair Axcelis’ and Veeco’s ability to attract, retain and motivate key management, sales, marketing, technical and other personnel prior to and following the Merger. If Axcelis and Veeco are unable to retain personnel, including Axcelis’ and Veeco’s key management, who are critical to the successful integration and future operations of the companies, Axcelis and Veeco could face disruptions in their respective operations, loss of existing customers or loss of sales to existing customers, loss of key information, expertise or know-how, and additional recruitment and training costs. In addition, the of key personnel could the anticipated benefits of the Merger.
If key employees of Axcelis or Veeco depart, the integration of the companies may be more difficult and the combined company’s business following the Merger may be harmed. Furthermore, the combined company may have to incur significant costs in identifying, hiring and retaining replacements for departing employees and may lose significant expertise and talent relating to the business of each of Axcelis or Veeco, and the combined company’s ability to realize the anticipated benefits of the Merger may be adversely affected. In addition, there could be disruptions to or distractions for the workforce and management associated with activities of labor unions or integrating employees into the combined company. No assurance can be given that the combined company will be able to attract or retain key employees of Axcelis and Veeco to the same extent that those companies have been able to attract or retain their own employees in the past.
Whether or not the Merger is completed, the announcement and pendency of the Merger will divert significant management resources to complete the Merger, which could have a material adverse effect on Axcelis’ and Veeco’s respective businesses, financial results, and/or market prices.
Whether or not the Merger is completed, the announcement and pendency of the Merger could cause disruptions in the businesses of Axcelis and Veeco by directing the attention of management of each of Axcelis and Veeco toward the completion of the Merger. Axcelis and Veeco have each diverted significant management resources in an effort to complete the Merger and are each subject to restrictions contained in the Merger Agreement on the conduct of their respective businesses in the period prior to the completion of the Merger. If the Merger is not completed, Axcelis and Veeco will have incurred significant costs, including the diversion of management resources, for which they will have received little or no benefit.
The market price of the combined company’s common stock may be volatile, and holders of the combined company’s common stock could lose a significant portion of their investment due to decreases in the market price of the combined company’s common stock following completion of the Merger.
The market price of the combined company’s common stock may be volatile, and following completion of the Merger, stockholders may not be able to resell their Axcelis common stock at or above the price at which they acquired the common stock pursuant to the merger agreement or otherwise due to fluctuations in its market price, including changes in price caused by factors unrelated to the combined company’s operating performance or prospects.
Specific factors that may have a significant effect on the market price for the combined company’s common stock include, among others, the following:
changes in stock market analyst recommendations or earnings estimates regarding the combined company’s common stock, other companies comparable to it or companies in the industries they serve;
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actual or anticipated fluctuations in the combined company’s operating results or future prospects;
reaction to public announcements by the combined company;
strategic actions taken by the combined company or its competitors, such as any contemplated business separation, acquisitions or restructurings;
failure of the combined company to achieve the perceived benefits of the transactions, including financial results and anticipated cost synergies, as rapidly as or to the extent anticipated by financial or industry analysts;
adverse conditions in the financial market or general U.S. or international economic conditions, including those resulting from war, incidents of terrorism and responses to such events; and
sales of common stock by the combined company, members of its management team or significant stockholders.
Each of Axcelis and Veeco will incur significant transaction, merger-related and restructuring costs in connection with the Merger.
Axcelis and Veeco have each incurred and expect to incur a number of non-recurring costs associated with combining the operations of the two companies, as well as transaction fees and other costs related to the Merger. These costs and expenses include fees paid to financial, legal and accounting advisors, facilities and systems consolidation costs, severance and other potential employment-related costs, including retention and severance payments that may be made to certain Axcelis employees and Veeco employees, filing fees, printing expenses and other related charges. Some of these costs are payable by Axcelis or Veeco regardless of whether the Merger is completed.
The combined company will also incur restructuring and integration costs in connection with the Merger. The costs related to restructuring will be expensed as a cost of the ongoing results of operations of either Axcelis or Veeco or the combined company. There are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the Merger and the integration of the two companies’ businesses. Although Axcelis and Veeco expect that the elimination of duplicative costs, strategic benefits, additional income and the realization of other efficiencies related to the integration of the businesses may offset incremental transaction, merger-related and restructuring costs over time, any net benefit may not be achieved in the near term or at all. While both Axcelis and Veeco have assumed that certain expenses would be incurred in connection with the Merger and the other transactions contemplated by the Merger Agreement, there are many factors beyond their control that could affect the total amount or the timing of the integration and implementation expenses.
Axcelis stockholders and Veeco stockholders will not be entitled to appraisal rights in the Merger.
Appraisal rights are statutory rights that, if applicable under law, enable stockholders of a corporation to dissent from an extraordinary transaction, such as a merger, and to demand that such corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to such stockholders in connection with the transaction. Under the DGCL, stockholders do not have appraisal rights if the shares of stock they hold are either listed on a national securities exchange or held of record by more than 2,000 holders. Notwithstanding the foregoing, appraisal rights are available if stockholders are required by the terms of the Merger Agreement to accept for their shares anything other than (i) shares of stock of the surviving corporation, (ii) shares of stock of another corporation that will either be listed on a national securities exchange or held of record by more than 2,000 holders, (iii) cash in lieu of fractional shares or (iv) any combination of the foregoing.
Because the Merger is of Merger Sub with and into Veeco and holders of Axcelis common stock may continue to hold their shares following completion of the Merger, holders of Axcelis common stock are not entitled to appraisal rights in the Merger.
Because shares of Axcelis common stock are listed on Nasdaq, a national securities exchange, and because Veeco stockholders are not required by the terms of the Merger Agreement to accept for their shares anything other
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than shares of Axcelis common stock and cash in lieu of fractional shares, holders of Veeco common stock will not be entitled to appraisal rights in the Merger.
