Q1 2020 Earnings Call
[music].
Good day, ladies and gentlemen, and it wasn't to be Axcelis technologies calls to discuss the company's results for the first quarter of 2020.
My name is Julie and I will be or coordinator for today.
At this time, all participants are in listen only mode.
We will be facilitating a question answer session towards the end of this conference.
If they anytime during the call you require assistance. Please press star followed by zero and a coordinated we'll be happy to assist you.
I would now unless it isn't a presentation over to your host for todays call Mary Puma, President and CEO of Axcelis technology.
Hmm.
Thank you Julie.
With me today, it's Kevin Brewer Executive Vice President and CFO, and Doug Lawson Executive Vice President of corporate marketing and strategy.
We're all participating in this call remotely so I would like to apologize in advance for any technical difficulties.
If you've not seen a copy of our press release issued last night. It is available on our website playback service will also be available on our website as described in our press release.
Please note that comments made today about our expectations for future revenues profits.
The other results are forward looking statements under the S. He sees hit Safe Harbor provision.
These forward looking statements are based on management's current expectations and are subject to the risks inherent in our business.
These risks are described in detail in our form 10-K annual report another S. T SEC filings, which we urge you to review our actual results may differ materially from our current expectations. We do not assume any obligation to update these forward looking statement.
I hope you in your families are healthy during this difficult period.
Axcelis, we're carefully managing through this unprecedented global situation, but I would like to emphasize that we remain laser focused on the strategic objectives, we outlined at our Investor day in September.
During the first quarter, we achieved two key milestones along the path to market leadership in ion implantation and to our long term business model.
First we received our first periodically on order from Japan second we closed the first Purion Dragon evaluation and received a follow on order.
The dedication univar employees has made these significant accomplishments possible and our top priority is ensuring their health and safety, while continuing to serve our customers.
I would personally personally like to give a heartfelt. Thank you to our extraordinary employees in the factory global field locations and those at home in the U.S. and around the World who are working diligently to meet our customer commitments I also want to thank our suppliers and customers for their support.
As we strive to meet the continuing high level of customer interest in our Purion products.
Our first quarter financial performance was very strong.
Revenue for the first quarter was $119 million earnings per share of 33 cents was well above guidance and consensus.
During the first quarter memory accounted for 52% of our shipments, 31% DRAM and 21% NAND mature foundry logic customers accounted for the remaining 48%.
The geographic mix of our shipment our system shipments in the first quarter was China, 38% Korea, 34%, Taiwan, 20% and the Western Europe, 8%.
Well the cobot 19 pandemic has generated uncertainty and new challenges for 2020. It is important to understand the semiconductor industry is critical in today's world and remains fundamentally strong.
Near term, we will be required to manage our business on a day to day basis relative to uncontrollable pandemic driven hurdles.
Associated with global government policy, the impact on world economies, and the reactions of our customers and suppliers.
The industry is just exiting a down cycle a period of lower capacity investment as a result, we can still expect to see investment in both technology and capacity for critical market segments.
Accelerative done significant work to understand our customers market segments and to develop products that provide a competitive advantage, we expect to see the individual market segments react differently to covert 19 challenges.
Currently semiconductor products required for working from home and sheltering in place or in high demand. This includes products for Pcs video streaming and communications at the same time demand for products related to automotive in aviation for example of slow.
Our knowledge and expertise allow us to work closely with our customers across these market segments. Even during this difficult time to provide them with the best ion implant solutions for their specific manufacturing challenges.
We are well positioned as a result of investment in new Purion products during the down cycle and by the broad and highly diverse periodic customer base. We have developed over the last several years.
In the first quarter, we close the revaluations all for new memory applications.
One of these evaluations was for the first purion drag and a NAND customer. This is our newest and most technologically advanced high current Implanter. We also received the first Purion Dragon follow on order and shipped that tool in the first quarter as well.
The interest level is also very high for two of our other new Purion systems. The Purion Xes Max a high energy tool designed for the most advanced image sensor applications and for the Purion H 200, which is focused on the power device market. We also announced our first period.
Order in Japan, a purion XE for a power device customer.
It is easy during this difficult time to forget that the industry is beginning what will likely be an extended growth cycle driven by the new communications capability of Fiveg technology.
We still believe to Fiveg infrastructure build has begun and will accelerate in 2020 and into 2021.
As the infrastructure expand new fiveg capable phones and other devices will drive a strong memory cycle beginning in 2021.
Following this and beginning in 2022, there will be another cycle of industrial I O T applications, even bigger than the last which will drive strong growth in the mature process technology segment.
One thing that emerges very clearly from this pandemic is that communication requirements and the technology to support them are more critical than ever and that Axcelis is extremely well positioned for strong growth during the upcoming fiveg driven cycle.
Now I'd like to turn it over to Kevin to discuss our financials and some operational details.
Thank you Mary and good morning.
Before I provide an update on our very strong fourth quarter performance.
I'd like to take a minute discuss some of the actions were taken.
For the current Pandemics situation.
I'll start by saying all areas, our business through M&A and operational since the early up at some point supplier.
Customer demand.
Pardon the pun health and wellbeing of employees remains a top priority.
We are doing our best to create a safe working environment for all consultant boards.
But also must work in our factory, we've implemented safe harbor physical distances.
And have required to use of now.
Everyone, who can't work from home is working from home.
The opening Sam's campaign to support our customers are falling for government customers car safety protocols.
No worries about provide guidance for the quarter this enormous oil.
The pandemic and potential economic impact is going up at our visibility.
Could potentially put on comparable challenges in our path.
As a result, we will not be providing formal guidance.
However, I will highlight that Q1 bookings and backlog finished at record levels.
Indicating the current strengthens the math axles products and services.
We're pacing activity continues the strong customer discussions remained very active.
Based on our current orders.
Through revenue could be similar to Q1.
But the many unknowns and put in potential supply chain disruption courage, rather than normal uncertainly around our superior results.
Now turning to the first quarter results.
Q1 revenue finished at $119 million.
Well above our guidance compared to 107.7 million in Q4.
Hey, one system sales or $82.3 million compared to 71.4 million in Q4.
Q1 sales not revenue finished at $36.7 million compared to 30.3 million in Q4.
Q1 sales top 10 customers accounted for 85.9% of our total sales compared to 85.5% Q4.
Our customers what percent are above standard. Thank you for.
The one system bookings were $115.1 million compared to $77.2 million in Q4.
For the Q1 book to Bill ratio 1.37 versus 1.0 stress and Q4.
Backlog in Q1, and holding deferred revenue finished at $120 million compared to 99.3 million Q4.
One combined SGN and R&D spending was $31.8 million.
And below our guidance of approximately $33 million due to timing of expenses.
So that quarter.
Operating expenses were 28, 26.8% of revenue compared to 31.1 million or 28.9% in Q4.
Thats Sienna quarter was $17.2 million.
But R&D at 14.6 months.
Q1, gross margin was 38.3% and above guidance compared to 41.1% Q4.
Q1, gross margin is lower than normal the closure of Threeg evaluation tools, including the first Perion Dragon.
Although we're not providing a formal Q2 guidance, we still expect full year gross margin be greater than 40% and we remain on track to achieve our gross margin targets and our 550 million and $650 million target models.
Operating profit in Q1 cents at $13.7 million compared to Q4 operating profit of 13.2.
We want to income was $11.2 million or 33 cents per share and above guidance.
At the 9.7 million or 29 cents per share in Q4.
Inventory ended at $136.1 million compared to 140.4 million in Q4.
The one inventory turns excluding evaluation tools finished at 2.2 compared to 2.0 in Q4.
You want accounts payable were $26.1 million compared to 25.3 million in Q4.
You want to receivables of $64.2 million compared to 83.8 million in Q4.
Q1 cash finished at $181.4 million compared to 146.5 million in Q4.
Cash from operation incentive quarter was 39.7 million.
In the quarter, we repurchased $7.5 million of our common stock.
Have suspended the repurchase program.
We will maintain a conserve cash investment strategy, while continuing to invest in a business. During these uncertain times.
Axcelis entered 2020 in the great momentum.
For the pandemic concern us some near term challenges, we have not lost focus on achieving our $550 million and $650 million target models.
Our customers continued to have high expectations for Purion products, which we intend to achieve.
I hope that are viewing the crown has a well during this challenging times I will now turn the call back the Murray for closing comments.
Thank you Kevin.
We are pleased with our excellent first quarter performance and remain focused on executing well for the rest of the year.
Axcelis has a competitive purion product line, a broad and diverse customer base, a strong balance sheet and a dedicated team of employees.
We are counting on these strengths to pull us through this difficult period and result in market leadership in ion implantation and with that I'd like to open it up for questions Julie.
Ladies and gentlemen, if you wish to ask a question. Please press star followed by one on your Touchtone telephone.
If your question has been answered or you wish to withdraw your question press the pound team.
Please press star one to begin.
Your first question comes from Patrick Ho Stifel.
Right Mark Congrats nice quarter, you weren't your everyone well.
Maybe clyburn, who brought up for Couldnt Mark.
That concludes.
On the gross margin improved.
Right and there were any gruden core whether we're going to like two or.
Even the Frac crew to recruit.
How much of the impact is adding one Andy.
You too.
Yes, Thanks Pat.
So let me start off by this single framework around operating expenses.
We are seeing with an impact from the Cronto virus.
Putting us on a couple places it's simply.
And supplies for VR supply mass the People's additional training on the factories.
There's other you know there are some inefficiencies.
Within the factory, we want the social business thing we've had the move workspace developed.
For all kind of around and.
The asked me for a number right now.
It's probably in order a million.
As soon as high as a million and a half.
For Q2 Q.
Q3 at this point and that spread Africa across the Opex line and the gross margin.
If I looked at my Q2 expenses.
And based on the revenue recurring 13 from which is similar to Q1.
Operating expenses are going to creep up to about.
35 million when you put everything in there that we need to go do both in terms of investing in that new products, because we're not slowing down and our investments were not slowing down an email tool that we plan to put in the field.
So there is no there is some impacted at this point in time Im thinking that it's at this.
What kind of right now into Q2 to three type of event.
Now I'm, assuming in Q4 that we're it's more of our back to normal type situation, but.
No just.
Great a little bit.
And I know, you're well aware of it and everybody probably as I mean, it's very difficult right now the good.
Our freight forwarders and there is to bring material and are now consolidated shipments pretty much have ended.
I think that is one area or.
Well for along with probably a lot of from our peer that sentiment that from third costs.
And that predominantly forces in the gross margin, but there is a piece of that those gone to the Opex was the best probably across all the efforts.
Great Thats, not what maybe Kevin as a follow up is that correct.
Speaking on the Brown.
And then your working capital management, obviously inventory.
You mentioned the evaluation system going through the customers throughout Europe Cardinal standpoint, how do you could argue you about your inventory levels given that might lead to use to be building a little bit of buffer inventory, we want from your customers.
Is there anything users.
Within the supply is how do you.
Building that some of the inventory for you so.
Given.
To further disruption.
Yes, so it's a good question Patrick.
So the everybody wants to get in line to make sure ligand apart. So we're probably doing the same thing.
Again, our peer group are doing well.
We've looked at our MLP.
Lead time offsets right now, we've adjusted our performance apparel and earlier.
We're also looking at the long lead items, and where we're driving some extra material for a long lead items. So.
We're trying to stay ahead of this because the supply chain has been as a day by day event.
We watch that move around the world from starting in Asia that in Europe in California.
So.
Right Andy can be right now is to try to stay ahead of the and again, we're driving material little bit ahead.
You can say almost a similar thing so even in our own we that we had strong service.
Our CFO nice revenue in Q1, and you can see some regions EMA spare parts with customers are trying to pull ahead, a little bit Phil.
That's fair Dan I think we plan right now so.
Yes, we're trying to stay out of it.
Great My reflected remained very in terms of the market environment.
Mark and ARPU, along pretty healthy level revenue guidance can you give a little bit of color.
Zack.
Was it primarily domestic maybe a little color between the mix.
The foundry and memory.
Okay. So.
China is obviously, a very important region for Axcelis it runs approximately 30%.
Our revenues in any given quarter right now on China continues to be very active and we're seeing that primarily in the mature process technology segment.
The domestic Chinese manufacturers, even though a significant portion of our business in China typically comes from the global semiconductor companies right. Now there is quite a bit of activity from the domestic customers and I would say that activity is a mix.
Really across all segments were seeing.
Not only the mature process.
Technology, but we are seeing.
Demand coming from some of the memory customers and I would say that image sensors also continues to be a very active segment for us. So we continue to watch for that we are and we are prepared we have teams in place.
Two accepted the shipments and do the installations and those are all things that we're watching so right now.
We're very happy with that inactive region and we in we're prepared to service.
Great. Thank you very much.
Your next question comes from Craig Ellis.
FBR.
Yeah. Thanks for taking the question and congratulations on the good execution in the first quarter.
Kevin I wanted to start with yeah, you're welcome wanted to start with some clarification one.
There was an unusually large number of evaluation tools in the quarter, but if we set that aside than we just looked at.
Curian system margin performance and cost reduction what the business have stayed on that nice purely an upward trend that we see in the investor deck, where there are different things going on with cobot adjustments, but what it would have precluded ongoing margin expansion.
Yes, so the the biggest impact on Q1 was that involves if I looked at what that contributed currencies.
It was about 300 basis points of negative.
Gross margins so.
If you add that back when you consider exactly where one of them.
Our.
Some things flowing through.
The gross margin line, but they haven't really hit yet.
Because a lot of.
Basi, how we.
Due to build up on the.
Expenses and capitalized variances and bring it back through.
Peter point in time, most of that starts to hit in Q2 Q3 areas. So Q1 was really all about developed tools and like that was about 300 basis points as far as negative impact.
In terms of cost out activity.
We're still right on plan or Roadmaps.
I think.
We are lower than we thought about for a while that we've got many many thanks for drilling with both the supply chain and continue doing a factory with lead times and.
The current of wireless has not impacted that even though a lot of folks are working from home.
We're keeping up with everything engineer that keeping up with then.
Purchase and keeping up and I will support groups.
At this point in time and people know factory.
For the direct labor people manufacturing, some supervision and some port support but the good news as everybody else working from home is keeping up so everything we wanted to do with our Roadmaps, we're still on track them.
No I'm still very comfortable with the margin targets, we have and both the Fyfifteen 650 million type models.
Very good and certainly a significant accomplishment in this environment. Just further clarifying that point is that reasonable to think that theres, one ish evaluation tools per quarter for.
Or would they be above or below that not looking for specific guidance, but just some color on what you see.
The funnel.
So I'll tell you there.
Pat.
Many more email is going out this year than what we disclose into one so that there's plenty of 2000, there and thats part of the investment in Twoq as a big chunk of the the Opex line.
But when I when I talked about still.
Seeing our full year gross margins average greater than 40% I've got that accounted for Craig So.
Even though we've got it.
Fair number of either sales coming out of.
This was an unusually.
Because of the stacked against us in this quarter three valves close we also had a very high net.
Hi, current and you can see from our Investor presentation.
Unfortunately age is still the lower margin, but it's continuing to competitors.
Is that we had a few things back against this quarter, but going forward.
I still expect even with this start at 33 that are for your average is still going to be about 40 based on when we're seeing so the Q2 to three to four.
That's great great and.
Yes.
Greg just wanted to add one thing relative to expectations for.
Future evaluates the from new product.
The Purion XE Max the Purion H 200.
Hi, good and so forth.
Those those are key targets for evolves over the course of this year. So thats, that's really part of the growth towards the.
Hi, 50, and especially towards the 650 model is getting those products suited.
Absolutely. Thanks, Doug Mary I wanted to see if we could get some color just on what you're seeing with.
Bookings and backlog strength for the first quarter, what that might mean for the mix of business in the second quarter I know theres not specific guidance given the uncertainty, but any color on.
How some of.
Thanks, Keith segments might trend mature foundry and then within memory.
Any DRAM and NAND color.
Okay. So I can tell you what the bookings look like through the first quarter. We have said that bookings typically come in one quarter in those tools are typically shift in the same quarter, but but I can give you some color around.
So the bookings for Q1. It was it was actually 50 50 split between mature process technology and memory.
And also that split was pretty even in memory between.
DRAM and NAND, so that'll that'll give you a sense and.
We mentioned on our last call.
We believe that memory spending has picked up it started for us in Q4.
In Q1, we talked about how approximately 50% of our shipments were from memory and we are seeing strength in memory going into Q2 as well.
Given the fact that.
We have all the cobot 19 activity going on it's hard to assist the potential impact that that will have on.
Any specific segment going forward, particularly memory, but we still expect the memory spending to increase in.
2021 in 2022, we.
We mentioned.
That automotive has been impacted which obviously has.
An impact for us or a negative impact on power.
Devices. So we've seen a little did slow down in some of the mature process technology areas.
Where customers are specifically focused.
On automotive, but other than that demand really continues to be strong and we attribute that not only to having a strong purion product line, but having that.
Large diverse customer base is positive and so we think that while there may be some fluctuations and downward fluctuations in some market segments. We think that there will be a positive impact in other market segments and we're hoping that.
That will provide somewhat of a buffer for us.
Moving moving forward, but demands in general continues to be strong.
That's really helpful and Mary I know you spend a lot of time just out meeting with customers I'm wondering if you could help us with any color just beyond the second quarter as it relates to the years plenty already any sense from those customer conversations.
So the environment is setting up per flattish linearity.
Potentially down given how strong things are in the first half.
Thanks for any insight.
Yes, it's really hard.
To tell what's going to happen moving forward I just mentioned some of the observations that we've had.
Based on some of the market.
Segments.
But you know any any further color at their customers are obviously, taking a hard look at whats going on.
Right now in terms of demand from their customers and that's the part we just don't know is what is the economic impact going to be on their business and then how that will.
Run down or impact our business. So we continue to watch that but.
As I said right now things continue to be quite strong in our sales teams are monitoring that on a daily basis and feeding that into us So I.
I think we have a pretty good handle right now on.
You know the demands for Q2 as Kevin said that there obviously is a lot of uncertainty around some of the other factors that are are going into that is as he explained so Craig it's really hard to look much further out than that at this point make any predictions.
Understandable congratulations on the performance sorry, thank you.
Thanks.
Your next question.
Well with Craig Hallum capital.
Hey, good morning, guys great quarter.
Just a little bit clarity more clarity on.
On the cautious just to give exact guidance on the topline for for Q2.
When you're looking at the supply chain is you know issues is is it is a concern you know more movement.
Restrictions or is it.
Actually you know fears over getting certain components.
Or in addition, though is there any.
Cautiousness that you could is the quarter goes on to see customer push outs.
The extremely strong backlog that you currently have been place if theres any color you could provide their that'd be great.
Yes so.
Chris and right now it is.
It's all around the supplied stand from a demand point of view.
I'm not worried about the the customer.
Thank you to a matter of fact is.
Discover more customers alike to pull things and then puts out at this point.
It really is.
Keeping track of supply chains is very global I mean, we've had we've had amanda.
From factors that might have discrete outbreak of the virus or how to have temporary shutdowns.
We've got things coming out of Mexico were factors still can't have more 50 people per shift.
Thanks, I tables for example.
We've dealt with shutdowns that were in California. So.
The caution really around the daily changing environment with supply chain and again it's.
We can certainly look at our suppliers right now I know, where there is state regulations that maybe some people down or shutting down but it's it's best gets back. The discrete operates for example, and all the Sun you've got a critical supplier who's not delivering.
So that's that's probably the most color and get it right now so that's why we're we're being a little bit cautious because we are on a daily basis, we're dealing with them. We have a fairly large supply chain has a lot of.
Components to the Army's Implanters and.
The only takes a couple of that can stop yet.
Great. That's fabulous color and then it'll merrier, Doug you know as you guys are.
Or maybe you talked about your expectations for.
An improvement memory spending environment in 2020 and for that to continue into growth and 21.
Can you give us some color in your guys just thought even though the impact of growing capital intensity.
No at each step no change in NAND and DRAM.
Is that.
The predominant reasoning for that or do you. Finally believe will begin to see due to ongoing memory demand.
The beginnings of.
Capacity true true capacity additions versus technology node transitions impacting spending any clarity on your guys as long term decisions on that would be fabulous.
Okay.
So I think.
As we said in the in the call the.
Last year memory under invested.
So there's a fair amount of activity, especially on the technology side right now.
And a little bit on capacity.
So we would expect 2020.
Continues in that manner 2021 is really still the point, where we'll start to see capacity big capacity increases, which hasn't really changed.
On the Grand scheme of things throughout the.
Look over 19 crisis.
So we're seeing a lot of interest and there's a lot of activity relative to the more difficult implants steps.
And theres lot of interest in the Dragon product.
In those steps.
There is more high energy activity.
Some of those some of the NAND steps and so forth. So.
So I think it's probably a little more driven by technology at this point.
Christian where we have some capacity and keep in mind as people add layer counts it doesn't directly impact.
In plant.
In the sense, if there's more implants required for the next layer count, but it does affect the capacity balance within the factory, which usually does mean, they do need to rebalance and add some implant steps, but some implant.
Implanters. So it's a combination for 2020 and 2021 is I think where we're going to really see the step up in capacity adds.
Great and then my last question.
Congratulations on a bunch of the email tools out there.
Should we be watching email tools in particular.
Potentially the Dragon.
As kind of a leading indicator.
Well this year for.
Market share gains in 21.
Yeah, I mean weeks.
So.
It does go ahead of time.
[laughter] bubble I guess, what else can say Christian was.
That's the new tools or are very important.
Indicators on for the model growth.
The.
I think one of the things we talked about at the Investor Day was how those the current products some of the products like the VX fee and some of the power devices are very critical towards the 550 model and that the newer ones Dragon actually Max Purion H 200, we'll have we'll have some influence over the five shift.
The model, but are very important for the 650 model. So so I think you should be looking at the emails for the new products.
As having much more.
Impact on the longer term models and on the near term. The current product set is are the May drive main drivers for the 550 model.
Okay, Alright, thats very helpful. Thank you.
Your next question comes from Tom Diffely with D.A. Davidson.
Yes. Good morning, So first I guess a clarification for Kevin.
It sounds like if revenues are flat quarter over quarter.
I think margin gross margins will be up a little bit even though there are some extra costs coming from the Corona.
The extra costs from the current affairs.
Yes, yes, Tom based on.
The cost of activity that were.
Currently doesn't play and.
The Q2 minutes, which does not have reval, but Q1 that.
That will continue to see margin expansion.
Throughout the year.
We're gonna have to continue to give a better quarter by quarter that hit the greater than 40% portfolio, which.
We expect this point, we're going to do and.
Now at this point I have the impact.
As I know baked into.
Those gross margin assumptions.
And I.
Yes.
In Q2, Q3 is where at this point I see the majority of the.
The impact on the business based on based on what I know to.
Okay. That's very helpful. And then when we look at the new products specifically here. The Dragon. So obviously very nice to see a follow on order in the shipment of that.
How do you see that rolling out does it stay with demand market for Awhile and then ultimately you get to look from the DRAM or the logic market or.
Looking at for all three end markets little color there would be great.
Okay.
So.
The initial customer has looked at it for both and started just based on their their demand and their technology needs started on those on the NAND side.
There is there still strong interest on the DRAM side and just.
We'll see that rollout and there is really strong interest in the larger advanced logic side in the product as well so I think Tom the.
We can't go into the specifics for each of the customers but.
The sales team and marketing team and and the customers.
They have a strategy for.
Sort of the combination of Purion, H and and Dragon for each of the applications.
And what fits for the different recipe needs through each of the technologies. So so I think you should expect to see.
Dragon.
It's starting with NAND.
When surprise, we just see DRAM activity over the course of this year and certainly into next year.
As well, okay. So it's not a situation where technology advantages on the dragon are more evident or more towards the end versus DRAM based on the structure.
Yes, no it's absolutely.
Specific demand so all of those all three of the advanced technologies, whether its logic DRAM or NAND.
Hello, similar structural.
Things and uniformity requirements.
Dragon is is better than the existing products on the market.
Great. Okay, and then finally, when you look at that penetration into the Japanese market, how bigger market is that for.
Yeah.
We think that Japan.
Finally.
Oh.
Go ahead.
All right, but we we actually think that.
Japan represents about 15% of the overall on 1 billion ion implant Tam so about $150 million.
We have not sold there for.
Number of years.
Just recently broke back in and sold some legacy systems, but we're very excited because we did just receiver for steel for a purion product. It was a purion XE for a power device.
Application from Japanese customer. So we believe now that we have many opportunities to expand into other customers in other markets segments. We are working very closely with the large.
Japanese customers, we're continuing to collaborate with screen and we have equipment in their lab, but one of the things that we've learned over the last two years.
From working with screen is the customers actually want to buy directly from Axcelis because of.
The highly.
Technical sales process associated with an ion implanter. So we have on over the last few years been building a Japanese organization and we're continuing to staff our own Axcelis direct team and in fact, we recently hired a new Japanese country manager. So it's a lot.
Opportunity and we're planning to aggressively go after it.
Okay, great. Thank you so.
Tom Tom Let me if I can add just one more thing.
This is another one where the Japanese market.
If something there we think is important on the 650 model.
Have lesser impact on the March to the 550 model and so so it's something.
Spect will will be patient where that will take some time.
Okay. Thanks.
Your next question comes from David duly.
[music].
I got thanks, most my questions have been answered, but I still have a few.
Okay first question is.
Spring from the orders.
Book to Bill.
Orders were up substantially in your book to Bill I guess was 1.3, but you kind of implied that your revenues if everything shakes out as you expect would be flat.
Could you just talk about.
Why you would expect plot that surge in orders.
Well, we're looking at looking at.
At this point, what we believe we can deliver on terms of.
And again.
What kind of gets and are really is we don't know from day to day, what could happen with.
Supply chain disruptions.
So we we feel at this point, it's you know the tip assembled but again as you know to say today things that could be interested.
We have a pretty strong backlog coming out of the quarter, two or I mean.
Yes backlog I think it's 127 million.
So we know the speed things up building up a little but that's just just where we there's going to be at this point Thunder.
So this quarter, you're going to ship a lot more out of the backlog route book and ship during the quarter I guess is one of which.
We still I mean, if there's a lot of quoting activity. So we doesn't mean that Q2 can't be another strong bookings quarter.
Quotation activity remains strong at this point.
I think the reality is that.
The good news so far that we haven't seen.
At least leased hotels has seen a falloff and customer demand for products.
And based on the Q1 numbers bookings and backlog and based on the quotation activity, we're still seeing.
We're.
We're expecting that to continue at this point.
Okay. So it's fair to say that.
You can straight you got one revenue our supply side, driven rather than demand from the customers at this point.
Yes, so the kids in the us yes.
Okay.
And Dave Dave if I could just add on that with when you get into the segmented markets.
Some of the specialty markets and so forth and the mature process technologies.
Those those guys do.
Planned out.
A little bit longer.
In terms of Peos and so forth. So so some bookings are not necessarily in the same quarter when when.
In these in some of these markets versus the memory, which is tends to be much more book and ship.
Very close together.
Okay.
As far as.
Chinese revenue goes.
Great kind of went into a pandemic first and then I guess they were what are the first.
Do you got presence to come out and I realize you have lot of exposure to China, but are you seeing.
Hi, guys activity improved substantially as their economy improves and do you think that that can be as a good guide for what we might expect when youre some European.
Same point the curve.
So Dave I don't actually think we saw a significant change in demand from China even during.
You know the first quarter, while they were going through.
Hi, good the pandemic they did a pretty good job keeping things going I would say for the most part the fab.
Continued to run.
We continued to service the equipment in those Fabs, we install new equipment in those fabs im not going to say that goes with that challenges and I want to thank our employees for actually on making that happen, but we didn't really see any significant slowdown in China.
Moving into Q2, it's pretty much business as usual there hasn't been any significant change in to the most part and the way that they have been.
Laying out their products and if anything.
I would I would say maybe things has accelerated a little bit they're asking for pull ins, but I'm not sure. If that's any acceleration in projects as much as it is.
You know what Kevin mentioned earlier, some customers are a little bit nervous about supply chain issues and so.
They continue to work with us in contact us to make sure that we are able to ship their products on time and they're happy to take.
In some cases take them them earlier, if if we can get get the shipments out earlier.
Okay final question for me is.
The evaluation systems that were placed during the March quarter I much I guess three you got follow on orders for one of those evolves.
We expect follow on order from the other two evaluation systems in the current quarter or when would we expect follow ons for those other evolves.
So all of those even elsewhere memory emails that they are and applications. We've been working with the customer on for a long time, but I think.
Given some of the things that are going on and the timing of the investment plans of those customers I don't think it's something that we necessarily going to see in the short term, meaning you know the next quarter, maybe even two quarters.
It's just simply a function of planning and when those customers are going to make an investment and and im not sure any of those things have changed significantly as a result of what's going on right now with the pandemic I think it's something that we knew in advance are heavily on for awhile.
Great. Thanks for answering my questions.
Yes.
And again, ladies and gentlemen, if you wish to ask a question. Please press star followed by one of your personal telephone.
A question has been answered or you wish to withdraw your question first capacity.
Your next question comes from Mark Miller with the benchmark company.
Thank you for the question I'm glad everyone stay in helping Axcelis.
Thanks Mark.
In terms the email tools.
Well tools in Japan currently.
No. We don't have any email E mail tools in Japan currently the tool that we're shipping is not going to be an easy now we have we won outstanding evaluation right now that is being used by an image sensor customer that we are forecasting will close.
Lows within this year, but as Kevin mentioned.
No and Doug mentioned, we have a lot of new products right now that we're working with customers on to seed the market and we will have.
Additionally, downs going out throughout the year exact a significant number these ongoing out which again as Kevin mentioned is one of the things driving our operating expenses for the year, but it's it's a great investment is it too fast for us to make for the future for the 550 and 650 model.
I believe you said you mentioned you weren't really seen any major impact in terms of component supply for your corporate because of ours was that correct.
Now so.
Well I guess the ethanol so we're working around issues on a daily basis Mark but.
At this point, we've been able to resolve.
Most of the issue the pad.
You know some of them then.
Taking longer than others, it's definitely impacted the palmetto into the factor in terms of South Dakota, but.
There's been nothing to date that does put us down hard we've been able to so far work around things.
As I mentioned, probably the biggest impact as the unknown at this point no what I know, but I don't know what I don't know and there are we have had to deal with.
With some actually some of smaller suppliers that are worth is free offerings and our factories going ahead, the shutdown for paradigm. So.
Thats kind of what we're navigating around I think in terms of.
You know what the government do around the world of as garden since we haven't been handle on.
The capacity of our suppliers, we know whether us though restrictions you know limitations on working word so.
Again this is more about what could change on a daily basis and.
Yes discrete components.
Now that.
We bought a lot of parts, but because there's millions of parts that go into the partly by itself.
It's hard to even know what could happen any discrete components capacitor transistor or whatever so.
Anyway, where we're working around.
What we know this point mark.
You benefited from lower corporate tax rate in the March quarter is that we'll go back to more normal corporate tax rate in the rest of quarters or this year.
Okay.
Yes, I mean, I'm not sure where that for many years, we're going to I.
I think we've always corporate is 21.2% this still could be different pickups in how we have R&D tax credit for example that we're still working through.
It will probably come up from where it wasn't until one.
What was the result was so low was it.
Detached critics phasing them.
Yes, there is various credits that we have done through that we face them.
Thank you.
Yep.
Your next question comes from Craig Ellis with B. Riley.
Yes, thanks for taking the follow up to please the first to marry from the detection that we're hearing around China It seems that.
China has potential to stay more in the mid to high Thirtys, then drift back towards what historically been about 30% of sales just set up their view of what.
The team is seeing over the next quarter so.
Craig I know I'm not going to give you any guidance on China.
I will say that we do expect it to.
Continue to contribute a large portion of our revenues moving out through the rest of the here.
Okay and then the follow up question, it's more strategic and it goes back to analyst stay at analyst day about one of the more interesting.
Slides relative to the 550, and 650 models, where the market segmentation work the team had done across summer mature process technology membrane advanced logic and.
30 to 40 implant recipes that.
The company's ses across those as incremental opportunities for new product and custom product as we move through this year and exit 2020, Mary where will we be in terms of progress.
Placing product into those 30 to 40 incremental recipes and what should we expect the team could do in 2021.
Doug will take that.
Sure so.
So Craig the actually Max.
As a key product in the image sensor space that we're going after several recipes.
So we should.
We would expect and hope that we'll see evaluation systems for that over that time period that you're discussing.
Purion Dragon certainly.
As a lot of interest on has the first Steve L. closed and.
First follow on for NAND.
Order.
As I mentioned before and one of the other questions. We would expect additional activity in and then in the DRAM.
And hopefully into logic over over the cycle and and then the Purion H is a proven age 200 excuse me.
Is targeted first and foremost at the power device markets and so there's a lot of interest there because it's a much more productive tool for those applications.
Which is peter customers and reducing the overall cost of their devices. So.
So I think we should over this next couple of years that you described.
See many applications and many new evaluates of especially those three systems.
That's great. Thanks, Tim.
Thanks, Rick.
Thank you.
Thank you.
This concludes the Q and a portion of the call I'll now turn the call.
Closing remark.
Thank you Julie I'd like to thank everyone for listening to our call and we hope you can join us virtually for several conferences. This spring we will be participating in the Craig Hallum, 17th annual institutional Investor Conference on May 27.
The Cowen 2020 technology media and Telecom conference on May 29.
Stifel 2020 processor insight conference on June eight we will also be participating in virtual non deal road shows with D.A. Davidson and B. Riley during the quarter.
We thank you for your continued support and we stay healthy.
This concludes the presentation. Thank you for your participation in today's conference you may now disconnect.
[music].
[music].
[music].
[music].