Q3 2020 Axcelis Technologies Inc Earnings Call
[music].
Good day, ladies and gentlemen, and welcome to the Axcelis technologies call to discuss the company's results for the third quarter 2020. My name is Catherine and I'll be your coordinator for today at.
At this time all participants are in a listen only mode, we'll be facilitating a question and answer session towards the end of this conference.
If any if at any time during the call you require assistance. Please press star followed by the zero and a coordinator will be happy to assist you.
I would now like to turn the presentation over to your host for today's call Mary Puma, President and CEO of Axcelis technologies. Please go ahead ma'am.
Thank you Catherine with me today is 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 and other results are forward looking statements under the FCC 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 and other 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 statements.
Good morning, and thank you for joining US 2020 has certainly proven to be an unusual year. Despite.
Despite this axcelis has maintained a focus on driving purion growth in key markets, while addressing the many twists and turns the year has brought.
Let's start with our top priority, which is the health of our employees operating in the COVID-19 environment through.
Through the implementation of recommended safety protocols, we continue to run our Beverly facility at full manufacturing and lab capacity with all other employees working from home our field teams around the world our operating according to their local guidelines and are working closely with our customers to ensure that we are able to.
Satisfy their requirements in a safe manner.
I would like to personally thank our extraordinary employees 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 third quarter financial performance met or exceeded guidance and consensus.
Revenue for the third quarter was $110.4 million with earnings per share of 32 cents gross margins of 43.6% and a cash balance of $212.7 million at quarter end.
Our aftermarket business or what we refer to as CFO benign once again contributed significantly to our revenue and gross margin.
The mature process technology markets continued to be an area of strength for Axcelis, which has been critical during this longer than expected memory slowdown. This.
This is especially highlighted in the third quarter were 100% of our systems shipments went to mature foundry logic customers.
China has also been a strong market for Axcelis this year with the strength continuing through the third quarter.
The geographic mix of our systems shipments in the third quarter was China, 66% Korea, 20%, Japan, 8% in Europe, 6%.
This mix highlights the strength of the mature foundry logic market in both China and Korea.
We expect there will be some memory shipments in Q4, although the quarter will be heavily weighted toward mature foundry logic, China will also continue to account for a significant percentage of our fourth quarter shipments.
During the third quarter, the U.S. government imposed new restrictions on sales of certain semiconductor equipment and materials to the Chinese foundry customer SM I see.
Semi see is an important axcelis customer, especially in the mature process technology market.
We have thoroughly assess the new restrictions tools and parts that are affected will require a license to ship in the future. After careful examination of our systems and the mature applications. They are used for we currently expect that we will receive licenses as needed for SMTC shipments.
Now turning to guidance for the fourth quarter, we expect revenue of approximately $110 million gross margins of approximately 41%.
Operating profit of approximately $10 million and earnings per share of approximately 21 cents.
Using Q4 guidance Axcelis revenues will be up 35% year over year. This.
This is strong performance given that memory is expected to account for less than 35% of total revenues in 2020.
When memory spending does strengthened axcelis will be well positioned to achieve our 550 and $650 million target models over the next several years.
Continued growth of Purion products is the key to achieving our long term business model.
During the third quarter, we shipped three new Purion high current product evaluations.
We shipped the first Purion 202, leading power device company.
The power device market is a critical market for Axcelis and the Purion H 200 is expected to play a key role in increasing our customer base and market share in this segment.
The other two evaluations are for Purion H systems, the first ship to a leading advanced logic customer. The advanced logic market segment is a key focus for our $650 million model. The second Purion H ship to a NAND customer that currently uses the Purion XE excel.
Expanding our purion footprint at existing customers is a critical element of our long term strategies for both the 550 and $650 million models.
At the end of Q3, we had six evaluation systems in the field.
These evaluations represent the acceptance of our new products penetration into new market segments and expansion of our product footprint within an existing customer.
This includes the Purion VXE XE and Purion XE Max both focused on image sensors.
Purion H 200 for power devices, a purion dragon for DRAM applications, a purion H for advanced logic, and the second Purion H for NAND application, we expect to ship additional evaluation units over the next year as we continue to work closely with customers on further purion.
Adoption.
Before Kevin reviews, the financials I would like to summarize four key takeaways.
First the mature process technology market is very strong and growing and Axcelis is the ion implant market leader in this segment SEC.
Second China will continue to be an important market for Axcelis and we are currently and we currently expect that we will receive licenses as needed for SMTC shipments.
Third memory is expected to recover in 2021 and will be additive to our strong mature process technology and Chinese business.
And fourth the Purion product family is extremely well positioned to support this future growth.
Now I'd like to turn it over to Kevin to discuss our financials and some operational detail Kevin.
Thank you Mary and good morning.
Axles delivered solid third quarter performance. Thanks to the continued outstanding work around employees and supply chain partners.
Strong gross margin performance was in line revenue drove earnings per share of wallet bulk company guidance and consensus estimates.
During this ongoing pandemic that health and well being of employers remains a top priority.
Doing our best to create a safe working environment for everyone that itself.
From employers required to work, our factory, where enforceability screen and physical business thing and required use of space Matt.
Everyone or can work from home is working from home and we'll continue to do so for now.
Bill based danza continues to support our customers will fall in customer and country specific protocol.
Total installations have been successfully completed by self employed.
Third party support greater virtual salute.
We remain focused on our 550 $650 million revenue model.
And then still invest in product sales channels required to achieve this target model.
Additionally, we have been investing in manufacturing capabilities with new technologies and capital expenses aimed at improving productivity and capacity.
I will now turn for the third quarter results.
Q3 revenues finished at $107.1 million.
The $123 million so.
Q3 system sales of $70.2 million.
Hard to $76.8 million.
In Q2.
Q Threec ethanol revenue finished at $40.2 million compared to 46.2 million in Q2.
Shipments of spare parts and consumables remained strong in the quarter.
Driven by fab utilization and customers like remained standing at higher levels frozen side.
Q3 sales to our top 10 customers accounted for 76% of total sales compared to 83.6% Q2.
Great customers grew at 10% or above.
Q3 system bookings of $26.4 million.
Theres a $56.2 million.
Sorry, Q3 book to Bill ratio 0.37 versus <unk> 0.73 in Q2.
Backlog in Q3, including deferred revenues finished at $45.1 million.
Compared to $102.6 million.
Bookings and backlog can fluctuate quite a bit quarter to quarter.
The specific order and practices with some customers booking and billing was in the same quarter.
Q4 bookings to date already exceeded the entire third quarter.
Q3, combined STN and R&D spending was $34.3 million for 31% of revenue.
Compared to 35.5 million or 28.9%.
Thats DNA in the quarter was $19.4 million from R&D at 14.9 months.
We expect Q4 operating expenses to be approximately $36 million.
To support numerous evaluations systems.
Additional costs associated with the pandemic.
Q3, gross margin was 43.6% compared to 42.2% in Q2.
Q3 gross margin was driven by strong sales contribution.
Product mix and ongoing cross sell efforts.
Q4, gross margins are expected to be approximately 41%.
For full year gross margin awful rough quarter losses.
Gross margins can fluctuate quarter to quarter based on a level, yes my contribution.
Customer and product mix.
Well as you know the evaluation units.
Through ongoing cost out efforts and planned higher sales at our Purion product extensions.
We expect gross margin to improve over time.
Other than our 550 $650 million target model.
Operating profit in Q3 finished at $13.9 million compared to 16.4 million.
Yes were net income of $10.8 million or 32 cents per share well above consensus.
The $13.3 million or 39 cents per share in Q2.
We are forecasting Sam dynamic related expense of approximately 1.8 million Q4 credit Cross CNO.
Inventory ended at $109.7 million.
Theres a $149.2 million in Q2.
Due to the timing of shipments and additional inventory to support evaluation tools.
Q3 inventory turns excluding eval tools finished at 1.8 compared to 2.1.
Q3 accounts payable were $24.3 million.
Fair to $30.3 million in Q2.
Q3 receivables were $45.2 million compared to $64.9 million in Houston.
Q3, cash finished at $217.7 million compared to $197 million.
Cash from operations in the quarter $19.1 million.
Our stock repurchase program remains on hold as we continue to maintain a conservative cash strategies.
We will be revisiting this with Axcelis forward in Q4 and expect to develop plans to return capital to our investors moving forward.
We are finished in 2020 with strong momentum and are excited about the prospect of a 20.1 recovery in the memory and automotive markets.
We're continuing to make the necessary investments in our products and infrastructure needed for our 550.
Some of $50 million target model.
Customers continue to have high expectations for Purion products.
We intend to achieve.
Thank you and I'll now turn the call back to Mary for closing some.
Thank you Kevin we are pleased with our third quarter financial performance as well as our expected performance in 2020 overall, we are excited by recent and upcoming evaluation shipments of both new Purion product extensions and enhance purion based products that will keep axcelis on track.
To achieve our target business model.
Axcelis has a competitive purion product line, a broad and diverse customer base, a strong balance sheet and a dedicated team of employees. These are the strengths that will continue to drive our growth ultimately to the market leadership position in ion implantation with that I'd like to open it up for questions.
Kathryn.
Ladies and gentlemen, if you wish to ask a question. Please press the star followed by the one on your Touchtone telephone. If your question has been answered or you wish to withdraw your question press the pound key again Thats star one.
And our first question comes from Patrick Ho with Stifel. Your line is open.
Thank you very much welcome nice quarter Marin admitted first of all in terms of the mature technology note can you give a little more color of the type devices.
Yes, the log rank in during the third quarter and whether you see any changes in the quarter income is that core market.
That said.
So as.
As we said the mature process technology market is very strong and it's growing and we see a lot of strength in particular in the image sensor and just general mature foundry.
Business, we see automotive recovering and that's going to be a positive for the power device market.
We said that you know well memory really hasn't hasn't recovered yet. So you know in Q3, we had we had no system shipments to the memory segment, but we do expect memory to come back a bit in Q4. So.
That will change the segment mix a bit but in general the mature process technology segment is going to be our strongest segment in the fourth quarter and China Act.
Actually for US is is quite strong as you know we had 66% of shipments in Q3. It will continue to be strong in Q4 EPS.
And I would say the majority of the business that we get from China is in the mature process technology segment. So we'll see we'll continue to see business come from that segment as well from that region as well.
Hey, Patrick is locked up yet.
Just to add a little bit to that so the mature foundries are running at very high utilization rates and so in addition to the strength in image sensors.
As Mary mentioned the power device market is starting to come back as automotive recovers.
A lot of the strength is is in material products related to you know just all the glue logic all the little little parts that go into making gaming systems in Tvs and monitors and all that stuff that has benefited actually from the work from home environment. So that that's a little bit of a boo.
As to the mature markets.
Great Thats helpful, maybe and Kevin as my follow up question all right in terms of gross margin you mentioned, how you don't.
Yes, Hi, Nick.
As well as the cost out efforts as we look at Q4.
Given the value evaluation units you talked about is that kind of the biggest impact on a quarter to quarter basis in terms of the variables are that.
Effect.
The December quarter gross margins.
Yeah, sorry, you point out Patrick CS and I, we've always kind of said that that's accretive so whenever we have a big mix of beer Tonight that that certainly help within the products themselves.
We have that page in the Investor presentation. It does show the roles of Purion products with the high energy being wrong.
The highest gross margins in the morning.
In high current and medium current kind of lag that so.
If there is a product mix shift in there with more high energy versus high current or more C as an eye versus systems.
Those all will move that evaluation tools as you point out I mean.
It was are typically margin drag so in given quarters, one when you felt hits it does move our margin.
No even though this year were.
Going to be full year average of 41% is what I said.
As you remember, we got off to a pop star Q1, we were in the 38% range because we had.
Several evils converted over.
So going forward as they evaluate them and they certainly can impact a quarter, but.
Trending what the rest of the Mexico, and sometimes you can help alleviate some of that if you have a perfect perfect storm and you've got a lot of high current.
With lower margins than a lot of you about them Mike is that that's the perfect storm, but I think the endpoints. The core plans that we are continuing to drive costs out we've got our target models out there for 550 650, and we have we have detailed roadmaps in place that we've been executing two as they move forward towards those models.
Great. Thank you very much.
Thanks factor thank you.
Thank you. Our next question comes from Craig Ellis with B. Riley Your line is open.
Thank you for taking the questions and congratulations on the good financial and strategic execution in the quarter. So.
Mary I wanted to start off just by following up on some of your CS nice commentary so.
The third quarter was the second consecutive quarter, where we saw revenues above $40 million.
Do you believe that the segment is re resetting structurally higher into the into the low fortys or are we just seeing something that's more temporal in the near term with sales as we would think about calendar 2001 potential likely to go back to about that mid thirtys range well.
We're not going to give a pass for 2021 at this point in time, but.
We have been saying in the past that see us Eni our service businesses has runs around 30% of our revenues.
Recently, it's been running around 40% of our revenues and you know based on what we know today you know that that's a pretty good percentage basically it you know it it goes back to what Doug just said right now there is a high level of SAB utilization at the foundries, particularly.
In China, and we're also seeing customers in China maintain high minimum stock levels, given what's going on with the pandemic and some of the geopolitical risk.
That we've all been talking about recently, so right now I think the 40% range is a is a good place to be but again, we'll just have to wait and see what 2021 brings and again.
Again, we're not going to give a forecast for that at this point.
Okay. That's helpful and certainly on the mature foundry side, we've seen absolutely abundant signs that.
Calendar Utilizations are very high and IDN, that's moving up going.
Going back to the China points.
Very helpful color on where you stand with stop lights and submissions for SMIC.
Smith, but can you just help us understand what the next steps are.
When do you expect to receive licenses and and Kevin.
How do we think about the way you manage.
Inventory and other issues. So that once received you can actually shipped product on on a timeline that data that you would like.
So you know we talk so the restrictions just came out recently it was just the end of <unk>.
September and as a business Weve worked very very hard to understand exactly what that means for us. We've worked very carefully you know with legal counsel our outside trade attorneys with semi our industry group to just kind of keep abreast of the situation and and help us.
Work our way through it so as I said you know.
We've we've thoroughly assessed the new restrictions.
We have identified that there are axcelis tools and parts that will require a license to shift in the future.
We're going through all the steps that are required.
Fourth to meet the U.S. government guidelines.
Weve and so at this point in time as I said, we have confidence that we are going to be granted the the required licenses. So it's all it's all in in process at this point, Craig there's really nothing more specific to give other than to say that.
Yes from an inventory is nonetheless.
I'll hit on an important point, Craig we're going through or are driving ahead.
He said we're confident at this point that these licenses will be granted.
And again, we did a pretty thorough review on the technology, our tools are being used on to which.
It gives us a little bit more copper too.
In terms of you know our assumption so.
We're we're moving forward inventory, whether it be for systems build for that or.
Let's see us an eye and within our guidance. We've got we've got everything factored in right now where we think we're going to end up in Q4 with with any potential impact of placements.
Nothing.
Got it and then housekeeping Kevin.
Can you identify how many evaluation tools you've incorporated into the fourth quarter Guide and then for Opex, Yes, sorry helpful.
Correct, Yes. So we currently have about evaluation tools in the field I think.
It's it's probably double what we had at any point in time, if not double pretty close to double I mean, typically we have.
One two maybe three tools out there about six right now.
And there are additional developed tools plan the gloss. So there's a lot of activity right now going on with the newer product extensions a lot of interest in the product so.
And you know as we've talked about this is one of the things going forward that is.
He is going to help with the margins too.
More customers.
Moving over to some of the product extensions or the Dragon type tools. So does.
Yes.
Thanks.
Well known out there right now.
It's likely to grow.
Hi, first problems that for you.
Craig just to add some color.
It kind of do the math on it there are two.
Two evaluations going on in memory ones, appearing on Dragon for DRAM one's a purion H for NAND, we've got three in the mature process technology area.
One is a purion H 200 for power devices and then there are two high energy tools for image sensors, and then Theres one purion H for advanced logic. So that's.
That's kind of the mix by segment and then for them our high current and two of them are high energy. So it's actually really a nice mix across.
You know all the segments that we play in and for the tools that were really trying to see the marketing I mean, having four high current evaluations out there is very important because as we've talked about high current is the largest.
Segment in implant and that's an area, where we think we can drive some significant growth. So it is very good and as Kevin said weeks, we expect to put more out in the field to help us drive towards our Fyfifteen 650 models.
Indeed.
And if I could lastly on housekeeping, Kevin I'd expect that beyond the fourth quarter for Opex, we would see some FICA and fringe costs in the first quarter anything else that we should be aware of as we look beyond Fourq you know.
No I think you know.
I think I've said it before that this.
$36 million ranges in the range or less than for a while especially as we have this number evolves going out.
And now we've got the models out there on 556 decades at that point the percent of revenue.
25%, plus 50 mile down 24% six ft model so right.
By now you know we've got we've got that.
We've been running a little pandemic expenses through as I said, it's cut across the P. in Alberta hitting everywhere. So you know.
Thanks, This $36 million range, we're here for a while at this point.
Got it thanks everybody.
Okay. Thanks, Greg.
Thank you. Our next question comes from Christian Schwab with Craig Hallum. Your line is open.
Hey, great congratulations on the good execution in the quarter.
It was between conference calls so I apologize if it's been addressed already but you know after a prolonged memory slowdown that we kind of highlighted at the beginning of the call Mary how do you see the memory market recovery as we go through 2021.
Okay. So you know like others in the industry, we did see an increase in memory in the first half.
2020, and at the beginning of the year, we actually said that memory could account for about 35% of our systems revenues in 2020, and it's likely to come in slightly shy of that we'd add no memory shipments.
In a in the third quarter, we do expect some in the fourth quarter.
But we extend expect memory spending to come back in.
2021, and that's kind of where we are right now where we're continuing to watch it and talk to our customers and assess the situation.
In in when you're talking to your customers or are you looking for.
Potential recovery and more DRAM over over NAND or.
50, 50 mix or how does it look.
To you today as we we've we've come to the end of 2012.
Hi, Christian it's Doug the.
The mids remember for us it's all about wafer starts we don't.
Participate significantly in NAND delair additions so for NAND, it's about it's about wafer start additions.
And DRAM, we get a little bit with the shrinkage, but more again on wafer starts. So it was this quarter clearly with zero shipments is is likely the bottom starts to pick up next quarter.
Then moves through the year.
It looks for US it's kind of split right now.
Between both DRAM and NAND and so little bit is going to depend on how the customers decide to ramp.
And of course, which customers are ramping first so I.
I think for both products.
DRAM is is pricing has been pretty flat.
And we're starting to see a lot of activity, there and they've been adding layers over the last several months several quarters actually and so there's probably a need to add some wafer starts soon there. So so I think we'll see both.
Okay, Great. That's the only question I had thank you.
Thanks.
Thank you. Our next question comes from Tom Diffely with D.A. Davidson Your line is open.
Yeah, good morning, and nice results away, but having no memory in the quarter, it's pretty good.
So Larry just following up on the the China situation have you been given any kind of indication how long it takes to get a license and have you the other equipment companies receive licenses.
You know I can't.
I guess the answer is we're just waiting and watching and talking to other in talking to our peers through through semi at this point in time I think everybody's just trying to look to learn what this what this all means so the answer is at this point, we really don't know what the what the timeline is but as I said.
Before we are we are.
We have confidence where we will be required we will be granted the required licenses.
Okay.
Is this impacting your initial view of the fourth quarter, though with some business.
Wait until you work through the process.
You know why again, if things move in and out of quarters I can't say that it had a significant impact.
On the fourth quarter, but again, we you know we had a lot of work to do it.
Not just for that from a system standpoint, but think about all the parts that we sell so the team has done a really nice job just digging through everything and pulling the pieces together. So at this point in time.
Q4 is what it is and we will continue to move on and we've applied for what we need to apply for and we'll see how the process plays out.
Okay, and then when you look up the evaluation tools in the field right now based on the feedback you're getting which of the programs are end markets. Do you think will be the first to get the volume manufacturing for the new tools.
I actually think that you know I think memory will especially the high energy tools will come to fruition, which is mostly in.
In image sensors, just because it's a very it's a very strong market and our customers have a lot of data on how our tools.
You know will perform there also.
Also.
Hi, I'm, sorry, I said memory mature process technology and image sensors I think the memory market will also.
When it ramps up when we see memory recover I think we will we will see some volume buys clearly from the high current tools that were putting in both the Purion H.
And the Dragon I think as you know putting a tool into advanced logic is a very long.
Long tedious process it's.
It's at least one year of evaluation and then our customer and qualification and then our customer has to work with.
Their customer or customers to get approval to actually put it into into production. So that's the one that will take I think a little bit longer to see any volume buys on and I think I actually mentioned in the script that that's more directly tied to our $650 million.
Idled and the 550, which would indicate you know it could be several years out before we start to see some volume tied to that.
Great and then finally any update on how the valuation in Japan is going with the older tool.
Well, it's not an older tool.
We do have much we do have legacy tools in Japan, and we've had those there for several years so.
Devaluation is actually for a brand new Purion xsix that went to a power device customer.
It's been installed and is under qualification right now and it's it's actually going quite well is that what you're referring to that is yes, sorry, all right yes.
Thanks for your time this morning, okay. Thanks.
Thank you and as a reminder, if you would like to ask a question press. The Star then the one key on your Touchtone telephone.
Our next question comes from David Duley with Steelhead Securities. Your line is open.
Thanks for taking my question. My first question is on the size of the market.
I know that's not a big focus for you guys, but if you could just review what the overall size of the implant market is and specifically really what the hike.
Hi, current portion of the market is now as a percentage of the overall market.
In may.
Maybe just help us with.
I think it's really important area for you to pick up market share in the two up market share goals. In this segment of the market or how should we think about your progress in penetrating this large piece of the import market.
So Dave.
Yes, Doug.
So the implant market. We've typically said is about a billion dollars in size kind of plus or minus 10%, depending on where we are in the cycle. Our view at this point is that it's probably growing.
To be on the top end of that and we'll probably be more like 1.1 billion.
And we'll oscillate a little bit depending on the cycle. The growth is is being caused by a couple of factors.
One on the high energy side.
Theres growth as a result of the.
The image sensor market, especially.
As well as to some degree the power device those those two segments are.
Especially image sensor or very implant intensive and very high energy implant intensive.
And their purchasing tools like the VX C and the Exi, Max which are much higher asps. So those are that's driving the Tam up from that perspective, and then the the high current side is also growing proportionately.
Thats growing as a result of more material modification.
Requirements and so.
As far as as far as the exact share goes we don't really track.
Specifically on share because it's hard to get that data from from everybody, but the.
Estimate is that high energy.
25% to 30% of the the Pam Hi, current is 50% to 55% and medium current makes up the rest.
In high energy space, we do have very high market share and especially high market share in key areas with products like the VX C. And we think we're very well positioned for growth and high current with with the Dragon product targeting some very specific.
Productivity applications in low energy ranges and load.
Hi, dose and then with the Purion H.
The newest version of the Purion H.
Now looking at advanced logic, as well as some new memory applications.
And again all of these are targeted at a more difficult.
Challenging implants for our customers.
And as far as the.
Cmos image sensor market goes.
Do you have an idea about how big of a section of the overall market that is.
And obviously, it's growing and there's three or four key customers around the world.
Maybe maybe comments on penetrating the Japanese customer your progress potentially getting into that customer.
Yeah. So so we don't comment on the exact size of the image sensor market because its very difficult a lot of image sensors are built in.
In stand.
Standard.
Sure foundries on standard mature logic process flows with some additional steps to do the image sensor piece. So it's difficult to really estimate that on and we don't break out the specifics relative to the high energy piece, which is more specific to the image sensor market.
So I can't really give you.
Exact implant.
In a market size for for that.
Image sensor market as a whole is growing quite substantially.
And then as far as.
The customer you're referring to.
With all of the image sensor customers were really targeting.
Utilizing the Vmc and then the Exi Max on the Exi Max brings a much higher energy levels, which are critical for the most advanced image sensors and maybe more importantly, the boost technology reduces the metals contamination issues.
Substantially which is an enabling capability for the advanced image sensors. So those will be the two things that.
Good.
Leading edge image sensor companies as a whole will be looking at.
Great. Thank you.
Thank you.
Our next question comes from Mark Miller with the Benchmark Company. Your line is open.
I just wanted to clarify a couple of things I missed the tool that you ship to power device was that a high energy tool Purion H.
No the power the power device evaluation on the tool was it was a it was a purion H 200 is it was a high current tool.
It's 200 and then maybe.
Okay, I was talking to one to show up.
There was a image sensor also ship what type of what was that.
Well the two image sensor shipments were high energy tools, there was an X C. Max and then Purion EXE C. Max in a purion DXP.
Okay.
Have you seen anything in terms of your competitor.
The technological approach to their tools.
Well our competitor our competitor is always making.
Movements, that's one of the one of the things that customers like about having a strongly competitive market with axcelis and our competitor is there were continuously both improving our products.
Capabilities of our products productivity level.
Levels.
And overall cost of ownership for them so.
The key for US is we we believe that period.
Peering Dragon is a tremendous leap forward in terms of high current technology.
And the Purion M.
Ex the VXP actually Max continued to.
Also be market leaders in technology.
But also in terms of their use in key growing markets like image sensor and power device.
Thank you.
Thanks.
Thank you. Our next question comes from Quinn Bolton with Needham Your line is open.
Hey, guys. Most of my questions have been asked but I just I guess someone wanted to come back to the gross margin revenue titled roughly flat sequentially, yet margins down 250 basis points Doesnt sound like the change in margin is really any kind of absorption issue. So is it is it really just product mix.
In systems I mean.
She is an i. revenue it sounds like it's roughly flat at about 40% of sales. So it just feels like it's got to be either or mix within the system shipments or.
Your expectations to recognize revenue on perhaps in lower margin L. tools, and so just trying to make sure that all the moving parts right.
Yes Quinn it's it's in Q4 is the next with the systems mix so as the.
You know the mix of basically the high current and high energy that's.
Impacting the Q4 number.
Got it okay. Thank you and then on the.
Q on each email unit going into new and I know you guys have very high share in a high energy applications for both NAND and DRAM I just wanted to make sure that this in each is sort of team experiences for you.
Customer rather than a purion H coming into replace where high.
Hi, Energy Willy High energy tool may have previously been used.
It is it.
It's actually a new customer.
For us and it's a it's a new customer and it's a new fab. So it is it is expansion for us.
Great. Okay. Thank you very much.
Thank you.
Thank you. This concludes the <unk> portion of the call I will now turn the call back over to Mary Puma, who will make a few closing remarks.
Thank you Catherine I'd like to thank you all for joining US today, we hope to talk with you virtually at several upcoming investor events.
We will be participating in the benchmark conference next week and in December.
The CEO summit, and D.A. Davidson Semicap laser and optical conference.
We also expect to conduct several virtual NDRC during the quarter as well we thank you for your continued support and please stay healthy.
This concludes the presentation. Thank you for your participation in today's conference you May now disconnect everyone have a great day.
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