Q1 2021 Axcelis Technologies Inc Earnings Call

Good day, ladies and gentlemen, and welcome to the ex Telus technologies call debt to discuss the company's results for the first quarter 2021 and my name is Chelsea and I'll be your coordinator for today.

At this time all participants are in a listen only mode.

We will be facilitating a question and answer session towards the end of this conference.

And at any time during the call you require assistance. Please press star followed by zero and and coordinator will be happy to assist you.

As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference.

Turn the presentation over to your host for today's call Mary Puma, President and CEO of ex Telus technologies. Please proceed ma'am.

Thank you Chelsea and with me today is Kevin Brewer Executive Vice President and CFO, and Doug Lawson Executive Vice President of corporate marketing and strategy. We are all participating in this call remotely so I would like to apologize in advance for any technical difficulties.

If you have not seen a copy of our press release issued last night. It is available on our website play.

Playback service will also be available on our website and 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 SEC 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 and 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 <unk> posted another strong quarter as a result of overall strength in the semiconductor market combined with the growing momentum of the Purion product line.

Revenue for the first quarter was 132 $8 million with earnings per share 48, and driven by strong gross margins of 42, 5%.

Our aftermarket business or what we referred to as C. S and I once again contributed significantly to our revenue and gross margin C. S and I revenue in Q1 was $51.8 million. This strong performance was a result of high fab utilization and growing purion install base.

And significant upgrades and used tool sales.

We couldn't have achieved these results without the strong support of our employees. They have continued to manage well through the many complexities brought on by China trade tensions and the continuing pandemic.

I'd like to thank them for their dedication through these difficult and challenging times.

In the first quarters of growing mature process technologies technology market continued to be and area of strength for excel and with 82% of Q1 shipments going to mature foundry logic customers.

Other 18% of shipments went to NAND memory customers.

Even with the expected increase and memory revenues later in the here and we believe the mature process technologies segment will account for greater than 70% of system revenue for the full year 2021.

During the fourth quarter of 2020 of the U S government placed Chinese foundry customer of customer S. M. I C. On the entity list, meaning that export licenses are required for all its Dallas U S shipments to SMIC.

We applied immediately for these licenses, but have found the approval process to be slower than anticipated.

Since no licenses were issued in the first quarter, we were not able to ship any systems and parts to SMIC.

Early in Q2, we were granted our first export licenses and began shipping approved systems and parts to SMIC.

Our guidance reflects our expectations relative to this process.

And the result of geographic mix of our systems shipments in the first quarter was Korea 44 per cent, China's 39% and Europe, 17%.

Although the percentage of China's shipments was down from last quarter, we have a strong domestic and multinational customer base in that country across multiple market segments business with domestic Chinese customers in the mature process technologies segment in particular remains quite strong.

For the second quarter, we expect revenue of between 135 and $140 million gross margins of approximately 41, 5% operating profit between 19 and $21 million and earnings per share of between 43 and 47 cents.

Hitting the midpoint of this Q2 revenue guidance will signify reaching the quarterly run rate of our $550 million model and fab.

That <unk> is on track to exceed $550 million in revenue for the full year 2021, achieving this goal a year ahead of schedule.

Given market trends and the strength of Purion based products and new product extensions, we have come to believe two things first that it's possible that we can also reach of our $650 million model sooner than expected, perhaps hitting a quarterly run rate before the end of 2020 two and second.

If there is an implant driven revenue model and beyond $650 million that <unk> can achieve.

These developments are very exciting and point to a potential path forward for stronger than expected growth.

Before turning the call over to Kevin I'd like to provide a short update on our product and key market segments.

The power device and image sensor markets are very important to astellas as we have said before we hold of leadership position in implants in both of these specialty markets.

And the second quarter, we shipped multiple purion VX six image sensor customers as well as Purion, H 200, and silicon carbide and Purion M Silicon carbide system.

Click and carbide power device customers.

With the shipment of the first Purion H 200, and Silicon carbide tool <unk> can now provide power device customers with a full suite of purion products to support all of their ion implant needs.

Evaluations are key to developing new customers, increasing footprint of existing customers and penetrating new segment.

We currently of six Purion evaluation tools in the field focused on supporting future growth.

During the first quarter, we closed the evaluation of of Purion EXE and shipped of Purion XE Max evaluation to a second customer for us and advanced image sensor development.

The six evaluation systems, which include of Purion Dragon, a purion H 202, Purion H's and two Purion XE Max's are positioned across key target segments, including advanced logic, NAND and DRAM image sensors and power devices.

We expect these systems to contribute to our future growth.

Kevin.

Thank you Mary and good morning.

The sales delivered strong first quarter fundings of performance.

The continuing outstanding work of all of our employees.

On supply chain partner.

So on this ongoing pandemic, the health and well.

All of our employees remains of top priorities.

One of our fastest create a safe work environment.

Every one of itself.

And Denmark related protocols and some of it.

2020 remain in place.

Our pandemic response team is closely monitoring and speculation and continues to update these actions as required.

We are excited about the acceleration and growth.

We believe it can take up to one of six one of $50 million.

We currently have sufficient manufacturing capacity and flu season.

Some of them.

But that's we are seeing growth more quickly than anticipated.

Decided to bring on additional manufacturing capacity.

Our operations team is focused on adding manufacturing capacity closer to some of our largest customers for the goal of increasing customer satisfaction.

Turning to the first quarter financial results.

Q1 revenue finished at 132 $8 million compared to $143 2 million and Q4.

Q1 system sales were $81 million compared.

Compared to 64 of five 2 million and Q4.

Do you want this and I of revenue finished at 51 8 million.

Compared to $58 million and Q4.

And the F&I revenue was driven by strong upgrade and used tool sales.

We expect Q2 EPS my revenue of approximately $40 million.

And recommend model and the second half of $42 million per quarter.

He wants Delta of Pops on customers of chronic with 79, 8% of our total sales.

Compared to 81, 5% and Q4.

One customer was above 10% and Q1.

Paired with Sweet and Q4.

Q1 system bookings were $148 $4 million.

And 131 5 million from Q4.

But of Q1 book to Bill ratio of 192.

One nine days from Q4.

Backlog in Q1 and put in deferred revenue.

And at $186 5 million.

A new record for itself.

Compared to a 116 $2 million and Q4.

They want combined SG&A and R&D spending of $36 $1 million of.

27 of 22% of revenue.

Compared to $38 9 million from 31.8 per cent of from Q4.

SG&A and a quarter was $24 million with R&D at 15 seven.

We expect Q2 spending to be similar to Q1 of them.

Approximately 27% of revenue.

Q1 on gross margin was 42, 5% and above our guidance.

And by strength and Keith and I.

Hi.

<unk> net income.

And while stop activity.

We our guidance Q2 gross margin of approximately 41, 5%.

Gross margin will continue to fluctuate quarter to quarter.

Based on product and customer on that.

The number of evaluation tools close on <unk>.

Level of revenue contributions from most of the F&I business.

We are continuing to experience some higher costs from.

Right and on pandemic related protocols.

Which I expect will linger throughout the year.

Operating profit in Q1 finished at $23 million compared with $14 1 million from Q4.

We are guiding Q2 operating profit of approximately $19 million to $21 million.

And one net income of $16 $5 million of 48 cents per share compared to $14 7 million of 43 per share and Q4.

For our guidance Q2, EPS of approximately 43 to 47 of them.

This guidance reflects any non impact from Corona virus and the export license stipulations.

Q1 cash finished at 207 5 million.

Compared to $204 $2 million and Q4.

And this quarter, we generated $15 $1 million of cash from operations.

And repurchase shares worth $12 5 million.

Q on receivables of $75 9 million.

Compared to $86 9 million and Q4.

Q1 inventory ended at $174 $4 million compared to $161 1 million from Q4.

And the quarter finished goods inventory increased due to the export license situation.

Q1 inventory turns as clothing and evaluation tools benefit to point of the same as Q4.

You want accounts payable of $45 million compared to $24 million and Q4.

And I'm excited about the ongoing strength of the industry and customer demand for its solid profit.

We have a strong balance sheet, which is available and the right level of business investments, while returning capital to our shareholders through the share repurchase program.

Additional manufacturing capacity is targeted at improving customer satisfaction.

Fortinet piece as well.

And I hope that all of you and your families are staying healthy during this pandemic book.

And with more people to come back from where we can find and get back to normal times.

Thank you and on and I'll turn the call back and Mary for closing comments.

Thank you Kevin we.

We are encouraged and excited by our future as we move into a post COVID-19 environment, the strong multiyear trends of the industry cycle and growth and the adoption of new technology that uses ever increasing chip content bode well for customer investment and capacity.

The use of implant to address challenging and emerging customer manufacturing requirements will likely expand the implant Tam and accelerate the adoption of our differentiated purion products and services across all segments.

Excel it has the financial means to invest in R&D global support infrastructure and capacity to capitalize on all of these opportunities.

The ingredients for continuing success are in place and will drive our leadership in ion implantation.

With that I'd like to open it up for questions.

Ladies and gentlemen, if you wish to ask a question. Please press star followed by one on your Touchtone telephone.

And if your question has been answered.

And if you wish to withdraw your question press the pound key place.

Please press star one to begin.

Your first question comes line of Patrick Ho with Stifel.

Alright. Thank you very much of anything directly on the ninth quarter actually of two questions for kind of the gross margin performed very well in the first quarter and it.

And there's always moving pieces with it but as we look out the next several quarters of some of the moving pieces you talked about valuation.

And our continued cost out program and even.

Even.

From a customer mix.

And the impact over the next few quarters.

What are the business is moving.

And we will impact gross margin one way or the other over the next few quarters.

Yeah. Thanks, Patrick Yeah. So I think you know and the beginning of the year, we thought gross margins would be some of it the last year.

If you look at where we are right now with our cost of our road map.

Probably ahead of where we thought it would it be on revenue as Mary said, we now expect to achieve or beat of 550 million revenue model. This year. So.

Cost out road and.

That's a lot of little bit father Budd.

Volumes and a half of <unk>.

And those that are kind of converting those of all of these blend and the plan. So.

I don't think it's.

And I was around to say that.

We're on track for a $550 million or above revenue model. This year, we got on gross margin targets on that.

Even though a little bit ahead of that fabric.

And certainly comments of low end of those.

Margin so.

At this point you know.

And a 42 per cent range, plus or minus a little bit I think that's what he has been a day so even with all of the moving pieces and again.

Everything accelerating and all of these designs and stuff, where we are continuing to make good gains. So I think what we started out very solid year of gross margin.

Great. That's helpful and my follow up what do you look at the of Kevin is on the supply chain and.

Inventories situated.

Given that there are some space and the ecosystem itself, you guys, who actually made it very well from an inventory.

And with respect to well again with a lot of moving parts of the eval system and.

And you just collectively of demand.

How are you mainly of the inventory levels and the ability to pursue of supply, but normally we would meet the needs of suggestions of valuation.

And to the field.

Yeah. So we've continued to have our planning and fulfill on materials and place of long lead material of a real quick is and make sure.

And the long lead and you know I think it was you would acknowledge we were a little flush with inventory right now.

Turns out of holding it too.

But we've been driving ahead of this thing it's really simple pandemic started because my philosophy all of it was if we get out of line, we're not gonna go and get back there.

So I think we're in and critical assets from a supply standpoint of view of there's obviously issues of pop up on a daily basis, but that's that's not new line everybody goes to that Theres no doubt that everybody is running hard right now it's not just of salvage doing well of peer group as well of is doing.

Remarkably well at this point, so there's pressure there, but I think that she is and stay out of the major drive inventories a little bit too and how many of that which of them do and then.

No.

It should be good to execute on the plans this year.

Great. Thank you very much.

Thank you.

Yes.

Your next question comes line of Craig Ellis with B Riley Securities.

Yeah. Thanks for taking the question and team congratulations not only on the quarterly execution, but on all of the strategic progress to the intermediate and long term growth. So Mary of wanted to start just with a question.

And for you on calendar 'twenty, one so nice to see the company, you're feeling confident about the 550 million target that implies a given and.

<unk> Q results and <unk> guidance at least of $140 million of quarter on average and the back half of the year. So the question is can you just share with us some of the visibility that you have and any thoughts on linearity that we might see as we go through the backdrop of here.

Thanks, Thanks, very much Craig.

So.

What we expect 2021 to be.

Eight year.

At this point, we see demand holding up and remaining strong across all market segments. We think this is a multiyear cycle and essentially that most of the markets are hitting on all cylinders and as you said the data point that we expect to exceed $5 50, this year and even hit our 650 million.

On a revenue run rate by 2022 means that we're continuing to show those seeds and built strong business even out for the future. So in terms of the segments.

The mature process technology market remains extremely strong for us their strength and Iot, which drives general mature.

Technology sense of devices, such as sensors, we've got image sensors, we've got power devices.

And those are quite strong and and even growing because of the recovery we're seeing in <unk>.

Automotive and memory is increasing and that is part of what is.

Driving our confidence throughout the remainder of the year.

But as I said, we expect the mature process technology segment to account for over 70% of our systems revenue in 2021, so that's going to be the major driver.

And of what we see going on although memory will be additive to that and as it recovers obviously it will be another strong.

Lever. So we think that the stars are all aligned in terms of the market segments and because.

Because of the strong product portfolio that we have both in terms of the Purion products base products plus the product.

Line extensions and the fact that we are seeding the market with eval, six and the field plus additional going out.

In the future, we feel real confident that things will continue.

To be strong throughout 2021.

We're not we haven't given guidance for the second half of the year you just did the math in terms of what and a minimum would need to happen to exceed $5 50. So at this point you know I think we will leave it there and as we move throughout the year and we get.

You know for the clarity and and data we can share we will.

Certainly and I do that with you.

That's fair and.

Thanks for all of that color and then the second question just really of longer term question.

Really nice to hear the point on the potential for the $650 million target model on a quarterly run rate basis sometime and in calendar 'twenty. Two of the question. There is you know to what extent is the is the significant success with the product customization.

And the Sam expansion and that they would engender really playing to that or to what extent. Alternatively, you suggest some of the bigger capex commitments that we've seen and done.

And some of the other things that that are also quite significant on a multiyear basis, but maybe not those are leading logic and foundry guys are really driving the expectation that we could get to about $650 million target on a run rate basis for sure.

Yeah, well, let me just start with saying, we've always said that debt market really across all of the segments would need to be strong for us to hit our 550 million and $650 million.

Revenue target. So obviously as I mentioned, we're expecting the market to continue strong and into next year and over the next few years, but absolutely.

Our success is being driven by the Purion product line and a lot of that is coming from the product line extensions and what we're doing in some of the and some of those markets. So you know even if I look at the evaluations that are out and the field today.

Two of them are in memory.

And three or and mature process technologies. So there are two image sensor and one power device and one is advanced logic. So just to talk briefly about advanced logic, we said that we need to do more work to further penetrate and.

To that margin market segment, and we're pretty excited that the evaluation that we have in place right now will that turn into additional business for US you know as we move into the 650 model and even beyond that and we are working with the other advanced logic customers to to make progress there.

Dmitry and the mature process Technology Center, and that's a segment, that's really where our specialty products, where the market segment driven products really shine.

The image sensor market and we've done incredibly well and we said we believe that we're the leader and implant and both image sensor and power devices and so.

And so very strong presence with high energy some of the very high energy tools now the Purion XE Max is our highest energy tool and the tools going into the power device market. The Purion H 200, all of the Silicon carbide tools.

Across the full spectrum of the Purion product line, So high energy high current and medium current those are all really key drivers.

You know of of our future growth and and I believe are really on the underlying reason from the fact that we believe that we can even get beyond the $650 million model.

Very encouraging.

Sorry go ahead, Jeff.

<unk>, let me just add one other thing to it so on Mary commented on the power market.

Theres a lot of a lot of.

And of discussion about the automotive chip shortage and so forth one of the things that's interesting.

With our products as the Purion and power for Silicon carbide, and and Silicon and really targeted at a lot of the electric vehicle activity, that's going on and that's that's a little less caught up and the shortage that's more of a planning for the future. So I think.

That power device market is another key that allows us to drive towards the 650 and beyond.

Yeah, and certainly some positive comments within the last two weeks with some of the biggest chip manufacturers based in Europe.

And that serve that market with that technology. So good point, Doug if I could just ask a clarification before I hop back in the queue nice to see.

Some licenses granted for export shipment.

To that Chinese customer of the question of assist to what extent were those granted relative to what you applied for and to the extent that it was plus and 100 per cent is there potential for further grants to move up to what where you would hoped.

Felicia Thank you.

Yeah, we have multiple licenses that are out there to cover all of the of the orders that we have.

For across our Purion product line and actually even more significantly and number of our legacy systems at this point in time so.

And we did just start receiving some licenses as we said in the second quarter. We are shipping those tools and the parts of associated with them that were approved on those licenses.

We are continuing to work with our outside trade council and with semi and the U S government to ensure that the rest of the licenses are granted so at this point and time, we think that the.

The flow of those licenses has begun and we can.

And we're continuing to work to ensure that the rest of them arent at granted on a timely basis.

Very helpful. Thanks, everybody.

Your next question comes line of Tom Diffley with D. A Davidson.

Yeah, Good morning, and thanks for taking my question.

A follow up on the last question. If you look at the really strong bookings and the quarter is there a meaningful portion of those bookings that are going to also require export licenses going forward.

So we did have a very strong bookings quarter and out of China, but the thing that I want to continue.

And to stress is that we have a very broad customer base in China, and that's comprised of both multinational and domestic customers.

Although we've said met most of those customers and many of those customers and focused on the mature process technology market.

And the customer SMIC that requires export licenses is only one of those many customers that we have so we at this point and time, we really don't expect that there's any more significant risks to any of the systems that we're going to ship beyond what we already knew.

No associated with that.

With the SMIC license.

Uhm.

Okay, Great and then.

And.

When you look at the CSI business, obviously, very strong and the quarter I'm curious how if at all it was impacted by COVID-19 and the inability of certain service people to move around.

And also what causes the variability on a quarterly basis, what's the biggest driver of durability.

Yeah, Hey, Tom it's Kevin.

So the variability of let me start with that.

No.

Use tools, our various bodies and we actually had a lot of used tools on the quarter.

So that that'll move it around.

We are coming off a couple of strong quarters I think everybody remembers you know Q4 was very strong, but we did say there was.

A good amount of pre buying going on and what we thought with some of our customers.

And in China.

And we've always kind of frame this the F&I business.

This revenue level of about $40 million of quarter price.

Business.

So we're off to a strong start we think Q2 is around 40, I think the back half of the years of being around 42, So it's up a little bit book.

So the variability really sad day has been I think some pre buying and strong surge and used tools probably of discrepancy because systems you know in general of everybody's sort.

Line and get all of it kind of at this point.

So I won't I won't.

And starting to want to leave my models of $50 million, but I wouldn't be worried that we brought back into the low forties.

Exactly where we expected it to be based on number of tools out there and number.

You know, what we think of as our entitlement that goes with those tools of spare parts and service.

Okay, Great and then finally, Kevin when you look at lead times for your tools have they changed meaningful way and the last few quarters and.

And any supply issues yourself.

Yeah, So I know some of.

Some of our peer group has talked about.

Lead times of pushing way out.

I think that is.

Point, we've done a good job, where I think we're keeping up of what customers are wanting.

It's certainly not easy to pull tools and at this point.

And if I looked at what our standard lead times are to where we are.

And we're not that far off in terms of.

The manufacturing side of the time, but you know as I mentioned earlier too. We we are driving a lot of long lead material ahead of schedule.

Because that's really kind of the.

Bottleneck and the process you know.

Most of it there it was very short lead time, but it's a longer lead stuff.

We've been keeping ahead of us so at this point I'm not going to raise the flag and say that we can't we can't do a little bit of what customers want and so our lead times again are you know, they're not too far off where they would normally day.

Okay. Thank you.

Yeah.

Your next question comes line of Charles shy with Needham and company.

Hi, Thanks for taking my question and this is Charles <unk> on behalf of Quinn Bolton Needham from so maybe I wanted to follow up on a question on around licenses from us.

I think I understand of the licensing requirement came in two rounds around.

SMIC.

The first around on targeting.

Some of your products on the restriction around and the September timeframe.

The second round action on it with all of your cash.

Shipment to SMIC and Elisa system side on Doug.

Licensing requirement. So on this initial approval of licenses as debt.

Approval for the first of few licenses that.

You guys of applied around the September timeframe of last year or is that some of that actually of comfort on that December applications.

So you're right you explained the situation correctly first SMIC was put on the military and use the list and September and then the entity list and December we applied for licenses.

You know in September and then we applied for licenses again in December.

December for the remainder of our products that weren't covered the first time around.

But I guess, the only thing I can say is <unk>.

And they do not seem to be coming out based on you know.

Chronological order.

And it's not exactly clear how they are in fact doing the review and what they're putting priority on versus other things. So at this point and time.

The answer is not as clean as I think maybe we would of all anticipated and as I said.

You know the licenses are not being issued and and as timely of fashion as you know.

We would have hoped.

But we again, we are we're happy that some of them were issued and we continue to drive.

To ensure that the rest of them are issued and in a timely fashion.

Thanks, a lot and Mary.

Yeah following up on another question.

Really a round of CSN.

Maybe this is a question and book Kevin.

And Kevin I on.

Standard fourth quarter last year and first quarter this year.

Hi, it's probably running on a.

Probably go ahead of your $550 million model targets of which I think it's about and <unk>.

And $40 million per quarter of actually closer to your $650 million model.

And the last quarter, you did point out that of one of the factors from a lump of several factors.

Driving.

I mean, I, usually higher CSI revenue is about advanced purchases of inventory stockpiling.

Maybe a few of your Chinese customers due to geopolitical tension on.

Understand the industry Utilizations High and then also are you pointed out some of used tool of strength, but I wonder for your Q1, yes on.

Where theres some of that is still driven by some of the inventory hoarding behavior from.

On some of your Chinese customers due to geopolitical reasons.

Yeah, So kind of Charles I would say of that Theres still some of.

What I would say is pre buying of Q1 for sure.

But I would also say that.

We did see strength come in from almost all of our <unk>.

Different regions of the supply parts and so.

Or or Q4 was certainly.

China centric and.

A lot of pre buying.

We did see strength and Q1 in Korea, we saw throughout Europe, and we saw it actually and the U S picking back up so.

You know so some of those areas I would not think so.

And our pre buying because of word of worrying about trades right now, whether they're buying a little bit because they have a huge ramp coming at them and utilization side of that could be going on but.

Think this is probably normal right and then you ramp the level of the rebel level. We're seeing at this point was you know say Korea, Europe and U S. So.

China, Yeah, I think theres still lot of pre buying going on for obvious reasons, and it's probably not just SMIC.

And I think everybody, maybe a little bit nervous over there but.

It's definitely I think that's on a scale back off right. So if we grow up into that 40.

And of range in Q2, and then and 42 of the back and what do we want a day.

Nice to be surprised that as higher sales.

But at this point I think Charles we think that that's kind of settled down.

Great got it thanks, Kevin and so on so maybe my next question.

Round of evaluation tools.

I think of one of the tools of Dragon tools based on with off of one DRAM application.

You ship that tool probably around June timeframe last year, and the evaluation cycle typically about a year I'm not asking why you haven't closed it yet.

Are you sort of expecting some point in Q2, it's going to get closed on.

So one of the reason is we sort of expect that DRAM will become stronger and second half, especially one of few of top DRAM customer recently announced that they are holding the capex in 2021, and the Black Sea and the majority of that will be DRAM. So I wonder whether debt eval closed you can be ahead of that.

Mark and Graham and the weather that will drive further offset part of second half of memory revenue.

So Charles you're right on it.

We shipped mid last year, which would mean it in.

Should close mid this year. So it's not quite mid this year, yet so that remains to be seen and we will report on and as soon as it's closed.

And it's moving along.

Her plan.

Sometimes evaluation to actually don't close exactly.

12 months to the exact date and the reason for that typically is as we work with customers. During these evaluation periods. We also work to qualify as many recipes as possible and sometimes we get opportunities to actually work on recipes that werent originally planned for these.

<unk>, which then takes more time, so I'm not necessarily commenting specifically on this evaluation, but I just wanted to make it clear and that if it doesn't close exactly at the 12 month Mark there are many reasons for that and the evaluation will go on to be successful in terms of the timing.

This is actually the second dragon that we have at this customer of the customer already has qualified the dragon for NAND applications. So we feel very good about.

And we feel very good about our position with this customer given that this is the second dragon and believed that.

You know as the cycle picks up this customer will in fact purchase additional drag and as they have capacity needs.

Sure for high current so when at this point and we're not worried about missing any any upswings in the market.

Thank you Mary out thanks.

Thanks, guys.

On the results and industrial and outlook. Thanks.

Your next question comes on of David Dooley with still head.

Oh, yeah. Thanks for taking my question.

I'm wondering if you hit the $550 million revenue targets.

Calendar year.

What would you say that that translates into market share in 2021 and for the implant market.

Hey, David.

It's hard to tell and actually this year.

As you know.

And <unk>.

The market share denominator for the Tam for ion implant.

And is it really reported very accurately and so.

So we're not trying to make a guess as to what exactly that Tim Tam will be.

We know, we're increasing market share and we're having great success with with Purion, and especially with the Purion extensions, and then, especially and the segmented markets, where we would consider that we have very high share, but its difficult at this point to to gauge the exact share we do believe.

And that the Tam.

Is increasing right now as we've said the last couple of years on it.

And it's above $1 billion at this point exactly how far above it's kind of hard to estimate.

Okay Hum.

What are the key things that you need to accomplish to get to the $650 million market I think in the past it's been.

And Japan, and wins and high and foundry and logic is that still kind of the targeted areas or do you think you can get there.

And by just having some of your other segments grow faster than expected initially expected.

So I think we feel very good debt, we planted the seeds that we need already to get to 650 I mean, if we if in fact, we hit a run rate next year.

That means that you know putting additional evaluations in the field at this point really isn't going to drive any significant volume of.

Above that in 2022.

And perhaps even into 2023, Japan and advanced logic are obviously important.

Segments, and we've made some progress and Japan, Dave you know, we shipped our first Purion XE there last year to the power device market. The power device market is very strong and Japan as image sensors and NAND. So we're continuing to drive after that and and advanced logic I've already mentioned that.

We have a purion H evaluation out there and of customer, where we think that can turn into.

Some significant revenue the timing on that is we've got to complete the evaluation and and sort of go from there. So.

Japan, and advance and logic are important and segment, but theyre not going to be the major segments that are driving.

650 at this point and time, given given the timing and and giving what we've seeded the market with it really is going to be.

At the customers, where we already are and where we're process tool of record.

And the customers you know know the tools like the tools are running the tools and production. So a lot of it will have to do.

China again will still remain a very strong market for us is growing our purion footprint and our existing customer base at base again, where we already have and installed base and perhaps of continued for example to expand the number and types of applications, where in that something that can be done more readily.

All new tool and for example for evaluation.

So those are all of the things that we are already doing debt will contribute to the 650, which is why we think we have a pretty good line of sight into 650, and and feel confident that and as I said those seeds have already been planted.

And two other questions.

Kevin what is the impact on the P&L, either and operating expenses or Cogs from the increase and capacity that you referred to and then also as far as the competitive.

Environment Mary what is the.

What are you seeing.

Core competitor of the implant market doing now with you continue to gobble market share.

Yeah. So on.

Yeah. So so.

So Dave on the manufacturing capacity.

At this point.

And the early stages of setting this up.

And as of year goes on I think we will provide some additional details about what it is we're doing and any potential impact.

I guess, the only thing I would say is of that.

The long term impact should be positive.

I think we are where we're moving to.

And opportunities to improve gross margin from this.

As you point out, there's always near term students and setup and training and things but.

I think from.

Bob you to take away is that longer term it should be.

And it's something that helps the company is from a gross margin point of view.

Let's hope the overall P&L.

Okay and from a competitive standpoint.

Competition remains.

Quite strong.

We are facing you know our largest competitor of really at every account. We go too although I will say in terms of some of the specific segments and me.

Mature process technology for example, like image sensor empower devices, where we have of leadership.

Physicians and it makes it more difficult for them to participate given the strength of the purion product offerings that we.

We have and those areas, but other than that we are we just it's just obviously theres always you know.

Pricing pressure and there's the bundle that they tried to throw at the customers there.

Some of the typical things that our competitor likes to do but in general we've because we our process tool of record in most of the places.

Now where.

There's some significant spending.

And well and again I'm, just going to clarify that again.

Probably not in Japan, and probably not in advanced logic.

But in all of those other areas, where we have strong positioning we've been able to really would them off.

Thank you.

Okay.

Your next question comes out of Mark Miller with benchmark.

Congratulations on your quarter and thank you for the question.

There are at least four major Fabs three plan and U S coming up.

Starting next year and I'm just wondering in terms of your projection for the 650 run rate.

Are these primarily.

Components of the 650 or are these are coming in for more existing fabs.

No you know what we're all of I think we're all excited about that and the new fabs that are going to be constructed and the U S. Scrapes and you asked it's great for a job.

And it's great for the industry, but right now.

Those arent any of those are not accounts or in any of our $650 million model revenues and that as I said previously we've already got the seeds planted for 650 model. So.

You know as we evaluate those opportunities that would be something that would figure into the model that we are working on right now that goes.

Beyond 650, and with an implant only focus.

Do you see these fabs contributing to orders next year for you.

And again I don't have a.

A full handle on the timing for all of these things so I really am.

And again as part of next year, we're continuing to work on our $650 million model and it's there are orders from some of those fabs in there then that would be upside to what we currently have planned but as I said, we are working on and sharing that we have the right resources in place the right infrastructure in place and.

And we're doing all of the right things right now too to make sure that we can capitalize on those opportunities.

Okay and last question is of your tax rate and kind of jumping around the last two quarters of what should we thinking about for tax rate for the remainder of the year.

And.

Yeah, I'm going to give them the standard of line Mark I think.

I always through my model using standard of corporate tax so you're absolutely right.

And it has been moving around this this quarter it was lower.

All of that came through stock sales.

But.

All I would just use of standard.

Or you know if you wanted it lowered of couple of points and obviously wanted to get down to.

And 19%, 19% and you probably won't be part of it because we do have R&D tax credits and stuff, we continue to bring back through.

And so but.

It is all of it is all over the place that's for sure.

Thank you.

Yeah.

Your next question comes line of Craig Ellis with B Riley Securities.

Yeah. Thanks for taking the follow up question and Kevin and I didn't mean to trick nor you on the initial rounds from coming back with you. So the first question you mentioned that Opex and the second quarter would be flat as a percentage of sales, but on tire sales such higher dollars. So is that performance based increases and a bonus.

Accruals, you said sales commissions or are there just projects that are queuing up and R&D that would drive the sequential increase of course other things.

The answer is yes.

Yeah.

All of them.

And you got it.

And it's across the board it is the variable compensation fees as it is the on these pieces and you.

No.

And that help you out with full year of models.

38 millions of probably a good number to use and.

And you know if you look at where our 550 model there.

25% approximately of our revenue instead of and you know.

As of revenues.

And on that I think.

Now 38 million and certainly.

Not a bad place to be using for the remainder of the year.

Great and then the follow up great to see the $12 million and share buyback and the quarter.

Question is with the license granted for customer shipments into China.

Obviously, there's some pressure to keep the right amount of inventory on hand, but what are some of the gives and takes with respect to persecuting the share buyback and the second quarter.

So we're buying to attend and be five one plan for it. So I don't you know that.

And that's where it is in place and we're going to execute to that so.

The things that we've talked about or whether it be inventory or.

And capacity I mean, that's not going to impact what we're doing with share repurchase program. We go.

We have very strong balance sheet as you know we have plenty of cash.

Execute.

Both of the investments needed and the business and <unk>.

And and grow the business and.

And returns.

Capital back to shareholders.

Yes.

And we really wanted to do this year and we said this the program in place I think they sort of are.

It's very sizable program in place, especially for sellers. So I'm, we're very committed to continue considering that and again, we have of grid debt.

Six of them too.

Nice to hear and thanks, so much Kevin.

Yeah take care.

And again to ask a question. Please press star one.

Your next question.

Comes from the line of Christian Schwab with Craig Hallum.

Hey, this is Tyler on for Christian Thanks for letting me ask a question so.

So I was just wondering maybe a little bit bigger picture you guys said your mix of mature foundry and memory is expected to be 70, 30, this year and eval tools for for both of the field.

And so next year and into futures and move towards of 650 model.

Both of those.

And to continue to grow and maybe of mixed.

They kind of similar to these levels or overtime and do you expect that mix maybe day.

Move back closer to a 50 50 mix any color there would be great.

Well Tyler.

And the mix is really going to be a function of of which customers and which segments are spending but as we said we think that this is a multiyear.

Cycle, we expect the mature process technology customers to continue to spend we expect.

Memory to recover increase throughout the year and.

So we may see more memory spending as a percentage of our total revenues.

Based on again spending of specific customers. So it's possible that it could shift a bit more towards back back towards memory, but.

But we expect really mature process to continue to be strong I mean, if you take a look at where we were.

Last year the mix was pretty similar we had as you know we had 29.

In a percent memory last year, and and and this year, we're saying you know prop maybe around 30%. So it could be the same but I think we just have to wait it out and and see exactly what happens is as we move into 2020 two.

Alright Thats great.

On my other questions were answered thanks, guys. Thank you.

Thank you.

This concludes the Q&A portion of the call I will now turn the call back over to Mary Puma, who will make a few closing remarks.

Thank you Chelsea, so I'd like to thank everyone for joining US today, we hope to talk with you virtually at upcoming investor events.

In June we will be participating and the Craig Hallum, 18th annual institutional Investor Conference of Cowen and 49th annual Technology Media and Telecom Conference. This day.

<unk> 2021 cross sector insight conference and the 13th annual CEO Summit.

I'd like to thank you for your continued support and day well.

This concludes the presentation. Thank you for your participation in today's conference you May now disconnect good day.

Sure.

Okay.

[music].