Q1 2022 ASML Holding NV Earnings Call
Thank you for standing by and welcome to the acetyl Q1, 2022 financial results call for out today's introduction all participants will be on a listen only mode.
After a smell some production that will be an opportunity to ask questions. If you'd like to ask questions. Please press zero Guam to register if he might swifter. All question. Please press the CRH you at any time during the call.
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All of it not watch turn conference call over to Mr. Skip Miller. Please go ahead Sir.
Alright. Thank you operator welcome everyone. This is skip Miller, Vice President of Investor Relations at ASML join.
Joining me today on the call are Asml's, CEO , Peter <unk>, and our CFO Rosie Dasa the.
The subject of todays call is as <unk> 2022 first quarter results.
A length of this call will be 60 minutes and questions will be taken in the order they are received.
This call is also being broadcast live over the Internet at ASML Dot com.
A transcript of management's opening remarks, and a replay of the call will be available on our website. Shortly following the conclusion of this call.
Before we begin I'd like to caution listeners that comments made by management. During this conference call will include forward looking statements within the meaning of the federal Securities laws.
These forward looking statements involve material risks and uncertainties.
For a discussion of risk factors I encourage you to review the Safe Harbor statement contained in today's press release and presentation found on our website at <unk> Dot com and in Asml's annual report on form 20-F, and other documents as filed with the Securities and Exchange Commission.
With that I'd like to turn the call over to Peter Winick for a brief introduction.
Thank you skip welcome.
Welcome everyone and thank you for joining us for our first quarter 2022 results conference call.
I hope all of you and your family are still healthy and safe and before we begin the Q&A session, Roger and I would like to provide an overview and some commentary on the first quarter 2022.
As well as provide our view of the coming quarters and the Roget will start with a review of our first quarter 2022 financial performance with some added comments on the short term outlook.
That will complete the introduction with some additional comments on the current bill.
<unk> environment.
And on our future business outlook for Jacob.
Thank you Peter welcome everyone.
I will first review the first quarter financial accomplishments and then provide guidance on the second quarter of 2022.
Net sales came in at $3 5 billion euros, which is at the high end of guidance with.
We shipped nine <unk> systems, and recognized 591 million euros revenue from three systems this quarter.
Net system sales of $2 3 billion euros, which was nicely balanced between logic at 50% and 50% from memory.
Installed base management sales for the quarter came in at $1 2 billion euros as guidance.
Gross margin for the quarter came in at the guidance of 49.0%.
On operating expenses R&D expenses came in at 739 million euros, and SG&A expenses at 208 million euros R&D was below guidance of spend rates in the quarter was lower than planned and we will move to Q2, we still expect to be around 14% of the sales for the year.
Net income in Q1 was 695 million euros, representing 19, 7% of net sales and resulting in an EPS of $1 73 years.
Turning to the balance sheet, we ended the first quarter with cash cash equivalents and short term investments at a level of $4 7 billion euros.
Moving to the order book Q1, net net system bookings came in at 7.01 billion euros, including $2 5 billion euros, four thirty-three UV and <unk> systems and multiple <unk> <unk> 55 in E systems.
<unk> 52 hundreds.
Another very strong deep UV order intake of $4 5 billion euros this quarter, reflecting the continued strong demand for advanced and mature nodes.
Total net system bookings was driven by logic with 66% of the bookings and memory accounting for the remaining 34%.
With that I would like to turn to our expectations for the second quarter of 2022.
We expect Q2 total net sales to be between $5 1 billion euros and $5 3 billion euros does excludes around 800 million euros of net delayed revenue for Q2 as a result of more fast shipments at the end of Q2 than at the end of Q1.
We expect our Q2 installed base management sales to be around $1 2 billion euros.
Gross margin for Q2 is expected to be between 49% and 50% relative.
Relative to last quarter, we expect positive margin impact from higher volume for both <unk> and deep UV offset by lower ASP.
Deep UV mix and continued cost pressure in the quarter.
The expected R&D expenses for Q2 are around 790 million euros and SG&A is expected to come in at around 220 million euros.
In the current environment. It is also appropriate to address how we may be impacted by rising cost this year.
We're not immune to rising costs, there is pressure on labor cost as the global market for engineers of sites and there is a competition for talent.
Costs related to components in the supply chain are also increasing due to higher material costs, including additional fees to secure parks.
Transportation costs have increased due to rising fuel costs and changing flight routes.
LNG contracts in renewable energy help limit the increase Angie cost impacts.
We clearly see pressure on margins due to these cost increases, which we expect to translate roughly to a 1% impact on gross margin for full year 2022.
We expect the second half of the year will be strong with expected gross margins of around 54%, primarily driven by higher <unk> and deep UV volume as well as improved margin from installed base business.
In summary, we currently expect gross margin to be closer to 52%.
Our estimated 2022 annualized effective tax rate is expected to be between 15% and 16%.
In Q1, 2020 to ASML acquired three 6 million shares for a total amount of around $2 1 billion euros as part of our current program.
With that I would like to turn the call back over to Peter.
Thank you Roger.
As highlighted <unk> revenue and profitability for the quarter came in.
This guidance.
With system revenue balance between logic and memory.
We expect a step up in sales in Q2 as revenue from fast shipments in Q1 will be recognized.
While supply chain challenges are still presence, we will continue to utilize fast shipments as a means to get systems to customers as soon as possible.
Although the current macroeconomic environment creates uncertainty we believe the fundamental growth drivers remain intact.
We continue to see unprecedented customer demand across all market segments for both advanced and mature nodes driving demand across our entire product portfolio.
We're running at maximum capacity and expect demand to exceed supply well into next year.
Our view of the full year revenue therefore remains unchanged.
Year on year growth of around 20% over 2021.
As mentioned last quarter. This 20% sales growth does not include the full shipments value of systems out with this year due to a number of fast shipments, which will result in a delayed revenue into 2023.
But our <unk> business, we still expect to ship about 55 systems. This year.
And as we plan to do fast shipments on a number of these systems, including systems in Q4, we expect some revenue to be deferred through 2023. This.
This translates to an expected system revenue of around seven 8 billion euros. This year.
And our deep UV and applications business, we expect significant growth in both immersion and drive systems as well as continued demand for metrology and inspection systems.
In addition to advanced nodes, we see growing demand for deep UV system supporting mature market segments, such as analog power and sensors. These.
These market segments are part of the secular growth drivers and support our digital infrastructure, which includes automotive and green energy applications.
We expect revenue growth of over 20% for non <unk> system revenue.
With the installed base management business service revenue will continue to scale with growing installed base of systems.
Customers continue to look at all methods to add wafer capacity and greater productivity upgrades.
In these times are very high fab utilization some of these upgrades are hardware intensive.
Wire systems do we've taken offline for installation.
Therefore available system time will dictate their ability to install these types of upgrades and as we mentioned in previous quarters. The quickest way to add wafer capacity is to install software productivity packages.
Upgrades require less system downtime.
And it now being installed in most of our customer Fabs.
We currently expect 2022 installed base revenue to be up around 10% year on year.
Looking at the market segments in 2022, our view on growth is similar to last quarter.
We still expect logic system revenue to be up more than 20% year on year and memory system revenue to be up around 25% year on year.
While high in a UV, we're making good progress and we are currently started the integration of the first <unk> system in our new clean rooms Alto.
We received multiple orders for our <unk> 5200 system in Q1.
We also received additional <unk> 5200 orders this month April .
With these bookings we now have high in a orders with three logic and two memory customers.
<unk> 5200, <unk> <unk> next model high in a system that will provide the next step for lithography performance and productivity.
The global market trends that we talked about at our Investor day last year, a broadening the application space and providing secular growth drivers for future demand.
The strong demand this year and beyond as reflected in the significant bookings over the past several quarters, resulting in a backlog of around 29 billion euros is an all time high.
We expect a strong order intake to continue as the miles we will continue to exceed supply also going well into next year.
With multiple countries pursuing technological sovereignty.
We are now seeing a number of announcements from customers for new Fabs in the coming years in support of this global trend.
These announced investments are expected to have a positive impact on the medium term the math.
That's just unprecedented demand is exceeding our capacity.
<unk> and its supply chain partners are planning to actively add capacity to meet future customer demand as communicated during investor day last year.
But at that time, we talked about the current capacity ramp is expected to deliver an output capability of over 70, <unk> point through three array systems and around 375 deep UV systems by 2035.
As mentioned last quarter we.
We see a need to further increase our output beyond this level in order to meet the stronger end market demand to support an industry that is expected to at least double by 2030.
With the goal of adding more capacity, we are investigating the feasibility of increasing our annual capacity by 2025 derived 90, EV three three and a systems and 600 DPP systems for.
For <unk>, we're planning to increase capacity for both <unk> and drive with a heavier weighting towards dry.
We're also discussing with our supply chain partners to secure a capacity of around 20.
Five high in E systems in the medium term.
Bear in mind that this translates to what we currently feel our maximum capacity goals should be therefore, not be a final output plan.
We discussed our goal recently with our supply chain partners and ask them to come back in the coming quarters with confirmation on the feasibility of a request.
Once we complete this analysis, we also expect to revisit our 2025 scenario some growth opportunities beyond 2025, we are planning to provide an update to the capital markets in the Q4 timeframe.
This is clearly a dynamic challenging but also exciting period in our industry and only increase our confidence in our long term growth opportunity.
And with that we'd be happy to take your questions.
Rose and Peter.
The operator will instruct you momentarily on the protocol for the Q&A session.
Beforehand, I would like to ask that you kindly limit yourself to one question with one short follow up if necessary. This will allow us to get as many callers as possible.
Now operator could we have the final instructions and then the first question. Please.
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One moment please for the first question.
And that comes from the line of Robert Sanders Deutsche Bank. Please go ahead. Your line is open.
I'm Robert Sanders from Deutsche Bank. Your line is open from all side. If you have your final meet you won't eat smart meter.
Like we need to move to the next.
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The next call.
Next caller.
Hey, Mama of Bank of America. Please go ahead your bonding is open.
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Did you hear from Bank of America. Your line is open if you have your final meet you will meet that.
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Yes.
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Third one.
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Okay. So the next question will come from the line of.
Sure.
Wells Fargo. Please go ahead your line is open.
Joe from Wells Fargo. Your line is open. Please go ahead.
Okay.
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Mark I think there is a connection issue.
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