Q1 2022 Axcelis Technologies Inc Earnings Call
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Good day, ladies and gentlemen, and welcome to the <unk> technologies call to discuss the company's results for the first quarter of 2022.
My name is Sylvia and I'll be a coordinator for today.
At this time all participants are in a listen only mode.
It will be facility a question and answer session towards the end of this conference.
If at any time during the call you require assistance. Please press star followed by 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 <unk> technologies. Please proceed ma'am.
Thank you Sylvia 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've not seen a copy of our press release issued yesterday. 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 SEC's Safe Harbor provision.
<unk> 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 for our first quarter earnings call 2022 has begun exactly as 2021 ended for both Astellas and media industry.
Significant demand for chips and the capital equipment required to produce them.
Turning to excel as specifically.
10 of the full Purion product family has been strong and continues to gain momentum across a large and growing customer base.
Customer satisfaction remains our top priority today, despite the challenging supply chain and logistics environment solid execution by the full extent with his team has allowed us to keep up with this high level of customer demand meet shipments and maintain high levels of customer satisfaction.
Like to thank our dedicated employees once again for delivering these results under these challenging conditions.
As a result of this demand and our strong execution, our first quarter financial performance was well above our guidance.
Revenue for the first quarter was $203 $6 million with earnings per share of $1 22.
Gross margin of 44, 1% and the quarter end cash balance of $297 $9 million.
Our aftermarket business or what we referred to as <unk> continued to contribute significantly to our revenue and gross margin.
<unk> revenue was in Q1 was $51 $8 million.
Growing mature process technology market continues to be an area of strength for sellers.
81% of first quarter shipments going to mature foundry logic customers and 19% to memory customers with NAND accounting for 9% and DRAM, 10%.
Our geographic mix was spread more evenly around the world due to significant global investment in the mature process technology market.
The resulting mix of our systems shipments in the first quarter with China, 32% Korea, 18%, Europe , 13%, Taiwan, 11%, the U S, 10%, Japan and 6% in the rest of the world 10%.
Visibility for 2022 continues to be good from a demand perspective with significant orders for 2023 already booked.
As a result, <unk> now expects to achieve revenue of greater than $850 million in 2022.
For the second quarter, we expect revenue of $205 million to $215 million gross margin of approximately 41% operating profit of approximately $41 million and earnings per share of approximately $1.
Our guidance reflects increases in supply chain and logistic costs that are impacting our gross margin and operating expenses in a few minutes, Kevin will provide more color on the actions we are taking to mitigate these challenges.
The industry is in the strongest cycle ever seen and continues to be driven by the same factors, we discussed last quarter in.
In addition to a strong market the implant Tam has increased significantly to approximately $2 billion and investment in the power market, both silicon and Silicon carbide continues to grow rapidly.
Power devices are more implant intensive and require our more advanced purion product extensions, we expect the power segment to account for between 30% and 40% of our systems shipments in 2022.
This growth is a long term trend driven by the transition to electric vehicles and should benefit <unk> for many years to come.
Overall, we expect that the mature markets will account for approximately 80% of our total system shipments in 2022.
That memory in 2022 will approach revenue levels seen at the last peak in 2021 memory accounted for 17% of systems revenue.
We expect it to be approximately 20% in 2022.
We maintain a strong and growing position in memory in April we shipped a purion H high current evaluation to a new memory customer for DRAM application.
Also in April we shipped the Purion H evaluation system to a new fab at an existing mature process technology customer.
These two purion H evaluation shipments will position <unk> for further growth in the high current market the largest implant products segment.
Now I'd like to turn it over to Kevin to discuss our financials and provide an operational update Kevin.
Thank you Mary and good morning.
<unk> delivered exceptional first quarter financial results, beating company guidance and consensus estimates across the board.
Favorable mix, our tool sales and strong execution drove solid top and bottom line results in Q1.
Throughout the quarter, our purchasing and engineering teams work closely with suppliers to mitigate supply chain disruption, while our manufacturing team filled the gap performed at a very high level.
Pandemic related shutdowns, Megan chip shortages and logistics issues are continuing and we're working hard strategically and tactically to tackle these issues.
As Mary mentioned 2022 is on track to be another great year for sellers and we now expect full year revenue to be greater than $850 million.
End markets are strong and visibility remains good.
Like others in the industry, we are dealing with similar supply chain disruption and higher costs included these anticipated challenges into our Q2 guidance and full year forecast.
But the situation is changing almost daily.
As noted in our last call. We began production at the New <unk> Asia Operation Center in South Korea, and we are in.
Now ship multiple systems from the ALC as we continue to ramp production levels.
This factory is flexibility and manufacturing capacity to support our $1 billion revenue model.
Moving now to our first quarter financial results.
Q1 revenue finished at $203 $6 million, well above our guidance compared to $205 7 million in Q4.
Q1 system sales were $151 $8 million.
Mm $147 3 million in Q4.
Q1, <unk> revenue finished at $51 8 million compared to $58 4 million in Q4.
We expect Q2 see us now revenues would be around $51 million and recommend modeling the remainder of 2000 $20 million to $55 million per quarter.
Q1 sales to our top 10 customers accounted for 69, 8% of our total sales compared to 71, 9% in Q4.
Two customers that are 10% or above in Q1.
Compared to three in Q4.
Q1 system bookings were $315 $5 million.
Care to a $193 9 million in Q4.
Q1 book to Bill ratio of two <unk> versus 129 in Q4.
Backlog in Q1, including deferred revenue finished at $625 million.
A new record compared to $461 million in Q4.
Multiple customers are planning, new fabs and expansions for 2023.
Which is driving bookings out beyond one year.
Q1, combined SG&A and R&D spending was $48 million or 21% of revenue compared to $42 9 million or 29% in Q4.
SG&A in the quarter was $23 9 million with.
With R&D at $17 million.
In Q2, we expect SG&A and R&D spending to be approximately 22% of revenue.
For the full year I recommend modeling SG&A SG&A and R&D spending.
Approximately 21% of revenue.
Q1 gross margin was 44, 1%.
Well above our guidance.
Gross margin in the quarter was higher than guidance due to a more favorable mix of systems and upgrades.
We are guiding Q2 gross margin of approximately 41% drill.
Driven by the expected shipment of a less favorable mix compared to Q1.
Full year gross margin is expected to be approximately 42% due to significantly higher supply chain costs.
We are continuously evaluating ways to offset increased costs, but customer satisfaction remains our top priority.
Outside.
The higher cost mentioned, we continue to make solid progress on core gross margin improvement initiatives that are fueled by growth in our <unk> business purion product extensions and across the board cost out.
Our $1 billion model reflects continued gross margin expansion driven by higher revenue from <unk> and Purion product extensions.
Incremental supply chain volume and value engineering.
Planned labor on quality improvements.
Return to a more typical supply chain and logistics environment.
Operating.
Profit in Q1 finished at $48 9 million.
Compared to $46 6 million in Q4.
We are guiding Q2 operating profit of approximately $41 million.
Q1, net income was $41 6 million or $1 22 per share compared to $35 7 million.
<unk> five per share in Q4.
Q1 includes a favorable tax benefit resulting from a foreign derived intangible income tax deduction.
In this study.
We're forecasting a 15% effect the effective tax rate for future quarters based on the <unk> reduction.
We are guiding Q2 earnings per share of approximately $1.
As noted earlier, our Q2 guidance reflects the anticipated impacts on our business from supply chain and pandemic related issues.
Remains an evolving situation.
Q1 receivables were $119 million compared to $104 4 million in Q4.
Q1 inventory ended at $203 8 million.
<unk> to $195 million in Q4.
Q1 inventory turns excluding evaluation tools finished at $2 five compared to $2 seven in Q4.
Q1 accounts payable were $50 8 million compared to $38 million in Q4.
Q1 cash finished at $298 million slightly higher than Q4, which was $296 million.
In the quarter, we generated $25 $8 million of cash from operations.
Total share repurchases of $20 million.
Through Q1, we returned over $95 million of cash our shareholders through stock repurchases.
It's an exciting time for <unk> with significant growth in the industry and solid customer demand for our products.
We have executed at a very high level throughout the pandemic and once again I want to thank the entire team for continuing to perform exceptionally well in a very difficult environment.
I also want to thank our supply chain partners that are working very hard to support us.
Our customers for their strong support during these unusual times.
We are working hard to minimize the disruption to our customers.
Dawn on us to execute on our commitments.
And we remain laser focused on customer satisfaction.
Thank you and I'll now turn the call back to Mary for closing comments.
Thank you Kevin we are pleased with our first quarter results and excited about the opportunity to achieve revenues greater than $850 million in 2022, a year earlier than previously expected.
So it is a competitive purion product line, a broad and diverse customer base, a strong balance sheet and a dedicated team of employees.
We are well positioned for significant sustainable growth.
The implant market is increasing thanks to strength in the overall semiconductor industry, but also due to our rapidly expanding mature process technology segment.
The capabilities of Purion product extensions like the Purion powered series combined with the implant intensive nature of the image sensor and power device segments uniquely position <unk> to benefit from the electrification of the automotive industry.
We are experiencing one of the most exciting times in the history of the semiconductor industry and we are confident that we are making all the right investments to achieve leadership in ion implantation.
<unk> is working through current supply chain and logistics related headwinds.
We're committed to maintaining high customer satisfaction levels during these challenging times.
That I would like to open it up for questions Sylvia.
Ladies and gentlemen, if you wish to ask a question. Please press <unk> one on your Touchtone phone.
Your question has been answered or you wish to redraw your question, perhaps zero two.
Once again zero one.
And our first question comes from Patrick Ho from Stifel.
And once again, if you have a question please.
Zero one on your Touchtone phone.
Patrick Ho from Stifel.
On the line. Please go ahead.
If your line is media please on mute yourself.
Patrick Your line is muted can you please on mute.
And just a reminder, if you have a question. Please press <unk> one on your Touchtone phone.
Patrick Ho from Stifel.
Can you hear me.
We can hear now. Please go ahead, yes, we can.
Okay.
Great great.
Congrats again.
Thanks for taking my question, maybe first part for you Kevin in terms of the supply chain issues the locked out.
That's obviously affecting everyone as we look at the June quarter can you qualify what the bgs issues or is it parts procurement is it labor availability.
Is it the Covid lockdown in.
And maybe from a gross margin perspective, how much of that is impacting at least the June quarter in terms of these supply chain issues.
Yes.
Scott.
So in terms of the Lockdowns in China right now.
The biggest impact to us is probably on the <unk> side of the business.
Getting material and.
And distributed throughout China.
<unk> been shortages coming out as well.
There is some.
Particular suppliers, we have Patrick that had been down waiting for commodity level things out.
Out of China.
So there is impact on the supply chain side for sure.
Thanks.
One of the things that probably hit us the hardest census pandemic has started.
And this quarter was suppliers, having shortages with the chips.
We've been working through this issue for several quarters.
In many cases were order was proprietary designs, we were able to kind of work around them with our engineering teams and find alternatives.
But this quarter seemed to be more difficult in terms of some of our suppliers getting hit hard so.
Thats something thats been out there for a while.
Something that probably.
Was a little bit harder this quarter.
So the supply chain is kind of difficult across the board, there's a lot of stuff.
From from chip shortages to commodity shortages too.
Logistics issues that have been out there for quite a while now just getting material move in and out. So we're continuing to work with those were.
Very focused with our engineering team helping out.
The supply chain people are working hard to kind of mitigate that.
So again, we're moving on in terms of.
The margin impact.
This this quarter in Q2, we are honest with you a lot of it is a big shift in mix.
From where we were in Q1, but as the year runs on these higher supply chain costs are starting to catch up with US I think as you know we've had some pretty good margin improvement throughout the pandemic last year. We hit we added quite a few points to arm, our bottomline margin, even in a difficult environment, but it's.
It's catching up or some of the things we're working on arent quite keeping up as fast so.
I see that.
Those issues continue to plague us really into the second half, which is why I thought it was important to put our full year gross margin target out there of 42%.
So people can kind of model and see where we're going.
But.
Beyond that.
Still a lot of good things going on with our margin improvement initiatives. So we're we're continuing on with our value engineering projects. We've still got we're working on growing the C&I business. We've got <unk> out there there are additional product extensions that will convert over and those are high margin.
<unk>.
Our we're pedaling the bike SaaS trying to keep ahead of these higher costs, which at some point is going to let up.
I think if you ask me to quantify.
On a full year basis, what the impact of the supply chain is.
I would say conservatively its negative a 150 basis points.
It could be as high as 200 negative basis points. So there's quite a bit of pressure on the supply chain right beside right now with cost.
Which is why I feel comfortable as we move.
Out of this year and move towards our $1 billion model, which as you know it's farther down the road.
Get some of these near term headwinds behind US, we continue with our with our cost out roadmaps.
We feel very comfortable with the $1 billion model.
We've put an update in our presentation budget for this year, we think will be greater than 850 million.
I would also say that.
Even though the margins are lower if you look at our models for <unk> before we had higher operating expenses in there. So we've been able to pull that back about a 100 basis points. So.
That kind of helps offset the.
On the bottom line, we can cover a little bit of a margin pressure with Opex and then there is a favorable tax pickup too. So I think of an EPS level, where more than fine to our models.
The net out of everything with the kind of the ins and outs.
Yes.
Great. That's really helpful. Kevin Thats My follow up question and I'll throw it out to all of you.
<unk> business continues to.
Deliver for you guys.
It's very accretive to margins and you're projecting some growth in the second half of the year, what's the biggest driver given that I.
I guess utilization rates are high right now for chip makers to supply chain is an issue for all parties involved is it upgrades as a spare parts is that the biggest driver or is it a mix of different products.
Yes so.
He is kind of all of the above I mean, certainly as we continue to ship more purion product of the field.
There is some level of an entitlement that goes with that right. So there is spare parts that comes with that and then at some point after off warranty there is.
Service on the brake fix type of things.
So that there is no doubt the spare parts from utilization and more tools out there is a big piece of it but.
Upgrades is another area, where we've always.
Continue to focus on and we're having good results driving new upgrades to the field, which.
Typically tend to be very good margin events too.
The bottom line with upgrades as if.
If we can develop on we can probably sell loans. So most there's not there's not a lot of third party competition upgrades. They don't have the technology or the capability to design them. So that's a part of the business that we can control. So we have in our engineering teams are continuously working on various upgrades that can improve either yield or throughput.
These are all things that the customers.
Like and that's part of the business that will continue to work on to grow that so it's it's really upgrades and spare parts.
<unk>.
It's not the used tools because trying to find core Z today is almost impossible. So the growth is coming in those areas, which are two areas that are good for us Patrick in terms of the margins.
Great. Thanks, again and congrats.
Yes. Thank you.
We have no questions at this time again to ask a question. Please press <unk> one.
Okay.
And our next question comes from Mark Miller, the benchmark company.
Congrats again, another great quarter.
I'm trying to think your tax rate went down last quarter.
Jackson for taxes for the rest of this year.
Yes, Mark I would model.
It's 15%.
The rest of the year the F 15.
We've always kind of told you to hang into 2021%, but.
With this new deduction for our foreign ship product that we're getting and Thats really because we've exhausted our Nols now so we can take advantage of this new deduction.
Kind of keep our tax rate down so I would model at 15%.
SG&A is going up somewhat in the June quarter, and also for the rest of the year or is that driven more by R&D or <unk>.
I'm sorry.
Opex is growing up more then.
Yes.
The March quarter, so that's being driven by R&D or SG&A.
Yes, it's a little above but really the full year.
We're at <unk>.
<unk>, 21%, so it's it's going to come back down.
Even though it's up a little bit in Q2 full year should be at 21% and.
And if you look at where our models had his mark on the 850 model that we put out last December it was 21% to 22% so.
We're going to hang on the lower end of that and pick up some savings.
On the Opex. So we're we're right on our model as we're exiting the low on our model. So its full year plan.
Okay. Thank you.
Yes. Thank you.
Our next question comes from Hans Chung from D. A Davidson.
Hi, Thank you for taking my questions. So I just wanted to follow up on gross margin.
You mentioned.
Shifts in the mix.
Can you elaborate more.
What's the dynamic here.
What kind of shifts.
And how should we think about.
But going forward, maybe the second half I know you put out there for your guidance, but just kind of.
Any color would be helpful.
Yes.
So on the mix side of things.
Each of the product lines carry different margin levels.
There is a.
Chart, that's in the Investor presentation that shows how the contribution level as the standard margin level on high energy high current medium current.
And you can see that on the Bar chart. There is there is a difference.
Very noticeable between each of those product lines. So this quarter. The shorter answer is is less high energy weighted.
And then the other thing is the impact this quarter to quarter two as.
The mix of the CSI in terms of.
How much revenue comes from from <unk>.
We don't provide a a.
Gross margin on <unk>, but it's accretive to the overall bottom line margin so.
There is a little more growth on the system side this quarter versus <unk>, because it's flat with last quarter and our revenues are coming up so that puts a little bit of drag but.
As I mentioned and as you pointed out the full year would be 42%.
As I mentioned with Patrick.
There is there is.
There's quite a bit of drag right now coming out of the supply chain.
We're from a 150 basis points conservatively to probably as high as 200 basis points.
That's really the bigger gross margin story, we always have had fluctuation quarter to quarter.
It will continue that way based on mix and stuff, which is why we have always tried to just focus on the full year, because it tends to average out from quarter to quarter.
Thank you.
That's all I have.
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 comments.
Thank you Silvia. Thank you all for joining US today, we hope to see you at our very active upcoming investor event schedule, we will be participating in the 22nd annual B Riley institutional Investor Conference in Los Angeles in May and we are participating in three conferences in June .
The 19th annual Craig Hallum, Institutional Investor Virtual conference the 15th.
Annual Cowen Technology Media and Telecom Conference in New York City, and the Stifel 2022 Cross sector insight conference in Boston.
During semicon West in July we will also be participating at the CEO summit as well as hosting our own Astellas investor Breakfast seminar and we will be attending the D. A Davidson big Sky technology stomach in Montana in August .
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 good day.
Yes.
Okay.
Okay.
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Yeah.
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Good day, ladies and gentlemen, and welcome to the Cabela's technologies call to discuss the company's results for the first quarter of 2022.
My name is Sylvia and I'll be a coordinator for today at.
At this time all participants are in a listen only mode.
We'll be facility a question and answer session towards the end of this conference.
If at any time during the call you require assistance. Please press star followed by 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 Axa, Let's technologies. Please proceed ma'am.
Thank you Sylvia 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've not seen a copy of our press release issued yesterday. 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 SEC's Safe Harbor provisions.
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 for our first quarter earnings call 2022 has begun exactly as 'twenty 'twenty. One ended for both accelerates in the industry with significant demand for chips and the capital equipment required to produce them.
Turning to Astellas, specifically the adoption of the full Purion product family has been strong and continues to gain momentum across our large and growing customer base.
Customer satisfaction remains our top priority today, despite the challenging supply chain and logistics environment solid execution by the full extent with team has allowed us to keep up with this high level of customer demand meet shipments and maintain high levels of customer satisfaction.
To thank our dedicated employees once again for delivering these results under these challenging conditions.
As a result of this demand and our strong execution, our first quarter financial performance was well above our guidance.
Revenue for the first quarter was $203 $6 million with earnings per share of $1.22.
Gross margin of 44, 1% and our quarter end cash balance of $297 $9 million.
Our aftermarket business or what we referred to as C. S. N I continued to contribute significantly to our revenue and gross margin.
<unk> revenue was in Q1 was $51 $8 million to.
The growing mature process technology market continues to be an area of strength for zealous with 81% of first quarter shipments going to mature foundry logic customers are 19% to memory customers with NAND accounting for 9% and DRAM, 10%.
Our geographic mix with spread more evenly around the world due to significant global investment in the mature process technology market.
The resulting mix of our systems shipments in the first quarter with China, 32% Korea, 18%, Europe , 13%, Taiwan, 11%, the U S, 10%, Japan and 6% in the rest of the world 10%.
Visibility for 2022 continues to be good from a demand perspective with significant orders for 2023 already booked.
As a result, <unk> now expects to achieve revenue of greater than $850 million in 2022.
For the second quarter, we expect revenue of $205 million to $215 million gross margin of approximately 41% operating profit of approximately $41 million and earnings per share of approximately one dollar or.
Our guidance reflects increases in supply chain and logistic costs that are impacting our gross margin and operating expenses in a few minutes, Kevin will provide more color on the actions we are taking to mitigate these challenges.
The industry is in the strongest cycle ever seen and continues to be driven by the same factors, we discussed last quarter in.
In addition to a strong market the implant Tam has increased significantly to approximately $2 billion and investment in the power market, both silicon and Silicon carbide continues to grow rapidly.
Power devices are more implant intensive and require our more advanced purion product extensions, we expect the power segment to account for between 30 and 40% of our systems shipments in 2022.
This growth is a long term trend driven by the transition to electric vehicles and should benefit excel us for many years to come.
Overall, we expect that the mature markets will account for approximately 80% of our total system shipments in 2022.
That memory in 2022 will approach revenue levels seen at the last peak in.
In 2021 memory accounted for 17% of systems revenue and we expect it to be approximately 20% in 2022.
We maintain a strong and growing position in memory in April we shipped a purion H high current evaluation to a new memory customer for DRAM application.
In April we shipped the Purion H evaluation system to a new fab at an existing mature process technology customer. These two purion H evaluation shipments will position <unk> for further growth in the high current market the largest implant products segment.
Now I'd like to turn it over to Kevin to discuss our financials and provide an operational update Kevin.
Thank you Mary and good morning.
<unk> delivered exceptional first quarter financial results, beating company guidance and consensus estimates across the board.
Favorable mix, our tool sales and strong execution drove solid top and bottom line results in Q1.
Throughout the quarter, our purchasing and engineering teams work closely with suppliers to mitigate supply chain disruption, while our manufacturing team filled the gap and performed at a very high level.
Pandemic related shutdowns.
Chip shortages and logistics issues are continuing.
We're working hard strategically and tactically to tackle these issues.
As Martin mentioned 2022 is on track to be another great year for <unk>.
And now expect full year revenues to be greater than $850 million.
End markets are strong and visibility remains good.
Like others in the industry, we are dealing with similar supply chain disruptions and higher costs that are included as anticipated challenges into our Q2 guidance and full year forecast.
The situation is changing almost daily.
As noted in our last call we began production at the New <unk> Asia Operations Center.
With Korea.
We have now ship multiple systems from the ALC as we continue to ramp production levels.
This factory edge flexibility in manufacturing capacity to support our $1 billion revenue model.
Moving now to our first quarter financial results.
Q1 revenue finished at $203 6 million well above our guidance compared to $205 7 million in Q4.
Q1 system sales were $151 $8 million compared to $147 $3 million in Q4.
Q1, <unk> revenue finished at $51 $8 million compared to $58 4 million in Q4.
We expect Q2, <unk> revenues would be around $51 million and.
And modeling the remainder of 2022 and $55 million per quarter.
Q1 sales to our top 10 customers accounted for 69, 8% of our total sales compared to 71, 9% in Q4.
Two customers at 10% or above in Q1.
Paired to three in Q4.
Q1 system bookings were $315 5 million.
Compared to $193 9 million in Q4.
With a Q1 book to Bill ratio of 2.0 versus 129 in Q4.
Backlog in Q1, including deferred revenue finished at $625 million a.
A new record compared to $461 million in Q4.
Multiple customers are planning, new Fabs and expansions for 2023, which is driving bookings out beyond one year.
Q1, combined SG&A and R&D spending was $40 8 million from 21% of revenue.
Third to $42 9 million or 29% in Q4.
SG&A in the quarter was $23 9 million with R&D at $17 million.
In Q2, we expect SG&A and R&D spending to be approximately 22% of revenue.
For the full year I recommend modeling SG&A, SG&A and R&D spending at approximately 21% of revenue.
Q1, gross margin was 44, 1% well above our guidance.
Gross margin in the quarter was higher than guidance due to a more favorable mix of systems and upgrades.
We are guiding Q2 gross margin of approximately 41%.
Driven by the expected shipment of a less favorable mix compared to Q1.
Full year gross margin is expected to be approximately 42% due to significantly higher supply chain costs.
We're continuously evaluating ways to offset increased costs, but customer satisfaction remains our top priority.
Outside of the higher cost mentioned, we continue to make solid progress on core gross margin improvement initiatives that are fueled by growth in our <unk> business purion product extensions across the board cost out.
Our $1 billion model reflects continued gross margin expansion driven by higher revenue from <unk>, and purion product extensions and incremental supply chain volume and value engineering.
Planned labor on quality improvements.
Return to a more typical supply chain and logistics environment.
<unk> profit in Q1 finished at $48 $9 million compared to $46 6 million in Q4.
We are guiding Q2 operating profit of approximately $41 million.
Q1, net income was $41 $6 million or $1 22 per share compared to $35 7 million or one.
<unk> five per share in Q4.
Okay.
Q1 includes a favorable tax benefit resulting from a foreign derived intangible income tax deduction known as <unk>.
We are forecasting a 15% effect the effective tax rate for future quarters based on the city reduction.
We are guiding Q2 earnings per share of approximately $1.
As noted earlier, our Q2 guidance reflects the anticipated impacts on our business from supply chain and pandemic related issues.
<unk> remains an evolving situation.
Q1 receivables were $119 million compared to $104 4 million in Q4.
Q1 inventory ended at $203 8 million compared to $195 million in Q4.
Q1 inventory turns excluding evaluation tools finished at $2 five compared to $2 seven in Q4.
Q1 accounts payable were $50 8 million.
Compared to $38 million in Q4.
Q1 cash finished at $298 million slightly higher than Q4, which was $296 million.
In the quarter, we generated $25 $8 million of cash from operations.
Total share repurchases of $20 million.
Through Q1, we returned over $95 million of cash our shareholders through stock repurchases.
It's an exciting time for sellers with significant growth in the industry and solid customer demand for our products.
We have executed at a very high level throughout the pandemic and once again I want to thank the entire team for continuing to perform exceptionally well in a very difficult environment.
I also want to thank our supply chain partners that are working very hard to support us.
Customers for their strong support during these unusual times.
We are working hard to minimize the disruption to our customers who count on us to execute on our commitments.
And we remain laser focused on customer satisfaction.
Thank you and I'll now turn the call back to Mary for closing comments.
Thank you Kevin.
Pleased with our first quarter results and excited about the opportunity to achieve revenues greater than $850 million in 2022, a year earlier than previously expected.
So it is a competitive purion product line, a broad and diverse customer base, a strong balance sheet and a dedicated team of employees.
We are well positioned for significant sustainable growth.
The implant market is increasing thanks to strength in the overall semiconductor industry, but also due to our rapidly expanding mature process technology segment.
The capabilities of Purion product extensions like the Purion powered theory combined with the implant intensive nature of the image sensor and power device segments uniquely position <unk> to benefit from the electrification of the automotive industry.
We are experiencing one of the most exciting times in the history of the semiconductor industry.
And we are confident that we are making all the right investments to achieve leadership in ion implantation.
So it is working through current supply chain and logistics related headwinds and we are committed to maintaining high customer satisfaction levels. During these challenging times.
That I'd like to open it up for questions Sylvia.
Ladies and gentlemen, if you wish to ask a question. Please press zero one on your Touchtone phone.
If your question has been answered or you wish to draw your question, perhaps zero two.
Once again, it's zero one.
And our first question comes from Patrick Ho from Stifel.
And once again, if you have a question.
<unk> press zero, one on your Touchtone phone.
Patrick Ho from Stifel.
On the line. Please go ahead.
Your line of meter please on mute yourself.
Patrick If your line is muted can you please on mute.
And just a reminder, if you have a question. Please press zero one on your Touchtone phone.
Patrick Ho from Stifel.
Can you hear me.
We can hear you now. Please go ahead, yes, we can.
Right.
Great great.
Thanks.
Congrats again.
Thanks for taking my question, maybe first off for you Kevin in terms of the supply chain issues. The locked out this is something thats, obviously affecting everyone. As we look at the June quarter can you qualify what the biggest issues or is it parts procurement is it labor is it the cold.
Lockdowns.
And maybe from a gross margin perspective, how much of that is impacting at least the June quarter in terms of these supply chain issues.
Yes.
That's good.
So in terms of the Lockdowns in China right now.
The biggest impact to us is probably on the <unk> side of the business.
I'm getting material and.
And distributed throughout China.
<unk> been charges coming out as well.
There is some.
Particular suppliers, we have Patrick that have been down waiting for commodity level things out of that.
Out of China.
So there is impact on the supply chain side for sure.
I think one of the things that probably hit us the hardest census pandemic has started.
And this quarter was suppliers having shortages with.
Chips.
We've been working through this issue for several quarters.
In many cases were orders proprietary designs, we were able to kind of work around them with our engineering teams and find alternatives.
But this quarter seemed to be more difficult in terms of some of our suppliers getting hit hard so.
Thats something thats been out there for a while.
Something that probably you know.
Was a little bit harder this quarter.
So the supply chain is kind of difficult across the board, there's a lot of stuff.
From from chip shortages to commodity shortages too.
Logistics issues that have been out there for quite a while now just getting material moved in and out. So we're continuing to work with those who were very.
Very focused with our engineering team helping out.
But supply chain people are working hard to kind of mitigate that.
So again, we're moving on in terms of.
The margin impact.
This this quarter in Q2, we are honest with you a lot of it is a big shift in mix.
From where we were in Q1, but as the year runs on these higher supply chain costs are starting to catch up with US I think as you know we've had some pretty good margin improvement throughout the pandemic last year. We hit we added quite a few points storm, our bottomline margin, even in a difficult environment, but it's.
It's catching up or some of the things we're working on arent quite keeping up as fast so.
I see that.
Those issues continue to plague us really into the second half, which is why I thought it was important to put our full year gross margin target out there of 42%.
So people can kind of model and see where we're going.
But.
Beyond that.
So a lot of good things going on with our margin improvement initiatives. So we're we're continuing on with our value engineering projects.
We've still got we're working on growing the C&I business. We've got <unk> out there there are additional product extensions that will kind of broke over and those are high margin.
Thats, where we.
Pedaling the bike fast trying to keep ahead of these higher costs, which at some point is going to let up.
If you ask me to quantify on a full year basis, what the impact of the supply chain is.
I would say conservatively its negative 150 basis points.
Could be as high as 200 negative basis points. So there's quite a bit of pressure on the supply chain right beside right now with cost.
Is why I feel comfortable as they move.
Out of this year and move towards our $1 billion model, which as you know it's further down the road we get some of these near term headwinds behind US we continue with our with our cost out roadmaps in.
We feel very comfortable with our $1 billion model.
We've put an update and a presentation project for this year, we think will be greater than $850 million.
I would also say that.
Even though the margins are lower if you will.
Look at our models for $2 50, before we had higher operating expenses in there. So we've been able to pull that back about 100 basis points.
That kind of helps offset the.
On the bottom line, we can cover a little bit of a margin pressure with Opex and then there is a favorable tax pick up too. So I think of an EPS level, where we're more than fine to our models.
The net out of everything with the kind of the ins and outs.
Yeah.
Great. That's really helpful. Kevin as my follow up question and I'll throw it out to all of you.
<unk> business continues to.
To deliver for you guys.
It's very accretive to margins and you're projecting some growth in the second half of the year.
What's the biggest driver given that.
I guess utilization rates are high right now for chip makers to supply chain is an issue for all parties involved is it upgrades as a spare parts is that the biggest driver or is it a mix of different products.
Yes so.
It's kind of all of the above I mean, certainly.
As we continue to ship more purion product to the field.
There is some level of an entitlement that goes with that right. So there is spare parts that comes with that and then at some point after the off warranty there is.
Service on the brake fix type of things.
So that there is no doubt the spare parts from utilization and more tools out there is a big piece of it but.
Upgrades is another area, where we've always.
Continue to focus on and we're having good results driving new upgrades to the field, which.
Typically tend to be very good margin events too.
The bottom line with upgrades as if.
If we can develop on we can probably sell them. So most there's not there's not a lot of third party competition upgrades. They don't have the technology or the capability to design them. So that's a part of the business that we can control. So we have in our engineering teams are continuously working on various upgrades that can improve either yield or throughput.
Are all things that the customers.
Like and that's part of the business that we're continuing to work on to grow that so it's it's really upgrades and spare parts.
<unk>.
It's not the used tools because trying to find core Z today is almost impossible. So the growth is coming in those areas.
Our two areas that are good for us Patrick in terms of the margins.
Great. Thanks, again and congrats.
Yes. Thank you.
We have no questions at this time again to ask a question. Please press zero one.
Okay.
And our next question comes from Mark Miller of Benchmark company.
Congrats again on another great quarter.
Just trying to think your tax rate went down last quarter. What are you projecting for taxes for the rest of this year.
Yes, Mark I would model.
It's 15%.
The rest of the year 15.
We've always kind of told you to hang into 2021%, but.
With this new deduction for our foreign ship product that we're getting and that's really because we've exhausted our Nols now so we can take advantage of this new deduction.
Trying to keep our tax rate down so I would model at 15%.
SG&A has gone up somewhat in the June quarter, and also for the rest of the year or is that driven more by R&D or <unk>.
I'm sorry.
Opex is growing up more than that.
Yes.
The March quarter, so that's being driven by R&D or SG&A.
Yes, it's a little above but really the full year.
We're projecting.
<unk>, 21%, so it is going to come back down.
Even though it's up a little bit in Q2 full year should be at 21%.
You look at where our models had his mark on the 850 model that we put out last December it was 21% 22% so.
We're going to hang on the lower end of that and pick up some savings.
On the Opex. So we're we're right on our models, we are executing on our model so full year flat 1%.
Okay. Thank you.
Yes. Thank you.
Our next question comes from Hans Chung from D. A Davidson.
Hi, Thank you for taking my question. So I just wanted to follow up on the gross margin.
You mentioned the big shift in the mix and can you elaborate more on that.
What was the dynamic here.
What kind of shifts.
And how should we think about.
Like is that going forward, maybe second half I know you put out there.
For your guidance, but just kind of.
Any color would be helpful.
Yes.
So on the mix side of things.
Each of the product lines carry different margin levels.
And we actually there is a.
Chart, that's in the Investor presentation that shows how the contribution level as the standard margin level.
High Energy high current median firms.
And you can say that on the Bar chart. There is there is a difference.
Very noticeable between each of those product lines. So this quarter.
Short answer is it's less high energy weighted.
And then the other thing is that impact this quarter to quarter two as the.
The mix of CSI in terms of.
How much revenue comes from from <unk>.
We don't provide a.
Gross margin on sales and I, but it's accretive to the overall bottom line margin. So.
Theres, a little more growth on the systems side this quarter versus <unk>, because it's flat with last quarter and our revenues are coming up so that puts a little bit of drag but.
As I mentioned and as you've pointed out full year before 2%.
As I mentioned with Patrick.
There is there is.
There's quite a bit of drag right now coming out of the supply chain.
We're from a 150 basis points conservatively to probably as high as 200 basis points. So that's.
That's really the bigger gross margin, starting we always have that fluctuation quarter to quarter.
It will continue that way based on mix and stuff, which is why we always try to this focus on the full year, because it tends to average out from quarter to quarter.
Got it thank you.
Thats all I have.
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 comments.
Thank you Sylvia and thank you all for joining US today, we hope to see you in a very active upcoming investor event schedule, we will be participating in the 22nd annual B Riley institutional Investor Conference in Los Angeles in May and we are participating in three conferences are in yen.
The 19th annual Craig Hallum, institutional Investor Virtual conference.
<unk> annual Cowen Technology Media and Telecom Conference in New York City, and the Stifel 2022 Cross sector insight conference in Boston.
During semicon West in July we will also be participating.
<unk> done it as well as hosting our own Astellas investor Breakfast seminar.
And we will be attending the D. A Davidson Big Sky Technology Summit in Montana in August .
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 good day.