Q2 2022 Axcelis Technologies Inc Earnings Call
[music].
We are aligned.
Good day, ladies and gentlemen, and welcome to the accelerate technologies call to discuss the company's results for the second quarter 'twenty 'twenty Chair My name is chandeliers and I will 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.
I'd like to turn the presentation over to your host for today's call Mary Puma, President and CEO of Excel technologies. Please proceed ma'am.
Thank you Sandra line.
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.
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 Safe Harbor provision Easter.
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 second quarter earnings call.
Business continues to be robust for sellers, especially in the highly implant intensive mature process technology segment.
In the second quarter, 84% of system shipments and 95% of system bookings came from this segment.
Automotive and industrial applications are extremely strong as evidenced by the growing strength in our power strength and power devices.
We recently posted a new presentation on our website on this exciting market opportunity.
We remain focused on customer satisfaction with on time shipment and installation of key metrics.
Despite the challenging supply chain and logistics environment solid execution by the fullest Seles team has allowed us to keep up with this high level of customer demand meet shipment and installation date and maintain high levels of customer satisfaction.
I'd 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 second quarter financial performance was well above our guidance.
Revenue for the second quarter was $221 $2 million with earnings per share of $1 32.
Gross margin of 44, 8% and our quarter end cash balance of $287 $9 million.
Our aftermarket business or what we referred to as CEO and I continued to contribute significantly to our revenue and gross margin see F&I revenue in Q2 was $55 $8 million.
As mentioned before the mature process technology market continues to be an area of strength for excel us with 84% of second quarter shipments going to mature foundry logic customers.
16% of shipments went to memory customers with NAND accounting for 14% and DRAM, 2%.
The geographic mix of our systems shipments in the second quarter with China, 55% U S, 16% Korea, 14%, Europe , 4%, Taiwan, 3% and the rest of the world 8%.
Visibility for 2022, and 2023 continues to be good from a demand perspective.
System bookings and shipments continued to hit record levels with significant orders for 2023 already booked as a result, <unk> now expects to achieve revenue of greater than $875 million in 2022 with gross margin of approximately 42, 5%.
For the third quarter, we expect revenue of between 220 in $228 million.
Gross margin of approximately 42% operating profit between $44 five to 47 $5 million and earnings per share between $1 10 and $1.15.
Our guidance reflects increased supply chain and logistics costs that are impacting our gross margin in a few minutes, Kevin will provide more color on the actions we are taking to mitigate these challenges.
There is currently concern in the industry around capex spending in memory and consumer related IC manufacturing for 2023.
<unk> has a strong presence in the memory segment, but we currently have limited relative exposure to memory due to the size of the implant opportunity in the mature markets.
2022 we expect to only about 20% of system revenue from the memory segment.
We have made progress in penetrating the advanced logic market, which has significant exposure to consumer IC spending we continue to work closely with customers, but we have no material exposure to the advanced logic segment in 2022 and limited exposure in 2023.
Our continued growth is being driven by the mature process technology segment, which is expected to account for approximately 80% of our system revenue in 2022.
Growth in this highly implant intensive segment, especially automotive and industrial applications.
More than double the ion implant Tam to greater than $2.25 billion in the last three years.
Howard devices are a key part of this growth and require our more advanced Purion product extensions, we expect the power segment to account for between 35 and 40% of our system 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.
As a result, we expect our business to remain strong, but we will use any slowdown in specific market segments as an opportunity to penetrate new applications with additional evaluation system and to work with customers on adoption of the more advanced Purion product extensions.
Now I'd like to turn it over to Kevin to discuss our financials and provide an operational update.
Thank you Mary and good morning.
<unk> delivered exceptional second quarter financial results, beating company guidance and consensus estimates across the board.
Favorable mix with higher gross margin and solid execution drove these positive results.
Supply chain disruption was significant in Q2.
Caused by pandemic related shutdowns nagging chip shortages and capacity.
Throughout the quarter, our purchasing and engineering teams work closely with suppliers to implement both strategic and tactical measures to address these issues.
Our manufacturing team address challenges created by material availability.
<unk> and service teams work closely with customers to <unk>.
Fab ramp plans and high utilization rates.
As Mary mentioned 2022 is on track to be another great year for <unk>.
We now expect full year revenue to be greater than $875 million.
Visibility remains good and customer demand remains strong.
Like others in the industry, we are done with similar supply chain disruption and the higher Cogs.
We try to include these anticipated challenges into our Q3 and full year guidance, but.
But the situation changes almost daily.
The only constant right now is that the industry is supply chain constrained.
We have continued to make improvements in our manufacturing capability in both Beverly and South Korea.
In the second quarter, we significantly ramp production at the New <unk> Asia operations Center in South Korea and.
And began additional projects to increase manufacturing capacity in Beverly.
These efforts will enable us to support greater than a $1 billion in revenue.
Moving to our second quarter financial results.
Q2 revenue finished at $221 2 million and above our guidance compared to $203.6 million in Q1.
Q2 assistance revenue was $165 $4 million compared to $151 8 million in Q1.
Q2, <unk> revenue finished at $55 8 million compared.
Compared to $51 8 million in Q1.
<unk> posted very strong margins in the quarter due to mix and some lower costs.
We expect Q3, <unk> revenue to be around $55 million and recommend modeling the remainder of 'twenty two two.
2022 at $55 million per quarter.
Q2 sales to our top 10 customers accounted for 66, 3% of our total sales.
Compared to 69, 8% in Q1.
Two customers were up 10% or above in Q2 the.
The same as in Q1.
Q2 system bookings were $432 8 million compared.
Compared to $315 5 million in Q1.
While the Q2 book to Bill ratio of 256 versus 2.0 in Q1.
Backlog in Q2, including deferred revenue finished at $869 5 million, a new record compared to $625 million in Q1.
Most of our customers are planning, new Fabs and expansions for 2023, and 2024, which is driving bookings out beyond one year.
Q2, combined SG&A and R&D spending was $45 million or 24% of revenue compared to $40 8 million or 21% in Q1.
SG&A in the quarter was $26 3 million with R&D at $18 7 million.
In Q3, we expect SG&A and R&D spending to be approximately 21% of revenue.
For the full year I recommend modeling SG&A and R&D spending at approximately 21% of revenue.
Gross margin was 44, 8% and well above our guidance.
Gross margin in the quarter was higher than guidance due.
To a more favorable mix of systems and higher than normal CSI margins.
We are guiding Q3 gross margin of approximately 42%.
Driven by the expected shipment of a less favorable systems mix compared to Q2.
And the increased impact of supply chain related costs.
Full year 2022 gross margin is expected to be approximately 42, 5%.
[noise], which includes.
The impact of supply chain.
And logistics headwinds.
We believe we are at the trough and should begin recovering during 2023.
We are continuously evaluating ways to help offset increased costs the customer satisfaction remains our top priority.
Outside of the higher costs I mentioned, we continued to make progress on core gross margin initiatives.
Our $1 billion model reflects continued gross margin expansion.
Driven by higher revenue from CSI.
And purion product extensions.
Incremental supply chain volume and value engineering.
Planned labor and quality improvements.
And a return to a more typical supply chain and logistics environment.
Operating profit in Q2 finished at $54 1 million compared to $48 9 million in Q1.
We are guiding Q3 operating profit between 44, five and $47 5 million.
Q2, net income was $44 $2 million or $1 32 per share compared to $41 6 million or one.
<unk> 22 per share in Q1.
We are guiding Q3 earnings per share between $1 10, and $1 <unk>.
As noted earlier, our Q3 guidance reflects the anticipated impacts on our business from supplier and pandemic related issues, but remains an evolving situation.
Driven by the timing of shipments.
Q2 inventory ended at $213 1 million compared to $203 8 million in Q1.
Q2 inventory turns excluding evaluation tools finished at $2 six compared to $2 five in Q1.
Q2 accounts payable were $49 $4 million compared to $50 8 million in Q1.
Q2 cash finished at $288 million compared to $298 million in Q1.
Driven by an increase in working capital.
In the quarter, we generated $3 $5 million of cash from operations and sell those share.
Share repurchases of approximately $12 5 million.
We have returned over $107 million of cash to our shareholders since beginning our stock repurchase programs.
This is an exciting time for accelerates with significant growth in the ion implant Tam.
Solid customer demand for our products and long term growth prospects and a power device market.
We are executing at a very high level, despite a challenging environment.
And once again I want to thank the entire team for continuing to perform at this level.
I also want to thank our supply chain partners for their hard work supporting <unk> and our customers. During these unusual times.
We have a number of projects underway focused on stabilizing our supply chain and adding manufacturing capacity.
As a result, we believe that <unk> emerge from this period with a stronger and much more resilient business.
I'll now turn the call back to Mary for closing comments.
Thank you Kevin.
It is a very interesting time in the semiconductor industry.
Concerns over a reduction in consumer in memory spending signal an industry slowdown in 2023, however, any impact on <unk> will be moderated by several factors.
Supply chain and logistics challenges continue to create a supply limited environments, where our customers likely healthy smooth over any slowdown in end user demand.
Government spending programs like <unk> chips that are globally incentivising semiconductor companies to build at.
And lastly, but very important to ask Alice is the.
Suffocation of the automotive industry.
The investments required for this long term trend a rapidly expanding the ion implant Tam and driving significant growth in our business.
The capabilities of the Purion powers series uniquely position <unk> to benefit from that.
That I'd like to open it up for questions.
Andrew Lim <unk> <unk>.
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I'm going to ask while I'm troubleshooting any wide, let's see we have Mr.
Is Mr Ho able to dial star one one.
Who asked the question.
Andrew when we can get a message. We've just got a message that said that people are getting repeated confirmed that their hand is raised and they have spoken when they've been called on but apparently we can't hear them.
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Are you able to parse your question please.
Yes.
Cracks on the nice quarter and thanks.
Thankfully, our results and outlook and speak for themselves.
Kevin maybe first off for you.
I know, it's always a challenge in this supply constrained environment.
Gil managing systems deliveries as well as the CSI business.
At the highest utilization yet at the same time they are trying to expand that capacity how are you prioritizing.
Your your your shipments are on both sides of the businesses.
Yeah. So it's a good question project is Theres no doubt theres a bit of a juggling act but.
First and foremost that we have to pay attention to customer satisfaction. So.
Priority.
Keeping the field up and running always.
It goes first.
And then system deliveries.
After that kind of a second.
You know it's.
Probably the most difficult situation in this quarter was the continuing chip shortages at we're hitting summer Oems.
But I do think some of the good news that came out of.
A couple of other companies have announced that our R. A oem's they've been talking about improving supply chain. So I.
I think if we can get.
You know the Oems back on track.
Kipp beyond Sunday chip charges, that's going to go a long ways down program things we have.
We have plenty of capacity in place right now in terms of manufacturing. So it is all about supply chain.
And then you know the costs have been escalating.
Sure.
We're paying the cost right now because we have to make deliveries, but this is going to be some work to do to start rolling back. Some of this as the situation starts to recover and commodity prices start dropping but.
So yes.
You know the the top level and customer satisfaction, so theres a tool down on the field, we gotta ended up Ryan.
That means the power has to come out of something on our shipping Dock then that's what's going to have to happen.
Great that's helpful and maybe as my follow up question for Barry obviously, the demand trends and booking trends continue to be very.
Robust and solid on a goldman accrual basis, but obviously theres a lot of market concerns out there.
You know what gives you confidence when you talk to your customers that these are.
You don't real demand and orders that were looking at for 2023 it is growing.
What gives you the confidence that the.
Some of the Bayer concerns that it's a head fake and they'll just cancel orders if need be.
I guess, what's your take on the situation.
Well you know, we stay very close to our customers and what we're talking to them constantly I just over the last couple of weeks we've had.
Discussions with two of our customers who are in the mature process technology.
Area and basically you know while they say yeah. There are certain some certain segments of their businesses that perhaps are softening a little their business.
In some of the areas that we talked about specifically automotive and industrial are very very strong and so what they're able to do is to now cover everything that David that does customers.
Specifically me. So I think everybody has to is just watching and waiting but demand remains very strong you.
You know even in the memory segment, where we understand that you announced this potentially some slowdown being driven by calling 15 in phone sales. We believe that our business is going to be steady in 2022 and into 2023.
Perhaps maybe there will be a you know again, some softening, but but the mature process technology segment is really overshadowing all of that and we have not had any push outs.
To date that has been related to any customer telling us that there has been a softening in demand.
It's very normal.
They go in and out but.
Other factors that are impacting it like a perhaps a delay in their investment or a delay in their fab construction things like that so at this point Patrick began you know we feel we feel very confident that all the trends are in place the long term trends.
Have not changed and we are very well positioned with our purion product lines. Our execution is really excellent and Kevin and the team has done a fantastic job and so you know we're very bullish about the future at this point.
Thank you very much again and congrats.
Perfect.
Thank you.
Our next question will be from Mr. Christian Schwab.
Craig Hallum.
Hey, congrats guys on the on a fabulous quarter.
And outlook.
Mike My question is you have <unk>.
Continue to have obviously very strong visibility.
Can you talk to us as far as the future bookings that are going out kind of the mix between mature nodes in silicon carbide and then a follow up to that would be you know by the end of calendar 'twenty three how many different.
Silicon carbide.
No.
Manufacturers do you think you'll be.
Selling ion implant too.
Well, we haven't we haven't given you now a forecast out for the fall bookings that we have in place. We have we have talked about our bookings for the quarter, 95% of our bookings were from mature process technology. The other 5%, obviously with her memory, but enough.
From what I know about the backlog it clearly the mature process technology continues to overshadow.
In the memory segment at this point in time and you know we've talked about how the from a Tam standpoint, 65% of the Tam is mature process technology about 22, 5% memory advanced logic is about 15%. So I think that that will give you a feel for the fact.
It is a major business for M. Ion implant is going to come from mature process technology and you know last year, 82% of our systems revenue was mature process technology. This year, we're talking about the fact that it'll be approximately 80%.
So.
Christine you'll have to read into that without any having any specific numbers, but I think the trend will continue.
The Christian Amish Doug.
The only other thing I'd add to it is that we do continue to see very strong.
Bookings from the power market.
We said we'd do.
Expect 35% to 40% of our systems revenue for the year to be coming from that segment. So.
It's that's reflective of both what the business is like right now.
Great.
Our questions. Thanks, guys. Thank you.
Our next question is from Mr. Craig Ellis with B Riley Craig.
Yeah. Good morning, Tim can you hear me.
Yeah. Good morning, Oh wonderful, thanks, and congratulations on truly stellar execution I had a couple clarifications before a bigger picture question. The first clarification.
On the calendar 'twenty two guidance for 875 million plus in revenues can you just help us understand the variables at play with respect to what the plus.
Could be caused by is it really just supply chain dynamics and if so to what extent could that be internal XL us versus versus broader issues in and if you can provide any color on magnitude that would be helpful too.
Yeah, Mary Lynne, let me take that so yeah. There is there is no doubt Greg that we've got a strong demand and I think there's probably more more customers that would take earlier deliveries versus as Mary said, we're not really seeing the push outs.
The supply chain is probably the number one challenge right now in terms of.
How much more quickly we can wrap things up although I think we've done a.
A great job, we've had significant growth year over year.
And P&L.
You know, we certainly have been getting our fair shake from our supply chain partners that are all working very hard with us. So.
I think any additional upside.
To that greater than 875 at this point.
If I said it was anything other than supply chain, then I would be disingenuous. So that's that is the the challenge right now.
Got it that's helpful. Kevin and then the second question is on the backlog so.
Very dramatic numbers said well above 850 million. My question is this is Mary.
Is the if the backlog at 12 month backlog that the company provided or does that include some of the multi year orders that you had described and to the extent you can characterize how much in backlog would be 12 months versus beyond 12 month Arthur.
Would be great.
Kevin do you want to take that yeah well.
Include everything so there is some stuff that goes all way out into 'twenty.
<unk> 2024.
I don't have the specifics of.
How much is 12 months versus whats beyond it I mean.
The majority of I'm going to say is over the next 12 months for sure, but I'm not going to tell you theres not some in that backlog desktop a little bit further.
Got it and and then finally guide given the last.
Week, we've seen one semiconductor company increased shifts view for silicon carbide three year shipments by.
1.4 billion up to 4 billion in and so the question is just as we go back and look at.
That nice Sam summary that the company provided at Semicon West.
Moving up to 2.25 billion.
In light of some of the recent developments in Silicon carbide, Jay think that Sam he really captures the magnitude is shrink coming from silicon carbide or are we starting to see trends that will put upward pressure on that 2.25 billion. Thank you.
Yeah. So.
Craig I think that the numbers that we put up later in the presentation are our current view.
We're constantly evaluating it as as cost as we talked to customers in and get their their input in terms of what their demand is but we will continually update it but but the charts that are in the presentation show our current view.
Alright got it thanks team a very good execution. Thank you.
Okay. Thanks, Craig.
And our next question will come from Mr. Tom definitely Tom <unk> with D. A Davidson.
Yeah, Good morning, and I Hope you can hear me this time yup, Ken So good yes, so Doug just following up on the last couple of questions on the power side, and obviously, we think about silicon carbide Evs, but maybe just talk a little bit about what else is driving this really strong power segment for you right now in.
In terms of either industrial or just traditional cars.
Well you know.
As.
You can look at the Investor presentation that we posted and also the one from semicon.
Automotive is is very much driving the bulk of of silicon carbide in terms of its volume. There's many other applications in smart grid applications and you know in other other industrial applications, but automotive is the biggest driver and then you know there.
There is a split between silicon RGB T type devices and silicon carbide.
That really depends on the automakers decision on what they want for for their first round of Evs.
Okay, Great and then Mary you did a good job of laying out junior minimal exposure to the advanced logic market today in the consumer but curious you. Obviously most of your mature business is driven by power and L. A b or image sensors.
But what is your exposure on the mature side to the consumer.
There's some exposure in the general mature.
Area, but again from talking to customers, while they see some potential softness in terms of consumer related devices.
Devices, they're all as I said most of them are seeing strength in some of the other areas.
At this point in time, that's actually been able to offset any weakness at our customers I see air.
So as I said, we haven't we haven't seen any.
Major impact on <unk> as a result of that are.
You know our our our order book is very strong.
Projects are booking outright MEO into 2023, and enter 2000, twenty's or as Kevin said and customers just remain.
Better tied to rich.
The general mature process technology area, specifically the power devices as Doug said are are really we.
We have question, we've had we have customers still telling us that they'd like to quote.
Border shipment dates and so again.
Things remain they remain intact and they remain quite good.
Great and then finally, Kevin when you look at the the margin guidance of Covid.
You quantify your split the adult.
Between the second and third quarter between the mix and the the supply chain the impact of the on the margin yes.
So why don't I do what I am going to do is I'm going to give you a kind of more of a full year look at this time.
Thank you.
No.
And its backend loaded so it is more it's a little bit heavier in Q3, Q4, which is which is one of the things that in the margins, but if I take a look at where I think we are in terms of.
Negative purchasing price variances and.
Much higher logistics costs.
There is there is approximately 250 basis points on the full year margins in terms of impact.
It is.
In Q3 Q4, it's a little more heavy in terms of how is heading based on when the material was bought versus the timing longer shipping tools.
But.
We're working.
We're continuing and it's hey, I want to make this point ware.
Although we've got some higher costs coming in we've also we're getting favorable cost to assist you know the favorability is being offset by the higher stuff, we're still investing in <unk>.
All the things we've talked about before.
Lean manufacturing, we've invested in the augmented reality and AI, we're still doing all the value engineering things.
You know we are taken advantage of volume so.
I feel good that you know, we haven't slowed down with our core initiatives with the product extensions that we've talked about are adding to our C&I. We bet a lot of growth in that business. So you know.
We still even though we've got some near term pressure I think we're set up very well for you know our gross margin growth that we've talked about them is higher model. So.
And I expect that cause.
As I said, where we're.
We're in a what I would say as a trough where we're at the low point right now.
And we should start working through this.
You know you're not going to state this quarter, obviously, because you already got the guidance and you've got the full year, but I would expect by the time, we get through a couple more quarters, we should start seeing things improve I think the other point I'd make too.
On our last call I believe we we had indicated that full year gross margins will be around 42%.
We brought those up about 50 basis points today of 42 and a half. So we're continuing to do everything we can on the gross margin side.
But we've also got to get material in.
If it comes down to pay it or don't get it we're fang it so that's kind of where we're at.
That's very helpful. Kevin. Thank you very much and thank you all for your time today. Thanks.
Thanks, Tom.
Our next question will be from Quinn Bolton with Needham Quinn.
Hi, guys can you hear me yes.
Kevin maybe just a follow up on the gross margin question that you just got if I do the math it looks like gross margin in the fourth quarter could be below 40% to get you to that 42, 5% for the year. So I just want to make sure that the gross margin and a 39% to 40% range is kind of what youre thinking for the fourth quarter.
Those higher material costs and the timing of when those hit the income statement yet.
I will tell you he won't.
I'm pretty sure you're not going to see a three in front of it.
You could see something with a low for those so I don't think you have to go as low as 39 point something but.
I think your math is going to take you that.
You know we could have a quarter that was slightly down from Q3, but the other thing I would say is because this is evolving.
And you know we're working hard on things.
We were able to bring back about 50 basis points since the last call and we're going to continue to focus on you know everything that's still cross dock for future shipments so.
But yeah.
Yeah, if you're modeling quit I I don't think you have that goes low order with a three in front of it but right now the math suggests what it suggests.
Got it. Thanks, Thanks for that clarification, Kevin and then I guess Mary two questions for you want on the booking strength in mature obviously is a fantastic bookings quarter was that mature strength, it's very broad based or was it driven by most likely power. If if one area was going to dominate.
Yeah, I would say a big power was clearly the strongest segment, but there was also strength there from from C. A S. In general mature so it wasn't it wasn't totally out of the power segment.
Great and then you mentioned.
In your comments about exposure to consumer not having a lot or really any advanced logic.
Exposure in 2022, but you said you you might have some in 'twenty three and so maybe I'm interpreting this wrong, but it sounds like advanced logic could be.
Maybe not meaningful but certainly.
A growth area for you as you look into 2023 that could offset some of the other pressures and in the general industry and so I guess I'm just trying to get a sense from you how meaningful are.
How much revenue do you think you might be able to generate next year from advanced logic.
Well, we talked about how.
Excuse me, we successfully closed an evaluation at an advance logic customer and we expect it to get.
Repeat orders in 2022, and so as we move into 2023 again, we expect further expansion.
In terms of orders from from that customer so.
You know the advanced logic market is it's really only about 15% of the overall implant Tam and we are just breaking into it now we're continuing to work with the other advanced logic.
We know manufacturers as well.
So at some point in time that will become more meaningful for us but at this point as we said we're really we're really just that we're just starting out.
Got it okay. Thank you.
Our next question will be from Mr. Mark Miller with benchmark Mark.
Congratulations on yet another strong quarter, our margin guidance for the year.
Incorporating this third quarter.
Looks like he'll be a significant reduction in margins in the fourth quarter I'm, just wondering what's driving that.
Yes, so it is the continuing.
Cost increases we're seeing on the supply chain side, Mark you know, we've we've actually done really well with our labor, we've done really well with factory absorption.
Obviously.
And even our or our costs for.
Warranty.
From quality furniture, making have been better. So you know the headwind right now is coming from the supply chain side and it's it's a it's a mix of higher freight costs and just higher piece part cost.
And it's you know if I broke it down one more one more time from there I would say is probably two thirds is skewed towards higher prices on parts.
With the remainder being the higher freight costs.
Again. These are all areas, we're working on we're working with our existing suppliers. They see what we can do some of these higher costs are just been because of some of the chip shortages, we've had to pay some extremely high prices to get some chips into product. So those are more discrete events.
Those will go away some of the higher cost of come because of commodity pricing for higher labor costs.
I think we are not commodities are starting to come dominance is going to take time for that the flash back through everybody's a material inventory.
But yeah. So it's it's just a continuation of what we have now with its supply chain related.
And then we did talk about mix too, we definitely have a less favorable mix in Q3.
And in our <unk>.
ER presentation, I know you're aware of it we've got the relative margins on the product line than in a high energy is obviously, our highest margins and high current and medium current or less so when our mix swings a little bit more towards those other products away from the high energy that can impact it.
So that is a that is a piece of the Q3. It is mix and the rest of the supply chain and that's a similar thing in Q4 markets pretty much the same story.
Would it be further through estimate that the supply chain was impacted margins by 150 to 200 basis points of the June quarter.
Iowa.
Oh in the June in the June quarter quarter here.
Yeah.
Unfortunately, it's not to that level it's.
Actually gotten worse in terms of our quarter to quarter and some of that again is how material was brought in on mbank consume but the higher cost material.
The cost of them that are heading more in Q3 and Q4.
Now in the current quarter.
It was it was much less.
But on a full year basis.
As I mentioned earlier.
We've got a good 250 points and on a full year basis.
And it is more backend loaded than front end loaded for sure.
In terms of how that setting.
That's right was down again this quarter, what can we should we estimate for the second half of the year for us at 15%, Yeah, I'd use 15, Mark I mean, we did start getting the benefit of.
The foreign derived intangible income tax at city deduction, we talked about so for tools that the material actually the systems that we're shipping offshore it's a 13% tax rate in those versus the standard corporate tax rate and because we've used up all our Nols, we qualified now to be able to use this other.
Sure.
The city deduction, so that's really what's bank, giving us a favorable pickup in a quarter or two are there. Some other pickup is from.
Some stock comp expense and things like that but.
I'd use 15.
If I were you the figures in 'twenty, one you're going to be way too high.
And finally Capex for June what was Capex Capex in June was $1 9 million, which was up a little bit from Q1 Q1 was a 1.5 in Q2 was one nine but still within our normal run rate of you know we run anywhere from if you go back over the last couple of years anywhere from 1 million to $3 million a quarter. So we're.
You know I guess you could argue were still on a lower end this year compared to last year.
Yep.
Yeah.
This concludes the Q&A portion of the call I will now turn the call back over to Mary Puma, who would take make a few closing remarks Mary.
Well I'd like to thank you for joining us today I'd also like to apologize for the technical difficulties that we experienced.
But in terms of future investor events, we will be participating with D. A Davidson Big Sky Technology Summit in Montana, and the Needham third annual virtual conference. Both in August we hope to see you at one of these events and thank you for your continued support.
This concludes the presentation. Thank you for your participation in today's conference call. You May now disconnect the call and again, we would like to thank you for your patience Dorn, our technical difficulties. Please have a wonderful day.
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