Q1 2024 Axcelis Technologies Inc Earnings Call
Operator: Good day, ladies and gentlemen, and welcome to the Axcelis Technologies call to discuss the company's results for the first quarter of 2024. My name is Crystal Love, and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question and answer session towards the end of this conference. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Doug Lawson, Executive Vice President of Corporate Marketing and Strategy. Please proceed.
Good day, ladies and gentlemen, and welcome to the accelerate technologies call to discuss the company's results for the first quarter 'twenty 'twenty four.
Krystal Lab: My name is Krystal lab, and I will be your coordinator for today.
At this time all participants are in listen only mode. We will be facilitating a question and answer session towards the end of this conference.
Krystal Lab: As a reminder, this conference is being recorded for replay purposes.
Krystal Lab: I would now like to turn the presentation over to your host for todays call, Doug Lawson Executive Vice President of corporate marketing and strategy. Please proceed.
Douglas A. Lawson: Thank you, operator. This is Doug Lawson, Executive Vice President of Corporate Marketing and Strategy. And with me today are Russell Low, President and CEO, and Jamie Coogan, Executive Vice President and CFO. If you have not seen a copy of our press release issued yesterday, it is available on our website. A playback service will also be available on our website, as described in our press release.
Krystal Lab: Thank you operator, this is Doug Lawson executive Vice President of corporate marketing and strategy and with me today is Russell low president and CEO and Jamie.
Russell J. Low: Cogan Executive Vice President and CFO.
Russell J. Low: If you've not seen a copy of our press release issued yesterday. It is available on our website.
Russell J. Low: Playback service will also be available on our website as described in our press release.
Russell J. Low: Please note that comments made today about our expectations for future revenues profits and other results are forward looking statements under the SEC Safe Harbor provision these.
Douglas A. Lawson: 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. Such 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. Now, I'll turn the call over to President and CEO Russell Low.
Russell J. Low: These forward looking statements are based on management's current expectations and are subject to the risks inherent in our business.
Russell J. Low: These risks are described in detail in our Form 10-K annual report and other SEC filings, which we urge you to review.
Russell J. Low: Our actual results may differ materially from our current expectations, we do not assume any obligation to update these forward looking statements.
Russell J. Low: Now I'll turn the call over to President and CEO Russell well.
Russell J. Low: Good morning, and thank you for joining us for our first quarter 2024 earnings call. We are off to a strong start to the year with first quarter financial results exceeding our forecast. Our revenue came in at $252.4 million.
Russell J. Low: Good morning, and thank you for joining us for our first quarter 2024 earnings call.
Russell: We are off to a strong start to the year with first quarter financial results exceeding our forecast at.
Russell: Revenue came in at $254 million on the bottom line earnings per diluted share were $1 57.
Russell J. Low: On the bottom line, our earnings per diluted share were $1.57, which increased 10% from $1.43 in the year-ago period. These high earnings were primarily driven by more than a 500 basis point improvement in gross margin. As a result, the product mix shipped during the period was partially offset by higher selling costs, R&D, and taxes. However, continued execution by the Axcelis team combined with strength in the implant-intensive silicon carbide-powered device segment and strong customer shipments to China enabled Axcelis to achieve this performance.
Russell: Which increased 10% from $1 43 in the year ago period.
Russell: Earnings were primarily driven by more than a 500 basis point improvement in gross margin as a result of product mix shift during the period, partially offset by higher selling costs R&D and taxes.
Russell: Continued execution by the citizens team combined with the strength of the implant intensive silicon carbide power device segment and strong customer shipments to China enabled access to achieve this performance.
Russell J. Low: Based on current booking levels and quoting activity, we expect these two trends to continue for the foreseeable future. Looking forward, our goal is to extend our lead in the power market and establish a position in advanced logic. We've focused R&D, sales, and marketing efforts on key areas critical to the next phase of growth. These include joint development engagements and the use of evaluation systems to help grow our market share. Currently, we have evaluations at customers across nearly all market segments and multiple technical customer engagements designed to improve capabilities and increase our footprint. We have the Purin Dragon, our most advanced high-current implanter, at a leading European research institute focused on advanced logic process development.
Russell: Based on current booking levels and quoting activity. We expect these two trends to continue for the foreseeable future.
Russell: Looking forward our goal is to extend our lead the power market and establish a position in bonds logic.
Russell: We are focused R&D sales in multi assets in key areas critical to the next phase of growth.
Russell: These include joined development gateways and the use of evaluation systems to help grow our market share.
Russell: Currently we have evaluations at customers across nearly all market segments and multiple checkpoint.
Russell: Customer engagements designed to improve capabilities increase our footprint.
Russell: We have the Purion Dragon and most advanced high current and Plaza.
Russell: <unk> European Research Institute spokesman advanced logic process developments.
Russell J. Low: We also have a second Pure and Dragon under evaluation with a leading advanced logic customer. These tools and the associated technical collaboration will be critical to the customer's development of the next generation of logic technology. In Japan, we continue to experience success in the power market due to the strength of the Purim Power Series, and we are engaged with multiple Japanese customers in additional market segments. Turning to our systems revenue breakdown in the quarter, and beginning geographically, China represented 59% of sales, US 17%, Japan 7%, Europe 4%, Korea 4%, and the rest of the world at 9%.
Russell: So I have a second purion dragon under evaluation with a leading advanced logic customer.
Russell: <unk> foods and the associated technical collaboration with critical customers development of the next generation logic technology.
Russell: In Japan, we continue to experience success in the power market due to the strength of the pure empower series or engaged with multiple Japanese customers and additional market segments.
Russell: Turning to our system's revenue break down the quarter and beginning geographically China represented 59% of sales U S, 17%, Japan, 7%, Europe, 4% Korea oxygen and the rest of the world at 9%.
Russell J. Low: By market segment, mature nodes, which include power devices, comprise 99% of ship systems revenue in the first quarter, with only 1% of shipments going to DRAM. Comparing this to the first quarter of 2023, where we saw 89% of systems shift revenue to mature nodes and 11% to DRAM. Breaking down the mature nodes in more detail, power continued to lead systems shipments with 55% of total systems revenue. The other general mature segment was 41%, and image sensors contributed 3%.
Russell: By market segment, which show knows which include power devices comprise 99% of ship systems revenue in the first quarter with only 1% of shipments to DRAM.
Russell: Compared to the first quarter of 2023, where we saw 18, 9% of system shipped revenue to mature nodes and 11% for DRAM.
Russell: Breaking down the mature nodes in more detail.
Russell: I'll continue to lead systems shipments with 55% of total systems revenue.
Russell: The other general mature segment was 41% and image sensors contributed 3%.
Russell J. Low: Breaking down total revenue in power a little further, of the 55% recognized in the quarter, silicon carbide and silicon IGBTs were split 76% and 24%, respectively. We continue to monitor the recovery in our end markets, specifically memory and other general mature process technologies, although the exact timing of this recovery is difficult to predict.
Russell: Breaking down total revenue.
Russell: Power a little further off the 55% recognized in the quarter.
Russell: Second carbide Silicon <unk> cheese was split, 76% and 24% respectively.
Russell: We continue to monitor that recovery in our end markets, specifically memory and other general mature process technologies.
Russell: The exact timing of this recovery is difficult to predict we expect revenue levels to increase in the second half of 2024 over our expected performance in the first half we've put power continue to be an area of strength.
Russell J. Low: We expect revenue levels to increase in the second half of 2024 over our expected performance in the first half, with power continuing to be an area of strength. We anticipate silicon carbide and silicon IGBTs will combine to represent approximately 60% of our system shipments for the second consecutive year. Our other markets are expected to strengthen in the second half, depending upon economic conditions. This will be underscored by a long-term trend for increasing demand as mature technologies are utilized in the Internet of Things, connected devices, consumer electronics, and our growing advanced electronics market.
Russell: Anticipate silicon carbide and silicon RGB piece.
Russell: Combined represent approximately 60% of system shipments the second consecutive year.
Russell: Our other markets are expected to strengthen in the second half dependent upon economic conditions. This will be underscored by a long term trends of increasing demand as mature technology to utilize it.
Russell: Things connected devices consumer electronics, and our growing advanced electronics market.
Russell J. Low: The timing of a DRAM recovery is now expected later in the year than our previous expectations, and NAND is not expected to recover until 2025, when DRAM and NAND are forecast to have a strong year. We expect China to represent 40-60% of our quarterly systems revenue, with the remaining revenue spread relatively evenly across the other geographies.
Russell: The timing of a DRAM recovery is now expected later in the year and our previous expectations and NAND is not expected to recover until 2025, and DRAM and Ned are forecast to have a strong year.
Russell: We expect China to Rick said, 40% to 60% back quoting systems have made with our remaining revenue spread relatively evenly across the other geographies.
Russell J. Low: In the power segment, in particular silicon carbide, we have developed a large and diverse customer base. We continue to win business globally from our customers as well as expand our product footprint with existing customers. The full portfolio of Purion Power Series products is valued by these customers, allowing them flexibility in both 150mm and 200mm to ramp their fabs in the most productive and cost-effective manner. FABs will often start up by establishing a core of Purin M silicon carbide tools and then adopt the use of the Purin H200 silicon carbide and Purin Xe silicon carbide systems to improve productivity, cost of ownership, and device performance.
Russell: In the power segment in particular Silicon carbide, we have developed a large and diverse customer base and we continue to win business globally from our customers as well as expanding our product footprint with existing customers.
Russell: The full portfolio Purion power series products is valued by these customers allows us flexibility at both the 150 millimeter and 200 millimeter to ramp their fabs and the most productive and cost effective manner.
Russell: Faisel often startup by establishing a core of pure <unk> power bi tools and then adopt the use of a purion H, 202nd carbide and pure <unk> second called Bae systems to improve productivity cost of ownership and device performance.
Russell J. Low: As a result, we've seen a significant increase in the adoption of pure H200 and pure Xe silicon carbide systems. Axcelis is the only iron implantation company that can deliver complete recipe coverage for all power device applications. We are considered the technology leader and the supplier of choice, providing the best product family and manufacturing capabilities. This means that using Axcelis tools provides the lowest risk path to high volume manufacturing required to support aggressive fab ramp plans. Looking ahead, we're even more excited about the upcoming years.
Russell: As a result, we have seen a significant increase the adoption of the Purion H 200, Im sure <unk> second complex systems.
Russell: <unk> the only on implementation.
Russell: And deliver complete recipe coverage for all power device applications. We are considered a technology leader and the supplier of choice, providing the best product family and manufacturing capabilities.
Russell: This means that using excels towards provides the lowest risk path to high volume manufacturing requires support aggressive fab ramp plans.
Russell: Looking ahead, we are even more excited about the upcoming several years, we will discuss this in more detail at our July 11th Investor Day.
Russell J. Low: We will discuss this in more detail at our July 11th Investor Day, but here is a quick summary of how our future growth will be driven by several fundamental industry trends. First, rapidly growing electrical power requirements for transportation, industrial, and overall energy needs will demand a significant increase in semiconductor power device capacity. Silicon carbide, silicon, and gallium nitride chips will be used in high-volume applications such as EVs, various forms of hybrid automobiles, and their charging support. Energy generation, transmission, and storage applications, including the global adoption of solar and wind power, and AI data center power requirements include generation, storage, distribution, cooling, and service.
James G. Coogan: Remember, power chips are one of the most implant-intensive semiconductor devices to manufacture, making this a strong growth driver for Axcelis. The second significant industry trend is AI. This trend will impact every device segment in the industry. First, GPU requirements will drive advanced logic processes and require significant manufacturing capacity additions. Second, in addition to the high bandwidth memory associated with each GPU, AI will drive DRAM demand beyond the AI data center, including increased PC and phone requirements.
Russell: So here's a quick summary of how our future growth will be driven by several fundamental industry trends.
Russell: Rapidly growing electrical power requirements for transportation industrial overall energy needs with demand a significant increase in semiconductor power device capacity second carbide silicon and gallium nitride chips will be used in high volume applications such as E. These various forms.
Russell: Hybrid automobiles and they're charging support energy.
Russell: And as you generation transmission and storage applications, including the global adoption of solar and wind and AI data Center power requirements include generation storage distribution tooling and service remember the power chips are one of the most implant intensive silicon device. It's a matter of fact you make.
Russell: It's a strong growth driver for <unk>.
James G. Coogan: Third, AI will generate data that will drive storage demands, including NAN requirements. Finally, AI will also drive a third wave of IoT, using sensors and connected devices as a primary source of data. This will drive capacity in image sensors, analog chips, and mature logic process nodes. AI will drive fat capacity growth in all segments, including implant, intensive memory, and IoT types of chips. At Axcelis, we're excited to play a significant role in the next wave of technological change and expect it to drive our growth for several years. Now, I'd like to turn it over to Jamie.
Russell: The second significant industry trend is AI. This trend will impact every device segment in the industry.
Russell: The GPU requirements will drive advanced logic processes are required significant manufacturing capacity additions second in addition to high bandwidth memory associated with each GPU and life will drive DRAM demand beyond the AI data center, including increased PC and filing requirements.
Russell: Third AI will generate data that will drive storage demand include NAND requirements.
Russell: Finally, I will also drive a third wave of Iot using our sensors and connected devices as a primary source of data. This will drive capacity image sensors analog chips that mature logic process nodes.
Russell: I only would drive that capacity growth in all segments, including implant intensive memory and Iot types of chips.
Russell: At <unk>, we're excited to play a significant role in the next wave of technical change and expected to drive that growth for several years now.
Russell: Now I'd like to turn it over to Jamie.
James G. Coogan: Thank you, Russell, and good morning, everyone. We are pleased with our financial results for the first quarter and look forward to a solid 2024. We are guiding second-quarter revenue of approximately $245 million, with gross margins of around 43.5 percent, operating income of approximately $47 million, and earnings per diluted share of $1.30. Looking to the remainder of the year, power is expected to remain solid throughout the year, and as Russell noted, we are monitoring the expected recovery in the other mature markets and memory.
Jamie: Thank you Russell and good morning, everyone.
Jamie: We are pleased with our financial results for the first quarter and look forward to a solid 2024.
Jamie: We are guiding second quarter revenue of approximately $245 million with gross margins of around 43, 5% operating income of approximately $47 million and earnings per diluted share of $1 30.
Jamie: Looking to the remainder of the year power is expected to remain solid throughout the year and as Russell noted we are monitoring the expected recovery in the other mature markets in memory.
James G. Coogan: Although the timing of the recovery is difficult to predict, we continue to expect revenue levels to increase in the second half of the year over our expected performance in the first half. Looking at our first quarter, revenue and earnings per diluted share finished above our guidance due to solid execution and continued demand for Purion, especially in the silicon carbide power market. Q1 revenue was $252.4 million, with system revenue at $195.4 million and CS&I at $56.9 million.
Jamie: Although the timing of the recovery is difficult to predict we continue to expect revenue levels to increase in the second half of the year over our expected performance in the first half.
Jamie: Looking at our first quarter revenue and earnings per diluted share finished above our guidance due to solid execution and continued demand for purion, especially in the silicon carbide power market.
Jamie: Q1 revenue was $250 million to $4 million with system revenue at $195 $4 million and CNI at $56 9 million.
James G. Coogan: These revenue levels reflect flat system volume and a modest decline in CS&I compared to the prior year. Q1 earnings per diluted share of $1.57 was driven by higher than expected revenues and gross margin, as well as lower overall operating expenses. This compares to earnings per diluted share of $1.43 in the prior year, which marks an increase of 10% driven primarily by MIPS.
Jamie: These revenue levels reflect flat system volume and a modest decline of <unk> compared to the prior year.
Jamie: Q1 earnings per diluted share of $1.57 was driven by higher than expected revenues and gross margin as well as lower overall operating expenses. This compares to earnings per diluted share of $1 43 in the prior year, which marks an increase of 10% driven primarily.
James G. Coogan: For the first quarter, systems bookings totaled $107 million, and we ended the period with a systems backlog of $1.1 billion. The general mature market and memory markets remain soft, but bookings and quoting activity for systems in the power segment remain solid and continue to support our revenue expectations. As a reminder, neither our bookings figures nor our backlog reflect orders associated with the CS&I portion of our business.
Jamie: By mix.
Jamie: For the first quarter systems bookings totaled $107 million and we ended the period with systems backlog of $1 1 billion.
Jamie: The general mature market in memory markets remain soft, but bookings and quoting activity for systems in the power segment remains solid and continue to support our revenue expectations.
Jamie: As a reminder, neither our bookings figures or our backlog reflect orders associated with the <unk> portion of our business.
James G. Coogan: CS&I revenue was down quarter over quarter due to lower tool utilization. Given this lower fab utilization, we are revising our expectations for CS&I revenue for the year to approximately $250 million. Q1 gross margin finished at 46%, driven by product mix, exhibiting proof that achievement of these margin levels is well within Axcelis' ability. In 2024, we expect to see a year-over-year improvement in gross margin. However, quarterly gross margins will fluctuate based on product mix.
Jamie: See F&I revenue was down quarter over quarter due to lower tool utilization.
Jamie: Given this lower fab utilization, we are revising our expectations for <unk> revenue for the year to approximately $250 million.
Jamie: Q1 gross margin finished at 46% driven by product mix exhibiting proof that achievement of these margin levels as well within <unk> abilities.
Jamie: In 2024, we expect to see a year over year improvement in gross margin. However, quarterly gross margins will fluctuate based on product mix.
James G. Coogan: We expect Q2 gross margins to moderate from the levels we saw in Q1, given the product mix for the period and the anticipated closure of several evaluation systems during the period, which typically have lower gross margins due to costs incurred during the evaluation period. We remain laser focused on margin improvement, and we are using 2024 to implement a number of actions designed to improve operational efficiency, specifically focused on gross margin. One Such action is a retirement incentive program with the realization of cost savings beginning in the second half of the year.
Jamie: We expect Q2 gross margins to moderate from the levels. We saw in Q1, given the product mix for the period and the anticipated closure of several evaluation systems in the period, which typically have lower gross margins due to costs incurred during the evaluation period.
Jamie: We remain laser focused on margin improvement and we are using 2020 forward to implement a number of actions designed to improve operational efficiency, specifically focused on gross margins.
Jamie: Such action is a retirement incentive program with the realization of cost savings beginning in the second half of the year.
James G. Coogan: It is the continued execution on these types of initiatives, the use of flexible labor by operations teams, and most importantly, our drive to reduce the cost of supplied components that provides us the confidence to file gross margin at greater than 45% over the long term. Turning to our operating expenses, the first quarter ended at 23.6% of sales. We expect OPEX as a percentage of sales in the second quarter of 2024 to be flat with the first quarter and will improve as revenue increases during the second half of the year.
Jamie: It is the continued execution on these types of initiatives the use of flexible labor by operations teams and most importantly, our drive to reduce the cost of supply components that provide us the confidence to buy a gross margin of greater than 45% over the long term.
Jamie: Turning to our operating expenses. The first quarter ended at 23, 6% of sales, we expect opex as a percentage of sales in the second quarter of 2024 to be flat with the first quarter and will improve as revenue increases during the second half of the year.
James G. Coogan: Investments in R&D for the first quarter were 10.2% and are expected to be between 9 and 10% of revenue for the year. The incremental funding for R&D will be focused on the continued development of our Purion product extensions and upgrades to strengthen our position in power and to grow our position in Japan and advanced logic. As you would expect, we will continue to tightly manage spending while continuing to support the future growth of the business by solidifying our technological advantage in the specialty market.
Jamie: Investments in R&D for the first quarter were 10, 2% and are expected to be between 9% and 10% of revenue for the year.
Jamie: The incremental funding of R&D will be focused on the continued development of our purion product extensions and upgrades to strengthen our position in power and to grow our position in Japan and advanced logic.
Jamie: As you would expect we will continue to tightly manage spending while continuing to support the future growth of the business by solidifying our technology advantage in the specialty markets.
James G. Coogan: And most importantly, continuing to invest in our employees and infrastructure to ensure we have the necessary skills, equipment, and facilities required to achieve our financial model. Moving on to our balance sheet and cash flow. We ended Q1 with $530.2 million of available cash and generated $42.2 million of cash from operations in the period. We continue to execute against our share repurchase program, buying back $15 million of stock in the quarter, and have $175 million remaining on our $200 million authorization.
Jamie: Creasing, our footprint in the memory and advanced logic markets and most.
Jamie: Shortly continuing to invest in our employees and infrastructure to ensure we have the necessary skills equipment and facilities required to achieve our financial models.
Jamie: Moving to our balance sheet and cash flow. We ended Q1 with $532 million of available cash and generated $42 $2 million of cash from operations in the period.
Jamie: We continue to execute against our share repurchase program buying back $15 billion of stock in the quarter and have $175 million remaining on our $200 million authorization.
James G. Coogan: In total, we've returned over $200 million of cash to shareholders since 2019 through our various share repurchase programs. We have a very active calendar of investor events in the coming months, including attendance at 11 conferences through the end of the year, the details of which are on our website. As a reminder, we intend to host an investor day on the morning of July 11th in San Francisco. At this event, we will present our next long-range financial model, and we look forward to seeing many of you there. With that, I will now turn the call back to Russell for his closing comments. Thank you, Jamie.
Jamie: In total we've returned over $200 million of cash to shareholders since 2019 through our various share repurchase programs.
Jamie: We have a very active calendar of investor events in the coming months, including attendance at 11 conferences through the end of the year the details of which are on our website.
Jamie: As a reminder, we intend to host an investor day on the morning of July 11th and San Francisco.
Jamie: This event, we will provide our next long range financial model and we look forward to seeing many of you there with that I will now turn the call back to Russell for his closing comments.
Russell J. Low: Jamie, Axcelis is off to a good start in 2024, and our long-term growth is achievable due to the same factors discussed last quarter. First, implant TAM has more than doubled in the last few years and is expected to continue to grow, with mature market segments representing greater than 60% of the total TAM. Second, power devices, especially silicon carbide devices, are highly implant-intensive, and the general mature nodes have increasing implant intensity, peaking at 28 nanometers.
Russell: Thank you Jamie <unk> off to a good start in 2024, and our long term growth is achievable due to the same factors discussed last quarter first the implant Tam has more than doubled in the last few years and is expected to continue to grow with mature market segments, representing greater than 60% of the total Tam.
Russell: Yeah.
Russell: Second how devices, especially silicon carbide devices are highly implant intensive and the general mature nodes have increase the implant intensity, peaking at 28 nanometers.
Russell J. Low: Third, high-value purine product extensions were designed to optimize power and image sensor device manufacturing, making Axcelis the only company of this product line capable of covering all implant recipes in these key markets. This uniquely positions Axcelis to benefit from high growth in the mature process technology market. And finally, Axcelis has strong long-term customer relationships and a fundamental cultural desire to win by making our customers successful. In closing, I want to thank our employees, suppliers, customers, and investors for your continued support and look forward to seeing you at an upcoming conference by our Investor Day. With that said, I'd like to open it up to questions. Thank you.
Russell: Third high valued purion product extensions were designed to optimize power and image sensor device manufacturing, making a <unk> only company that product line capable of covering all implant recipes in these key markets.
Russell: <unk> uniquely positions <unk> to benefit from high growth in the mature process technology markets and.
Russell: And finally, <unk> has strong long term customer relationships and a fundamental cultural desire to win by making our customers successful in closing I want to thank our employees suppliers customers and investors for your continued support and look forward to seeing you not coming conference by our Investor Day.
Speaker Change: With that I'd like to open up to questions.
Operator: Thank you. At this time, we will now conduct our question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A rough. Our first question comes from the line of Craig Ellis of B. Reilly Securities. Your line is now open.
Speaker Change: Thank you.
Speaker Change: This time, we will now conduct our question and answer session.
Speaker Change: As a reminder to ask a question you will need to press star one one from your telephone and wait for your name to be announced kiln withdraw. Your question. Please press star one again.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Craig Ellis of B Riley Securities. Your line is now open.
Craig Andrew Ellis: Good morning. Thanks for taking the question, and nice job in the quarter, guys. I wanted to start just with a higher-level question to get better insight into some of the near-term dynamics you're seeing, and I'll put it this way. If we rerun the clock three months, we would have seen a very strong fourth-quarter order profile, but early 1Q shipments that saw some pushouts. In early 2Q, we've seen softer 1Q orders, and I'm hoping you can give us some insight into what's happening with order activity. Is it stabled? Is there still a little bit more movement? And then, related to that.
Craig Andrew Ellis: Hi, good morning, Thanks for taking the question and nice job on the quarter guys.
Craig Andrew Ellis: I wanted to start just with a higher level.
Craig Andrew Ellis: <unk> to get better insight into some of the near term dynamics, you're seeing at all I'll put it this way if we rewind the clock three months, we had seen a very strong fourth quarter.
Craig Andrew Ellis: Order profile, but early <unk> shipments that saw some push outs and.
Craig Andrew Ellis: In early two Q, we've seeing softer one Q orders and I'm, hoping you can give us some insight into what's happening with order activity, if it stabilizes or still a little bit more movement, and then related to that as we look at the potential for a rise in.
Craig Andrew Ellis: Second half sales any color on linearity not looking for specific <unk> guidance, but linearity color would be helpful.
Russell J. Low: So, hey Craig, it's Russell. So, we're currently, good morning. We're currently running at a one billion run rate in the first half. You know, we are expecting a stronger second half. While we're not actually providing the four-year guidance, basically, as you know, it's just coming down to the timing and magnitude of the coming upturn, which is dependent upon market conditions. We have seen an increase in Q1 quoting activity over Q4.
Craig Andrew Ellis: So Craig it's Russell so good morning Atwood currently we're currently running at a 1 billion run rate in the first half.
Russell: We are expecting a stronger second half.
Russell: While we're not actually providing full year guidance.
Craig Andrew Ellis: Basically.
Russell: You know this is coming down to the timing and magnitude of the coming upturn.
Craig Andrew Ellis: Which is dependent upon the market conditions.
Craig Andrew Ellis: We have seen an increase in the Q1 quoting activity over Q4.
Russell J. Low: We have seen a slowing of customer pushouts and a couple, a small uptick in pull-ins. And we are fortunate to have our $1.1 billion in backlog, which, as Jamie mentioned, that's systems only. So we are expecting a second, a stronger second half with the continued improvement in the end markets that we serve.
Craig Andrew Ellis: We have seen a slowing of customer push outs and a couple of small uptick in Poland and we are fortunate to have a $1 $1 billion of backlog, which as Jamie mentioned that systems. Only so we are expecting a second a stronger second half.
Craig Andrew Ellis: With the continued improvement in the end markets that we serve.
James G. Coogan: Yeah, and when we think about the linearity of the second half recovery, you know, it is going to be a little bit weighted towards the fourth quarter, you know, Craig, and so, you know, but that is supported by, you know, strong order bookings that we already have in the ledger today, our expectations for, you know, CS&I revenue load, and, you know, we are seeing some positive indicators in the underlying markets, as Russell noted, as, you know, the sort of pace of, you know, customer requests for shipment changes has shifted from push out to more, a little bit pull in, and we know that's sort of, you know, overly anecdotal, but those are the types of indicators that we are looking at, along with the quoting activity that provide us that confidence in the uptick we are seeing in the second half.
Speaker Change: Think about the linearity of the second half recovery, there's going to be a little bit weighted towards the fourth quarter Craig.
Speaker Change: But that is supported by strong order bookings that we already have in the ledger today, our expectations for CSI revenue load.
Speaker Change: And we are seeing some positive indicators in the underlying markets. As Russell noted is that sort of pace of customer requests for shipment changes has shifted from push out to more a little bit Paul and we know thats sort of overly anecdotal, but those are the types of indicators that we're looking at along with the quoting activity that provide us that confidence in the in the uptick we're seeing.
James G. Coogan: That's really helpful, guys, and then I'll ask that follow-up question to Jamie before I hop back in the queue. Jamie, you mentioned that the company was pursuing some gross margin optimization initiatives, and you gave one specific example. Can you just talk about the magnitude and the income statement impact timing of those items that investors should look for?
Speaker Change: In the second half.
Speaker Change: That's really helpful guys, and then I'll ask a follow up question to <unk>.
Speaker Change: <unk> before I hop back in the queue. Jimmy you mentioned that the company was pursuing some gross margin optimization initiatives. When you gave one specific example can you just talk about the magnitude and.
Speaker Change: The income statement impact timing of those items that investor should show the car.
James G. Coogan: Yeah, so on the early retirement incentive, or retirement incentive, I guess I should call it, that we've offered to folks here, is going to be a second quarter event for us. You know, current estimates, it's not, you know, overly significant in terms of costs, about approximately a million and a half or so is where we're triangulating that as we speak right now. The benefit of that will accrue to us over the back half of, you know, 2024.
Speaker Change: Yes.
Speaker Change: Early retirement incentive or retirement et cetera, but I guess I should call. It that we've offered to folks here is going to be a second quarter event for us current estimates it's not over.
Speaker Change: Overly significant in terms of cost approximately a million and a half or so is where we're triangulating that as we speak right now the benefit of that will accrue to us over the back half of two.
James G. Coogan: And then ultimately, right now, that's been primarily focused on our operations team. So we would expect some benefits to accrue, you know, modest benefits through SG&A with the majority of that coming in through our cost of sales line items.
Speaker Change: <unk> 2024, and then ultimately right now thats been primarily focused in our operations team. So we would expect some benefits to accrue.
Speaker Change: Modest benefits through the SG&A with the majority of that coming in through our cost of sales line items.
Craig Andrew Ellis: Got it. Thanks, guys. I'll hop back in the queue. Thank you. Please stand by for our next question.
Speaker Change: Got it thanks, guys I'll hop back in the queue.
Speaker Change: Great.
Speaker Change: Please standby for our next question.
Thomas Robert Diffely: Our next question comes from the line of Tom Diffely of D.A. Davidson and Company. Your line is now open.
Speaker Change: Our next question comes from the line of Tom definitely at global become uncomfortable. Your line is now open.
Thomas Robert Diffely: Yes, good morning. Thank you for letting me ask a question here. Russell, I was wondering if you made a comment that the DRAM recovery was a little bit slower or projected to be a little bit delayed from what you thought previously. And I'm wondering if you're surprised by that because we're seeing a lot of silicon being used with high bandwidth memory now, and I thought that that was going to help accelerate the need for more just general capacity.
Tom: Yes, good morning, and thank you for letting me ask a question here.
Tom: So I was wondering you made a comment that the DRAM recovery was a little bit slower or project to be a little bit delayed from what you thought previously and I'm wondering if you're surprised by that because we're seeing a lot of silicon being used up with high bandwidth memory now and I thought that that was going to help accelerate the need for more just general capacity.
Russell J. Low: Hey, Tom. Yeah, thanks for the question. So yes, there's certainly a lot of news about the demand for high bandwidth memory. Regarding that, for us as an implant company, we really don't see a change necessarily in the number of steps to process that memory. So it's very much about the number of wafers processed in that case, and we will see an improvement in the utilization of memory fabs. And then, obviously, we'll see that there is an uptick in demand. But like I say, we're not a DEP or an X person taking significant new steps with that particular architectural device.
Speaker Change: Yeah, Hey, Tom Yeah. Thanks for the question. So yes, there's certainly a lot of news about the demand for hybrid high bandwidth memory.
Tom: Regarding that for us as an implant company, we really don't see a change necessarily in the number of steps to process that memory says very much about the number of wafers processed in that case.
Tom: So we will see an improvement in the utilization of memory Fabs and then obviously, we'll see.
Tom: That will have an uptick in in demand, but like I say, that's where we're not a <unk> person getting significant new steps with that said particular architectural device.
James G. Coogan: And, Tom, just to add to that, you know, in the press, there's been quite a bit of news from several of the memory companies in terms of the beginning plans for CapEx, for, you know, new expansions and new fabs. So, you know, we're starting to see that kind of activity and that kind of interest from terms of customers in the sales discussions.
Tom: Tom just to add to that in the press, there's been quite a bit of news from several of the memory companies in terms of.
Tom: At the beginning plans for.
Tom: Capex for new new expansions.
Tom: And new Fabs, so we're starting to see that kind of activity in and that kind of interest in terms of the customers and the sales sales discussions yes, we certainly can stay very close to our customers and we know from history that this particular market turns on a dime. So.
Thomas Robert Diffely: Yeah, we're certainly going to stay very close to our customers, and we know from history that this particular market turns on a dime. So we are ready should that occur, and we've been keeping very close to our customers.
Tom: So we already should that occur we and we've been keeping very close to our customers just to kind of echo some of those sentiments on the preparedness of the organization, we are making some investments incremental investments in inventory in those sort of higher turning kind of drop in orders that would come through from our memory customers and maintaining sufficient.
Russell J. Low: Yeah, just to kind of echo some of those sentiments on the preparedness of the organization, you know, we are making some investments, incremental investments, and inventory, you know, in those sort of higher-turning drop in orders that would come through from our memory customers and maintaining, you know, a sufficient level of capacity, not only to meet the expected recovery or potential recovery in the second half of the year here but also for the growth that we see in 2025.
Russell J. Low: What level of capacity not only to meet the expected recovery of potential recovery in the second half of the year here, but also for the growth that we see in 2025.
Thomas Robert Diffely: Okay, no, that's helpful. So, the recent news about softness in PCs and servers is, I guess, more apt than the longer-term projections for high-bandwidth memory ramps. So I guess the next question is, when you look at the non-power part of the ion implant business, you know, we spend so much time on silicon carbide and power, but in the other mature markets, it's still a pretty significant level of revenue versus previous cycles.
Speaker Change: Okay. Okay. That's helpful. So the recent news about softness in Pcs and servers I guess is more App then the longer term projections for high bandwidth memory ramp.
Thomas Robert Diffely:
Thomas Robert Diffely: So I guess the question is when you look at the non power part of the ion implant business. We spent so much time on silicon carbide empower.
Thomas Robert Diffely: But in the other mature markets, it's still a pretty significant level of revenue versus previous cycles curious what are the biggest end market drivers of that part of the business and when he talked about a second half recovery from a pretty good level today, what are the end markets that are driving that.
Thomas Robert Diffely: Curious, what are the biggest end market drivers of that part of the business? And when you talk about a second half recovery from a pretty good level today, what are the end markets that are driving that?
Russell J. Low: So, thanks, Tom. I think the long-term cycle remains intact.
Speaker Change: Thanks, Tom I think the long term cycle remains intact, we are in a.
Russell J. Low: You know, we are in a data-driven connected world. So, some of the items that are going to drive that general maturity are the Internet of Things. It's going to drive Mature Foundry and, obviously, the logic market. Data storage in 3D is going to drive NAND. Data analytics, AI, is going to drive DRAM and advanced logic. So, outside of the power world, which we've talked a lot about, basically, the general mature is going to be driven very much by the secular trends we see in, you know, the connected world. Yeah,
Russell J. Low: Data driven connected world. So some of the items are going to drive that general matures. The internet of things is going to drive mature foundry and obviously the logic market.
Russell J. Low: Data storage in three DS can drive NAND data analytics, the Allen is going to drive DRAM and advanced logic, so outside of the power World, which we've talked a lot about.
Russell J. Low: But basically the general mature its going to be driven very much by the secular trends we see.
James G. Coogan: Yeah, and Tom, just adding to that, you know, many of our customers in that particular market are foundry-based. And so, you know, they shift around depending on what's active in their end market. So, really looking at what they've been talking about publicly, you know, recently, it's been the beginning of some PC activity, the automotive kind of bouncing around on the bottom, and, you know, industrials kind of hanging in there a little bit. The expectation is that we really need the consumer stuff to kick back in to really drive that market quite a bit.
Russell J. Low: Sure.
Russell J. Low: The connected world.
Speaker Change: Just adding to that our many of our customers in that particular market, our foundry based and so they're.
James G. Coogan: Payer shift around depending on what's active for better end market, so really looking to what they've been talking about them publicly recently.
James G. Coogan: It's been at the beginning of some some PC activity.
James G. Coogan: Automotive kind of bounce around on the bottom and industrials kind of hanging in there a little bit by the expectation is.
James G. Coogan: Really need the consumer stuff to kick back in and to really drive that market quite a bit.
Thomas Robert Diffely: Great. Well, thank you for your time. Thank you. Please stand by for our next question.
Speaker Change: Great well, thank you for your time.
Speaker Change: Thank you please standby for our next question.
Yu Shi: Our next question comes from the line of Charles Shi of Needham and Company. Your line is now open.
Thomas Robert Diffely: Our next question comes from the line of Charles <unk> of need Ham and company. Your line is now open.
Yu Shi: Hey, good morning, Russell and Jamie. I want to ask a little bit more details on your various end markets, provided you with your breakdown for the Q1 numbers. If I compare with the full year 2023 numbers, it looks to me that silicon carbide does continue to be strong. It's at a higher revenue run rate in Q1 compared with the full year 2023. Silicon-powered devices are slightly lower in Q1, but mature FoundryLogic, which is not a power device, and mature General Semis, looks like it's tracking actually well above last year's level.
Yu Shi: Hey, good morning, Russell and Jamie.
Yu Shi: I wanted to ask a little bit more details.
Yu Shi: By your various end markets.
Yu Shi: By that that your.
Yu Shi: We will breakdown for the Q1 numbers.
Yu Shi: If I compare with with our full year corporate concrete numbers it looks to me that.
Yu Shi: Silicon carbide was.
Yu Shi: Does continue to be strong.
Yu Shi: A higher run rate revenue run rate in Q1, compared with our full year three.
Yu Shi: Sorry.
Yu Shi: Silicon powered devices.
Yu Shi: The slightly lower in Q1.
Yu Shi: But mature mature foundry logic.
Yu Shi: Which is not the power device mature general assemblies looks like that's tracking actually well above last year's level. So these are the three most important end markets for <unk> I believe I can I'll kind of walk us through whats the trend through the rest of the year for these three markets I did hear you yourself.
Yu Shi: So these are the three most important end markets for Axcelis, I believe. Can you kind of walk us through what the trend is through the rest of the year for these three markets? I did hear that silicon carbide will continue to be strong, but what about silicon power devices? Are you expecting a recovery? And the current run rate of mature General Semis, do you think it's sustainable through the rest of the year? I have a follow-up question. Thank you.
Yu Shi: Copper will continue to be strong, but what about silicon power devices are you expecting a recovery.
Yu Shi: The current run rate of mature so I may be pancakes are sustainable through the rest of the year.
Speaker Change: Thank you.
Russell J. Low: Thanks, Charles. This is Russell.
Yu Shi: Thanks, Charles This is Russell so, yes, youre right. So if you looked at last year to this year.
Russell: Power is about the same but within side of that you. Yes, you are right Silicon carbide has gone up by the same amount of silicon how has gone down.
Russell: One thing that you notice that last year, we had a sizable amount of DRAM in our business. So this year. The the reason why the global sorry. The general mature has increased is because at the moment at memory is quite low.
Russell J. Low: So yeah, you're right. So if you looked at last year to this year, the power is about the same, but within the side of that, you, yes, you're right. Silicon carbide has gone up by the same amount that silicon power has gone down. The one thing that you will notice is that last year we had a sizable amount of DRAM in our business. So this year, the reason why the global, sorry, the general mature has increased is because, at the moment, our memory is quite low. Regarding General Mature, what do you think is driving that? I think we certainly will see strong silicon carbide power in China.
Russell J. Low: Guarding.
Russell J. Low: Regarding general mature I think what is driving that I think.
Russell J. Low: We see that to continue. We have some visibility with our bookings. Regarding the General Mature, I think Doug hit that one on the head.
Russell J. Low: We certainly see strong silicon carbide power in China, we see that to continue we have some visibility of that bookings regarding the general mature I think Doug Doug hit that one head basically is consumer spending so when consumer spending picks back up and obviously, we'd love memory pickup.
Douglas A. Lawson: Basically, it's consumer spending. So when consumer spending picks back up, and obviously we'd love memory to pick up as well, you'll start to see a rise in our business, not unlike many others in our peer group. So really, we have a strong underlying business. We're kind of waiting for some of our markets to recover. And we do expect to see that happening in the second half, which is why we're forecasting the second half to be slightly ahead of the first half. And Charles
Charles: Well, you'll start to see.
Douglas A. Lawson: A rise up in that business not like not unlike many others in our peer group. So really we have a strong underlying business, we're kind of waiting for some of our markets to recover and we do expect to see that happening in the second half, which is why with forecast in the second half to be slightly ahead of the first half.
James G. Coogan: And Charles, just, you know, adding a little bit more relative to the power, one of the things we like to make sure everyone understands is the broad base of customers we have in the power industry, both in silicon carbide and in silicon. And so, you know, depending on what the car companies all decide relative to, you know, their EV, you know, plug-in hybrid strategy and so forth, we're well positioned across that supply base.
Charles: And Charles just.
James G. Coogan: Adding a little bit more relative to the power.
James G. Coogan: One of the things.
James G. Coogan: I'd like to make sure everyone understands is the broad base of customers. We have in the power both in Silicon carbide, Adam Silicon and so dependent on what the car companies all the side relative to their.
James G. Coogan: Their EV plug in hybrid strategy, and so forth, but we are well positioned across that that supply base.
James G. Coogan: And that's, you know, geographical as well. So, you know, recently it's been stronger in China, you know; a year ago, it was stronger in Europe. So it will move around depending on the end customers for those products. And the last piece is, you know, it's not just the automotive industry that's using a lot of power. As Russell said in his prepared remarks, there's a lot of activity for power devices in many other places, you know, data centers and so forth; clean energy are just a couple of good examples.
James G. Coogan: And thats geographical as well so recently, it's been stronger than in China, a year ago was stronger in Europe. So it will move around depending on the end customers for those products and the last piece is it's not just automotive thats.
James G. Coogan: There's a lot of power as Russell said in his prepared remarks, there's a lot of activity for power devices and many other places.
James G. Coogan: Data centers and so forth clean energy are just a couple of good examples.
Yu Shi: If I can follow up, well, maybe I should have asked the question a little bit more directly. When I ask about mature foundry logic, I mean anything that's standard CMOS, that's not the power devices, that's not silicon carbide.
Speaker Change: If I can just follow up.
Yu Shi: Maybe not.
Yu Shi: Sure.
Yu Shi: I ask the question a little bit more directly.
Yu Shi: What was asked about that the mature foundry logic.
Yu Shi: <unk>.
Yu Shi: Anything Thats standard Cmos, that's not in the power devices, that's not with silicon carbide.
Yu Shi: Based on the breakdown you provided, it looks like it was 41% of the Q1 revenue, right? That translates to roughly $100 million in revenue. I think that from that segment, the non-power, non-image sensor part of the mature nodes, the total revenue last year was roughly $290 million, which means the Q1 run rate from that particular segment is pretty high. My question, if I may, really is about whether this is a one-quarter phenomenon or do you expect the strength to continue throughout the rest of the year? Because I do remember you were expecting the second half growth. Some of that second half growth will come from even stronger mature standard CMOS foundry logic types of the devices, the non-power, non-image sensor type.
Yu Shi: Based on the breakdown you provided it looks like it was.
Yu Shi: 41% after Q1 revenue right that that translates to roughly $100 million of the revenue I think that from that segment that the non power non image sensor products and mature nodes.
Yu Shi: The total revenue last year was roughly 290 plus million, which means Q1 run rate from that particular segment is pretty high.
Yu Shi: So my question if I may really is about whether this is a one quarter phenomenon or do you expect this strength to continue throughout the rest of the year because I do remember you were expecting the second half growth.
Yu Shi: Some of that.
Yu Shi: Second half growth will account for an even stronger mature mature.
Yu Shi: Standard Cmos foundry logic type devices, the non power and image sensor type I, just really wanted to clarify that.
Yu Shi: I just really want to clarify that given the Q1 number. Thank you. Yeah, thanks, Charles. Sorry about that.
Speaker Change: Given that Q1 number thank you.
James G. Coogan: Yeah, thanks, Charles. Sorry about that.
James G. Coogan: The, you know, so the answer is, you know, that market is beginning to recover. If you look at all the reports from our customers and our supplier customers, you know, over this quarter, you know, all are indicating, you know, signs of recovery. So, you know, we would expect and continue to expect that the mature markets as a whole are going to account for, you know, over 90% of our total systems revenue for the year. So, whether it stays exactly where it is this quarter, it's, you know, likely to bounce around, but we would expect increasing trends into the recovery. Thanks.
Speaker Change: Yes, Thanks Charles.
Speaker Change: Sorry about that.
James G. Coogan: So the answer is that market is beginning to recover if you look at all the reports from our customers on our customer customers over this quarter all are indicating signs of recovery. So we would expect continue to expect the mature market as a whole.
James G. Coogan: We're going to account for.
James G. Coogan: Over 90% of our total systems revenue for the year, so whether it stays exactly where it is this quarter is likely to bounce around but we would expect increasing trends into a recovery.
James G. Coogan: Okay.
James G. Coogan: Thanks.
Speaker Change: Thank you please standby for our next question.
David Duley: Thank you. Please stand by for our next question. Our next question comes from the line of David Duley of Steelhead Securities. Your line is now open.
James G. Coogan: Our next question comes from the line of David Duley of Steelhead Securities. Your line is now open.
David Duley: Thanks for taking my questions. I have a couple. I get a lot of questions from investors about how the, you know, pivot from electric vehicles to hybrid might impact your business. So could you just talk a little bit about the difference in the number of steps and implant intensity for the hybrid versus the electric vehicle?
David Duley: Thanks for taking my questions I have a couple.
David Duley: I get a lot of questions from investors about how the pivot from electric vehicles to hybrid might impact your business. So could you just talk a little bit about the difference in the number of steps.
David Duley: Implant intensity for hybrid versus electric vehicles.
James G. Coogan: Yeah, Dave, you know, that's a good question. So, you know, a lot of people don't realize that hybrid vehicles have a significant amount of power chips and inverters, and I'm dating back to, you know, the original Prius. And so it depends on the car depends on the architecture, whether it's silicon, IGBT, or whether it's silicon carbide. There's probably more use of silicon IGBT in hybrids today, as costs come down, as performance requirements come up for hybrids, you know, as car companies start to look at increased range and plug-in hybrids, and these kinds of applications, then we would expect to see them looking at silicon carbide. But And so both markets are very good for, you know, implant and for Axcelis.
Speaker Change: Yeah, Dave.
David Duley: OK, so they're just different types of implant steps. They're not silicon carbide steps. They're regular standard silicon or IGBT steps.
James G. Coogan: Yeah. That's a that's a good question. So a lot of people don't realize that hybrid vehicles have a significant.
David Duley: Out of power chips, and Inverters minimum dating back to.
David Duley: Original Prius and so.
David Duley: It depends on the on the car it depends on the architecture, whether it's silicon IGT or whether it's.
David Duley: Silicon carbide, theres, probably more use of silicon.
David Duley: <unk> in hybrids today as costs come down as performance requirements come up for for hybrids.
David Duley: As car companies start to look at increased range and plug in hybrids and these kind of applications. Then we would expect to see them looking at silicon carbide, but for <unk> keep in mind, the implant intensity for all power devices, whether it's silicon or silicon carbide is very high.
David Duley: But there's still lots of intensive implant steps involved. OK. Yeah. Right. OK. Just wanted to clarify that. Thank you.
David Duley: And so both markets are very good for for implant FERC zealous.
David Duley: Okay. So they're just different type of implant steps are not silicon carbide steps the regular standard silicon right GPT steps, but theres still a lot of intensive.
David Duley: Implant steps around skin, okay, great. Okay.
David Duley: Also, you know, I've been a little curious. You know, we're on the wave of upgrading all the data centers to, you know, more compute power and AI servers. You know, and I read lots of articles about the amount of power they're going to be using through all of these new servers that are going to be deployed in the cloud and at the enterprise level. How will that impact your implant business over the long term?
David Duley: I wanted to clarify that thank you.
David Duley: Also.
David Duley: Yes.
David Duley: I'm, a little curious where on the wave of the upgrade of all of the data centers to more.
David Duley: Route power AI servers.
David Duley: I read lots of articles about amount about the amount of power they are going to be going through all of these new servers that are deployed in the cloud.
David Duley: You know, I would think there are a lot of power chips to control all this electricity that's flowing through these new AI servers. So maybe talk a little bit about how the growth in AI servers might impact the tanning market.
David Duley: Enterprise level.
David Duley: How will that impact your implant business over the long term.
David Duley: I would think theres a lot of power chips to control all of this electricity flowing through these.
David Duley: New AI servers, so maybe talk a little bit about how the growth in AI servers might impact the tail of the implant market.
Russell J. Low: Hey Dave, it's Russell.
Russell J. Low: So actually, that's an area I'm quite excited about. I was in China recently, and that was something one of the CEOs I was talking to was saying as the next opportunity. So it's not this.
Speaker Change: Hey, Davis Russell, So actually that's an area I am quite excited about I was in China recently and that was something one of the Ceos of talking to was saying is that next opportunity.
Russell J. Low: So clearly, there's lots of concern about how much power these data centers are using. So it's the generation of that power. It's the storage. That's the power of distribution.
Dave: So clearly there's lots of concern about how much our data centers using ups is the generation of that pallet storage less power distribution. That's obviously, all gonna be power devices, but I'm actually interested in the cooling pump and the servers themselves. So the wonderful thing about silicon carbide is you can run it hot service more efficiently generates.
Russell J. Low: That's obviously all going to be power devices, but I'm actually interested in the cooling part and the servers themselves. So the wonderful thing about silicon carbide is you can run it on hot air. It's more efficient. It generates less heat. And so those things are really exciting. But the crossover that we're also seeing, and it's been going on for a little while, but you might have seen yesterday in the news, Microsoft is going to invest $10 billion in renewable energy to supply these data centers. So if that goes in the direction of solar and wind, then again, that's going to all be inverters, again, which will be all power devices. So lots of power in that particular application.
Russell J. Low: Heat and so those things are really exciting, but the crossover that we're also seeing and it's been going on for a little while but you might have seen yesterday the news.
Russell J. Low: Soccer invest $10 billion in renewables to supply these.
Russell J. Low: Data centers, if that goes in the direction of solar and wind and again, that's going to all be inverters again, which will be all power devices.
Russell J. Low: Lots of power in that particular application.
James G. Coogan: So that's kind of like the backside, right? Power generation for the data farms or for the cloud data centers could be a big market. But what about the AI servers themselves? Won't they have a lot more power chips in them and therefore be more implant intensive?
Russell J. Low: So that's kind of like the back side right power generation for the update of farms or further cloud data centers could be a big market, but what about the AI servers themselves what they have a lot more power chips in them and therefore be more implant intensive.
Russell J. Low: Yeah, so it will depend on the design exactly, you know, how they do their power distribution inside the servers. So there certainly will be opportunity there. You know, as Russell said, a big piece of the opportunity comes, you know, from the full data set power in the whole data center itself and, you know, getting the clean energy there, getting the cooling that's required for these facilities and so forth. And so that's a very big piece of the opportunity.
Speaker Change: Yeah. So so it will depend on the on the design and exactly how they do their power distribution inside the servers.
Russell J. Low: So there certainly will be opportunity there.
Russell J. Low: As Russell said, a big piece of the opportunity comes from the.
Russell J. Low: The full dataset powering the whole data center itself and getting the clean energy there getting the cooling that's required.
Russell J. Low: These facilities and so forth and so that's a very big piece of the opportunity.
David Duley: Yeah, and Dave, just to kind of go on from that, so clearly, there are the power chips inside of the servers, but the cooling is a significant component of the total power usage. So whether it be gallium nitride or silicon carbide chips, they can certainly run in these applications more efficiently, generate less heat, and tolerate more heat. So that's an opportunity inside the actual data center itself.
David Duley: Yeah, and Dave just to kind of go on from there. So clearly there is the the power chips inside of the service, but the cooling is a significant component of the total power usage. So.
David Duley: Whether it be gallium nitride or silicon carbide chips. They can certainly run in these applications more efficiently generate let's say underwrite more hate so that's an opportunity inside the actual data center itself.
David Duley: Okay, I just have one clarification. You mentioned that the CSNI revenue now is going to be on a run rate of $250 million for 2024. Could you just remind me what the run rate was before?
Speaker Change: Okay. I just had one clarification you mentioned that the <unk> revenue now is going to be on a run rate of $250 million for 2024 could you just remind me what the run rate was before.
James G. Coogan: So it was estimated to cost approximately $260 million, and what we're seeing here is a little bit of moderation in utilization, which is driving that down slightly, although the team is out there working to kind of recover back to those higher numbers if possible.
David Duley: So it was.
James G. Coogan: Estimated approximately $260 million and what we're seeing here is a little bit of moderation in utilization, which is driving that down slightly although the team is out there working to kind of recover back to those higher numbers as possible.
David Duley: Okay, thank you very much. Thank you. Please stand by for our next question.
Speaker Change: Okay. Thank you much.
Speaker Change: Thank you clay standby for our next question.
Duksan Jang: Our next question comes from the line of Duksan Jang of Bank, I'm sorry, of America Security. Your line is now open.
David Duley: Our next question comes from the line of <unk>, Zhang uptake I'm, sorry of Bank of America Securities. Your line is now open.
Duksan Jang: Hi, thank you for taking my question and good morning. So it seems like the trough is pushed out a quarter. So is that the right interpretation that Q2 is going to be the bottom, and you're going to see the second half recovery. And alongside that, in this quarter's press release, we no longer see the comment that 24 is going to be a flat issue every year. Is that also the right interpretation, that it's going to be lower incrementally?
Duksan Jang: Alright, Thank you for taking my question and good morning.
Duksan Jang: I'm sorry, it seems like the trough is pushed pushed out a quarter or so.
Duksan Jang: Is that the right interpretation that Q3 is going to be the bottom and youre going to see the second half recovery and alongside that.
Duksan Jang: Sure.
Duksan Jang: This quarter's press release, we no longer see the comment that 24 is going to be flattish year over year.
Duksan Jang: Is that also the right interpretation that it's going to be lower incrementally.
James G. Coogan: Yeah, no, as we kind of said in our prepared remarks here, you know, we do continue to expect an uptick in the second half performance for 2024. As you noted, the timing and magnitude of that is going to be difficult to predict with a level of clarity and certainty. But, ultimately, we do have some second half drivers here that are going to benefit this, the continued recovery that we're seeing here in the general mature product technologies. And if that accelerates more, that'll provide, you know, incremental opportunity upside. You know, some degree of recovery in memory.
Duksan Jang: Yeah.
Duksan Jang: Yes.
James G. Coogan: Again, as we kind of said in our prepared remarks here. We do continue to expect an uptick in the second half performance for 2024 as you noted the timing and magnitude of that is going to be difficult to predict.
James G. Coogan: With a level of clarity and certainty ultimately we do have some second half drivers here that are going to benefit. This is the continued recovery that we're seeing here in the general matured product technologies, and if that accelerates more of that will provide incremental opportunity upside someday.
James G. Coogan: Some degree of recovery in the memory and then ultimately and this is probably the strongest signal. We have now is the continuation of strength that we're seeing in the power markets.
James G. Coogan: And then ultimately, and this is probably the strongest signal we have now is the continuation of strength that we're seeing in the power markets. You know, however, despite these items, you know, potentially driving lower, lower expected volume, and then what was, you know, relative to our previous expectations, we've been, you know, laser focused, as we noted on the call, in our prepared remarks on gross margins. And so, you know, despite lower volume, we do anticipate having higher gross margins in the period as well.
James G. Coogan: However, despite these items potentially driving lower lower expected volume and then what was relative to our previous expectations. We've been laser focused as we noted on the call and our prepared remarks on gross margins and so despite lower volume, we do anticipate having higher gross margins in the period as well.
James G. Coogan: Although we are making some higher investments to support those future growth initiatives, which will, you know, will help to offset or help to but will offset some of those gross margin gains. As Russell noted, again, we're on a run rate basis of about a billion dollars coming out of the first half of the year. With that second half uptick, you know, we do see revenue levels increasing in that back half of the year, and then ultimately, the split between that is probably a little bit more weighted towards the fourth quarter of the second half than it is the third.
James G. Coogan: Although we are making some higher investments to support those future growth initiatives, which will.
James G. Coogan: We will help to offset that help there, but will offset some of those gross margin gains.
James G. Coogan: Russell noted again, we're on a run rate basis of about $1 billion coming out of the first half of the year is our expectation with that second half uptick we do see.
James G. Coogan: Revenue levels, increasing in that back half of the year and then ultimately the split between that is probably a little bit more weighted towards.
James G. Coogan: The fourth quarter of the second half than it is the third.
James G. Coogan: Got it. Related to that, I think you answered in an earlier question that silicon carbide is actually seeing stronger demand than anticipated. And you know, China is doing well as well. So then is this an incremental weakness? primarily outside of silicon carbide? Is it memory and silicon in general mature node?
Speaker Change: Got it.
James G. Coogan: Related to that.
James G. Coogan: I think you answered in an earlier question that silicon carbide is actually seeing stronger demand than anticipated in China is doing well as well.
James G. Coogan: Then is this incremental weakness.
James G. Coogan: Primarily outside of Silicon carbide is it memory in silicon.
James G. Coogan: In general mature node.
James G. Coogan: Yeah, so largely memory, right, is probably where we're seeing a little bit of the, you know, where relative to our prior expectations, that's where we're seeing, you know, a little bit more weakness than we had anticipated. You know, your note on silicon carbide continues to be strong is accurate, that continues to be strong, and we expect that to be strong over the course of the year. And actually was a bright spot for us in our bookings in the first quarter, where it was, you know, really driven largely by, you know, continued strength and the power side of the business.
James G. Coogan: Yeah, So largely memory right is probably where we're seeing a little bit of the where our relative to our prior expectations Thats where were seeing a little bit more weakness than what we had anticipated.
James G. Coogan: Your note on Silicon carbide continue to be strong.
James G. Coogan: Accurate that continues to be strong we expect that to be strong over the course of the year.
James G. Coogan: Actually was a bright spot for us in our bookings in the in the first quarter.
James G. Coogan: Really driven largely by continued strength in the power side of the business.
James G. Coogan: And as we think, look at our quoting activity, we're seeing a nice, nice uptick in quoting activity, you know, through the through the first quarter timeframe, which we do expect to lead to future orders for the business in the, you know, both the second quarter and the second half of the year. And Doug, some
James G. Coogan: And as we think look at our quoting activity, we are seeing a nice nice uptick in quoting activity.
James G. Coogan: Through the through the first quarter timeframe, which.
James G. Coogan: Which we do expect to lead to future orders for the business in the both the second quarter in the second half of the year.
Douglas A. Lawson: And Duksan, just on your memory, part of that question and comment, you know, signs are very strong for a good memory year coming up in 2025. You know, everything we see with HBM using up capacity as the consumer starts to recover, PCs recover, we would expect that DRAM and NAND will see a very strong recovery, probably the strongest recovery.
Douglas A. Lawson: So I'm just newer memory.
Douglas A. Lawson: Part of that question and comment.
Douglas A. Lawson: The signs are very strong for a good memory.
Douglas A. Lawson: Coming up from 25%.
Douglas A. Lawson: Everything we see with HBM using up capacity.
Douglas A. Lawson: As consumer starts to recover Pcs recover.
Douglas A. Lawson: We would expect that DRAM and NAND world.
Douglas A. Lawson: See a very strong recovery, probably strong probably the strongest recovery.
Duksan Jang: And then a longer-term question, I know you're going to have an investor day in July and potentially you're going to update the numbers, but at least in the latest presentation, you're still rooting for the $1.3 billion model in 2025. And that essentially assumes an 18, 19% year-over-year growth, whereas the mature node wafer fab equipment market is likely going to be flattish. So what would be the drivers of this outperformance? So we...
Douglas A. Lawson: Understood.
Duksan Jang: And then a longer term question I know youre going to have an investor day in July and potentially youre going to update the numbers.
Duksan Jang: At least in the latest presentation Youre still.
Duksan Jang: Rooting for the one $3 billion motto in 'twenty five.
Duksan Jang: That essentially assumes an 18 19, 19% year over year growth.
Duksan Jang: Whereas mature node wafer fab equipment market, it's likely you're going to be flattish. So what would be the drivers of this outperformance. Thank you.
James G. Coogan: So we currently believe there's a path to 1.3 billion in the 2025 time frame. But again, it's going to depend on market conditions. So continued strength and power in China, combined with memory, you know, recovery in the mature markets are some of the key factors that will impact this timing. But we have said in the past that as the markets recover, there will be multiple paths to achieving this goal.
Duksan Jang: So we currently believe there is a path to $1 3 billion in the 'twenty to 'twenty to 'twenty five timeframe again, it's going to depend on the market conditions. So continued strength and power in China confirm at a memory recovery in the mature markets of memory some.
James G. Coogan: Some of the key factors that will impact the timing, but we have said in the past as the markets recover there will be multiple pass through to achieving this goal.
James G. Coogan: So, like you said, we're going to give more of an update on our long-term goals at July 11th Investor Day. But, you know, what's going on in the business? You know, we are seeing higher demo activity. We are seeing multiple evaluation units in the field successfully completing. And there is a high demand for the Purion product, so we are continuing to see a strong business and continue to grow as well. Thank you. Please stand by for our next question.
James G. Coogan: So like you said, we're going to give us more of an update at our for our long term goals at the <unk> Investor days.
James G. Coogan: What's going on in the business.
James G. Coogan: We are seeing higher demo activity, we are seeing multiple evaluation units in the field success.
James G. Coogan: Successfully completing and there is a high demand for Purion products. So we are continuing to see that business be strong and continued to grow.
James G. Coogan: Well.
James G. Coogan: Yeah.
Speaker Change: Alright, thank you.
James G. Coogan: Thank you please standby for our next question.
Jack Egan: Our next question comes from the line of Jack Egan of Charter Equity Research. Your line is now open.
Speaker Change: Our next question comes from the line.
Jack Egan: Tim or Jack Eagle Charter equity research. Your line is now open.
James G. Coogan: Hey guys, thanks for taking the questions. So for your strategic priorities over the past few quarters, you've mentioned expanding outside of Ion Implant, and I was just hoping to get a better idea of how you're thinking about that situation. So would this be the sort of thing where you're looking to expand into a process step that kind of adds to your core strengths like in the implant intensive markets, like power and sensing, or would it be potentially a way for you to kind of diversify your revenue base maybe into more advanced logic or memory or general boundary? I mean, I know you mentioned some initiatives to grow your share and advanced logic. So I don't know, maybe some additional color on whether that includes any kind of inorganic growth would be helpful.
Jack Egan: Hey, guys. Thanks for taking the questions.
James G. Coogan: So your for your strategic priorities over the past few quarters, you've mentioned expanding outside of ion implant and I was just hoping to get a better idea of how youre thinking about that situation. So would this be the sort of thing where you're looking to expand into a process step that kind of adds to your core strength like in the.
James G. Coogan: The implant intensive markets like power and something or would it be potentially way for you to kind of diversify your revenue base may be into more advanced logic or memory or Jen.
James G. Coogan: General boundary I mean, I know you mentioned some initiatives to grow your share in advanced logic. So.
James G. Coogan: So maybe some additional color on whether that includes kind of inorganic growth that would be helpful.
Jack Egan: Yeah, no, Jack, thanks. Thanks for the question. You know, as we think about the inorganic strategy, we're looking at, you know, a broad spectrum of potential opportunities for us to continue to find those other vectors of growth here, you know, to support our long-term initiatives. You know, it's always, you know, tricky commenting on those types of processes, you know, as we're always in the middle of, you know, going through doing our analysis and making decisions one way or another.
Speaker Change: Yes no.
Speaker Change: Jack Thanks, Thanks for the question as we think about the inorganic strategy, we're looking at at.
Jack Egan: At a broad spectrum of potential opportunities for us to continue to find those other vectors of growth here.
Jack Egan: To support our long term initiatives.
Jack Egan: It's always tricky commenting on those types of processes.
Jack Egan: It was we're in the middle of going through doing our analysis, and making making decisions one way or another so.
Jack Egan: So, you know, probably not going to get into any real specifics here on this call, but as we get closer to coming forward with opportunity sets, by all means, we'll make the necessary and proper disclosures associated with that in due time. But, you know, we do continue. What I can say is that we do continue to work through our evaluation process and, you know, trying to identify opportunities that will provide long-term value, creating opportunities for Axcelis.
Speaker Change: Probably not going to get into any real specifics here on this call.
Jack Egan: As we get closer to coming coming forward with opportunity sets by all means we'll make the necessary and proper disclosures associated with that in due time, but we do continue what I can say is we do continue to work through.
Jack Egan: Our evaluation process.
Jack Egan: And trying to identify opportunities that will provide long term value creating opportunities.
Jack Egan: So we're being very thoughtful, very deliberate as we undertake that. And then finally, you know, there is still a very significant amount of opportunity for organic growth inside of the business. And so we're making the necessary investments, as we noted in our prepared remarks, in the people, technology, and our facilities to be able to capture those organic growth opportunities as well.
Jack Egan: Opportunities for <unk> so.
Jack Egan: So we're being very thoughtful very deliberate as we undertake that and then finally.
Jack Egan: There is still there is still a very significant amount of opportunity for organic growth inside of the business and so we're making the necessary investments as we noted in our prepared remarks and the people technology.
Jack Egan: And our facilities to be able to capture those organic growth opportunities as well.
Russell J. Low: Got it. Okay, that makes sense. And so, it sounds like China is going to be the big contributor for power again, but it sounds like that mix might lean a bit more towards silicon carbide than silicon than it did last year. So are you seeing, you know, a slower build-out of silicon power, you know, relative to where it was last year in China?
Speaker Change: Got it okay that makes sense.
Russell J. Low: So it sounds like China is going to be the big contributor for power again, but it sounds like that mix might lean a bit more towards silicon carbide and silicon than it did last year or so.
Russell J. Low: Or are you seeing.
Russell J. Low: Slower buildout of Silicon power.
Russell J. Low: You know route relative to where it was last year in China.
Russell J. Low: So this is Russell. We are still seeing a lot of strength in China. I think, as Doug mentioned, we have many customers in silicon carbide in China. We actually have a broad base, and a lot of these customers have in recent years moved through the pilot phase, the R&D phase, into the higher volume phase. And you probably see, you've heard us talk a little bit about, people start with a pure-in-M silicon carbide tool, and then as they move into high volume production, they start to take the pure-in-XE silicon carbide and the pure-in-H200 silicon carbide.
Russell J. Low: So this is Russell so we are still seeing a lot of strength in trying to think as Doug mentioned, we have many customers.
Russell J. Low: In Silicon carbide in China, we haven't shipped growth pace and a lot of these customers have in recent years moved through the pilot phase the R&D phase into the higher volume phase.
Russell J. Low: You'd probably see you've heard us talk a little bit about you know people start with the Purion M. Silicon carbide tool and then as they move into high volume production. They start to take the Purion XE silicon carbide in the Purion H, 202nd carbide and we're seeing a good uptake of those tools as well as people go into high volume manufacturing and the Great News is they are highly specialized.
Russell J. Low: And we're seeing a good uptake of those tools as well as people going to high volume manufacturing. And the great news is they're highly specialized and highly differentiated as well from our competition. So that's actually another big opportunity for Axcelis. But yeah, very strong in China. They have many, many reasons to want to continue to develop silicon carbide chips.
Russell J. Low: And they are highly differentiated as well from our competition. So that's.
Russell J. Low: Another big opportunity for <unk>, yes, very strong in China. They have many many reasons to want to continue to to develop silicon carbide chips.
Jack Egan: Got it. So the silicon side, though, I mean, because I know we've heard a lot of talk about, you know, the expansion of some of that lagging-edge technology, maybe just in the general, you know, the analog, the power side on that. And so the silicon carbide, yeah, that's pretty strong. But is China the silicon business for some of that lagging-edge power that may be slowing down a bit?
Speaker Change: Got it so the silicon side, though I mean, because I know we've heard a lot of.
Jack Egan: Talk about the expansion of some of that lagging edge technology, maybe just in the general.
Jack Egan: The analog the power side on that.
Jack Egan: So the silicon carbide, yes, that's pretty strong, but the China the silicon business for some of that lagging edge power that maybe slowing down a bit.
Russell J. Low: Well, so overall, year on year, I think we kind of said that the, you know, we are approximately flat on power year on year, but the silicon carbide probably grew about 20 percent. And then you would have obviously seen the offsetting reduction in silicon power. So silicon power is certainly not nearly as strong as silicon carbide power.
Jack Egan: So overall year on year, I think we kind of said that the.
Russell J. Low: We are approximately flat on power year on year, but the silicon carbide, probably grew about 20% and then you have obviously seen the offsetting reduction silicon Silicon power is certainly not nearly as strong as the silicon carbide power, yes, So Jack one thing too.
Douglas A. Lawson: Yeah, so Jack, one thing to.. you know, to understand is that this is being driven by our customer's customers and ultimately, automakers and, and energy companies and so forth. So, Axcelis is very well positioned for both silicon and silicon carbide. So, you know, if they shift, and there's more need for hybrids for silicon IGBTs, Axcelis is very well positioned to take that. Similarly, if costs continue to come down on silicon carbide, and that continues to be the dominant choice, then Axcelis is well positioned there.
Douglas A. Lawson: To understand is that is being driven by our customer's customer and ultimately automakers and.
Douglas A. Lawson: Energy companies and so forth. So <unk> is very well positioned for both silicon and silicon carbide. So.
Douglas A. Lawson: They shift and Theres more need because the hybrids for for silicone <unk> is very well positioned to take on it.
Douglas A. Lawson: Costs continue to come down on Silicon carbide and that continues to be the dominant choice.
Douglas A. Lawson: <unk> is also well positioned there.
Jack Egan: Got it. Okay. Thanks. That's helpful. Thank you. Please stand by for our next question.
Jack Egan: Got it okay. Thanks Thats helpful.
Jack Egan: Thank you please standby for our next question.
Jonathan Dorsheimer: Our next question comes from the line of Jed Dorsheimer of Craig Hall, or, my apologies, from William Blair. Your line is now open.
Speaker Change: Our next question comes from the line of Jed Dorsch Amar Craig.
Jonathan Dorsheimer: Oh I'm sorry of William Blair. Your line is now open.
James G. Coogan: Hi, thanks for squeezing me in. So, I guess the first question: a lot have been answered, but the first question, are bookings generally aligned with revenue from a geographic distribution?
Jonathan Dorsheimer: Hi, Thanks for squeezing me in so.
Jonathan Dorsheimer: I guess first question a lot have been answered, but first question our bookings generally.
Jonathan Dorsheimer: Aligned with revenue from a geographic distribution.
James G. Coogan: Yeah, they're definitely aligned. You know, productivity, bookings, and revenue are quite well aligned. Yeah.
Jonathan Dorsheimer: Yes, they are definitely aligned connectivity.
James G. Coogan: Code activity bookings.
James G. Coogan: And revenue.
James G. Coogan: Are quite well aligned yet okay.
Jonathan Dorsheimer: Okay, and then you talk a lot about China, and I'm just curious why you haven't highlighted Japan, specifically for silicon carbide. There are large investments being made there. Historically, Tokyo Electron, I think, has been, you know, stronger as a local supplier in Logic. I'm just wondering, what are your, you know, plans? Does silicon carbide change things for you in the Japanese market? And what can you talk about in terms of activity?
Jonathan Dorsheimer: And then.
Jonathan Dorsheimer: Can you talk a lot about China.
Jonathan Dorsheimer: And I'm just curious you haven't.
Jonathan Dorsheimer: Highlighted Japan, specifically for Silicon carbide, there's large investments being made there historically Tokyo electron I think has been.
Jonathan Dorsheimer: Stronger as a local supplier.
Jonathan Dorsheimer: Logic.
Jonathan Dorsheimer: I'm just wondering.
Jonathan Dorsheimer: What are your.
Jonathan Dorsheimer: The silicon carbide change things for you in the Japanese market.
Jonathan Dorsheimer: What can you talk about in terms of activity there.
Russell J. Low: Hi Jed, this is Russell. Good question. So there are domestic suppliers of iron implantation equipment in Japan, and as you probably know, the Japanese would prefer to buy locally if they can. So with the rise in power, both silicon and silicon carbide, it's actually given us the opportunity to penetrate a number of customers in Japan because we have a full portfolio that nobody else has. So the Purion Power Series has actually been very well accepted, and we now have the full portfolio in Japan, and we're serving multiple customers.
Jonathan Dorsheimer: Hi, Jed this is Russell good question so.
Russell J. Low: Theyre, all domestic suppliers of ion implantation equipment in.
Russell J. Low: Japan as you probably know that the Japanese would prefer to buy locally if they can.
Russell J. Low: With the the rise off can empower both silicon and silicon carbide is actually given us the opportunity to to.
Russell J. Low: To penetrate a number of customers in Japan, because we have a full portfolio that nobody else has.
Russell J. Low: The Purion Palace series has actually been very well accepted and we now have the full portfolio in Japan, and we're serving multiple customers. So I think this inflection point in requiring specialized equipment to go into volume production for silicon carbide and Silicon power really has helped us because we.
Russell J. Low: So I think this inflection point of requiring specialized equipment to go into volume production for silicon carbide and silicon power really has helped us because we've been investing in this market for a long time, and we have the right product portfolio, as I mentioned, and we continue to invest in R&D to make sure we stay ahead.
Russell J. Low: With that we've been investing in this market for a long time, and we have the right product portfolio as I mentioned and we continue to invest in R&D to make sure. We stay ahead.
Jonathan Dorsheimer: That's great. And then just last question, so as you go into Analyst Day at Semicon West, it sounds like visibility is weakened a little bit in terms of, you know, there are more puts and takes in the business. What are you looking at? Is this just a function of trying to drill down with your sales team to get better confidence around, you know, where you'll be providing a longer-term outlook? What are you looking for in terms of signals going into that analyzer?
Jonathan Dorsheimer: That's great.
Speaker Change: And then just last question.
Jonathan Dorsheimer: So when you go into the.
Jonathan Dorsheimer: Analyst day at Semicon West.
Jonathan Dorsheimer: And it sounds like visibility.
Jonathan Dorsheimer: Is it weakened a little bit in terms of Theres more puts and takes in that in the business.
Jonathan Dorsheimer: What are you looking at is this just a function of trying to drill down with your.
Jonathan Dorsheimer: Odds with yourselves sales team to get better confidence around where you'll be providing a longer term outlook.
Jonathan Dorsheimer: What are you looking for in terms of signals going into that analyst day.
Douglas A. Lawson: Well, so in terms of the longer term, you know, that's right. Yeah, that that's not going to change based on, you know, a near term discussion with the with the sales guys, it's much more going to be around the products enhancements that we'll be making to support our positions in current markets of strength, how we'll penetrate other markets, you know, in terms that's what's going to drive, you know, a two to three year old model in terms of, you know, and updating any, you know, guidance for this year or things like that.
Jonathan Dorsheimer: Well so in terms of the longer term.
Douglas A. Lawson: Right yes.
Douglas A. Lawson: Yes, that's not going to change based on.
Douglas A. Lawson: Near term.
Douglas A. Lawson: Discussion with the with the sales guys. It's much more we're going to be around.
Douglas A. Lawson: Around the products enhancements that we'll be making to support our positions in current markets of strength, our penetrate other markets.
Douglas A. Lawson: In terms of that's what's going to drive.
Douglas A. Lawson: Two to three year old model.
Douglas A. Lawson: In terms of updating any guidance for this year or things like that yes, we will be looking at close indicators is what's happening with the customers.
Douglas A. Lawson: Yeah, we'll be looking at close indicators such as what's happening with the customers, you know, what we're hearing, you know, as Russell and the rest of the executive team or are with customers will be judging when they're building. You know, the visibility right now is probably like any upturn as it's about to happen. Everybody can sense it's happening. You know, you know, memory is going to fade. You just don't know which day, but you know, it's going to happen on a day. And so that's, you know, all of that kind of activity is, you know, is going on right now.
Douglas A. Lawson: What we're hearing.
Douglas A. Lawson: Russell and the rest of the executive team or our wind customers will be judging when they're building.
Douglas A. Lawson: The visibility right now.
Douglas A. Lawson: His probably like any.
Douglas A. Lawson: Upturn as it is about to happen everybody consensus App rain.
Douglas A. Lawson: No memory is going to turn you just don't know, which day, but you know what's going to happen on a day and so that's all of that kind of activity is.
Jonathan Dorsheimer: Sorry, one last question. You've mentioned memory several times, Doug, memories relatively small, what do you think memory could get to in an upturn? If I look historically, memory is still a relatively small component of the overall business, so you know, and I know it's maybe basing out now, but is there an expectation that that could get to a 200 300 million dollar business annually?
Douglas A. Lawson: He is going on right now.
Speaker Change: Sorry, one last question you mentioned memory several times Doug.
Jonathan Dorsheimer: Memory is relatively light.
Jonathan Dorsheimer: What do you what can memory get to in a upturn if I look historically memory is still a relatively small component of the overall business. So.
Jonathan Dorsheimer: And I know it may be basing out now.
Jonathan Dorsheimer: But.
Jonathan Dorsheimer: Is there an expectation that that could get to a 200 $300 million business annually.
Douglas A. Lawson: Yeah, I mean, we're not going to. We don't know exactly what the memory upturn will look like and how big it will be. You know, in the past, we've talked about the fact that there is, you know, $180 to $200 million worth of implant opportunity in 100,000 wafer start memory fabs. So, you know, it kind of depends on the process flow they're using at any given time and how big the fabs that they build and how much they add at any given time. That's what's going to determine whether we have a good content for the implant business in memory.
Doug: Yeah, I mean, we're not going to.
Douglas A. Lawson: We don't know what exactly the memory upturn will look like and how big it is in the past we've talked about the fact, there is $180 million to $200 million worth of implant opportunity.
Douglas A. Lawson: <unk> thousand wafer start memory fabs, so it kind of depends on the process flow, they're using at any given time and how big the fabs that they build and how much they add at any given time.
Douglas A. Lawson: What's going to be determined.
Douglas A. Lawson: We have a good content of <unk>.
Douglas A. Lawson: The implant business and the memories in memory cell.
Jonathan Dorsheimer: Got it. That's helpful. Thank you. Thank you. Please stand by for our next question.
Speaker Change: Got it that's helpful. Thank you.
Jonathan Dorsheimer: Thanks.
Speaker Change: Thank you please standby for our next question.
Jonathan Dorsheimer: Okay.
Jonathan Dorsheimer: Okay.
Christian David Schwab: Our next question comes from the line of Christian Schwab at Craig Hallam Capital Group. Your line is now open.
Jonathan Dorsheimer: Our next question comes from the line of Christian Schwab, Craig Hallum Capital Group. Your line is now open.
Christian David Schwab: I just have two quick questions. The first one is clarity. Are you implying that Q3 will be down quarter over quarter and then Q4 will be Chai Dorman?
Christian David Schwab: Hey, Great I just have two quick questions. First one is clarity are you, implying that Q3 will be down quarter over quarter and then Q.
Christian David Schwab: Q4 will be J dorman.
James G. Coogan: I know, no, not I would suggest what we're suggesting is the second half uptick, you know, weighted towards the fourth quarter. That's all, but not not not with that level of specificity there, Christian.
Christian David Schwab: No no no.
James G. Coogan: What we're suggesting is the second half uptick but weighted towards the fourth quarter. That's all.
Christian: Not with that that level of <unk>.
Christian David Schwab: Okay, perfect. And then a bigger picture question on getting to 1.3 next year, so I guess listening, you would expect... sustainability of Chinese domestic spending, whether it be IGBT or silicon carbide to remain at Floppy Levels, again, in calendar 24, and then some memory pickup. Am I hearing everything you're trying to convey correctly?
James G. Coogan: Specificity there Christian.
James G. Coogan: Okay, Perfect and then a bigger picture question getting to one three next year.
Christian David Schwab: So I guess with names you would expect.
Christian David Schwab: Sustainability of Chinese domestic spending whether it be <unk> or silicon carbide.
Christian David Schwab: To remain at.
Christian David Schwab: Lofty levels again in calendar 'twenty or and then some memory pickup.
Speaker Change: Hearing everything you are trying to convey correctly.
Douglas A. Lawson: Yeah, I think the other thing that's there would be the general maturity. So, you know, across the world, you know, China included, the general mature markets, you know, have been soft; we would expect those to pick up globally.
Speaker Change: Yes, I think the other other thing Thats, there would be the general mature so.
Douglas A. Lawson: Across the World China included the general mature markets have been soft we would expect those to pick up globally.
Christian David Schwab: Okay, okay. Perfect. No other questions. Thank you. Thanks, Christian. Thank you. Please stand by for our last question on today's call.
Speaker Change: Okay. Okay.
Speaker Change: Perfect no other questions. Thank you.
Speaker Change: Thanks Christian.
Speaker Change: Thank you. Please standby for our last question of today's call.
Mark S. Miller: Our last question comes from the line of Mark Miller of The Benchmark Company. Your line is now open. Thank you for the question. You indicated that you'll be closing a number of e-mails.
Christian David Schwab: Our last question comes from the line of Mark Miller of the Benchmark Company. Your line is now open.
Mark S. Miller: Thank you for the question you indicated that you'll be closing a number of emails and the <unk>.
Mark S. Miller: You have closed.
Mark S. Miller: And you will be closing in the second quarter and the second half of year, how many valves, where you have in the field and what what are there they're focused.
Russell J. Low: So I think we've said that we've got upwards of about seven evals in the field at this stage, and we're looking to close several of those by the mid-year. So that will reduce us down to the two to three type number.
Mark S. Miller: So.
Mark S. Miller: I think we've said that we've got like upwards of about 70 <unk> valve in the field at this stage, we're looking to close several of those by the mid year, so that will reduce down to the two to three type number those so as we stand the same up we basically have evaluations.
Russell J. Low: So as we stand as AMARC, we basically have evaluations across all segments of our business pretty much. So as these evals roll off, which we consider to be very successful, this builds a great relationship with the customer. It gets us qualified for a single application with a customer, and then we start to fan out. But as these ones are completed, we do actually have a list of evaluations we're looking to start in the second half of this year.
Mark S. Miller: Across all segments of that business pretty much.
Russell J. Low: So as these eval roll off which actually we consider it to be very successful. This builds a great relationship with the customer it gets us qualified for a single application with a customer and then we start to fan out but as these ones are.
Russell J. Low: Completed we do actually have a list of evaluations were looking to start.
Russell J. Low: So we continue to use evaluations as a really good strategic tool to build our business. You mentioned the pushouts were starting to ease up, but in terms of the pushouts you've seen recently, are they more related to the slow and any EV more? Sorry, Mark, what was the last part of that sentence? The push out you've seen, is it related to some slowdown in the EV market? No. So I think the pushouts have been typically general mature.
Russell J. Low: Into the second half of this year. So we continue to use evaluations is a really good strategic tool to build that business.
Russell J. Low: Okay.
Russell J. Low: You mentioned the push outs were starting to ease up in terms of the push outs, you've seen recently or are they more related to the slowing in the EV market.
Mark: Sorry, Matt was the last part of that sentence.
Russell J. Low: So.
Russell J. Low: Oh, yes, the push outs, you're saying are they related to some slowdown in the EV market.
Russell J. Low: The pull-ins, the small pull-ins I've been talking about, those actually are the EVs. We typically see silicon carbide tools getting pulled in because of the demand. But like I said, mostly it's the general mature stuff that Doug mentioned was soft. And a lot of that is people, you know, maybe it's either fab timing or project timing that begins to slow that down a little bit.
Russell J. Low: No so I think the.
Russell J. Low: Push outs have been typically general mature.
Russell J. Low: Paul is the small pull ends up and talk about those actually on the <unk>, we typically see silicon carbide tools getting pulled in.
Russell J. Low: Because of the demand, but like I said, mostly its the general mature stuff that Doug mentioned was soft and a lot of that is people.
Russell J. Low: Maybe it's either fab timing of project timing that begin to slow that down a little bit.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you for your question.
Mark S. Miller: Thank you for your question. This concludes our presentation. Thank you for your participation in today's conference. You may now disconnect. Good day.
Russell J. Low: Okay.
Mark S. Miller: Hassan. Thank you. Thank you.
Mark S. Miller: The propulsion and today's conference you May now disconnect good day.
Mark S. Miller: Okay.
Mark S. Miller: [music].
Mark S. Miller: Okay.
Mark S. Miller: Yeah.
Mark S. Miller: [music].