Q4 2024 ASML Holding NV Earnings Call - Investor Call
Speaker Change: Good day and thank you for standing by. Welcome to the ASML 2024 fourth quarter and four-year financial results conference call on January 29th 2025. At this time all participants are in a listen-only mode. After the speaker's introduction there'll be a question and answer session. To ask a question during the session you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question please press star 1 and 1.
Speaker Change: again. Please be advised that today's conference is being recorded. I would now like to hand the conference call over to Mr Jim Kavanagh. Please go ahead.
Speaker Change: Thank you, Operator. Welcome, everyone. This is Jim Kavanagh, Vice President of Investor Relations at ASO.
Speaker Change: Joining me today on the call are ASML CEO Christophe Fouquet and their CFO, Roger Dassen.
Speaker Change: The subject of today's call is ASML's fourth quarter and full year of Results 2024.
Speaker Change: The length of this call will be 60 minutes and questions will be taken in the order that they are received.
Speaker Change: This call is also being broadcast live over the internet on www.ASML.com.
Speaker Change: A transcript of management's opening remarks and a replay of the call will be available on our website shortly following the conclusion of this call.
Speaker Change: Before we begin, I would like to caution listeners that comments made by management during this conference call will include forward-looking statements within the meaning of the federal security source.
These forward-looking statements involve material risks and uncertainties.
Speaker Change: For a discussion of risk factors, I encourage you to review the Safe Harvest Statements contained in today's press release and presentation, found on our website.
Speaker Change: at www.asml.com and in ASML's annual report on Form 20-F and other documents as filed with the Securities and Exchange Commission.
Speaker Change: With that, I would like to turn the call over to Christophe Fouquet for a brief introduction.
Christophe Fouquet: Thank you, Jim. Welcome, everyone, and thank you for joining us for our fourth quarter and full year 2024 Resource Conference Call.
Speaker Change: Before we begin the Q&A session, Roger and I would like to provide an overview and some commentary on the fourth quarter and full year 2024 results, as well as provide some additional comments on the current business environment and on our future business outlook.
Speaker Change: Thank you, Christophe, and welcome everyone. I will first review the fourth quarter and fully year 24 financial accomplishments and then provide guidance on the first quarter of 2025.
Let me start with our fourth quarter accomplishments.
Speaker Change: In the fourth quarter of 2024, total net sales were €9.3 billion, which is above the high end of our guidance, primarily due to install-based revenue.
Speaker Change: As expected, it also includes revenue recognition on two HiNAE systems.
Speaker Change: Net system sales were at 7.1 billion euros, which includes 2.9 billion euros from EUV sales and 4.2 billion euros from non-EUV sales.
Speaker Change: Net system sales was driven by logic at 61% with the remaining 39% coming from memory.
Speaker Change: Insol base management sales for the quarter were above guidance at 2.1 billion euros, primarily driven by additional upgrade business.
Speaker Change: Of course, margin for the quarter was above guidance at 51.7% due to a combination of additional upgrade business and lower than planned costs associated with the new product introduction of high E&A systems in the field.
Speaker Change: On operating expenses, R&D expenses came at 1.116 billion euros in line with guidance, while FG&A expenses came in above guidance at 318 million euros due to year-end payroll adjustments and a pull-in of IT costs.
Speaker Change: The effect of tax rates Q4 was 21.5% as a result of a one-off tax expense related to a historic tax position, bringing the full-year ETR to 18.6%.
Speaker Change: 2025, we expect an annualized effective tax rates of around 17%.
Thank you.
Speaker Change: Net income in Q4 was 2.7 billion euros, representing 29.1% of total net sales, and resulting in an EPS of 6.85 euros.
Speaker Change: Turning to the balance sheet, we end the fourth quarter with cash, cash equivalents and short-term investments at a level of 12.7 billion euros.
Speaker Change: We end at Q4 with a free cash flow of 8.839 billion euros which is significantly higher relative to the last quarters with the majority of cash coming in at the very end of the quarter.
Speaker Change: Moving to the order book, Q4 net system bookings came in at 7.1 billion euros, which is made up of 3 billion euros of EUV and 4.1 billion euros of non-EUV.
Speaker Change: Net system bookings in the quarter were driven by logic with 61% of the bookings with memory accounting for the remaining 39%.
Speaker Change: At this point, I would like to briefly comment on the reporting of our bookings going forward.
Speaker Change: As we have said in the past, our order flow on a quarterly basis can be lumpy and does not necessarily reflect our business momentum accurately.
Speaker Change: Our sales guidance is primarily based on being able to work with all our customers as part of our planning cycle.
Speaker Change: With this in mind, we will continue to report bookings on a quarterly basis through 2025, but will no longer report on bookings thereafter.
Speaker Change: As of 2026, we will report the total systems backlog on an annual basis.
Thank you for watching!
Speaker Change: Looking at the full year, net sales came in at 28.3 billion euros with a gross margin of 51.3 percent.
Speaker Change: EUV system sales realized from 44 systems including INA were 8.3 billion euros, 9% lower compared to 2023.
Speaker Change: DPV system sales grew 4% to 12.8 billion euros. Ometrology and inspection system sales increased 20% to 646 million euros.
Speaker Change: Looking at the market segments for 2024, logic system revenue was 13.2 billion euros, 17% lower than 2023.
Speaker Change: Memory system revenue was 8.6 billion euros, 44% higher than 2023. And then sold days management sales were 6.5 billion euros, 16% higher than 2023.
Speaker Change: We conclude 2024 with a net systems backlog of around 36 billion euros.
Thank you.
Speaker Change: In 2024, we continue to invest in innovation across our full product portfolio, increasing R&D spending to €4.3 billion in 2024, or about 15% of sales.
Speaker Change: As G&A increased to 1.2 billion euros in 2024, which was about 4% of sales.
Speaker Change: Net income for the full year was 7.6 billion euros, 26.8% of net sales, resulting in an earnings per share of 19.25 euros.
Speaker Change: In 2024, we generate a free cash flow of 9.1 billion euros.
Speaker Change: We return 3 billion euros to shareholders through a combination of dividends and share buybacks in 2024.
Speaker Change: With that, I would like to turn to our expectations for the first quarter of 2025.
Speaker Change: We expect our Q1 install base management sales to be around 2.1 billion euros.
Speaker Change: Gross margin for Q1 is expected to be between 52 and 53 percent.
Speaker Change: This is primarily driven by a positive effect from no high in a revenue recognition in the quarter partly offset by lower immersion volume
Speaker Change: The expected R&D expenses for Q1 are around 1.14 billion euros and SG&A is expected to be around 290 million euros.
Speaker Change: In Q4, ASML paid the second quarterly interim dividend over 2024 of 1.52 euros per ordinary share.
Speaker Change: Ismael intends to declare a total dividend for the year 2024 of 6.4 euros per ordinary share.
Speaker Change: The third interim dividend of 1.52 euros per ordinary share will be made payable on February 19, 2025.
Speaker Change: Recognizing this third interim dividend and the two interim dividends of 1.52 euros per ordinary share paid in 2024, this leads to a final dividend proposal to the general meeting of 1.84 euros per ordinary share.
Speaker Change: In Q4 2024, no shares were purchased. With that, I would like to turn the call back over to Christophe.
Christophe Fouquet: Thank you, Roger. As Roger has highlighted, we finish 2024 with a strong quarter.
Speaker Change: We are extremely thankful to the whole ASML team that worked very hard to realize these results.
Speaker Change: In 2024, we have also successfully achieved a number of technology milestones, including the release of a number of new products critical for our customer technology on-premise.
Speaker Change: On our low NA EUV technology, the NXE3800E, we demonstrated the full system specification in our factory with 220 wafers per hour throughput at a new record overlay.
Speaker Change: We are on track to deliver a new system at full specification and start upgrades for the system already at our customer during the first half of 2025.
Speaker Change: We continue to work with our customers to drive the maturation of the system to support their ramp to high-volume manufacturing.
Speaker Change: On INA-EUV, we completed installation and customer acceptance on two systems in Q4.
Speaker Change: Customers have now run over 10,000 wafers on INA system and their feedback has been very positive.
Speaker Change: They are seeing major performance benefits in imaging, overlay, and contrast, which also provide significant cost reduction opportunities for both logic and NeurAMP processes.
Speaker Change: We continue to work with our customers to define the exact insertion point for INA in their processes.
Speaker Change: We also shipped a third system in Q4 that is now undergoing install and qualification.
Speaker Change: On DeepUV, we shipped the first NXT870B, the latest generation KRF system, capable of throughput of over 400 UFR per hour.
Speaker Change: and the NX-T2150i, the latest generation immersion DPV system, capable of achieving throughput over 310 WPH and overlay performance of equal or less than 1 nm.
Speaker Change: Finally, in application, after close collaboration with multiple customers, we have successfully completed the evaluation and recognized first revenue from a number of eSCAN 1100 multi-beam inspection systems.
Speaker Change: All in all, our product pipeline is pretty strong, supporting the roadmap requirements of our customers and driving our overall competitiveness.
Speaker Change: We will share more performance data at the SPIE lithography conference in February.
Speaker Change: Looking to 2025, we see full-year revenue between €30 billion and €35 billion, and gross margin between 51% and 53%.
Speaker Change: Consistent with our view from last quarter, artificial intelligence has become the key driver for growth in our industry at this moment.
Speaker Change: As we have witnessed in 2024, AI has created a shift in the market dynamics that is not benefiting all customers equally in the short term.
Speaker Change: If AI demand continues to be strong and customers are successful in bringing on additional capacity online to support that demand, there is a potential opportunity towards the upper end of our range.
Speaker Change: On the other hand, there are also risks related to customers and geopolitics that could drive reserves towards the lower hand of the range.
Speaker Change: Looking at market segments, we currently expect logic to be up versus 2024 with the ramp of leading edge nodes while we expect memory to remain strong similar to 2024.
Speaker Change: With respect to our install-based business, we expect revenue to grow versus 2024, driven by both service and upgrades, as part of a growing install base, to which EUV contribution is continuing to grow.
Speaker Change: Our China business in 2023 and 2024 was relatively high because of our ability to execute on the backlog that was created after low order fill rates in previous years.
Speaker Change: For 2025 and beyond, we expect our China business to go back to a more normalized percentage of our sales.
Speaker Change: Looking longer term, overall the semiconductor market remains strong with artificial intelligence creating growth but also a shift in market dynamic as I highlighted earlier.
Speaker Change: These dynamics will lead to a shift in the mix of end-market products towards more HPC and HPM, which requires more advanced logic and DRAM.
Speaker Change: For ASML, we anticipate that an increased number of critical lithography exposure for these advanced logic and memory processes will drive increasing demand for ASML products and services.
Speaker Change: As a result, we see a 2030 revenue opportunity between €44 billion and €60 billion, with gross margin expected between 56% and 66%, as we presented in the Investor's Day 2024.
With that, we would be happy to take your questions.
Thank you, Ray and Christophe.
Speaker Change: Robert Bearder will now instruct you all momentarily on the protocol for the Q&A session.
Speaker Change: Before, I would like to ask you to kindly limit yourself to one question with one short follow-up, if necessary.
Speaker Change: This will allow us to get through as many callers as possible.
Speaker Change: Operator, could we have your final instructions and then the first question, please?
Speaker Change: Thank you. As a reminder to ask a question you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question please press star 1 and 1 again.
Speaker Change: We will now go to the first question. One moment please.
Speaker Change: And the first question comes from the line of Joe Kutracki from Wells Fargo. Please go ahead.
Joe Kutracki: Yeah, thanks for taking the question. I had a question on your 2025 outlook. You know, you mentioned that
Joe Kutracki: if customers are able to build a capacity for AI, then you think you could hit the high end of your revenue guide. I guess, how do we think about that relative to your lead times? I know you've pre-built some EUV tools, but shouldn't we have a pretty decent idea kind of in the first half of this year if that?
as a target guide is possible.
Joe Kutracki: Well, I think, you know, as we go into the year, I think that we'll have indeed more visibility on what the final expectation is going to be.
Joe Kutracki: I think right now we are, in our supply plan, taking into account some of the upside we see, so we are preparing for that. And I think you're getting it right. As time goes and these opportunities become more concrete or less concrete, we will decide to build or not build those stores.
Thank you.
Speaker Change: Okay, that's helpful. And then in terms of the gross margin dynamics.
Speaker Change: You know, the cost of high-end A installs this past quarter was a bit lower than expected. You know, as we look in the second half, and you talked about, you know, gross margin maybe being a little bit higher in the first half, how do we think about the expectations of just the cost of installing those tools?
Speaker Change: In the first half relative to the kind of outperformance that you saw this past quarter. Is there any kind of update there?
Joe Kutracki: Yeah Joe, so indeed the costs were a little bit lower in the last quarter.
Speaker Change: But, you know, in coming up with our projections for, you know, for 2025, I would say that those learnings are also embedded in there.
Speaker Change: So we are recognizing in 2025 that we have lower costs. So I would still see that as a one-off benefit to the quarter. I wouldn't necessarily read into that that we're going to have significant savings that were not recognized when we provided the 51 to 53 percent guidance.
Speaker Change: So, but you are right, in the second half we did say that we expect the growth margin to be a little bit lower because the revenue recognition on high day is thought to be skewed towards the second half.
Thank you.
Thank you.
Speaker Change: Your next question comes from the line of Tammy Q from Berenberg, please go ahead.
Hi, thank you for taking my questions.
Sadly, I'm high MA.
Speaker Change: Since CMD you have been mentioning that the progress at customers has been ahead of where you were expecting. So currently of course you are negotiating with them the time frame etc but can you comment if there is any potential for them to use it quicker because that helps them saving the cost of manufacturing?
Christophe Fouquet: This is Christophe. So I think that, you know, there's a few conditions for customers to use a new tool like INA.
Christophe Fouquet: The first one is the one you repeated, which is, you know, the performance have to be attractive, have to be good. I think that's most probably one requirement we check at this point of time.
Christophe Fouquet: The second one is going to be the maturity of the platform, and there, as you know, we typically try to ship a few early tools. These are our 5,000, so that we can start to work aggressively on maturity.
Christophe Fouquet: We are going to start shipping the 5200, which is a tool more fit to high-volume manufacturing.
Christophe Fouquet: And then we'll have to spend a bit of time to demonstrate that the majority of the research that customer are comfortable to use it in production. So that process typically takes 12, 18 months, depends a bit on, you know, where we start with the tool.
Christophe Fouquet: and you know the discussion is a discussion we have I would say on a regular basis because again depending on the progress of course the appetite to move faster or slower is going to be adjusted.
Speaker Change: China, I noticed that they have been kind of pulling in some of the
Speaker Change: orders, maybe because of the pending U.S. restriction, which is supposed to be implemented quite soon.
Speaker Change: I'm in the new wave. Do you actually see your customer pulling in their order? As a result, do you see China order decline quicker in the coming months because of everything has been pulled in? And also, I know that you mentioned in the pre-recorded video that China was
Speaker Change: China's participation on US and has been falling into expectation. So do you think there is potential for China to have some downside or upside in this year as you have everything clear to you versus three months ago?
Speaker Change: I think, to be honest, our view on China hasn't really changed in comparison to when we last spoke, right? So when we last spoke, we said...
Speaker Change: The key dynamic on China is that, and why China was so very strong in, you know, 2023 and 2024 now, because what is, for a number of years we have been building up a very significant backlog because of all the fill rates for China was so low.
Speaker Change: That is the reason why, you know, the China sales in 2023 and 2024 was so high.
Speaker Change: and that is also the reason now that you know around this point in time where we have you know eaten significantly into that backlog
Speaker Change: We say that backlog is being normalized and that also means that we believe that the sales to China will be a more normalized percentage and as we said, we think that is a low 20% number that China will represent in 2025 in our total sales numbers.
Speaker Change: So that is what is going on. You know, the order intake that we received from China in the fourth quarter, I would call it healthy, but it's not an order intake that is in any way dramatic or skewed or whatever. That's not the case. It is, again, a relatively normal order intake for China. And therefore, I think the expectation that we articulated last time, China to be a more normalized percentage of our sales, I think that's what you will see.
in 2025, and frankly beyond.
Thank you.
You're welcome. Thank you.
Speaker Change: Your next question comes from the line of Sarah Russo from Bernstein, please go ahead.
Sarah Russo: Thank you very much for taking my question. So we've had quite a few conversations around your decision to phase out bookings information and as we understand it only provide a backlog view annually. Can you talk us through the decision to do that and I guess what are you expecting to be the reaction from investors and is this a response to the increased focus you've been seeing on bookings that seems to be taking place over the last 12 to 18 months?
I think we explained it in the video.
Sarah Russo: guidance. It's really based on the review process that we have with our customers. We have ongoing dialogues with our customers.
Sarah Russo: And based on that, you know, that gives us the insight into their business and that gives us the basis to then articulate at the start of the year what we think the total sales level for the year is going to be.
Sarah Russo: As you've seen in previous quarters, and as we have highlighted multiple times, order intake can be very lumpy, and that is because, you know, the total size of the orders per customers are pretty significance, you know, given the tool prices for high-in-a-tools, for low-in-a-tools which, you know, are pretty substantive. Now, let's move on to the next question.
Sarah Russo: You know, if customers take a number of tools, which they typically do, you get to very, very high numbers.
Sarah Russo: And that means that you have, if you have a few large customers that place an order in one quarter, you know, they typically wouldn't do it in one quarter and then get another massive order intake in the quarter thereafter. So as a result of that, you see sometimes very high order intake.
Sarah Russo: in one quarter and then lower order intake in other quarters. That does not necessarily reflect the business momentum that we enjoy.
Sarah Russo: and that's why we think that the market is better off.
Sarah Russo: with us having a robust discussion and a robust, robustly underpinned guidance that we provide at the beginning of the year. We think that is more meaningful than these, you know, these swings in the order pattern that you've seen before.
Sarah Russo: If you look at the past quarters, you do see that the market looks at these orders and sometimes the reactions, both in terms of positive and in terms of negative order intake, the reactions can be quite significant.
Sarah Russo: And that has been the reason that we say, we have been telling the market that order intake is lumpy, we have been saying that it doesn't necessarily reflect the business momentum accurately.
but we do see very significant market response to it.
Sarah Russo: And as a result of that, we have reached a conclusion that maybe the market is better off with what I just gave you, including an annual update of the backlog.
Sarah Russo: From that regard, we came to the conclusion that less is actually more. You know, this is something that we discussed with quite a few of you. When we had the investor day, we discussed this quite extensively with many investors.
Sarah Russo: And, you know, the conversations that we had there gave the confidence to Christophe, myself, and the full team that the decision that we just took is the right decision for the company and for its stakeholders.
Sarah Russo: Thank you for joining us. Have a great day. Bye. Bye. Bye.
Sarah Russo: What we said last time is indeed that we needed about 2 billion of EUV orders to get covered for EUV on the midpoint of 2025. So with the 3 billion that we have in there, we've reached that point. So it's clear that we're either starting to build on 26 or we're starting to build into
Sarah Russo: On DPV we're not yet fully covered, but I think the coverage there is quite high for the midpoint of the guidance as well.
Sarah Russo: But, you know, as also Christophe mentioned, of course, there are always timing issues and customers always have the ability, you know, during a year to either pull in or push out from the last quarter.
Great, thank you very much.
Welcome.
Thank you.
Speaker Change: Your next question comes from the line of François Bovigny from UBS. Please go ahead.
Speaker Change: Thank you very much. My first question is, you see a strong demand for EUV logic driven by AI, Christophe, you mentioned in your video, presumably mainly from one large customer. How do you think about the capacity of 2nano, you know, given it's going to be potentially a very significant node, could we see a front-loaded capacity build in a way that 25 will be a big build to prepare for 26?
Speaker Change: So, in other words, I mean, how do you think about the phasing of this strong node as first year could be bigger and then you add on, you know, a bit less in 2026-27, or is it going to be really a granular buildup?
Speaker Change: Well, I think first of all, as you know, we don't have the details of our customer ramp fully.
Speaker Change: The other thing we mentioned in our commentaries is we see that maybe there is an opportunity to ramp a bit faster if the demand remains strong. So I think that's another discussion we're having with the advanced logic customer. But I think we don't see any kind of pattern that you described.
Speaker Change: And Francois, this was actually also confirmed by CCUA on the call that they had, so he made specific comments on the RAMP profile of N2, so you might want to refer to that as well.
Thank you.
Do you think it's...
Speaker Change: You know, AI is big enough to offset some downside in the, you know, if we see downside on the iPhone, at least in the short term, because in the long term, you describe at your CMD that, you know, it's centralizing, but I was more wondering in the short term, so 25, 26.
You know, the dynamic of high AI and science.
slower smartphones.
Speaker Change: Well, I think in the short term, I think that we try to explain also with the upsides. I think that the demand is strong to
Speaker Change: to really drive, I would say, the utilization of whatever capacity would be built initially on advanced logic.
Speaker Change: I think, by the way, this will not be fully or so mostly dedicated to AI. So I think, yes, the rest of the market is not doing spectacular, but it's still there. I think that.
Speaker Change: I will also refer to the TSMC call where they were pointing also for the first time to some recovery on mobile.
Speaker Change: So I think nothing is spectacular there, but you know, as you go for the ramp and you know that the ramp will build up capacity over time, so you don't get the peak capacity before quite a bit.
Speaker Change: I think we think this part is solid at this point of time. So we see more upside than risk, at least with all the elements we have at hand.
Great, thank you very much.
You're welcome.
Thank you.
Speaker Change: Your next question comes from the line of Chris Sanker from TD Cowan. Please go ahead.
Chris Sanker: Yeah, thanks for taking my question. Christophe or Roger, the first question on the decline in China's sales from...
Speaker Change: and I repeat what I just said on China. I think this is the main reason why we're looking at a normalized percentage for China is the reason that I gave before. So yes, export controls are a part of that.
Speaker Change: But the lion's share of the reason for the normalization of the demand is what I said earlier, which is that the eating into the backlog that was built up all the way through 22 is now coming to an end, and now we're really seeing a normalized pattern.
Speaker Change: Got it, got it. And then a question on memory, you kind of said that...
Speaker Change: Well, I think you almost summarized it in your question. I think that high bandwidth memory is driving today, I would say, also an aggressive capacity addition, at least for some of the customers.
Speaker Change: I think on the normal DRAM, I would say, my comment is similar to the one on mobile morphology before. I think there is also nothing spectacular, but there is some recovery, which also calls for more capacity.
That's why we still see DRAM pretty strong in 2025.
Thanks, Roger.
Thank you.
Your next question.
Speaker Change: Comes from the line of Chris Caso from Wolfe Research. Please go ahead.
Chris Caso: Yes, thank you. Good morning. I guess and you know as I listen to you this morning it sounds
Chris Caso: like a situation perhaps similar to how you started out last year and correct me if I'm wrong with you know some pretty good backlog coverage to start the year and um you know last year there were some changes that backlog in the middle year so
I understand your prudence.
Speaker Change: I guess, yeah, one is that accurate depiction of what we're seeing here, and then secondly,
Speaker Change: What are the sort of plausible things that we should be watching for and concerned about that would justify the back, the lower end of guidance? Is it, you know, export control restrictions? Is it China? Is it perhaps some of the concerns about AI? You know, what are the some of the scenarios which would sort of point you to the lower end?
Speaker Change: Chris, let me take the first part and then Christophe can look at the second part.
Speaker Change: I'm not entirely sure I follow your logic on that we are today where we were a year ago.
Speaker Change: and also I would point out that a year ago we gave a guidance that I think we pretty much nailed during the year, right? So I think we delivered last year on exactly on the guidance that we provided in the year. The reason why I think...
The situation is also not comparable, it's because...
Speaker Change: Last year, we started the year saying we think this year will be comparable to 2023.
Speaker Change: I think this year we start the year with, you know, with a clear growth perspective at the midpoint, somewhere around 15 percent. So I don't think the situation is similar. Yes, we have a strong backlog. Yes, we had a strong order intake in the last quarter.
Christophe Fouquet: But I think, you know, Christophe discussed it on the call and he will provide the color and context now. We see a clear path within that, you know, within that guidance.
Christophe Fouquet: Maybe you can provide a follow-up. Yeah, and I think on the law, and I think even Roger mentioned it already, I mean, we have seen last year, I think,
Speaker Change: This was one of the lowlights of Q3. We've seen major push-out of some of the capacity for some of the customers.
Speaker Change: I think, you know, through our guidance this year we see that this risk is a lot lower in term of, you know, in term of...
Speaker Change: But I think Roger said it, that's always possible, so I think we are very transparent and we share with you the fact that, you know, if we look at the total dynamic, that some of those push-outs may not be completely excluded.
Speaker Change: That's what defines our range. So I think that's not more than that, I would say. Geopolitics, we also mentioned that. It's even more difficult, of course, to quantify because, you know, we just had a,
Speaker Change: new export control being released. So, you know, there's no expectation of anything on our side, but this is also out of experience, this call a bit for prudence on our side. So, that's a bit what we try to reflect in the lower hand of the guidance, not more than that.
Speaker Change: And, you know, given the lead times and the customer forecast, you know, I imagine you have some degree of visibility now, although it's very early at this point. Would you expect 26 to be a growth year? And, you know, what are the variables that you're thinking about with regard to 26?
Speaker Change: Yeah, Chris, that's as much as we've said. You know, we are looking at 26 as a potential growth year for ASML. That's how we look at it, but it is exactly as you said, it's way too early to provide any direction or magnitude on it.
Thank you very much. Thank you.
That's great. Thank you.
You're welcome. Thank you.
Your next question comes from the line of Didier Simama
Didier Simama: Yes, good afternoon, gentlemen. Thank you for taking my question. I wanted to go back to the order intake in EUV and DUV. So maybe first on DUV, can you maybe just help us understand how much of the DUV orders was related to DUV capacity build for the non-critical layers, e.g. non-China or any color you can give us?
Didier Simama: And I'll have a follow-up on the EUV order breakout. Thank you.
Didier Simama: A significant part of the of the of the DPV order intake for the for the for the quarter was indeed related to larger customers and for larger customers for the non-critical layers as you mentioned it but I'm not we're not putting a percentage on that.
Speaker Change: It's good to hear that it's confirmed. On the EUV order intake, obviously largely driven by foundry logic, I think you said 50-50 perhaps earlier on. On the DRAM side and on the foundry side, any color you can give.
Speaker Change: Obviously on the Foundry side you've got three major customers, on the DRAM side you've got three major customers. Can you just, obviously you can't discuss the various customers' sort of health.
Speaker Change: But is there any change with regards to the trajectory of the various buckets, e.g. is there any bucket looking a bit better? It looks like DRAM is looking a bit better. Given the diversity of the customers in there, it would be soundly not changing very much, but it would be much more interesting hearing your views.
Thank you for watching!
Thank you very much.
Speaker Change: Well, I think we're looking at each other, but I don't know which one of us have to tell you first that, well, these are not the type of detail we share because...
Speaker Change: We will be adding speculation on some of the market situations. The only thing I would say is, again, no major change compared to what we have discussed in the previous quarter. That would be my input to that question. Amen.
Okay, well, I'll allow myself to follow up then.
Speaker Change: Is that for a North American customer, or is that also for maybe a Taiwanese or Korean customer? That would be helpful.
Speaker Change: I think we said it's not for the North American customer, but we have not said and will not say where it went.
Speaker Change: Okay, I'll go back to the two. Thank you for the first two.
I've tried. You did.
Thank you
Speaker Change: Your next question comes from the line of CJ Mews from Cantor Fitzgerald. Please go ahead.
CJ Mews: Yeah, good afternoon, good morning. Thank you for taking the question. I guess first question, in the video when you discussed your 2025 outlook you talked about
Obviously, AI supporting the high end, other markets low end.
CJ Mews: I would have thought you would have completely de-risked the other markets, so can you touch on the level of de-risking embedded in your assumptions?
for those customers where you've seen pushouts to 26.
CJ Mews: And for the high end, is there sufficient clean room space at those foundry and HBM customers to actually take tools by the Q4 timeframe?
Speaker Change: Yeah, I think on the first part, I think Roger indicated when it comes to booking, I think that mostly we have the risk, the large part of EUE.
Speaker Change: So the risk, I think I'm going to repeat myself on this one, but the risk is just on some potential push out. I think that's what it is. So we're just a bit cautious based again on some of the experience we all went through last year.
Speaker Change: So that's the first part to your question. The second part, I think that's the right question.
Speaker Change: You know, most probably today, you know, we're looking at opportunity to get more clean room space. I think that's what we mean by building up additional capacity.
Speaker Change: and if this is possible and if this happens then we can most probably put some of our tools there but that's that's exactly what we're looking at with our customers.
Speaker Change: very helpful and I guess as a follow-up you talked about the the ongoing shift
led by A.I. across HPC and HBM, and curious.
Speaker Change: You know, in your discussions with your customers across both those fronts, can you comment on kind of what you're seeing in terms of EUV layer counts, you know, whether it's A16 or whether it's going HBM3, E4, et cetera? Would love to hear kind of your thoughts on the trajectory there.
Speaker Change: Well, I think we tried to explain that in November, so the need for high-power computers, the need for high-bandwidth memory, so basically the AI-driven chips, are more demanding when it comes to advanced process. I think what we said is we...
Speaker Change: We see those new products mostly calling for a bit of an acceleration of more slow and therefore our customers being more aggressive when it comes to technology transition. I think in some extent you see a bit of that already with 2 nanometers and mostly what will come after that.
Speaker Change: I think we also said in November that historically this has always driven more demand for advanced litho. That's of course part of the discussion we are having as we speak with our customers.
Speaker Change: You know part of the shift we see I think that's that's one that we describe as a positive one for us back in November
Speaker Change: and I think when it comes to the trend, the trend is there and, well, you're asking a very detailed question on...
Speaker Change: You know, future node, we don't have the detailed answer yet, but the trend is definitely there.
Thanks so much.
You're welcome.
Thank you.
Speaker Change: Your next question comes from the line of Andrew Gardner from City, please go ahead.
Andrew Gardner: Good afternoon, thanks for taking the question. I had another one on the customer visibility side of things.
Andrew Gardner: It's encouraging, obviously, to see that you've finished 2024 strongly in terms of orders. But if I look at 2024 overall, you've had a fairly low level of orders from the logic community, lowest since 2020.
Andrew Gardner: I understand the multiple reasons why it's been weak in recent quarters. So really, I'm sort of interested in a more forward looking view. You've already explained that 2025 is essentially fully booked. But as I look to 2026, assuming growth, as you've described.
Andrew Gardner: And so then if I think of your lead times and the points you were making about the stated customer plans for their CAPEX, the two nanometer migration, and in particular the high volume ramp in the first part of next year.
Andrew Gardner: Don't you need to see order commitments come in for EUV over the first half of this year in order to be able to meet those customer needs on time?
Andrew Gardner: Yeah, Andrew, I think that's fair. So we should be seeing, we should be seeing, you know, order intake.
Andrew Gardner: in the first two quarters, particularly when it comes to EUV. I think that would be logical.
Christophe Fouquet: Christophe describes, we do have flexibility obviously in the way we approach 2026. So we do have flexibility in our supply chain and also in our manufacturing capability. So it's not like, you know, at a certain point in time that's where the music stops.
Christophe Fouquet: But definitely, we should continue to see good order intake in the first two quarters. I think that's a fair assumption. Thanks. Related to your answer there, Roger,
Speaker Change: The strategy of pre-building, is that continuing, have you changed that at all given the shift in customer dynamics we've seen over the last six to nine months?
Speaker Change: that's one. And second, in order to create sufficient flexibility for us. So we're reviewing that. We're obviously reviewing that based on the latest insights that we get from customers. I reiterate the ongoing discussions that we have with customers rather than just the POs.
Speaker Change: And based on what we get there and based on the insights that we get there for this year and for next year, that also determines what our pre-bill strategy is, but that is an option that we continue to have.
Speaker Change: and that we continue to use in order to better optimize the loading of a factory.
Thank you.
Thank you very much.
Thank you
Speaker Change: Your next question comes from the line of Mehdi Hussaini from SIG, please go ahead.
Thank you very much.
Thanks for taking my question. Two follow-ups.
Speaker Change: Roger, can you give me an update where we are with the throughput for NXE3800E?
Speaker Change: Where is it today and how are you going to close the year?
Speaker Change: And then for the team, I want to better understand how you're planning internal capacity, especially looking beyond the 2025. When we had a strong cycle a couple of years ago, your backlog was in the $40 billion range.
and concentration of customers, or would you be more prudent?
Speaker Change: and try to build a longer backlog. I'm just trying to understand and balance your internal planning for the next couple of years versus your ability to get customers committed, especially given there is more concentration of customers for AUV.
Speaker Change: On the throughput, the systems that we shipped in last year were all on a better throughput than the throughput of the 3600, but not yet at the maximum throughput.
Speaker Change: That maximum throughput has been demonstrated and we're now in the process of rolling that out so that the newer tools that we're now shipping to customers will, you know, will gradually meet that specification. After the tools that have been installed with the customers, we're going to make sure that, you know, in the course of this year that those tools also meet that higher expectation. So, therefore,
Speaker Change: You will continue to see us reporting on the improvement and also the revenue that we recognize from the fact that we get those higher throughputs achieved with customers.
Speaker Change: and also get to get recognized for for that so that's that's the status so the 220 has been demonstrated now in the process of putting that out for the for the new tools and also you know backporting that to the to the 3800s that are currently in the in the field
Speaker Change: In terms of capacity beyond 2025, the key thing that we're doing is to make sure that what we call is the long lead time items that they are in place, i.e. that we have the flexibility to respond to higher demands.
Speaker Change: and that we have the long lead time items that we have those in place, you know, if you look at
Speaker Change: what we're projecting in terms of growth for the second half of this of this decade, including what we're projecting for 2030. And it's clear that capacity needs to be built. So the infrastructure, you know, we have already built and continue to do that so that the long
Speaker Change: that the infrastructure is in place and that then together with LiveChain and with our headcount we can respond once we get the very clear signals from our customers that demand is accelerating. That's the way we approach it.
Speaker Change: So does that mean that the backlog would be kind of in the 18-month range or are we going to go back to like 22-23 when backlog was extended due to supply constraints?
Speaker Change: No, that would not be I think a normal backlog is ultimately what we want to be able to offer to our customers We want to be able to offer to our customers a normal backlog because that will also help them respond to their business I mean, that's ultimately what you want to get that customers have a backlog that is and they order lead time That is manageable for them and that allows them to respond, you know in a good and flexible way to their demands of fluctuations
Speaker Change: and that's our ultimate goal and that's why we want to be as flexible as we can and that's why we put in the infrastructure such that we are able to to give our customers a normal orderly time. That's the objective that we are driving.
Thank you for details. You're welcome.
Thank you.
Speaker Change: Your next question comes from the line of Stephane Houri from Odo, B.A. Tess, please go ahead. Let's go ahead.
Speaker Change: much bigger than 7.5, 8.4, 8.5, so one billion above. So is there any seasonality we should have in mind about installed base management? Thank you.
Speaker Change: So let's take the last one first. So the 7.5, that's the number that we still include in our guidance. And of course, you know, over the quarters you've also seen that last year there can be some fluctuation to a very large extent that's dependent on upgrades. So that fluctuates from one quarter to the other.
Speaker Change: I would also say, and you know that, our visibility into the upgrades is of course less than the service business. But I think for now, I would encourage to still use the $7.5 billion as the right number.
Speaker Change: When it comes to the non-EUV business, I think you mentioned 50%. I think that's on the higher end. I think that's a little higher than what I had in my model when we were having the conversation. So 50% is a little too high, I think.
Speaker Change: I think we've said it's sort of on par with what you would see in the EV business and that would get you to approximately 40% increase and that's sort of where I think you're going to land.
And this is a change.
Thank you very much. Have a great day.
Speaker Change: What was that? No, it's not a change. It's not changed. Okay. No, that has not changed. That is still consistent with the analysis that we provided after Q3.
Thank you.
Thank you very much. You're welcome.
Thank you.
Speaker Change: Your next question comes from the line of Michael Rourke from DeGoff Peterkam. Please go ahead.
Speaker Change: Yes, good afternoon. Can I ask a question about one of your slides from the Investor Day 2024?
We do obey. Okay. Well, now you're still laughing.
It's a presentation by Mr. Harchandani.
Slide number 13.
Speaker Change: And that is the slide with the seven end markets and the total semiconductor sales. I'm sure you'll be able to visualize that one, correct?
I have it in mind.
Speaker Change: Do you believe that your customers will be able to generate 1 trillion in sales in 2030?
Speaker Change: It's not a customer's right that when you talk about the semiconductor industry for customers
Speaker Change: There, and that is precisely the answer I want to hear.
Speaker Change: because the Gartner market definition doesn't represent your customers, it represents your customers, the IDMs, and the fabless companies that are customers of your foundry customers.
However...
If I look at these seven end markets...
Speaker Change: then my perception is that the difference between vendor sales and manufacturer sales, which is a huge gap for the total market,
that the difference is biggest for smartphone and data centers.
Speaker Change: So you've changed all your scenarios with data center scenarios going up.
most other markets scenarios going down.
which optically looks great, but from a manufacturer perspective...
I don't know if anything has changed, actually.
Speaker Change: To be honest, I think you're losing a bit of the audience here. You're looking at a slide that no one else is looking at. So I would suggest that we have a follow-on conversation.
Perfect. However, you know what I'm talking about.
Speaker Change: I'm surprised that everybody keeps showing the Gartner data, which are not a reflection of the equipment customers.
Speaker Change: One tiny follow-up, then a whole different topic that's on the, you will no longer show the quarterly bookings, is perhaps a 12-month rolling booking figure, something that would be, you know, smoothing out all those lumpy intakes.
Speaker Change: But to be honest, I think a backlog per annum gets you awfully close to that, right? Because if you have the backlog and you have the sales numbers for the quarters, I think it doesn't take you too much to kind of recalculate that. So, I think by...
We only see it once a year, don't we?
Speaker Change: Yes you do, yeah, yeah, and I think as I explained before we believe that that's that's an important data point for you and it's good enough.
Speaker Change: We'll take it offline and then more questions about these slides will be in the next quarter and the one thereafter because I've got many more questions.
Speaker Change: Thank you. Okay, we've got time for one last question. If you've been unable to get through on this call and still have questions, please feel free to contact ASML Investor Relations with your questions. Now, operator, can we have the last caller, please?
Thank you.
Speaker Change: Your last question today comes from the line of Sandeep Deshpande from J.P. Morgan. Please go ahead.
Speaker Change: We do not know whether the customer is going to use these tools in high volume manufacturing only later in the year or next year, but you are already possibly building these tools for the customer. So is there a risk that the customer says to you at the end of the year that well actually we are not going to implement the tools into production next year, and that these orders don't happen in 2026 which are there in the backlog today.
Speaker Change: Well, I think, so you mentioned the backlog, and I think you know that indeed in our backlog we have quite a few tools that are not EXE 5000, which was a tool basically,
Speaker Change: plan for R&D. So, indeed, our customers have, up front, already ordered some 5200, which are tools.
Speaker Change: intended to be used in high-volume manufacturing so it means that
Speaker Change: I think we look at a few tools per customer, which are sufficient, basically, to start going.
Speaker Change: And that's what we call, you know, usually the first node insertion. And after that, of course, when we look at new booking on INA, we'll be most probably looking at the bigger insertion in the node after that, which is a bit later.
Speaker Change: But the logic you describe is the logic customers have put in place together with us already, in fact, a couple of years ago And I think they are sticking to that logic today
Thank you so much.
Thank you.
Speaker Change: Thank you. This concludes the ASML 2024 fourth quarter and four-year financial results conference call. Thank you for participating. You may now disconnect.