Q1 2025 Axcelis Technologies Inc Earnings Call

Speaker Change: Good day, ladies and gentlemen, and welcome to the Excelis Technologies call to discuss the company's results for the first quarter of 2025. My name is Sean Ottmer and I will be your coordinator for today.

Speaker Change: I would now like to turn the presentation over to your host for today's call, David Ryzhik, Senior Vice President of Investor Relations and Corporate Strategy. Please proceed.

Thank you.

Speaker Change: Thank you, operator. This is David Ryzhik, Senior Vice President of Investor Relations and Corporate Strategy, and with me today is Russell Low, President and CEO , and Jamie Cugan, Executive Vice President and CFO .

Speaker Change: If you have not seen a copy of our press release issued earlier today, it is available on our website. In addition, we have prepared slides that company today's call, and you can find those on our website as well.

Speaker Change: Playback Service will also be available on our website as described in our press release.

and our subject to the risk inherent in our business. [inaudible]

Speaker Change: These risks are described in detail in our Form 10K Annual Report and other SEC filings which we urge you to review. Our actual results made differ materially from our current expectations. We do not assume any obligations update these forward-looking statements.

Speaker Change: As we mentioned on our previous earnings call, we have decided to add non-GAAP measures to our first quarter results and those going forward as a result during this call, we will be discussing various non-GAAP financial measures.

Speaker Change: Please refer to our press release and accompanying materials for information regarding our non-GAAP financial results and a reconciliation to our GAAP measures.

Speaker Change: Now, I'll turn the call over to President and CEO Russell Low. Russell?

Speaker Change: Good morning and thank you for joining us for our first quarter 2025 earnings call.

Speaker Change: Speaking on slide number four, we ask you to weld in the first quarter with revenue of $193 million and earn its third alleged share of 88 cents, both exceeding our outlook with particular strength, that gross margins, and this clean cost control.

Speaker Change: On a non-GAAP basis, we delivered earnings for share of a dollar and four cents. James will discuss our financial results in further detail, including non-GAAP measures which we're introducing today.

James: This translates into a book to build of 0.8 times the highest level we've seen since Q4 of 2023. While we're encouraged by the improvement in bookings in the first quarter, we believe bookings can fluctuate from quarter to quarter as we move through 2025.

James: Before I turn to providing more detail on the trends we are seeing by market segment, I'd like to touch on the global terror situation and how this impacts Excelis.

James: To date, while the tariff of macroeconomic environment is dynamic, Excelot has not seen any meaningful change in demand from our customers as a result of the announced tariffs. Moreover, Excelot has plans in place to lessen the direct tariff impact.

James: From a supply chain perspective, as many of you know, Axcelis possesses a global supply base with partners inside and outside of the United States. And over the past several years, we've made significant progress in diversifying our supply chain to drive better resilience in our sourcing.

James: From a manufacturing perspective, our corporate headquarters and primary manufacturing facility is located in Massachusetts. However, several years ago, we invested in a new Asian operation center capable of supporting at Global Customers.

James: Our locations and facilities allow us to be highly as debt-fifths of rapidly changing policy environment.

James: We are executing well in developing solutions so we can continue to support our customers across the world. Lesson, the impacts are associated with the terrorists to support our gross margin goals while maintaining our focus and innovation to catch the long-term growth opportunities that lie ahead.

James: With that, let me add some additional color on the trends we're seeing by market segments. Turning to slide five in the quarter sells some mature node applications remain the lion's share of our business in particular, power and general mature.

James: As we noticed on fourth quarter earnings call, beginning with first quarter results, ship system sales to the image sensor market will now be included in our overall general mature category for simplified disclosure

James: Now, on Slide 6, let me review at Transpoint N Market.

James: Within our power business, shipment of silicon carbide applications declined sequentially in the quarter, consistent with expectations as customers are moderating investments due to softer end demand.

James: From a regional perspective, we are seeing continued pockets of investment in China or the rest of the world is managing through a broader digestion of capacity.

James: While companies in China have made significant progress with the reduction of silicon carbide wafers, we believe our customers are earlier in their journey on silicon carbide device manufacturing, where iron implantation is foundational.

James: which includes increased customer pull for us to support them in the transition from 150 to 200 millimeter wafers, as well as the transition from planar to trench device architecture and also going growing collaborations, super jumps and devices.

James: All these trends play to Excelsis' core strengths. We are the market leader of iron implantation of silicon carbide with the largest install base and extensive application know-how.

James: We're also the global market leader in high energy implied, which is increasingly relevant for next-generation device architectures in Silicon Carbide.

James: And finally, we have robust products and service upgrade offerings that allow customers to enhance their solutions to latest generation of implant technology within the existing factory footprint. And this is a key driver for long-term growth in CSI revenue.

James: As we think about this business over the next several quarters, we see continued pockets of investments that remain at more muted levels compared to 23 and 24.

James: Over a long time, however, we believe that the drivers for silicon carbide remain intact, namely, rising penetration of EVs and silicon carbide content within those EVs, particularly as 800 volt models and above are introduced to enable super fast charging.

James: Growing adoption of silicon carbide in data center applications, given the critical need for more power efficiency, and finally, proliferation of silicon carbide across a wide array of other industrial and commercial applications. For example, HFAC systems which globally consume a significant amount of electricity.

James: This can be an interesting application for silicon carbide, given the ability to drive better power efficiency which ultimately can lead to less strain on our power grid.

James: Turning to silicon IGBTs, revenues muted as a result of continued cyclical softness in the AutoN market combined the settler impact of growing the docks of silicon carbide.

James: Nonetheless, we anticipate Silicon IGBTs to remain a sizable sand for our influence solutions over the long term, requiring aperture technology

James: In our General Mature's statements, customers continue to manage their capacity investments given that come up the current demand environment in auto, industrial and consumer electronics. As a reminder, our General Mature's statement spans a broad array of planar devices with process modes of 28 nanometers and above.

James: While it's at the overall market to remain a digestion period through 2025, for in several years of strong build-outs, we are seeing some pockets of increased tool utilization, which if it continues is an important step forward towards a recovery in implant investments.

James: As the world becomes more connected and digitised, we expect the monthly foundational technologies to grow accordingly, and we are well positioned as a critical neighbour, especially given the higher intensity of implant required.

James: Turning to slide 7, in advanced logic, we continue to engage closer customers on their evaluation units as we work to expand as initiative, and as noted on our prior call, we anticipate a far one order from a customer that we added last year.

James: Moving to memory, we saw a nice sequential improvement in sales for the memory market, specifically for D-Rome.

James: In then, customers are focusing on technology transitions to higher layer accounts, such as one executive, two execs and beyond, to draw a better bit density, rather than waste of capacitive additions, which would be more impactful to our implementation demands.

James: As a result, we expect a month from their applications to remain muted over the balance of the year.

Jamie Coogan: On slide 8, let me wrap up my thoughts, try to hand the call over to Jamie.

Speaker Change: We adapt into rapidly evolving macroeconomic landscape particularly as it relates to tariffs and our primary focus is to continue to exert our customers to the best of our ability or strive into control costs and drive resilience in our global operations.

Speaker Change: Despite the macroeconomic and sickle backdrop, and uncertainty associated tariffs, we are seeing robust engagement of customers on their next generation roadmaps across power, general mature memory and autonomous logic.

Speaker Change: We believe that the long-term sector drivers for the semiconductor industry remain intact, with iron plantation being an enabling process step for every single chip that is manufacturing the world today. In fact, it happens to be one of the most complex technologies used in silica to manufacturing process.

Speaker Change: At its core, unimplantation is a particle accelerator at scale. It requires the complexity of advanced nuclear physics to combine the throughput, quality and extreme precision demanded for

Speaker Change: Each implant are composed more than 10,000 unique part numbers and more than 5 million lives of software codes. We're able to deliver up to 15 million electron volts of energy in an iron beam.

Speaker Change: And finally, our solutions are designed to implant pretty much any element in the parent table into a wafer.

Speaker Change: All of this is a culmination of almost 50 years of expertise, know-how, close collaboration and trial in Europe , with nearly every semiconductor manufacturer in the world today.

Speaker Change: As a result, the world made more than $1 trillion of semiconductor devices by 2030 across all different categories

Speaker Change: We expect the market for implant will continue to grow through the cycles and we believe we are well positioned to capsize on this opportunity that differentiate in the highly proprietary technology.

Speaker Change: With that, let me turn the call over to Jamie for a closer look at our results and our look. Jamie?

Jamie Coogan: Thank you Russell, and good morning everyone. I'll start with some additional detail on our first quarter before turning to our outlook for Q2.

Jamie Coogan: Starting on slide 9, first quarter revenue was $193 million with systems revenue at $138 million and CSNI at $55 million, both slightly above our expectations for the quarter.

Jamie Coogan: From a geographic perspective, as expected, China declines sequentially to 37% of total shift system sales down from 49% in the prior quarter.

Jamie Coogan: While we anticipate revenue from China in 2025 to be down on a year-over-year basis as customers digest the robust investments they've made into mature node capacity, we expect revenue from China to fluctuate from quarter to quarter [inaudible]

Jamie Coogan: Case in point, we currently estimate the mix of shift systems revenue to China to increase sequentially in the second quarter.

Jamie Coogan: Turning to the other regions, we saw ship system sales to the US grow to 23% of the total, while Korea also improved to 20%, which was mainly due to improved shipments for DRAM in Korea.

Jamie Coogan: As Russell mentioned, we are pleased to see bookings grow nicely on a sequential basis to $110 million and we exited the first quarter with backlog of $618 million million dollars.

Jamie Coogan: Turning to slide 10, let me share some additional detail on our gap and non-GAAP results.

Jamie Coogan: As we previously announced, we're introducing non-GAAP measures in 2025 following a thorough review of our peer group. These non-GAAP measures reflect adjustments for the impact of share-based compensation expense and certain items related to restructuring and severance and any other associated adjustments.

Jamie Coogan: For more information on our gaps in on-gap reconciliation, I can refer you to the appendix of this slide presentation as well as the tables in our earnings release.

Jamie Coogan: With that, we delivered strong gap gross margins of 46.1% in the quarter, exceeding our outlook of 40% Our non-GAAP gross margins were 46.4%

Jamie Coogan: Our better than expected margins were primarily due to lower than expected warranty and insulation costs, favorable mix for our deferred revenue recognized, as well as more favorable mix within our CSNI business. In addition, our gross margins were benefiting from our continued focus on managing our expenses.

Jamie Coogan: We expect gross margins in the second quarter to moderate, I merely do to mix.

Jamie Coogan: In addition, as Russell noted, we have plans in place to lessen the impact from tariffs.

Jamie Coogan: Gap operating expenses total $59.6 million, the lower outlook of $63 million, primarily due to lower employee-related costs associated with barrel, variable compensation and benefit expenses, as well as prudent cost controls.

Jamie Coogan: In the quarter, we took a number of additional actions to reduce expenses for the balance of the year, which resulted in a restructuring charge of $1.1 million. On a non-GAAP basis, operating expenses were $54.1 million.

Jamie Coogan: As a result, gap operating profit was $29.2 million, reflecting a 15.1% operating margin. Our

Jamie Coogan: As part of our introduction of non-GET measures, we are also including adjusted EBITDA as one of the key metrics we track. In the first quarter, adjusted EBITDA was $39.5 million, reflecting a 20.5% margin.

Jamie Coogan: Despite the softer revenue on a quarter over quarter and year over year basis, we are pleased with the execution of the team to deliver strong operating profitability. This is a testament to the proprietary nature of our products, the value we create for our customers, and our disciplined approach to managing costs. [inaudible]

Jamie Coogan: We generated approximately 3.9 million another income and our tax rate was 14% in the first quarter on both a gap and non-GAAP basis.

Jamie Coogan: For the balance of the year, we estimate our tax rate to be at the 15% level [inaudible]

Jamie Coogan: Our weighted average diluted share count in the quarter was 32.3 million shares, and this all translates into gap diluted earnings per share of $0.88, which exceeded our outlook of $0.38. The higher than expected EPS was primarily due to better than expected revenue and gross margins.

Finally, non-GAAP diluted earnings per share was $1.04 Thanks.

Jamie Coogan: Moving to our cash flow and balance sheet data shown on slide 11, we generated $35 million of free cash flow in the first quarter, as we benefited from better than expected profitability, as well as robust working capital management.

Jamie Coogan: Turning to our share repurchases, on March 12, we announced that the Board of Directors approved a $100 million increase to our share repurchase authorization which reflects our continued confidence in the attractive long-term fundamentals of our business.

Jamie Coogan: In the first quarter, we repurchased $18 million of shares and exited the quarter with $212 million remaining in share repurchase authorization

Jamie Coogan: To date, in the second quarter, as of Market Clothes on May 5th, we have already repurchased $23 million in shares, and we plan on continuing to repurchase at an elevated level over the balance of the quarter relative to our prior quarterly spend. [inaudible]

Jamie Coogan: Looking ahead, we intend to continue deploy capital to share repurchases while ensuring we maintain a strong balance sheet that gives us added flexibility to invest in our business while also evaluating inorganic growth opportunities.

Jamie Coogan: In fact, we exited the first quarter with a strong balance sheet, consisting of $587 million of cash, cash equivalence, short-term investments on hand with no debt [inaudible]

Jamie Coogan: With that, let me discuss our second quarter outlook on slide 12. All measures will be non-GAAP with the exception of revenue.

Jamie Coogan: We expect revenue in the second quarter of approximately $185 million.

Jamie Coogan: As we look into the second half, while the dynamic macroeconomic and terror-related environment has created some uncertainty, our discussions with our customers indicate that they intend to continue making investments and executing on their technology road maps [inaudible]

Jamie Coogan: As a result, we currently anticipate revenue in the second half to remain relatively consistent with first half levels.

Jamie Coogan: We expect non-gab gross margins of approximately 42 percent. The sequential decline is primarily due to mix as well as slightly lower volumes. In addition, this includes the impact from tariffs which we estimate to be relatively small. We expect non-gab gross margins of approximately 42 percent. We expect non-gab gross margins of approximately 42 percent.

Jamie Coogan: Beyond the second quarter, non-GAAP gross margins may fluctuate based on volume and mix, but we would expect gross margins in the second half to be relatively similar to second quarter levels inclusive of the estimated impact of tariffs.

Jamie Coogan: We expect non-GAAP operating expenses of approximately $54 million, and for the full year we anticipate non-GAAP operating expenses to be relatively flat on a year-over-year basis.

Jamie Coogan: Adjusted EBITDA on the second quarters expected to be approximately $29 million, and finally, we made non-GAAP diluted earnings per share in the second quarter of approximately $73.

Jamie Coogan: In summary, we are pleased with our execution in the first quarter as we maintain strong profitability amidst a muted demand environment, and this reflects the resilience of our operating model.

Jamie Coogan: We exited the quarter with a strong cash position in no debt. We repurchase shares in a disciplined but opportunistic manner and are ensuring that we continue to invest in our business to emerge in a stronger position once end markets recover.

Russell Low: With that, let me hand the call back to Russell for closing remarks.

Russell Low: Thank you, Jamie. We are navigating a dynamic environment, but one thing remains very clear to us. The world's needs are stemmed up to a school, continue to grow, and this can't be possible without the highly complex and priority equipment that is required to manufacture them. And that's what we do.

Russell Low: We believe that Axcelis is well positioned with a global and resilient operational footprint, leading technology and iron implantation with a relentless focus on innovation and a deep being grained customer first culture. We believe all of which will position Axcelis to drive long-term growth and value creation for shareholders.

Russell Low: I want to thank our customers, employees, shareholders and partners for their continuous support and trust and excellence. With that, operator, we are ready to take your questions.

Russell Low: Thank you, and at this time we will conduct the question and answer session.

Speaker Change: To ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced [inaudible]

Speaker Change: To withdraw your question, please press star one one again. We ask that you limit yourself to one question and one follow-up.

Speaker Change: At this, please hold on while we complete the Q&A roster [inaudible]

Craig Ellis: And our first question comes from Craig Ellis with B. Riley Securities. Your line is now open.

Craig Ellis: Yeah, thanks for taking the question and guys, congratulations on the real robust Chris Margin.

Craig Ellis: I wanted to start my inquiry. Yeah, you're welcome. I wanted to start the inquiry on some of the things that are contributing to that. So we're in a period which is our first

Craig Ellis: You know, a period of macro troubles where we really have a substantial purine install base. So as you look at the install base of purine systems and as we think about the propensity of customers to often. [inaudible]

Craig Ellis: Upgrade in periods where there's better capacity availability and they can flex changes more easily than when capacity is called. How are you feeling about CS and I's momentum? Yeah.

Craig Ellis: End of the back half of the year from what's been a real strong last few quarters and looks like a real strong two cube

Craig Ellis: Yeah, I appreciate the question, Craig. We look at it, Q-1 for CS, and I really, the mix here was around spares. We had a higher volume of higher margin spares, sales in the periods.

Craig Ellis: So, you know, there's still opportunity here for us to see incremental upgrade opportunities as we move through the course of the year, as people take care of the sort of their tool system and planning, you know, during these periods of lower utilization.

Craig Ellis: I think you hit the nail on the head though. The CS and I business is relatively sticky, right? We saw systems volume come down year over year. While CS and I remain sort of relatively flat, you know, on a year over year basis from Q1 of last year to Q1 of this year, despite the lower utilization, and we think that that's benefited by the increase in the install base around Purian. [inaudible]

Craig Ellis: Relative to margins overall, Mix is always going to be a...

Craig Ellis: systems, benefit in our systems margin as well from the favorable deferred revenue recognition in the period.

Craig Ellis: and I think most importantly, we have a focus, we put a focus in 2024 on making sure we drive margins towards our long-term goals.

Craig Ellis: that we've discussed previously. One of those was around installation of warranty and driving that cost down. And as I mentioned in the prepared remarks.

Craig Ellis: But overall, we are really well positioned to see margin appreciation on return to volume in market recovery.

Speaker Change: Thanks for that, Jamie, and then the follow-up question, I'll combine a couple things, so we had a really nice increase in orders.

Craig Ellis: Can you talk about the love of order and intensity to you to date and...

Craig Ellis: on a headline basis, it looks like there's not a significant mix change in the business in the second half.

Craig Ellis: versus what we see in 2Q. But can you talk about any expectations you'd have for a shift either within the mature foundry business or just within memory, which seems very teramway that, thank you.

Craig Ellis: Hey, Craig, it's Russell. Thanks for the question. So, yes, we had a nice booking so quarter, and like we said on the call in the paper of Marks, you know, it was a point eight multiplier compared to basically average for 2024 without point five, so it was a good uptick.

Craig Ellis: I would say that, you know, obviously we're very pleased and encouraged by that, but it's a bit premature. The premature is called an inflection point.

Craig Ellis: Looking a little bit more closely into the bookings that we had into you on, you're right, they do match pretty much the profile of our business is going forward so

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Thanks, guys. I'll hop back in the queue.

Thanks Fred.

Craig Ellis: And our next question comes from Jed Dorsheimer with William Blair.

Jed Dorsheimer: Hi, thanks for taking my question and, you know, congrats on the better than expected, particularly on the margins and the bookings.

Jed Dorsheimer: I just want to come at the margin question, maybe slightly differently and maybe you answer this and I just it wasn't as clear to me but can you just help me with the granularity of the 600 basis points and kind of the 400 that you're looking into and what I'm trying to get at is really around

In terms of NICs,

Jed Dorsheimer: and the predictive analytics of what you're seeing during the quarter. It seems like that mix shifted.

Jed Dorsheimer: Rapidly in the quarter to your benefit. And so I'm just trying to gauge how much of that 600 was specific to that and what's kind of going against the headwind in the 400 basis point decline. I'm just trying to gauge how much of the headwind in the 400 basis point decline.

Jed Dorsheimer: Yeah, and so, Jed, as we think about the mix, the largest contributor of that was Mix, and as we go through the period, we'll see periods of buying volume specific on the CS and I side that, you know, can shift and move throughout the quarter, you know, so we obviously we pull together plans and forecasts relative to what we anticipate. Bye.

Jed Dorsheimer: But as customer requests come in, we'll satisfy those as required and that can change the mix within a period.

Jed Dorsheimer: You know, pretty quickly, depending on what is bought and what is procured in that period of time [inaudible]

Jed Dorsheimer: In addition to that, on the deferred revenue base, right, that really is just, you know, we'll call it clean up of prior system sales as we deliver and execute again.

Jed Dorsheimer: Our commitments associated with system sales and so we can see that mixed shift within a period given, you know, called sign-offs from customers and how they look at, you know, the completion of system installations and related activities can result in a shift and deferred revenue relative to expectations as well. Thank you very much.

Jed Dorsheimer: you know, as we think about what's driving, you know, we're

Jed Dorsheimer: We don't anticipate the same level of mix, positive mix benefit in the second quarter, as we look at what we see today versus our systems, you know, and related CS and I volumes.

Jed Dorsheimer: But, you know, we do anticipate to be able to continue to benefit from, you know, some of the cost actions and other activities, which is, you know, given us confidence to increase margins relative to our prior expectations.

Got it. And then it's my follow-up.

Maybe just a slightly different angle on the tariffs.

Jed Dorsheimer: So, I know that you've done a great job in terms of mitigating the potential impact.

But...

Speaker Change: I think Secretary Bessons talked about 14 deals in the next few weeks to be signed. So assuming that you don't...

that if we may be exclude China, how much is…

Speaker Change: is sort of constrained from a margin perspective on the tariff side that, you know, I'm trying to get to what the potential impact would be positively if you see those come to, you know, more normal type of trade relations.

Speaker Change: Yeah, I think there could be some on the margin side, I think.

Speaker Change: Yeah, X China Red, I think there could be some opportunity, you know, on the upside, I think too early to tell, and as you know, it's been very volatile over the last few weeks trying to take the puts and takes and the daily news readings, and you know, the team has been sort of working through the various iterations and permutations here for us to be able to emphasize the potential impact.

Speaker Change: We had developed plans though that largely mitigated a significant portion of that by leveraging our global supply base and I think more importantly our global manufacturing footprint.

Speaker Change: We did make those investments in our Bayesian Operation Center a number of years ago, which provides us with an opportunity to continue to serve our customers across the globe. It also provides us an opportunity to mitigate a potential impact associated with the geopolitical tensions and the trade in addition to that. We have a large portion of our sales base, which is exportable. We have a large portion of our sales base, which provides us an opportunity to mitigate a potential impact associated with the geopolitical tensions and the trade in addition to that.

Speaker Change: and so although not all of the proposed tariffs are drawbackable, the large significant portion of them are for us and so we have processes in place that allow us to also draw back tariffs that we do pay on the exported goods.

Russell Low: Yeah, thank you. So we did say that the impact was relatively small, so obviously the upside would also be relatively small as well, but kind of like Jamie did give the numbers for the remainder of the year inclusive of tariffs.

Understood. Thanks guys.

Thanks.

And our next question.

from Charles Shee with Needham & Company.

Thank you.

Speaker Change: Hey, good morning, Russell and Jamie. Maybe the first question is about the composition of the backlog.

Speaker Change: First off, I think you guys did a good job of getting the very decent groupings for Q1, but that also...

Speaker Change: Lead to a Backtalk that is still roughly speaking four to five times of your system revenue run rate. That's a pretty high number. I would just say compared to historical norms. Let's start.

Speaker Change: It should have been somewhere between one to two times of the system.

Speaker Change: Revenue Run Race, but wonder what is the composition of the backslok there? Maybe one one way I would like to look at, or maybe you can put by some color on.

Speaker Change: of the total revenue for the company. But is China slightly overrepresented in that 618 million back bath or underrepresented or roughly in line with that?

Charles is Russell, so yes, we are.

please to have a large backlog, obviously as you note.

Speaker Change: Historically, we've been running a, say, you know, two quarters worth of backlog, which it today is run rate of systems that's probably like in the 300

Speaker Change: 300 million kind of regime, and we're with two experts. I do expect those numbers to come down with time. So I think you're going to see that coming down and then you'll start to see the flip to bill get more, more standard. You're going to see the flip.

Speaker Change: Regarding the backlog composition. As you can imagine, it looks awful lot like our business in the sense that it's going to be predominantly general mature, so it's going to be mature foundry and power.

Speaker Change: Overall, you'll see that bouncing around in 2025, but I think it will be going lower as a mix, so you will see the China percentage throughout 2025 becoming less than it was say in 2024.

Thank you.

Speaker Change: Hey, Ross, maybe I wasn't very clear. Yeah, I got your point that the China revenue percentage is going to come down this year, but the in the backflark is China still in that 40 to 62 percent range or higher or lower in the backflark. I'm not talking about though you're expected to revenue this year.

Thank you.

Speaker Change: So Charles, we don't really give that information, that's not something we've provided, but I would say that Apple King's in our backlog match very much had revenue profile but we've shared with you for Q1.

Thank you.

Speaker Change: The US revenue has some decent sequential growth in the March quarter. I wonder if you can provide some color? What's the application for the strength of that particular geography? Thanks.

Thank you [inaudible]

Speaker Change: Power, so it can carb my specifically and I'd say there's also been a little bit of, you know, other business tucked in there as well, but ultimately it's nice to see the US domestic. [inaudible]

I've been on stronger and it's basically...

Speaker Change: General Mature, as you'd imagine. Yeah, and once we look quarter to quarter, that's going to fluctuate over time, both the US, low, just given the customer delivery schedules and timing of orders. We'll see you in the next video.

Speaker Change: expected out of backlog. So from period to period, we're going to see both the US fluctuate, we'll see our memory business fluctuate from period to period as you know today. That's primarily serving the the Korean memory makers. [inaudible]

Russell Low: today, and we'll also see our China revenue fluctuate. So as Russell said, although we expect revenues on a year-over-year for China to be down relative to 2020.

James Coogan, David Ryzhik

Thank you.

Thank you guys. I appreciate it.

Thanks, Charles.

Speaker Change: Our next question comes from Tom Diffely, with DA Data Shining Company.

Tom Diffley: Yes, good morning and thank you for taking the questions. So maybe along the same lines as Charles lost question, Japan, we need to talk about Japan as a pretty nice growth driver and I'm just surprised it hasn't had any activity for the last couple quarters. Maybe just a quick update on your presence there.

and I think there's also some... Um...

Tom Diffley: kind of like general mature as well. And I think we're just beginning to see

people.

Speaker Change: Power, for example, some are looking to optimize their processes and improve their yields and reduce their costs, others are looking to do a node change. They might take one machine or two machines, you know, so we do see people taking like...

Speaker Change: High energy machines in order to help them in their transition from, say, planar to trench devices, so the revenues relatively low but the future opportunities are relatively high because once they're successful with those devices you start to see the ramp. [inaudible]

But yeah, I actually feel relatively positive about Japan.

Speaker Change: Okay, yeah, your answer, they're kind of spurred my next question. So, well, so when you look at the three technology transitions that your clients are using right now, the 150 to 200, planted a trench and super junction, how do each of those transitions specifically impact you in your business? [inaudible]

Speaker Change: Right, so the 150 to 200 weeks, so obviously we have, we can ship 200 millimetres of machines and we can also do upgrades. We actually have a large install basis looking carbide tools, across the entire Purium Power Portfolios that are high energy, the high current and the medium current, and all of those tools would be eligible for upgrades. There's a great opportunity for upgrades.

Speaker Change: Those devices require high energy so it moves the market even closer to where we've historically been very strong, which is in high energy.

Speaker Change: And one of the things we're seeing is that they're going to even higher energy. So as you go from, say, trends to superjunction, we're actually seeing some customers going up into the multiple mega-electron volts energies. So that's playing really well to our high energy technology. So we see an opportunity to capture more of the business as those devices transition. And all of this, Tom, you know, is [inaudible]

you know, increasing, you know, the wafer size.

Speaker Change: and kind of reduce the device sizes, increasingly number of devices and obviously reducing the cost. And we see this as the early innings for silicon carbide with lots of new applications.

Speaker Change: being switched on as the cost continues to fall so we're kind of excited by this and obviously we benefit as well.

Speaker Change: So we'll see this activity both in new systems as well as CSNI for some of the upgrades.

Speaker Change: So I think, you know, what we see is that many of our customers are making their money out of 150 millimeters.

Speaker Change: So consequently they're going to want to continue to do that

Speaker Change: You know, 200mm from the start, they start with obviously the R&D, get the process down path and I think some of them are waiting for the use to come, others are waiting for the price parity points. I think there's still a little bit of time for the price to be more, you know, more attractive for 200mm.

Speaker Change: And then I think what you're going to see is they'll wrap the 200mm, so that's probably the new machines. Once they've got that new 200mm line up and running, there may be an opportunity to then retrofit the 150's to make them more cost efficient. But I don't think you're going to see somebody take down their 150 line for a couple of months as they transition it over because they're going to reduce their run rates. So I think you're going to see this new tool systems going out. [inaudible]

Speaker Change: and then ramping and then seeing the aftermarket. That's my impression.

Speaker Change: Very helpful. Looks like a multi-year transition. Thanks for the time.

Yes, yes.

Speaker Change: As a reminder, we ask that you limit yourself to one question and one follow-up, and our next question comes from Jack Egan with Charter Equity Research.

Jack Egan: Great. Thanks for taking the questions. So you saw a pretty good increase in your book to bill and memory shipments were pretty strong in the first quarter, but as you've said before, those customers usually give you pretty short lead time. So is it fair to assume that the bulk of that increase in your book to bill is from non-memory segments? Or are you getting better visibility from those memory customers? Yeah, that's a pretty good increase in your book to bill. So that's a pretty good increase in your book to bill.

Jack Egan: Yeah, I think, again, no, the memory customers are still acting as they have historically in terms of we have some very robust conversations and discussions relative to their expected plans, but we still wait for purchase orders to arrive to make sure that we line everything up with the quarters and periods in which we expect to ship those devices relative to the expectations.

Jack Egan: What we did see in our book to Bill, though, and is also commented a little bit earlier is it does largely mirror that of our revenue splits for the periods as well And so that trend around where the where the orders are coming in from for the corner really does look look and feel a lot like our revenue splits.

Jack Egan: that we saw relative to General mature and power.

Speaker Change: Got it, and then on OPEX for the guidance for the full year being basically flat, you know you're probably going to see a pretty material decline in full year revenue.

Speaker Change: But that spending is gonna be still flat. So I guess what's what's the thinking there on just on keeping op-x a bit elevated?

Speaker Change: Yeah, it's investing, right? So a large portion of that is going into our R&D, right? We need some really meaningful and significant progress, and I can have Russell talk about some of the things that we're looking forward to in that space. But the goal here is to continue to invest in the base business. We've talked about our capital allocation strategy, really focused on.

Organic Growth First. [inaudible]

Speaker Change: and so putting money into the business for R&D, CAPX, and others to make sure that we're positioned.

Speaker Change: coming out of the, coming into the recovery to really make sure that we capitalize on the upswing and then partnering very closely with our customers during this period of time to make sure that we drive our technologies to their needs and requirements is going to be the most important part for us.

Russell Low: Yeah, Jack, this is Russell just to kind of add more. So we know this is a cyclical industry and I think it's been down a little bit longer than most of us would have anticipated.

Russell Low: So, you know, we believe we have great opportunities ahead of us to secular growth of this industry and the ethical recovery. So, we're continuing to make sure we invest in our products and services, stayed close to our customers. So, when the market does start to recover, then we're ready with these new products. We want them to be differentiated, innovative, and we want to obviously, you know, continue to grow our margins and revenue.

You know...

Russell Low: It will be a very bad idea to kind of like reduce significantly our op-ex given that we know there's a good, you know, there's an upturn coming and the other thing is, um...

Russell Low: It takes a long time to train people in our industry, right? I mean, it can take easily between two to five years for people to become, like, expert level. So given that we have these cycles that are considerably smaller than that, then, you know, we want to make sure we maintain those people. And like we said, continue to do add... [inaudible]

XQNR, product roadmaps.

That makes sense. Thanks for the color.

Thanks Jack, thanks Thanks.

Speaker Change: Our next question comes from Duksan Yang with Bank of America Securities.

Dexun Yang: Hi, good morning. Thank you for taking the question. I know earlier you said you do have some international manufacturing, but you still have a large portion of your products being manufactured out at the US.

Speaker Change: and you obviously have a large share of the China mix. So I'm curious if you've seen any pulling activities from customers and is that perhaps included in your outlooks. Thank you.

Speaker Change: Right, so I've said it, so the term one around tariffs, kicked in, kind of the second of...

Speaker Change: of April . So obviously, Q1 was closed pretty much at that stage. There was there was no activity to be talking about in Q1. So really it's about Q2.

Speaker Change: I would say there hasn't really been any pull forwards of note. We've had the usual push pulls depending on where customers kind of like plans are, but I would say there hasn't been a panic pull-in.

to serve our customers.

Got it. Thank you for the color.

Speaker Change: Then excluding all the tires, what are you seeing overall in customer inventory and utilization out of token carbide tools, because I think you said you're still seeing a little bit of demand out of China.

Speaker Change: Right, so I guess we've been talking about the green shoots and the opportunities for our end-market to recover. And since we are quite focused on the general mature, then you're talking about consumer spending in industrial and automotive, preliminary. We're kind of expecting to see things to start to improve, although at this stage it's hard to say everything's so bad.

Speaker Change: One of the second order effects of the terrace, though, is I would say that it's actually caused a little bit of uncertainty in the market.

Speaker Change: So that, you know, what might have been, you know, improvements have maybe caused a little bit, you know, more uncertainty But we're definitely seeing pockets improved utilization, but it's not broad-based yet [inaudible]

Maxine, you still left? Okay. Our next question comes from David Duley with Steelhead Securities.

David Dooley: Thanks for taking my question and congratulations on the nice margin performance.

David Dooley: Yes, thanks, sir. Thanks. Sure. Sure. My first question has to do with China. You mentioned I think that China revenue percentage declined to 37% in the quarter. And then you know, might be up in Q2. Could you?

David Dooley: Give us a guess as to where you think it declines to for the whole year, and I'm guessing that probably represents the bottom in Chinese revenue, maybe I'm wrong, but maybe comment a little bit on that for us.

David Dooley: We haven't provided full-year expectations necessarily for China just yet, but we do anticipate, like I said, we do anticipate it to increase here in the second quarter and then moderate it through the rest of the year here. Based on what we understand today, we do anticipate China revenue being lower than what we saw for MIX overall in 2024 versus 2025.

David Dooley: And so as a result of that, all the commentary we're going to provide at this point, we need to see where the rest of the year flows out and what type of activity and opportunities may present themselves before we make any more meaningful comment on that.

Speaker Change: Okay, and just to be clear, the comments you have made, I think it would indicate that the 37% to achieve in Q1 most likely for the year that that percentage would be down, if that doesn't have the message that you're trying to send us.

Speaker Change: It's going to all depend on the mix in the back half of the year and the averages over those periods of time, David. But again, we expected to be lower than what we saw. While I can say definitively as of right now, we do expect it to be lower than what we saw in 2024 overall. So year on year, we do expect that percentage to be lower. [inaudible]

Speaker Change: As far as the memory business goes, I think it's been kind of upticking the last few quarters.

Speaker Change: I was curious and coincidentally the Korean revenue was up as well. I'm sure those are related. But I'm kind of wondering has the memory business starting to broaden out? Is it all three customers or is it just one customer maybe some commentary on the breadth of the memory recovery? [inaudible]

Okay, hey, David's Russell, um, so...

Speaker Change: If you look at the uptick we had in memory, our last quarter, it was a pretty good uptick, but it was all DRAM, so, you know, addressing NAND first.

Speaker Change: We haven't seen orders from NAN for a long time, if you remember, if for us to receive NAN orders there has to be an increase the number of wait to starts and you know you're aware that the NAN guys

Speaker Change: basically looking to go more and more verticals, one X-X, two X-X, and beyond. So they're using this relatively quiet time to do a no-change, which is very typical, and that's increasing the bit dramatically, but it's not actually increasing the number of wave stars.

Speaker Change: Regarding DRAM, which is pretty much where all of our revenue came from, you know, we are seeing multiple customers look to grow their DRAM and obviously there's some customers that are doing well on...

Speaker Change: HBM, and that's actually taking down capacity, and then there's other customers that are doing well on D-Ram because of the D-Ram capacity being taken down by HBM. So, we were saying that, you know, you know...

Speaker Change: D-Ram is probably going to be modest for 2025. It's bouncing around a little bit, but that is really the story at this stage. It's D-Ram.

Thank you.

Thank you.

Speaker Change: Enter next question and comes from a Christian Schwab with Greg Helm, Capital.

Speaker Change: Hey, good, good quarter, guys. I just want to follow up on the earlier line of questioning.

by Compton Diffely.

Speaker Change: Do you guys see increased capital intensity? In other words, obviously impact on equipment sales per wafer starts?

as the industry upgrades from 150 to 200.

Speaker Change: and moving it from plainer to trench at in high energy, it seems that your dollar content, you know, per wafer start going forward should increase over time if you have any idea what percentage that would be. [inaudible]

Christian Schwab: So, hey Christian, so I think actually that's a great question. So, as people go from Plainer,

Christian Schwab: So you definitely see, I don't think there's no high energy implants in a plenary device that I'm aware of so it's moving to trends you've now got to put the deeper implants in an obviously super junction is the next level beyond that

Christian Schwab: As you also probably remember that there's basically no ability to diffuse dopant officially in silicon carbide. So if you want to go deep you now actually have to overlap a whole bunch of chain implants. So yes, we are seeing an increasing intensity of implants depth.

In certain car by devices that they don't go for mode to mode [inaudible]

Christian Schwab: I don't think we've actually quantified that at this stage. I think we've kind of had in prior examples, we've talked about, you know, the rough number of machines you need for a hundred thousand wafers starts, because we were trying to compare to memories. We've talked about memories.

So that's probably the closest we've come but I think you're going to see that you're going to see a transition in machine types.

Speaker Change: And that's kind of what we've shown in the past as well is we used to start off just by shipping pure in M tools and then people started taking eights to hundreds in the XZs as they started to go into high volume manufacturing and make a device transition. So yeah, I mean, does that answer your question, Christian?

Speaker Change: It does. Thank you. You know, my next question is, you know, a facility car by, you know, production today. Do you have a rust estimate of, you know, what percentage of the wafers are planar today and in expectation of what percentage will move to trench over a given period of time? [inaudible]

Speaker Change: Okay, so I'd say that right now, I mean, this is kind of like this transition's going on for 1,500, 200 planar to trench. I can only think of one customer's kind of like...

entrenched in planar.

Speaker Change: So I think you're going to see, you know, as people's capabilities grow, you will see this transition to a trench and then on to, you know, superjuncture and you'll see this transition from 150 to 200. The most advanced companies are going to move.

Speaker Change: Much more quickly. And, you know, we've said before we are the leaders in high energy, so as they move to trends and superjunctions, that plays very nicely into our strengths.

Speaker Change: You're right, and if I could just sneak in one last question, you guys mentioned

Speaker Change: Can you give us an idea of, you know, this, you know, bolt-on acquisitions that you're looking at?

Speaker Change: Something, you know, any kind of color of what that means, I guess, would be helpful.

Speaker Change: Yeah, understood. I think that the goal here is to keep the aperture as wide open as we possibly can. We want to leverage the fact of our expertise and experience in the semiconductor capital equipment space to the best of our ability.

Speaker Change: We've talked about leveraging our global footprint, the fact that we've got field service folks, inventory depots, and operations, next to all the major customers throughout the world here, we believe there's opportunities for us to leverage that by potentially introducing new technologies into our ecosystem. As you noted in plant, there's a little bit of an application today, and there aren't a ton of opportunities within that space to try to expand in organically.

Speaker Change: So, you know, that's one of the reasons why we're looking as wide and broad as we are as we go through it though we're going to continue to, you know, assess those opportunities relative to the other return characteristics we have both on organic as well as shareholder return basis in making decisions on how and when to execute that. So, you know, unfortunately, that's probably all I can say, you know, relative to our efforts at this point in time, but like I said, it's wide open.

Great. Thank you.

Yep, thanks [inaudible]

Speaker Change: And our next question comes from Mark Miller with the benchmark company.

Speaker Change: Thank you for your question. I wonder if you can give us any additional color or what's going on with your image customers.

Speaker Change: Besides, Mark, it means sensor customers. Okay, so we are, so again, it's very regional, but you actually do have...

A customer?

Sorry, that's actually adding significant capacity.

Thank you, Alfred, number one [inaudible]

Speaker Change: The use of emissances is foes, which is by far away the biggest use followed by cars. We are seeing a lot of senses going into cars so...

Speaker Change: And that's a little unusual. I think many of the other image-sense customers are adding much capacitive moments. It's relatively quiet. I mean, the game.

Mobile phones and automotives. [inaudible]

are the end-markets and they are fairly muted.

Speaker Change: Yeah, just as a point of clarity for everyone we did, the sport or we did embed image sensor sales as part of our general mature. I think we know that in our prepared remarks and so it won't be broken out on a go-forward basis, but by all means happy to talk about the trends that we see within that space and the opportunities that present themselves.

Speaker Change: I was a little surprised with your comments about not seeing a lot from NIN because NIN CapEx for the first time in a couple years is increasing

Speaker Change: I assume most of it's for capacity additions. Are you seeing any voting activity or is this still pretty dead?

Speaker Change: I would say that NAND is still pretty muted from that point of year, remember Mark, but we need new wafer stars.

Speaker Change: So I'd say that man's right now, they're beginning to build the Manhattan skyline, they're just going vertical. So that adds significant depth and edge. It adds significant bits per wafer. It doesn't add a lot of new waifers. And we need new waifers in order to drive new implants.

Thank you.

Thanks.

David: And this concludes the question and answer session. I would now like to turn it back to David for closing remarks.

David: Thanks operator, and I want to thank everyone for joining the call and your interest in Xcelis operator, you can close the call.

Speaker Change: Thank you for participation in today's conference. This does conclude the program. You may now disconnect.