Financial Data and Key Metrics Changes - The company reported third-quarter revenue of $214 million and non-GAAP earnings per diluted share of $1.21, both exceeding expectations [5][19] - GAAP gross margin was 41.6%, while non-GAAP gross margin was 41.8%, below the expected 43% due to a mix of low-margin system installations [21][22] - The company generated approximately $43 million in free cash flow during the third quarter, reflecting better-than-expected profitability [23] Business Line Data and Key Metrics Changes - Systems revenue was $144 million, and CS&I revenue reached a record of $70 million, driven by strong demand for spares and consumables [19] - Bookings in the third quarter declined to $52 million, primarily due to softer power and general mature bookings, but an improvement in memory bookings was noted [5][20] - Revenue from silicon carbide applications grew sequentially, while general mature revenue declined as customers managed capacity investments [10][14] Market Data and Key Metrics Changes - Sales to China decreased sequentially to 46% of total sales, down from 55% in the prior quarter, as customers digested previous investments [20] - The U.S. accounted for 14% of sales, while Korea declined to 10% [20] - The company anticipates revenue from China to decline sequentially in the fourth quarter [20] Company Strategy and Development Direction - The pending merger with Veeco is expected to create a leading semiconductor equipment company, enhancing capabilities and market reach [6][10] - The combined company aims to leverage strengths in silicon carbide and gallium nitride to address growing demand in electrification and AI [7][9] - The company is focused on product development and customer engagement while maintaining cost control [18] Management's Comments on Operating Environment and Future Outlook - Management noted that the second half of 2025 has shown slight improvement in demand compared to the first half, particularly in silicon carbide [29] - There is cautious optimism regarding memory market recovery in 2026, driven by increased DRAM and HBM investments [17][34] - The company expects bookings to improve sequentially in the fourth quarter, with a strong backlog of $484 million [20][51] Other Important Information - The company implemented a one-time voluntary retirement program, with additional expenses expected in the fourth quarter [22] - The company exited the third quarter with a strong balance sheet, consisting of $593 million in cash and marketable securities [24] Q&A Session Summary Question: Dynamics in the other power category - Management indicated that the second half of 2025 has been slightly better than the first half, with Chinese customers adding capacity while non-Chinese customers are not transitioning [29] Question: China demand outlook for 2026 - Management stated that 2025 has been a year of digestion, and future demand will depend on end demand environments and progress on chip self-sufficiency targets in China [32] Question: Memory market outlook - Management noted that demand is currently coming from DRAM and HBM, with expectations for new greenfield capacity to be brought online [34] Question: CS&I revenue sustainability - Management indicated that the current level of CS&I revenue is expected to be sustainable, driven by improved utilization rates and customer restocking activities [38] Question: Bookings expectations for Q4 - Management expects bookings to increase across all customer segments in Q4, with a buildup of pressure leading to purchase orders [39] Question: Silicon carbide adoption outside of EVs - Management highlighted potential applications in the electric grid and data centers, indicating a growing market for silicon carbide beyond electric vehicles [60]

Financial Data and Key Metrics Changes - The company reported third-quarter revenue of $214 million and non-GAAP earnings per diluted share of $1.21, both exceeding expectations [6][21] - GAAP gross margin was 41.6%, while non-GAAP gross margin was 41.8%, below the expected 43% due to product mix [23][24] - GAAP operating margin was 11.7%, and non-GAAP operating margin was 18.2% [25] - The company generated approximately $43 million in free cash flow during the third quarter [27] Business Line Data and Key Metrics Changes - Systems revenue was $144 million, while CS and I revenue reached a record $70 million, driven by strong demand for spares and consumables [21][22] - Bookings in the third quarter declined to $52 million, with a backlog of $484 million at the end of the quarter [22][28] - Revenue from the power business grew sequentially, particularly in silicon carbide applications, while general mature revenue declined [11][16] Market Data and Key Metrics Changes - Sales to China decreased sequentially to 46% of total sales, down from 55% in the prior quarter [22] - The company anticipates a decline in revenue from China in the fourth quarter, consistent with previous expectations [22][45] - Sales to the U.S. accounted for 14% of total sales, while Korea accounted for 10% [22] Company Strategy and Development Direction - The company announced a merger with Veeco, aiming to create a leading semiconductor equipment company and capitalize on trends in AI and electrification [7][10] - The merger is expected to enhance cross-sell synergies and optimize technology advancements [8][9] - The company is focused on maintaining a strong aftermarket strategy and growing its installed base to support profitability and cash flow [20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about bookings improving sequentially in the fourth quarter, driven by encouraging quoting activity [6][10] - The company is navigating a cyclical digestion period across markets while remaining disciplined on cost control [19] - Management noted that while 2025 has been a year of digestion, they see potential growth opportunities in 2026, particularly in memory and power markets [45][50] Other Important Information - The company implemented a one-time voluntary retirement program, with additional expenses expected in the fourth quarter [24] - The company exited the third quarter with a strong balance sheet, including $593 million in cash and marketable securities [27] Q&A Session Summary Question: Dynamics in the other power category - Management noted that Chinese customers are adding capacity in silicon carbide, while non-Chinese customers are not transitioning significantly [35] Question: Tariff impacts on the business - The company is managing through the tariff environment and expects potential impacts in 2026 as tariff costs move into the P&L [38] Question: China demand outlook for 2026 - Management indicated that China demand will depend on end demand environments and progress on chip self-sufficiency targets [45] Question: Memory market outlook - Management highlighted that demand is currently coming from DRAM and HBM, with expectations for new greenfield capacity to be brought online [50] Question: CS and I revenue sustainability - Management confirmed that the current level of CS and I revenue is expected to be sustainable, driven by improved utilization rates [66] Question: Bookings expectations for Q4 - Management anticipates bookings to increase across all customer segments, with a build-up of pressure leading to purchase orders [70] Question: Adoption of silicon carbide outside of electric vehicles - Management mentioned potential applications in the electric grid and data centers, indicating a growing market for silicon carbide [116]

Axcelis Technologies, Inc. (NASDAQ:ACLS) is one of the 14 Small Publicly Traded Semiconductor Companies to Invest in Now. On September 8, Axcelis Technologies, Inc. (NASDAQ:ACLS) introduced its new product called the GSD Ovation ES, which is a high-current ion implanter designed specifically for engineered substrates. The GSD Ovation ES supports best-in-class high current implanting capabilities for Hydrogen and Helium ions for engineered substrate applications like wafer splitting. According to the repor ...