ASML Holding(ASML)2020-07-15 19:52Financial Data and Key Metrics Changes - Net sales for Q2 2020 reached €3.3 billion, reflecting a growth of over 35% compared to Q1 2020 [11] - Gross margin improved to 48.2%, a significant increase from Q1, primarily due to a favorable Deep UV mix and improved EUV installed base gross margin [13] - Net income for Q2 was €751 million, representing 22.6% of net sales, resulting in an EPS of €1.79 [14] Business Line Data and Key Metrics Changes - Net system sales amounted to €2.4 billion, with Logic accounting for 62% and Memory for 38% of sales [12] - Installed Base Management sales were €887 million, contributing to a total of approximately €1.7 billion in the first half of 2020 [13] - EUV systems shipped in Q2 totaled nine, with revenue recognized on seven systems [11][12] Market Data and Key Metrics Changes - Q2 system bookings were €1.1 billion, with a balanced order intake between Logic and Memory at 50% each [15] - Sales to China accounted for 23% of system revenue in Q2, driven by demand from both Logic and Memory customers [21] - The company expects continued growth in the China region for the year [21] Company Strategy and Development Direction - The company anticipates a year of double-digit growth in sales and profitability for 2020, despite COVID-19 disruptions [20] - Focus on advancing technology nodes in Logic and supporting digital infrastructure applications such as 5G and AI [20] - Plans to maintain a capital allocation policy that includes growing dividends and share buybacks, with a target of €6 billion over three years [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the COVID-19 environment, with operations largely back to normal [10] - The company expects significant growth in the installed base business, with a similar revenue level in the second half of the year as in the first half [22] - Management remains cautious about the macroeconomic environment but sees stable demand and a strong second half for 2020 [27] Other Important Information - The company plans to resume share buybacks once free cash flow generation becomes healthy and risks are under control [18] - The effective tax rate for Q2 was 18.5%, influenced by a one-off tax assessment [14] - The company is working through a transition period regarding working capital, expecting significant improvements in the second half of the year [40] Q&A Session Summary Question: Can both DUV and EUV units see growth in 2021? - Management indicated that if Memory demand continues to rise, both DUV and EUV could see growth, but typically, increased EUV layers may cannibalize DUV layers [34] Question: What is the trajectory for gross margins in Q3 and Q4? - Management expects a slight deterioration in gross margin for Q3 due to a mix shift but anticipates reaching 50% gross margin in Q4 driven by improved immersion margins and EUV service revenue [36] Question: What is the outlook for working capital and share buybacks? - Management expects significant recovery in free cash flow generation in the second half of the year, with potential for share buybacks to resume in Q4 [42] Question: How is the Memory strength categorized between China, DRAM, and NAND? - Management noted that the Memory strength is driven by a mix of Chinese customers and traditional DRAM customers, with an emphasis on DRAM in the second half [64] Question: What is the expected mix of shipments between Logic and Memory for EUV systems? - Management confirmed that the majority of EUV shipments in 2021 will be for Logic, with limited shipments for DRAM expected [67]