Axcelis(ACLS) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported Q2 2024 revenue of $257 million, exceeding the previous outlook of $245 million, with earnings per diluted share of $1.55, significantly above the prior estimate of $1.30 [7][16][20] - Gross margins for Q2 were 43.8%, slightly above the expected 43.5%, driven by better volumes and a favorable systems mix [18] - Operating profit was $53 million, reflecting a 20.6% operating margin, impacted by restructuring charges of approximately $1.4 million [19] Business Line Data and Key Metrics Changes - Systems revenue totaled $199 million, with the Mature segment comprising 98% of total system revenue, driven by strong demand for silicon carbide applications [7][8] - Advanced Logic revenue was only 2% of total system revenue, but the company made significant progress in this area, including closing a Purion Dragon evaluation unit [10] - No systems revenue was generated from the memory market in Q2, but initial spending for DRAM is expected as the year progresses [11] Market Data and Key Metrics Changes - China accounted for 55% of total system sales, remaining the strongest region for the company [17] - Demand for silicon carbide applications is expected to remain healthy, particularly in the EV market, while demand for silicon IGBT applications was soft [8][9] - Image Sensor demand was robust in China but subdued elsewhere, with signs of growth as customer quoting activity increased [9] Company Strategy and Development Direction - The company aims to capitalize on secular growth in power applications, particularly silicon carbide, which is projected to grow at a 25% CAGR from 2023 to 2029 [13] - The company is focused on geographic expansion in Japan and increasing penetration in the market while leveraging customer relationships [15] - The long-term growth model targets approximately $1.6 billion by 2027, driven by advancements in AI, electrification, and increased semiconductor demand [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a slight revenue increase in the second half of 2024, with momentum expected to build into 2025 [12][28] - The company is closely monitoring macroeconomic conditions and their impact on customer spending patterns, particularly in the General Mature segment [27] - Management remains optimistic about long-term opportunities, particularly in the power segment and the eventual recovery of memory spending [32] Other Important Information - The company ended Q2 with $548 million in cash and generated $38 million in free cash flow [20] - The systems backlog was approximately $1 billion, with system bookings totaling $105 million in Q2 [17] Q&A Session Summary Question: Changes in Power Business Outlook - Management indicated that expectations for the full year have not materially changed, with continued strength in silicon carbide and a slight moderation expected in General Mature [26][27] Question: Pathways to 2025 Revenue Model - Management acknowledged that achieving the $1.3 billion model in 2025 is possible but will require a step-up in demand across segments, particularly in Memory and General Mature [31][32] Question: Backlog and Bookings Clarification - Management confirmed that the backlog fell due to revenue load and bookings, with no significant cancellations noted [36][37] Question: Key End Markets for General Mature Business - Management highlighted consumer spending as a key driver for General Mature, with automotive and industrial sectors lagging behind [39] Question: NAND Recovery Expectations - Management expects NAND demand to improve in 2025, following a recovery in DRAM [54] Question: Customer Profile and Pull-in Activity - Management clarified that the pull-in activity was beneficial, allowing for quicker closure of evaluation units and meeting customer production needs [58] Question: IGBT Market Dynamics - Management noted that while IGBT demand is currently soft, there is potential for recovery, particularly as silicon carbide continues to gain market share [70]