Axcelis(ACLS) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported Q1 2025 revenue of $193 million and earnings per diluted share of $0.88, both exceeding expectations, with non-GAAP earnings per share at $1.04 [5][19] - Bookings for the quarter were $110 million, reflecting a sequential increase compared to Q4 2024, resulting in a book-to-bill ratio of 0.8, the highest since Q4 2023 [6][19] - GAAP gross margins were 46.1%, exceeding the outlook of 40%, while non-GAAP gross margins were 46.4% [21][22] - GAAP operating profit was $29.2 million, reflecting a 15.1% operating margin, with non-GAAP operating margin at 18.3% [23] Business Line Data and Key Metrics Changes - Systems revenue was $138 million, and CS and I revenue was $55 million, both slightly above expectations [19] - Sales to mature node applications remained dominant, particularly in Power and General Mature segments [8][10] - Revenue from silicon carbide applications declined sequentially due to moderated customer investments, while engagement in technology transitions remained strong [10][12] Market Data and Key Metrics Changes - China accounted for 37% of total shift system sales, down from 49% in the prior quarter, with expectations for fluctuations in revenue from China throughout 2025 [19][20] - The U.S. saw an increase in shift system sales to 23% of total, while Korea improved to 20%, mainly due to DRAM shipments [19] - The company anticipates a decline in revenue from China on a year-over-year basis as customers digest previous investments [19][20] Company Strategy and Development Direction - The company is focused on innovation and cost control to capture long-term growth opportunities while mitigating tariff impacts [6][8] - Plans are in place to lessen the direct impact of tariffs, leveraging a diversified global supply chain [6][7] - The company aims to maintain strong profitability and invest in R&D to prepare for market recovery [26][85] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term drivers of the semiconductor industry, despite current macroeconomic challenges [16][28] - The company expects revenue in Q2 2025 to be approximately $185 million, with non-GAAP gross margins around 42% [26] - Management noted that while bookings improved, it is premature to call it an inflection point, and they expect continued fluctuations in bookings [39][40] Other Important Information - The company generated $35 million in free cash flow in Q1 2025 and exited the quarter with $587 million in cash and no debt [25][28] - A $100 million increase in share repurchase authorization reflects confidence in long-term business fundamentals [25] Q&A Session Summary Question: What contributed to the robust gross margin? - Management indicated that higher margin spare sales and favorable deferred revenue recognition contributed to the strong gross margin performance [33][35] Question: What is the order intensity for Q2? - Management noted that while bookings increased significantly, it is too early to declare it an inflection point, with most bookings coming from general mature and power segments [39][40] Question: Can you break down the margin performance? - The largest contributor to margin performance was the mix of sales, with expectations for moderation in the second quarter [46] Question: What is the impact of tariffs on margins? - Management acknowledged that while tariffs have a small impact, they have plans in place to mitigate these effects through a global supply base [50][51] Question: What is the composition of the backlog? - The backlog is predominantly general mature, with expectations for it to decrease over time as the company returns to a more standard book-to-bill ratio [56][58] Question: What is the outlook for Japan? - Management expressed optimism about Japan, noting progress in placing tools and anticipating repeat orders as utilization rates improve [70][72] Question: How are technology transitions impacting the business? - The transitions from 150mm to 200mm wafers and from planar to trench devices are expected to benefit the company, particularly in high-energy technology [73][75] Question: What is the outlook for memory business recovery? - The memory business saw an uptick primarily in DRAM, with expectations for broadening out in the future [103]