© Reuters.
Axcelis Applied sciences Inc. (NASDAQ:) has introduced document income for each the fourth quarter of 2023 and the complete yr, citing robust development within the implant intensive energy gadget section and important income contributions from the Chinese language market.
The corporate reported fourth-quarter income of $310.3 million and full-year income of $1.13 billion, marking a 23% year-over-year development. Axcelis anticipates continued development with a income goal of $1.3 billion by 2025, pushed by the mature and reminiscence markets, in addition to strategic investments in superior logic and the Japanese market. The corporate additionally highlighted its strong money place and dedication to shareholder returns by way of share repurchase packages.
Key Takeaways
- Axcelis Applied sciences reported document This autumn income of $310.3 million and $1.13 billion for the complete yr.
- China accounted for a good portion of system income, with expectations for 2024 ranging between 40-60%.
- The corporate targets a $1.3 billion income purpose for 2025, specializing in development in mature and reminiscence markets, and enlargement in superior logic and Japan.
- Earnings per share for This autumn stood at $2.15, with a full-year whole of $7.43.
- Axcelis ended This autumn with $506.1 million in out there money, having generated substantial money from operations and returned over $185 million to shareholders since 2019.
- The corporate plans to host a Capital Markets Day on July 11 to debate long-range monetary fashions and product improvements.
Firm Outlook
- Axcelis expects a decrease contribution from DRAM, lower than 10% of whole techniques income in 2024, and a NAND restoration by 2025.
- The main focus might be on rising market share within the superior logic section in Japan.
- The corporate goals for a income goal of $1.3 billion in 2025, with development anticipated from the growing implant TAM and market demand for the Purion product line.
- For Q1 2024, Axcelis forecasts income of roughly $242 million with gross margins round 43.5%.
Bearish Highlights
- The corporate anticipates a weaker first half of the yr and doesn’t anticipate NAND to get well till 2025.
- Considerations about potential U.S. authorities restrictions on legacy chip semi-cap tools are being intently monitored.
Bullish Highlights
- Axcelis has a powerful backlog and buyer relationships, particularly within the Chinese language market, which is exhibiting power in silicon carbide for electrical autos.
- The corporate is assured in its development in China and forecasts 60% of techniques income and 50% of whole income from the facility section.
Misses
- There have been no particular misses talked about within the supplied context.
Q&A Highlights
- Capital spending for the quarter was $10 million and roughly $20 million for the complete yr.
- Gross margins are anticipated to extend in 2024 as a consequence of greater CS&I volumes and system mixes.
- Robust bookings within the quarter had been pushed by demand for silicon carbide in China.
In conclusion, Axcelis Applied sciences has demonstrated a strong efficiency in 2023 and is positioning itself for future development with strategic focuses on key market segments and areas. The corporate’s robust monetary place and proactive method to market developments and buyer demand underline its optimistic outlook for the approaching years.
InvestingPro Insights
Axcelis Applied sciences Inc. (ACLS) has not solely reported document income figures but additionally presents a compelling monetary profile in line with real-time knowledge from InvestingPro. With a market capitalization of $4 billion and a P/E ratio of 16.22, the corporate’s valuation metrics counsel an inexpensive worth for its earnings. Notably, the P/E ratio adjusted for the final twelve months as of Q3 2023 stands at 17.24, indicating a slight improve over time. Nevertheless, the PEG ratio for a similar interval is 0.41, which may indicate that the inventory is undervalued relative to its earnings development potential.
When it comes to liquidity and monetary well being, Axcelis holds more money than debt on its stability sheet, a reassuring signal for buyers involved about an organization’s skill to satisfy its monetary obligations. The agency’s money flows can sufficiently cowl curiosity funds, and its liquid belongings exceed short-term obligations, that are essential metrics that mirror monetary stability.
The InvestingPro Ideas spotlight that three analysts have revised their earnings upwards for the upcoming interval, and Axcelis is buying and selling at a low P/E ratio relative to near-term earnings development. These insights could possibly be notably priceless for buyers trying to capitalize on potential future earnings surprises and the corporate’s development trajectory.
For these concerned with deeper evaluation and extra suggestions, InvestingPro gives further insights on Axcelis Applied sciences. There are extra suggestions out there, together with particulars on inventory worth volatility, profitability projections, and historic returns. To entry these insights and improve your funding technique, use coupon code SFY24 to get an extra 10% off a 2-year InvestingPro+ subscription, or SFY241 to get an extra 10% off a 1-year InvestingPro+ subscription.
Full transcript – Axcelis Tech (ACLS) This autumn 2023:
Operator: Good day, women and gents and welcome to Axcelis Applied sciences Name to debate the corporate’s outcomes for the Fourth Quarter and Full Yr 2023. My identify is Michelle, and I might be your coordinator for right this moment. Right now, all contributors are in a listen-only mode. After the audio system’ presentation, there might be a question-and-answer session. [Operator Instructions] Please be suggested that right this moment’s convention is being recorded. I might now like to show the presentation over to your host for right this moment’s name, Doug Lawson, Government Vice President of Company Advertising and Technique. Please proceed.
Douglas Lawson: Thanks, operator. That is Doug Lawson, Government Vice President of Company Advertising and Technique and with me right this moment is Russell Low, President and CEO; and Jamie Coogan, Government Vice President and CFO. When you’ve got not seen a replica of our press launch issued yesterday, it’s out there on our web site. Playback service might be additionally out there on our web site as described in our press launch. Please be aware that feedback made right this moment about our expectations for future revenues, earnings and different outcomes are forward-looking statements beneath the SEC’s Secure Harbor provision. These forward-looking statements are primarily based on administration’s present expectations and are topic to the dangers inherent in our enterprise. These dangers are described intimately in our Type 10-Okay annual report and different SEC filings, which we urge you to evaluate. Our precise outcomes might differ materially from our present expectations. We don’t assume any obligation to replace these forward-looking statements. Now I am going to flip the decision over to President and CEO, Russell Low.
Russell Low: Good morning and thanks for becoming a member of us for our fourth quarter and yr finish 2023 earnings name. Axcelis delivered document income for the fourth quarter of $310.3 million and $1.13 billion for the complete yr 2023. The implant intensive energy gadget section enabled Axcelis to realize 23% year-over-year income development throughout a big trade downturn. Fourth quarter earnings per share of $2.15 exceeded our revised steering, whereas full yr 2023 earnings per share got here in at $7.43. Taking a look at our geographic combine, China continued to supply power, particularly within the energy gadget section. Within the fourth quarter, China represented 49% of our system income, with Korea 18%, Europe 12%, the U.S. 11%, Japan 5%, and the remainder of the world 5%. For the complete yr, China represented 46%, the U.S. 15%, Korea 14%, Europe 11%, Japan 3%, Taiwan 2%, and the remainder of the world 9%. Trying on the market section distribution for 2023, the general mature section represented 88% of the shipped system income. Reminiscence was 10%, superior logic was 2%. Breaking down the mature section in additional element, energy continued to steer system shipments with 59% of whole techniques income. Silicon carbide made up 34% and silicon 25% of whole system income respectively. The final mature section was 26%, picture sensors had been 3% and DRAM represented the whole 10% of reminiscence techniques income.
IGBT: At the moment, DRAM is anticipated to select up in the direction of the tip of the yr and contribute lower than 10% of whole techniques income in 2024. NAND shouldn’t be anticipated to get well till 2025, when DRAM and NAND are forecast to have a powerful yr. Geographically, in 2024, we anticipate China to characterize 40% to 60% of our quarterly techniques income, with the remaining income unfold comparatively evenly throughout the opposite geographies depending on particular buyer initiatives. The facility gadget section and particularly silicon carbide has pushed our development in 2023. We now have developed a big and numerous buyer base on this market, and we proceed to win enterprise from new prospects in addition to increasing our product footprint with current prospects. The complete portfolio of Purion Energy Sequence merchandise is valued by these prospects. New fab initiatives and prospects usually begin up by establishing a core of Purion M silicon carbide instrument after which undertake the usage of the Purion H200 silicon carbide and Purion XE silicon carbide techniques to enhance productiveness, price of possession, and gadget efficiency. In consequence, we have now seen a big improve within the adoption and nice success with the Purion H200 and Purion XE silicon carbide techniques. Moreover, we proceed to work with prospects to additional improve this chance and at present we have now three Purion H200 silicon carbide system evaluations underway with prospects in a number of geographies. Two of those techniques are 150 mm and one is 200 mm. Clients are utilizing these analysis items to qualify productiveness limiting recipes as they put together to ramp to greater volumes. Additionally, by using the excessive power and dose capabilities of the Purion H200 silicon carbide instrument, prospects can start optimization work on their gadgets throughout the analysis interval. Axcelis is the one iron implantation firm that may ship full recipe protection for all energy gadget functions. We’re thought-about the know-how chief and the provider of selection, offering one of the best product household and manufacturing capabilities. Because of this utilizing Axcelis instruments supplies the bottom threat path to excessive quantity manufacturing required to help aggressive fab ramp plans. We anticipate the reminiscence and mature markets will get well later this yr, however throughout this gradual interval, Axcelis stays near our prospects, supporting their set up base and dealing with them on future know-how and manufacturing wants. Throughout trade slowdowns like this, prospects have extra time to collaborate with Axcelis on new applied sciences and product capabilities. We use this chance to focus our R&D efforts in key areas that might be crucial to prospects as they enter their subsequent section of development. Finally, this ends in delivery analysis techniques to prospects and joint improvement engagements that assist us develop our market share. At the moment, we have now an analysis system with prospects throughout practically all market segments and a number of technical buyer engagements designed to enhance capabilities and improve our footprint throughout all segments. We now have targeted initiatives anticipated to develop share within the superior logic section and geographically in Japan. In 2023, we shipped a Purion Dragon, our most superior excessive present implanter, to a number one analysis institute targeted on superior logic course of improvement. We even have one other Purion Dragon beneath analysis with a number one superior logic buyer. These instruments and the related technical collaboration might be crucial to the shopper’s improvement of subsequent era logic know-how. In Japan we have now seen preliminary success within the energy market as a result of power of the Purion Energy Sequence and we’re engaged with a number of Japanese prospects in further market segments. We anticipate these efforts to extend the Purion footprint on this vital and rising geography. Because the trade exits this downturn Axcelis will return to wholesome development within the mature and reminiscence markets. This, mixed with continued power within the energy section is anticipated to drive Axcelis to our $1.3 billion income mannequin in 2025. Moreover, investments being made in superior logic and Japan will assist drive our continued development past 2025. Now I would like to show it over to Jamie.
James Coogan: Thanks, Russell and good morning everybody. We’re happy with our monetary outcomes for the fourth quarter and for the complete yr 2023, particularly with the 23% year-over-year income development throughout this trade downturn. As we entered 2024, the trade continues to take care of market weak spot, however as Russell mentioned, there are additionally clear indicators of restoration and an expectation for a powerful 2025. On account of the present market circumstances, we’re guiding first quarter income of roughly $242 million with gross margins of round 43.5%, working revenue of roughly $45 million and earnings per share of about $1.22. We anticipate full yr 2024 income ranges to be much like 2023 with income weighted in the direction of the second half of the yr. Energy is anticipated to stay strong all year long with the mature markets and reminiscence recovering within the second half. Our robust techniques backlog and the anticipated restoration of those markets units us as much as obtain our $1.3 billion income goal in 2025. Taking a look at our fourth quarter, income and earnings per share completed above our revised steering as a consequence of strong execution and continued demand for Purion, particularly within the silicon carbide energy market. This autumn income was $310.3 million, with system income at $241.8 million and CS&I at $68.5 million. Full yr income was $1.13 billion, with techniques income of $883.6 million and CS&I at $247 million. This autumn earnings per share of $2.15 was pushed by greater than anticipated revenues and gross margin, in addition to decrease total working bills. This efficiency led to full yr earnings per share of $7.43. Regardless of softness within the basic mature and reminiscence markets, bookings and quoting exercise for techniques within the energy section remained strong and continued to help our income expectations. Bookings within the quarter had been $236 million, sustaining our backlog at $1.2 billion, a portion of which stretches into 2025. Given the rise in put in Purion techniques, we anticipate CS&I income to extend in 2024 over 2023. Though income will fluctuate quarter-to-quarter, CS&I must be modeled at roughly $260 million for 2024 and roughly $300 million for our $1.3 billion income mannequin. This autumn gross margin completed at 44.4% and at 43.5% for the complete yr. In 2024 we anticipate to see year-over-year enchancment in gross margin. Nevertheless, quarterly gross margins will fluctuate primarily based on product combine. We stay laser targeted on margin enchancment and have various initiatives underway to decrease the price of items offered and to drive greater gross sales of Purion product extensions. Execution on these initiatives will permit us to mannequin gross margin at better than 45% in our $1.3 billion income mannequin. Turning to working bills, the fourth quarter ended at 19% of income, higher than our steering, and at 19.9% of income for the complete yr. We anticipate OpEx within the first quarter of 2024 to be roughly 25% of income. The rise as a share of income is a results of the decrease gross sales quantity within the first quarter and the incremental investments we have made to help the upper income hundreds we anticipate sooner or later. OpEx as a share of gross sales is anticipated to say no over the course of 2024 given the upper volumes anticipated within the second half of the yr. Investments in R&D will improve in 2024 to roughly 9.5% of income in comparison with the 8.6% of income we invested in 2023. The incremental funding of R&D might be targeted on the continued improvement of our Purion product extensions and upgrades. As you’ll anticipate, we are going to proceed to tightly handle spending whereas persevering with to help the longer term development of the enterprise by solidifying our know-how benefit within the specialty markets, growing our footprint within the reminiscence and superior logic markets, and most significantly, persevering with to spend money on our staff and infrastructure to make sure we have now the mandatory expertise, tools and amenities required to realize our monetary fashions. Transferring to our stability sheet and money movement, we ended This autumn with $506.1 million of obtainable money and generated $65.6 million of money from operations within the interval and $156.9 million for the complete yr. We continued to execute in opposition to our share repurchase program, shopping for again $15 million of inventory within the quarter. In whole, we have returned over $185 million of money to shareholders since 2019 by way of our share repurchase packages. Earlier than turning the decision over to Russell for ultimate remarks, I needed to remind you that we’ll be taking part in various upcoming investor occasions, together with Wolfe Analysis’s Inaugural Semiconductor Convention in San Francisco on February 14 and Susquehanna’s twelfth Annual Know-how Convention just about on March 1. As well as, we intend to host a Capital Markets Day on July 11 of this yr in San Francisco within the time slot we often maintain our technical symposium. At this occasion, we are going to present our subsequent lengthy vary monetary mannequin, talk about our expectations for the market, evaluate our new product improvements, and introduce the crew members that may assist drive Axcelis in the direction of its subsequent section of development. We’ll present extra particulars on this occasion within the coming months, and we look ahead to seeing a lot of you there. With that, I’ll now flip the decision again to Russell for his closing feedback.
Russell Low: Thanks, Jaime. Axcelis achieved document income of $1.13 billion in 2023 and is concentrating on income of $1.3 billion in 2025. This development is achievable as a result of identical components mentioned final quarter. First, the implant TAM has greater than doubled in the previous couple of years and is anticipated to proceed to develop with mature market segments representing better than 60% of the full TAM. Second, energy gadgets, particularly silicon carbide gadgets, are extremely implant intensive and the final mature nodes have growing implant depth peaking at 28 nanometers. Third, excessive worth Purion product extensions had been designed to optimize energy and picture sensor gadget manufacturing, making Axcelis the one firm with a product line able to protecting all implant recipes in these key markets. This uniquely positions Axcelis to profit from excessive development within the mature course of know-how markets. And eventually, Axcelis has robust long-term buyer relationships and a basic tradition need to win by making our prospects profitable. 2023 was a document yr for Axcelis, however a turbulent yr for the trade. I wish to thank our staff, suppliers, prospects and buyers on your continued help all through 2023 and into 2024. With that, I would wish to open it up for questions.
Operator: Thanks. [Operator Instructions] The primary query comes from Craig Ellis with B. Riley Securities. Your line is now open.
Craig Ellis: Thanks for taking the query and congratulations on the very robust exit to 2023 guys. I needed to start out off with a query that mixes some near-term gadgets with some intermediate time period gadgets. So, Russell and Jamie, out of your coloration, it appears like as we take a look at the primary quarter steering after which the best way calendar ’24’s linearity performs out with the inflection within the second half. That blend can be pretty even inside techniques throughout mature foundry and reminiscence. Are you able to verify that? After which on the latter a part of that, what are the issues that you simply see that provide you with conviction within the second half inflection as you take a look at your backlog and buyer engagements, et cetera?
Douglas Lawson: Hey, Craig, that is Doug. I am going to take the primary half of that query. So, combine smart, energy continues to be robust. We anticipate for the yr energy to proceed to characterize about 60% of our whole income, and silicon carbide might be 50% of our whole techniques income. So we do anticipate that to proceed to be robust. As we get into the second half, we anticipate the mature markets to get well actually tied to the financial system greater than something, as shopper, automotive and industrial begin to return. After which we anticipate DRAM to get well forward of NAND, with NAND being extra of a 2025 factor. So should you take a look at the up to date presentation, we’re anticipating near 90% of our enterprise to come back from the general mature markets and about 25% of it from the final mature.
Russell Low: And relating to type of our conviction in regards to the second half, Craig, so sure, we do have a powerful backlog. We do have strong enterprise in energy, particularly in China. And in talking with our prospects, they need to begin ramping their companies within the second half of the yr.
Craig Ellis: That is actually useful, guys. And the second is extra for Jamie. So, Jamie, it is actual spectacular to see how resilient first quarter gross margins are as volumes decline and I am hoping what you are able to do is present some coloration on how combine and a number of the different firm particular components are taking part in out. And also you indicated that calendar ’24 gross margins may rise year-on-year. Are you able to give us any coloration on the magnitude of the rise that we would see? Thanks.
James Coogan: Sure, that is an incredible query, Craig, and thanks. The crew has finished a incredible job of setting up some initiatives right here to, one, decrease our price of products offered for the techniques and attempt to drive some better effectivity with out essentially having to boost costs for a few of these merchandise, given the aggressive atmosphere. Along with that, we have now recognized some service and improve alternatives that are offering incremental margin alternatives in our CS&I enterprise. And on condition that, we anticipate CS&I proceed to develop in mild of the upper set up base that we proceed to construct on the market of the Purion product platform, that a part of the combo goes to proceed to contribute incremental margin alternative over the course of the yr. After which on high of that, it is also the place the techniques are coming from over the course of the yr and we’re seeing some greater quantity in 2024 of a few of our greater margin merchandise, kind of shifting the combo a little bit bit in the direction of that, particularly in mild of decrease reminiscence quantity year-over-year. As you guys know, reminiscence market is a little bit bit extra aggressive there. Margins usually are not as robust on these merchandise as they’re in a few of our different areas and so with the decrease reminiscence quantity, we’re additionally seeing profit from that.
Craig Ellis: That is actually useful, guys. I am going to hop again within the queue. Thanks.
Russell Low: Nice. Thanks, Craig.
Operator: One second for the following query. The subsequent query comes from Tom Diffely with D.A. Davidson. Your line is open.
Tom Diffely: Sure, nice. Thanks for taking my query. Most likely for Doug, while you take a look at the TAM for ’24 in your slides you’ve it really going up for the complete yr, however you are speaking about your enterprise being flattish. Simply curious what the variations are there. Are there sure sectors that you simply’re not as robust in which are doing properly?
Douglas Lawson: Sure, that’s precisely what is going on on Tom is, we see the TAM for implant going up. Energy the place we’re robust is the place we’re profiting from that. We’re seeing early restoration in superior logic, which, whereas much less implant intensive, Axcelis has a a lot smaller place in one which we anticipate to develop over the following years, however in 2024, it is going to proceed to be smaller. Because the mature markets develop within the second half, then we’ll profit from the elevated TAM there as properly. And as we get into ’25, as you’ll be able to see, the TAM continues to develop. We expect an excellent yr throughout all markets in 2025.
Tom Diffely: Okay. After which, Russell, simply type of a basic query about how the yr is taking part in out. If you happen to suppose again 1 / 4 or two in the past, had been you anticipating a dip within the first quarter, the primary half of the yr earlier than second half power, or did the ebook of enterprise look extra steady a few quarters in the past?
Russell Low: I believe, so I assume what I would say is, the facility enterprise has stayed strong. I believe it is the final mature has softened considerably. I believe you have heard that from various our prospects. So actually, I would say that it is an evolving image and we now have a little bit bit extra visibility in Q1 and the remainder of the yr that we would not have had just a few months in the past.
Douglas Lawson: Sure, and Tom, on that time we had very, as you famous within the name, we had very robust bookings within the fourth quarter of this yr relative to our techniques income and our backlog once more we keep that backlog above $1.2 billion for the complete yr. And as we glance the place we’re right this moment, we do not actually see a significant change within the quantity of backlog that we’re carrying. Nevertheless, we have now seen some shifting within the timing of deliveries. And as Russell famous, that is in keeping with what our buyer commentary has been on that.
Tom Diffely: Okay, nice. That is useful. After which, Jamie, final query. Once I take a look at the margins going again to ’22 to ’23, you had very nice income development, very de minimis margin enlargement, and but you are projecting fairly wholesome margin enlargement over the following yr. Perhaps simply take us again to what the inventory margins from expense been in ’23 versus ’22 and I assume why you are assured that it accelerates right here going ahead?
James Coogan: Sure, that is an excellent query. A number of that has to do with reminiscence combine within the interval after which the efforts that we’re taking. So we are saying combine inside the yr relative to reminiscence after which our CS&I and I enterprise associated to service upgrades and different alternative units that we see for 2024. However on high of that, various the initiatives we put in place to drive incremental alternatives on price financial savings, particularly on the price of gross sales line merchandise, actually are multiyear profit suppliers to us. So these are issues just like the investments that we have made within the automated logistics heart, the place we have consolidated our footprint right here within the Beverly space, after which additionally the continued work of the R&D crew to determine new alternatives, upgrades and companies on the CS&I entrance which as you guys all are conscious does present some significant uplift on combine.
Tom Diffely: Okay, thanks on your time.
Operator: One second for the following query. The subsequent query comes from Mark Miller with The Benchmark Firm. Your line is open.
Mark Miller: Thanks for the query. You talked about you had three evals underway for Purion H200 and in addition a Dragon eval with a sophisticated logic buyer. Are there another evals at present underway?
Russell Low: Sure, there’s eight evals underway, Mark. We have got one medium present instrument that is at a DRAM buyer, a Purion XE Max beneath eval for a picture sensor firm. The three H200 silicon carbide instruments you talked about for energy gadget and in addition a Purion VXE in an influence gadget software. After which basic mature, we have now a Purion H after which the Purion Dragon in superior logic, so many shoppers, many functions, and many various merchandise throughout the board there.
Mark Miller: What was the medium present, I am sorry, buyer?
Russell Low: DRAM.
Mark Miller: DRAM, okay. Thanks.
Russell Low: Thanks Mark.
Mark Miller: Wolfspeed (NYSE:) indicated every week in the past that they noticed very robust design and so they’re a serious silicon carbide, as you realize, producer. I am simply curious why your first half might be weaker given what Wolfspeed was indicating would seem like very robust design, and I believe 75% of them are from automotive.
Russell Low: Sure. I believe Mark, so we see power in silicon carbide globally. Proper now there may be extra power coming from the Chinese language prospects. The Chinese language EV market getting a lot of press by way of it’s slowing its development price. If you take a look at the variety of EV corporations, the breadth of the product traces that they provide, they’re very targeted in China on silicon carbide, not just for inner to China, however to be a worldwide low price supplier. So we’re seeing robust bookings and continued robust quote exercise from China. All through the remainder of the world it slowed a little bit bit over the course of the final quarter, however as you remark, a lot of our prospects are speaking about that selecting again up because the automakers begin to decide on their precise product plans.
Mark Miller: Thanks.
Operator: One second for the following query. The subsequent query comes from Jed Dorsheimer with William Blair. Your line is open.
Jed Dorsheimer: Hello, thanks for taking my query. I assume the primary one, I simply wish to put a finer level, Russell, it sounds wish to a earlier query, while you preannounced positively three weeks in the past that you simply had perception that Q1 can be weaker. I simply wish to be sure that, is that the case that you simply knew that kind of the Q1 one can be off by 15% or did you see any push outs during the last three weeks? After which I’ve a observe up.
Russell Low: Sure, I am going to take that on. We now have seen once more the shifting in these supply necessities over the previous couple of weeks, particularly as our prospects now are firming up their CapEx necessities and the timing of these necessities over the course of the yr, Jed. So the fact is, as we thought by way of the information for 2024, our historic apply has been to be sure that we will present essentially the most significant steering to the parents relative to that and we traditionally have finished that on this name. So it was the mix of things there relative to the timing of that preannouncement.
Jed Dorsheimer: Acquired it. That is useful. Thanks. And I respect how fluid issues and dynamic issues will be. I assume alongside those self same traces, I do know I heard Doug speaking, talking positively on China. The common utilization for fabs in China is under 50%. Most are round kind of 30%. So I am simply questioning what offers you the boldness that these orders materialize? Sometimes you wouldn’t see further CapEx spend with such low utilization except the instruments are being repurposed for one thing else. So I am curious, what offers you the boldness that in that bookings that you do not see further push outs within the energy market in China? Thanks.
Russell Low: Sure, so I believe, Jed, a number of it’s the truth that the Chinese language corporations, I believe the Chinese language Authorities has a long-term plan for silicon carbide and EVs. And so the utilization might be rather less of a think about figuring out their funding coverage over the course of the following few years. And so, we see a number of new prospects along with the bigger silicon carbide prospects in China, and so there’s fairly a little bit of exercise regardless of your touch upon decrease utilization. I believe they’re additionally making ready for the truth that there may be nonetheless anticipated to be a big development in EVs over the course of the following 10 years. Many of the automakers globally, exterior of China, will say, have modified their plans a little bit bit over the course of the final six months particularly. However none are actually backing away from the truth that there will be a big variety of electrical autos. And so much are shifting to a mix of hybrid and electrical, and hybrid, after all, make the most of energy gadgets and inverters as properly.
Jed Dorsheimer: Acquired it. And final query for you guys and I am assuming it is most likely within the software program, however I simply wish to ask it anyhow. Many of the tools corporations which have offered into China have been reengineered and at the moment are being equipped by native distributors, with one exception, which is in implant. So, I am simply curious, how do you gauge that with a lot publicity to a market that authorities subsidies are actually tied to reengineering of the tooling? How do you’ve confidence that that will not occur along with your answer?
Russell Low: Jed, that is Russell. So there have been a few home suppliers, most likely for 20 odd years there’s a few them they have been engaged on knockoff medium present implanters. One factor I would say that does insulate us a little bit bit is that these are extremely complicated technical merchandise and the software program is a large element of it. The operation of the machine, the recipe, tuning, the setup is a large half. So, I might say that it is a very troublesome know-how to copy. Individuals have been attempting with out an excessive amount of success up to now. And I believe there’s one other couple of issues that go on right here as properly, that we’re an innovator and we’re preserve shifting quicker and quicker, working with our prospects to verify they’ve essentially the most up-to-date options that make them aggressive whereas sometimes the home instrument producers get left behind. So as soon as a know-how begins to plateau, then that is when international distributors get run over and I noticed that occur in a few different areas.
Jed Dorsheimer: Acquired it. Thanks. I am going to soar again in queue.
Operator: [Operator Instructions] The subsequent query comes from David Duley with Steelhead Securities. Your line is open.
David Duley: Thanks. I used to be curious in regards to the reminiscence restoration you talked about in 2024. I believe you talked about that reminiscence can be 10% of income this yr. And I believe historic peaks had been round 20%. However that was cut up evenly between NAND and DRAM. And I believe you are speaking about 10%, it is largely DRAM. Might you simply elaborate a little bit bit in regards to the breakout of income there? And if it will be 10% DRAM, that is fairly near historic peaks, I believe and simply discuss what the drivers are behind that reminiscence enterprise?
Russell Low: Sure, Dave. So the quantity that we have within the presentation is it’s going to be beneath 10%. So, that we’re monitoring that very intently because the yr goes on since it is a second half state of affairs, the drivers for it are mainly getting again to some extent the place we begin to see wafer begin additions by the reminiscence corporations on each DRAM and NAND. We anticipate DRAM to occur forward of NAND. And the drivers for using capability are HBM, which is at present seeing a number of our prospects shift capability over we see shrinks taking place that may permit them to get extra bits out earlier than they add capability or add wafer begins, after which they will begin to answer demand. And we anticipate demand drivers like all the patron and auto stuff because it comes again, AIPCs appear like they could possibly be an enormous driver of DRAM. Microsoft (NASDAQ:), they’re requiring 16 gigabyte per AIPC for Home windows 12 and AIPCs. So there’s a number of good indicators that we’ll begin to see capability additions as we get in the direction of the second half and finish of this yr. Driving into 2025, the place we anticipate it to be an excellent yr for DRAM. NAND, we do not anticipate to actually see a number of exercise till we get into the start of subsequent yr. That is going to be pushed by storage each on gadget and in knowledge facilities.
Operator: [Operator Instructions] The subsequent query comes from Charles Shi with Needham & Firm. Your line is open.
Charles Shi: Hello, good morning. Perhaps I wish to begin with a number of the commentary across the anticipated restoration of the final mature within the second half of the yr. So are you able to type of remind us what sort of prospects, what sort of functions you thought-about as basic mature and the way do buyers get snug with a second half restoration of that a part of the market? As a result of the CapEx announcement from mature foundries or a number of the bigger analog combined sign IDM, I assume the microcontroller a part of the CapEx is taken into account as a basic mature is not very optimistic. And the way do individuals get snug with that outlook for 2024? Thanks. That is my first query.
James Coogan: Okay. The final mature restoration is more likely to be very a lot tied to the financial restoration or the notion of financial restoration, I assume. And so it is shopper merchandise, automotive, industrial kind merchandise by way of gadget sorts, microcontrollers, analog, RF, all of the little widgets that go into all these gadgets that we purchase. One other robust place for it is going to be on the Web of Issues, we do anticipate that as AI takes off, it does drive one other wave of IoT gadgets. Since AI is an information hog, we anticipate that to occur. So we do see exercise and our prospects speaking about second half, including capability and constructing. So — and I believe should you pay attention, as we hearken to our prospects instantly and their public bulletins, most are persevering with with a fairly wholesome capital plan.
Charles Shi: Acquired it. So the second query is about China. I believe I heard you speaking about China most likely contributing 40% to 60% of the income this yr. The final yr’s quantity appears to be a little bit bit under that. So it virtually feels such as you’re guiding to China income to be up meaningfully this yr? What’s driving that? And did a number of the push out by the non-China prospects really assist you to backfill a number of the slots for the China prospects whose orders could also be parked a little bit bit additional down the highway, as an instance 2025? So actually simply wish to perceive the dynamics right here, is that natural underlying China demand development this yr or there’s a little bit little bit of places and takes by way of the manufacturing slots happening? Thanks.
James Coogan: Okay. So, no, there may be continued robust demand, particularly on the facility and particularly silicon carbide within the Chinese language market. And so that’s the place a lot of the exercise is, particularly by way of the primary half of 2024. After which we’d anticipate the final foundries, basic mature foundries worldwide would then begin to get well, and I believe that is in keeping with all of their public releases during the last couple of weeks. And so it is much less to do with motion creating slots or no matter for China and extra the exercise and the bookings stage and backlog that we’re seeing from the Chinese language prospects.
Charles Shi: Thanks. Lastly, undoubtedly the primary half numbers are anticipated to be a little bit bit decrease in contrast with definitely the second half of 2023, is the combo within the first half 2024, you are anticipating one thing nonetheless comparable, like 60% energy inside that 60% energy, possibly, I do not know, possibly someplace between 30% to 50% of the full being silicon carbide. Any coloration can be nice. Thanks.
James Coogan: Sure. So, Charles, for the yr, 60% of our techniques income might be energy. 50% of our whole income, or round 50% might be silicon carbide. The rest is combined between the final mature picture sensors and DRAM primarily. And so we do would anticipate that we’d see greater share of energy within the first half, after which we’d begin to see the opposite markets come within the second half and contribute and alter the odds.
Charles Shi: Thanks.
Operator: [Operator Instructions] The subsequent query comes from Christian Schwab with Craig-Hallum Capital. Your line is open.
Christian Schwab: Nice, thanks for taking my query. I am simply curious what your guys’ ideas are on the unintended penalties of the U.S. Authorities limiting superior chip manufacturing in China, which has led to extraordinarily robust funding in mature nodes. However now they’ve mentioned now they are going to look into mature node legacy chip manufacturing, as a result of as China’s meaningfully elevated manufacturing of mature chips, it is resulting in a attainable aggressive state of affairs for U.S. primarily based corporations promoting comparable chips as China tries to try to achieve market share with that. And, what’s the threat that they arrive again sooner or later this yr and begin making some semblance of restrictions on legacy chip semi-cap tools, which might clearly, with 40% to 60% of your income could possibly be a fabric threat?
James Coogan: Sure, Christian, we watch that very intently. We do not anticipate that to occur on the mature nodes at this level, particularly on the facility aspect, which is the place the power is, particularly within the first half, however it’s one thing we watch very intently. So we will not predict the longer term on authorities actions there, so it is one thing we simply have to observe and react to.
Christian Schwab: Nice. After which on the large DRAM reminiscence restoration in 2025, we have seen that each main reminiscence producer considerably scale back manufacturing capability and utilization of the tools available. After which in DRAM taking that tools and shifting it from DDR4 to DDR5, which is now that the chips can be found, the demand for that’s better. However the two individuals in Korea misplaced $15 billion making reminiscence in 2023. It’ll take fairly a while to get all their a reimbursement. So we have seen an enchancment in pricing due to these actions. I am simply attempting to know why you suppose there can be a considerable improve in DRAM reminiscence when by that time-frame they might not have recovered all of these misplaced earnings, which may be very troublesome to make future investments should you’re not making a considerable amount of cash, what am I lacking?
Russell Low: Effectively, I believe proper now they’ve, as you mentioned, they have been throttling capability to enhance pricing, which has improved. They have been changing their capability to HBM, which is greater ASPs and better margin for them, and in addition reduces the variety of chips on a wafer as a result of die dimension change. And they’re changing to the following shrink, which supplies them higher efficiency and in the end a decrease price level. So that they’re doing all of the issues that we usually see them do as they unravel the cycle and put together for the following turnaround. The subsequent turnaround has demand drivers in AI which are very DRAM intensive for greater ASP kind of components after which will drive shopper merchandise and so forth that also want the decrease price, decrease efficiency gadgets. So we see it as no totally different than another cycle the place they’re investing within the subsequent know-how to proper now. After which they will add capability to satisfy the rising demand of these finish markets, which might be AI shopper markets, automotive, industrial, after which shifting out to IoT and the sting computing kind of atmosphere. So I do not suppose it is any totally different, Christian, than another cycle that we have seen from reminiscence.
Christian Schwab: Okay, nice. No different questions. Thanks.
Operator: One second for the following query. The subsequent query comes from Duksan Jang with Financial institution of America. Your line is open.
Duksan Jang: Hello, good morning. Thanks for taking the query. I’ve a 2025 query. So that you reiterated the $1.3 billion in gross sales mannequin goal and that suggests a 15% year-over-year development for the system aspect. You talked about superior logic in Japan as a number of the alternatives, however what different forms of visibility do you’ve in your core energy and basic mature markets to be able to drive that development? Thanks.
James Coogan: Effectively, I believe we see it each by way of market developments after which instantly from prospects as they talk about their plans with us. After which lastly, extra on the realm that you simply mentioned, enlargement of our footprint and so we do see alternative in superior logic and we see alternative within the Japanese market as two areas that Axcelis has a decrease penetration price proper now. So we do anticipate to develop these. The 2025 quantity might be extra pushed, although, by the general market restoration in reminiscence and basic mature. We anticipate, as we have mentioned, that to actually begin off within the second half of this yr and achieve important momentum as we go into 2025. There’s a number of actually good long-term developments for this trade proper now that make 2025 and into 2026 appear like they could possibly be superb years. So we have now good confidence primarily based in the marketplace developments and primarily based on our prospects and what they’re saying and primarily based on the Axcelis place and the Purion product household proper now.
Duksan Jang: Acquired it onto these development markets that you simply talked about. So superior logic I imply, is there any technique to quantify or estimate how a lot development that might be? Since you’re clearly not guiding, nevertheless it’s been at a low single digit run price for a few years and you’ve got talked about development on this space for some time. So how do you guarantee us that you simply do have some winds coming and development is anticipated there?
James Coogan: Okay, good query. So simply a few issues. So I used to be going so as to add to what Doug mentioned in regards to the $1.3, there’s not a number of superior logic or Japan baked into the $1.3 billion. I believe these of you’ve recognized us lengthy sufficient that except we will see a transparent path, we’re not going to really exit and state this mannequin. And I believe we have additionally mentioned, as Doug indicated, there’s a number of paths to get to this going after superior logic it’s I believe once we work with prospects in superior logic, it has to undergo R&D. That could be a time consuming course of to get certified as a design instrument of document, to then get into the upper quantity course of instrument of document. We now have now managed to place our Dragon instrument at two areas. Now, one’s a sophisticated institute the place we predict we’ll get important learnings and the second is definitely a sophisticated logic buyer. We have positioned our dragon of their R&D area. So we’re making penetrations and people penetrations are all the time going to be technical pushed. It isn’t going to be a value of possession play. It needs to be a differentiation play. So we’re working with a number of totally different companions to work out how we will differentiate our know-how of their software and clearly the purpose is to resolve actually priceless buyer issues.
Duksan Jang: Understood. And as a follow-up onto OpEx, so in Q1, I believe the implied OpEx information is roughly $60 million. And clearly it is a little bit little bit of a rise sequentially regardless of gross sales coming down. So how ought to we take into consideration the run price from right here for the calendar 2024 and onto 2025 as properly, as a result of the 2025 at $1.3 billion, 19% of gross sales, that is about $245-ish million and I believe you are type of already at that stage.
James Coogan: Sure. In order we take into consideration OpEx going ahead, we have talked traditionally, and we talked about it within the ready remarks right this moment, that we’re going to proceed to make investments in incremental R&D. And so you may see that a number of the improve interval over interval has to do with incremental investments in our analysis and improvement crew right here. Along with that, we’ll type of proceed to attempt to maintain our SG&A bills comparatively flat. We consider we constructed a base right here that may help the kind of development that we see coming sooner or later. And so we’ll tightly handle bills round our SG&A over the course of the yr to take care of these on the, we’ll name it the exit price of 2023. Absent, regular wage appreciation and different forms of price modifications that might movement by way of our course of, largely talking, you are going to see that quantity as a share of gross sales come down because the volumes improve over the again half of the yr. And as we transfer to 2025, we’ll nonetheless be very even handed by way of ensuring that we have the kind of effectivity that we would like out of our SG&A group whereas persevering with to make investments in analysis and improvement.
Duksan Jang: Sounds nice. Thanks.
James Coogan: Yep.
Operator: One second for the following query. The subsequent query comes from Mark Miller with The Benchmark Firm. Your line is open. Mark, your line is now open.
Mark Miller: Thanks. Only a housekeeping problem. What was capital spending?
James Coogan: For the quarter? It was $10 million within the quarter and roughly $20 million for the complete yr.
Mark Miller: Okay. And your money from operations was $65.6 million, is that right?
James Coogan: Sure. Within the quarter? Sure.
Mark Miller: Thanks.
Operator: One second for the following query. The subsequent query comes from David Duley with Steelhead Securities. Your line is open.
David Duley: Thanks. I used to be a query on gross margins. You’ve got talked about income being flat for the yr. With the second half restoration the place ought to we take into consideration gross margins type of exiting 2024 or only a development all year long? Simply attempting to type of quantify while you discuss margins being up, how a lot.
Russell Low: Sure. Once more, we’re not going to supply direct steering on the place the expectations are for margin over the course of the yr. Proper now, what we’re forecasting, given the contribution of upper CS&I volumes over the interval, in addition to some system mixes, we do see it being up over 2023, gross margin total.
David Duley: Okay. And what was the rationale behind the robust bookings within the quarter? I believe that there have been $236 million I believe that was the quantity. Final quarter was like $198 or one thing like that. What had been the important thing in markets and functions that drove the rise in bookings?
James Coogan: Sure, it is silicon carbide in China. That is the large driver.
David Duley: Okay, thanks.
Operator: One second for the following query. The subsequent query comes from Craig Ellis with B. Riley securities. Your line is open.
Craig Ellis: Thanks for taking the observe up, guys. I needed to observe up on a messaging change that appears a little bit totally different than what we heard by way of final yr. And it is relating to CS&I this yr and subsequent yr, it looks like there is a extra optimistic view about what upgrades and another choices that the corporate has developed can do for annual revenues in that space. Is that right? And might you present any coloration on what particularly you are doing that’s driving the expansion that you simply’d anticipate in 2024 and 2025? Thanks.
Russell Low: Hey, Craig, it is Russell. So, as you are conscious, our set up base has grown actually quickly, notably by way of Purion and that has a really robust platform. In order we take a look at our CS&I aftermarket enterprise, we’re trying to concentrate on contracts and we’re trying to concentrate on excessive worth upgrades. So we’re actively creating upgrades that add important worth for our prospects so we will promote these. And at this level of the cycle, usually what you see is the utilization begins to return up. Then you definately see prospects shopping for upgrades that may help elevated capability, after which they begin shopping for machines. So it is a good time to be working with our prospects, qualifying these upgrades, working with these upgrades, and constructing that a part of our enterprise out stronger.
Craig Ellis: Acquired it. Thanks, Russell.
Operator: This concludes right this moment’s question-and-answer session and presentation. Thanks on your participation in right this moment’s convention. You could now disconnect. Have an incredible day.
This text was generated with the help of AI and reviewed by an editor. For extra data see our T&C.