ACLS - Earnings call transcript Q3 2019 | Axcelis Technologies, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Axcelis Technologies Call to discuss the company's results for the Third Quarter of 2019. My name is Gigi and I will be your coordinator for today. At this time, all participants are in listen-only mode.

We will be facilitating a question-and-answer session towards the end of this conference. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

to call, presentation CEO Mary Technologies. like host to of now today's for Puma, would turn over the your Axcelis I President and proceed, Please ma'am.

Mary Puma

President is Thank President Vice Marketing Brewer, me Gigi. Corporate and today Strategy. you, Executive Lawson, With of Vice and and Executive CFO; Doug Kevin

press our copy described not available revenues, are under Please described Playback in release service These expectations release. also in statements our be expectations issued to in on These last management's which made risks our you Harbor have provision. detail our current report you results annual of available website. urge Form filings, forward-looking review. If in statements night, our profits our and SEC as website are forward-looking on our seen a comments the and business. about SEC's based we to other on that press it the is other are are note subject XX-K Safe and inherent will today future for risks

may actual current not do We to from forward-looking any materially obligation Our expectations. assume update our these differ results statements.

achieved five QX be cycle consecutive a company. first the low maintained profitability quarterly years profits. have through-cycle to on the gradual We as and public are point believe of recovery. a marking also of the expect Based has we Axcelis this, time we

their made we this hard improve all accomplishments ingenuity our of profitability. Our changes open our like many to have this would has to made and thanking dedication call employees to indication drive provide a possible. that growth I strong business work, successful by revenue for and the

XX% allowed to $X.XX product margins line guidance above was for guidance spending of by Purion controls $XX.X continued of the Gross combined significant quarter. share Earnings quarter maintain above a extensions. driven us midpoint of and third the Strong the above of with per million margins with tight consensus. mix in were was guidance. profitability well in Revenue of gross

majority During sensors. XX% the the to XX% foundry just the mature of shipments accounted image shipments, with devices particularly memory third going and customers, quarter, for manufacturing power of our logic

geographic in breakout strong XX%; reflective the Korea the shipments in Europe China U.S. was is logic XX%; and Korea. our This regions mix mature these and of mix The third XX%. all foundry of system quarter including a of

the fourth XX%, XX% increase ranging to $XXX are $XX to we revenues million forecasting to For quarter, from million. by

We XX% H more are that also a includes driven Purion forecasting systems approximately base of gross mix margins by systems.

EPS $X million $X.XX We expect and between range and $X.XX. million and to operating between $X profit

rebound those investment We in activity an expect devices. to logic revenues QX in China with due customers, foundry mature image sensors particularly and continued power on to emphasis increasing by and

segment. we XXXX, for third signs are the evenly memory expect this Quote XX% DRAM. with in logic still early NAND mature the to remained our approximately of quarter and the bookings begin systems pickup of seeing and half market, Although, split we activity first during memory strong revenue especially the recovery during QX increased of the significantly expected foundry from between

family our discuss. in Kevin as Day the Investor to extensions new a introduced product we million which will business Purion as At September, model target new several $XXX well

our implant to challenges products all with for processes target and come common new products Purion new new customers new high-value enables a higher our initial Purion approach our This The result have built most quality base as ASPs and The costs. higher customers. focus product close methodology. Purion development market customers' lower than products to products. challenging developed the concurrent implant the of our products platform, All in with using on ion were collaboration were and on

steps in demand TAM. XX% of market high of has This a of increasing and energy been implant for device sensor energy for result The energy implanters. image as implant powering the the accounts products new Two segment multiple are applications. high now high

the carbide, two silicon end device products beam the marries the our to The these originally and market. new of in carbide station is carbide M our which This Purion Purion the energy Purion addresses first silicon tool silicon XE power XE silicon option product. implant common developed line for emerging requirements Purion utilizes high carbide

advanced second The the most product targets high-energy sensors. image

and next of our well we energy deliver technology customers issues as for XX implants The Purion the well Silicon-powered from requiring as incorporates as many current devices see as XEmax the to High contamination. Purion mature address are The industry's areas MeV the HXXX ion implant current new market metal market. in applications critical overall represents tool. excess XX% targeting logic the and product to new The of of XX% energies. boost face for high-dose productivity growth. will foundry productivity two significant cost significant in benefits products this ownership lowest is segment high addresses proprietary higher approximately

the higher levels customers levels is at on uses The significant direct Purion a logic of productivity called Purion is Dragon original jointly Purion Dragon. and with the beam designed Purion developed advanced deliver was HXXX Purion a The leading energy common the uses customer. Purion spot and built targeted Dragon achieve Purion descendant memory of is advanced new the platform, to process the control with last Purion line the now common It designed Also architecture gains. memory The a Purion high to with a product beam combined HXX. modified H, station. end

The a support It to steps. customer's products to first is are and early customers' six and carbide Purion systems is and differentiation customer Purion and our manufacturing implant in currently are successfully create new XE to designed critical at silicon the to Purion fab technology sites months. this in the These XEmax competitive for close ship Dragon next and under expected sustainable Purion evaluation are the needs Purion over XXXX. HXXX expected

discuss Now financials. I'd to over it our like to turn to Kevin

Kevin Brewer

Mary. you, Thank

our consecutive XXth marked quarter performance of financial quarter third profitability. Our

recovery, QX as time the first gradual company Given a of is represents that this view an industry public through were that profitable our the we industry a beginning cycle.

necessary goal to progress XX% to we began initiatives, mix of disciplined improvement gross in Our making above business, CS&I. we gross of downturn drive on a margin significant while investments With the the have future profitable, our and spending believe well was growth. favorable QX more accomplished margin driven the required when was this. remain and systems guidance, by

as extension aerobotic mix the sales. margins, The a shipped a higher upgrade in our played during role significant quarter boosting of did

full XX.X%. We projecting XX% gross of margin are still year to

to expected growth. revenue to this plan As required we investments continue making enter any to control drive upturn, while I spending, tightly

updated business XX%. target margin gross Investor to by model For million our to our XX, XX% Day on increasing we $XXX September

We flow XX% also operating XX% the profit than to new of gross free cash $XXX added model, a to XX%. and greater million margin XX% of XX%,

During highlighted on support elect million approximately cash increase impact the million to we to from expected the margin the newly to the gross plan event, our released $XXX and model. positive $XXX products

cash balance remains and Our in the million sheet from strong $XX operations. quarter generated of we

million our any during did program $XX not the and under have quarter. repurchase shares purchase share We remaining

million The Now, to I'll our revenue in turn guidance QX $XX.X at million to $XX.X into midpoint in third compared million million were quarter financial compared the system QX. sales three QX. $XX.X finished $XX.X results. of at

accounted driven at lower million QX to in sales QX. or CS&I for customers tool four to of XX.X% $XX.X two to to QX in above shipments. at compared used total compared $XX.X revenue XX.X% by finished XX with compared customers QX, sales our QX million, in our XX% customers top

compared QX in bookings to a QX. system with $XX.X X.X million, X.XX versus book-to-bill million QX were $XX.X ratio of

early of signs reflective As the noted, of this Mary is previously recovery. a

QX. Backlog combined quarter in in $XX.X in $XX.X $XX.X spending QX including in at million the was SG&A at million million. revenue and with R&D QX, was R&D $XX.X million or revenue of million compared to to QX. $XX.X deferred $XX XX% or XX% SG&A finished million compared

to gross cost-out approximately In QX, approximately strong XX% SG&A continued product and was expect QX upgrade XX.X% activity. QX extensions, $XX.X of was margin of a QX to mix. gross We're less million. to favorable guiding driven gross due spending in the CS&I by and QX. XX%, margin be mix Purion sales margin we compared R&D

our are function as mentioned mix revenue. gross of have factors we of total several margins CS&I of products of before, portion accretive As the and the a such businesses

carry tools also pressure closed highlighted and the also as products DRAM quarter profiles margins. presentation. within margin Evaluation investor in our different

result to improved points from a expect our variability execution solid initiatives. have rolling margin quarter-to-quarter. to of a margin average. on continue Purion X,XXX we these have Since basis full see nearly factors, on of improvement we four line, is, the What As systems tenor we introduction remains gross quarter key the product

our to and year finished $X.XX the at also previously guidance we per compared to the in $X For of top million expect in approximately $X.X profit million Operating We're end of million above the at $X.X QX to be XXXX, QX guidance midpoint $X income gross of $X.XX or QX in $X QX. profit as share full margin was noted. compared million XX.X% million $X.X net operating guiding to QX. million. per XX% share to

at tools X.X We're the inventory recovering and guiding in excluding to evaluation $XXX.X support in QX. inventory shipments finished tools. quarter million to evaluation share X.X, $X.XX planned ended QX. $X.XX. to compared $XXX.X QX to in QX per QX Inventory turns compared at earnings new million of increased system

In compared QX the compared QX $XXX.X QX. compared accounts cash to million, million of $XX QX. to to cash million $XX.X in payable quarter, we million were at generated $XX.X in million from receivables $XXX.X QX $XX.X million QX. operations. in were million $XX finished

cost-out top models additional on on we to margin $XXX as on and with company gross road products million our be margin found new fuel and introduction business margin growth initiatives and business improvement products, new the in the reflected maps. website. gross initiatives target areas million continuing in models. QX, additional improvement. presentation our our of The with make In investor to improvement expected our drive can These that line We're in can and are to combined $XXX continuing continued along four invest gross progress materials work bottom of

for Thank turn now call you. comments. to back the Mary I'll closing

Mary Puma

uniquely ion the customers' is focus to and Axcelis solve implantation challenges. high-impact capability, with DNA positioned unwavering Kevin. you, Thank high-value,

developed excited share to leadership to new customers market difficult bring continuous to we products the them a the time, Our a Axcelis Purion of Partnerships collaborations strengthen that with recovery. prosper with peers are solve and can perfect these offer to customer implantation. and ensuring that beginning continue to us issues stream at were market products in and will ion achieve allow grow, of Purion

to up Gigi? questions. like for I'd that, it With open

Operator

Instructions] [Operator from Patrick comes Ho first from question Stifel. Your

open. now Your is line

Patrick Ho

at primarily environment Thank percentage the the of December you a about very your broader-based? it quarter. going it's market much in off be quarter. customer? higher memory to and nice congrats is of talked Do the in gradually Or recovery this is you you coming one concentrated revenues first back terms and on overall Mary, maybe believe

Mary Puma

think it definitely he No, gradual person versus from it's sector that I That and here will us large that I plans and beginnings had customer think at do of that to year in also a that week, next recover they at will, this memory as mentioned to Axcelis We XX% memory a we evenly said of broader-based. steep. before spending we our at recover split. is of I that reviewing revenues year. XXXX. mentioned it said through likely given in that will of company to first Again, – do it that shared XX%, the NAND very and be see that will We with believe pickup NAND earlier this his expect end see QX said QX be but continue or that more I will begin it's we going expect do DRAM be the believe the

there be that recovery. gradual And again, suggested would he a also

to some have say going we points at point some in confidence steam. time that take that data time it up starting, us but to multiple So to from is this customers give it's pick

Patrick Ho

Great. That's question a for as maybe Kevin. follow-up And helpful.

like typically the plus these tools. You you have where specific you Are tend margin? designs lower new of do products they'll nature? – your potentially recently products new end and warranty costs, with that up trend How XX% how to cycles cost recent product that of set costs structure rep you for at new that previous things higher several up given beginning impact posting mentioned margins, new the for do products of higher are product products versus margins the how these introductions? these the announced extensions stuff application these gross higher And maintaining

Kevin Brewer

Okay.

So, Purion. well platform Patrick are all the we've would of the new product extensions that say common the of thing I new as introduced based first on that, is Dragon the as product

a using commonality that, So there can good if already we received the the take we products. the from is of activity existing news cost-out we're advantage have

development, input the phase, we're business is The a the we're upfront more using CPD the getting design and with second concurrent initiatives. thing product across

typically chain when down, work the this that helps lean we like a considered So also the we chasing to a lot do. which products alluding being front. activity get I that, probably the the upfront And supply do think we've what of rep the value lot so manufacturing engineering cost right we're that's you're keep how of years, in is structure but over that done not

we're definitely cost So out getting upfront. more

extensions we're H her third The very we mentioned is Investor pricing a more the of QX our on mix seeing are that at Day, products. than high not base base Those thing our product. the Purion in the the also was that Mary it's base about one of is products. the extensions really favorable things in And talked product that remarks

things think drag those received to the when guess, we have us these it. the the to we that I introduced way have products help new would are best and that is Purion, going say typical are I So with first not release margin --

Patrick Ho

very you much. Thank Great.

Kevin Brewer

you. Thank Okay.

Mary Puma

Patrick. Thanks,

Operator

you. Thank

Our Riley from Ellis next FBR. question from Craig B. is

Your now is open. line

Craig Ellis

the cycle for real and taking the on major there. significant trough in accomplishment Yeah. congratulations question Thanks improvement profitability

Mary Puma

you. Thank

Craig Ellis

the to you're on a as with we coming focus Has and visibility terms in book. mature you in very quarter-on-quarter? get provide improved what seeing the boundary see color Mary of on of what business you significantly this order memory move your into recovery. similar if more backlog wondering some I'm can helpful some

Mary Puma

that in Well, contributor XXXX. that it a have little a growth And to beyond we're in additional we in still significant segment. of obviously is the revenues in increase seeing and happen into early since bit what's to QX visibility going even

driven by A being things. is actually lot of that three

we've world. of and in mainly since of revenues the from in There's spending customers. the we now global seeing region come Chinese from but growth is typically revenues increase a some said significant although significant And the First revenues China. domestic in -- our that the past XX%, coming around are players, semiconductor some those are those

areas that and additional growth technology very for mature are remain also process sensors segments image power customers driving online The capacity. with us are strong, in other come Those as devices.

Craig Ellis

the a That's direction. prior very helpful. but And taking just it then question, Kevin a follow-up on different for

there. points XXX change Kevin we our looks here back to is into half quarter-to-quarter like likely there the with -- seeing expect quarter-to-quarter to congratulations of something in regard not, swings more expect of meaningful moves to So, be margin what more unusual may be XQ, what there of so smaller as magnitude we the the we're we basis a extensions of we the the gross from to seeing Purion gross than tremendous margin gross quarter-to-quarter where some margin more quarters margin XQ? third quarters like Or in gross should that the quarter, progress variability real year? high like be XQ in on the we're should more quarter-to-quarter in With have quotient that product move recovery, some given

Kevin Brewer

Yeah.

look way we've So, And would if over I guess, go what our full of the that you few continue say to that's on to back past that, and make basis expect is best been margins. been a progress we year years. gross on doing kind I the

customers, There these -- think out So gross goal so we year be continue there higher. I margins will do a the basis, currently the number will with we on is eval be eval think tools. there's march about to to tools going lopsided is more. could a But to of variability. it have forward, be quarters to full Craig plan We to where ship way

we product We which hit do had in model quarter, still have the this lot a demonstrated, margins. of I XX%, million bit $XXX some think with a million level are but know good had model to extensions, XX% I in a really pretty way. our we we realistic. $XXX just those QX a We boosted and the of good was perfect revenue storm

mentioned important think margin thing, But really as focus again, gross that the continuing we're I improvement. on I is to

have a of initiatives in place. improvement number We

I also out end, job done designing -- because know we've We a where products upfront. think good new costs these really we've

again, kind to expect march So, we gradual as what year-to-year the from is million would of I model. improvement $XXX

Craig Ellis

That's helpful. team. luck Good

Mary Puma

Thank you.

Kevin Brewer

Yes. Thanks, Craig.

Operator

Thank you. comes from [Operator Craig-Hallum. Instructions] Your question Schwab next Christian from

line Your is now open.

Christian Schwab

next on NAND? you Could expect for to couple the in Hey, you we solid or guidance. what gains share in DRAM years? be about if either memory of some And attention there's over Mary particular should us sector anything the expectations paying market give

Mary Puma

Well, our to the we perspective look the have put to that business are at models into I two there. think best way expectations out

we years $XXX model a again out. XX% then pegged the talked about business times before. And million $XXX which We TAM speaking, years the which pegged $X And model roughly dollar to is relatively million out. years using model, is business said to XX% got have million million the model, of we've to is $XXX share, $XXX two the which many a four five market share market a and about about we've flat billion, is

in that In additional growth terms there hard working that. various very customers we some would to penetrate on of and doing are we're and areas like memory,

how into those a more or really we customers. realistic of memory how it's about customers talked We've to Purion XX% expectation it's where given function any to understanding applications. our So we're those think at are penetrate one with very specific understanding have and going a going then of products

Kevin Brewer

that at thing Christian, remember the one has new think the is Dragon really I of other and advanced the memory is targeted Purion And to market. been products

as those the challenge ASPs difficult of strong to we both implant on there see that nodes. adoption from increasingly would well on as expect tool, higher growth the So, for

Christian Schwab

Thanks. other questions. Great. No

Kevin Brewer

you. Thank

Mary Puma

Yes. Thank you.

Operator

question next from from Your Steelhead Duley comes David Securities.

is line open. now Your

David Duley

Could this products Yeah. -- a and of of you've just that elaborate you could for taking think repeat for information on talked of new talk front. Thanks if the I more question. my host you couple a bit that I give guess timing you things. when you revenue little were shipments about about introduced? whatever did

And with product the customer? sell I high-end Does able one that was of one particular be everybody that come with customer. else? products you a mentioned that with for was will joint-developed guess, these joint, some Or to exclusivity also memory to you

Mary Puma

Okay.

We've referencing, So gotten we in Purion you're a talked the customer silicon we that at about Purion how the field. the Dragon to did out for where joint expect tool. first under is revenue the successfully XE we evaluation and talk XXXX. of minute that actually products two the have carbide in evaluation I'll close in early about and development we program The

for we Purion have the HXXX tools, the first the up Purion customers other then next the lined two within and XEmax, months. for six shipments And

to start of going So, all get rolling those out. revenue. we than got those tools, We've one tools are customer in so interested to more expect

As said, will also put new going is XXXX. which tools, very of additional out, to some we there the Kevin from normal get we're but and launch in rollout those some of with are evaluations tools some revenue

definitely sell Obviously, first will world. to marketing orders, more the the and program likely we it customer. and other product the free for development extensions we're no replicate, as market. was Purion There's It's they actively In system, that the that model we have and around that extremely successful. no get the of forward that want bring repeat it move joint tool to family a to line customers terms they customer, are to first exclusivity with with but

David Duley

if in the far market And guidance implant you your as do will you your of QX, as be? share where in then hit Okay. XXXX, think midpoint

Kevin Brewer

then so… in year to ends memory's that and very based going would highly really us Well, of see put the market low logic. project $X the market, it's the billion how very share given spend been to need has the we this and this much TAM to mature But for on And that. expect lower that advanced year in we're logic the been fact been year,

Mary Puma

because been Again, do it estimate to what very revenue refocus we've TAM. on the is growth, is to hard trying the

that So market I'd $XXX which in million of like the what's customers the and all you years. million you on to based the on $XXX track going may the four in in and with we in some refocus know on roll years million and $XXX downs. $XXX million still model. But into kind factors are five buying and to two have very model on ups we're And that much

David Duley

Okay.

Just magnitude what be just you final expect quarter far the down one you of and me. dollars? expenses operating Go as Could in for up the ahead. repeat to fourth

Kevin Brewer

$XX.X million.

David Duley

compares what And to again? that

Kevin Brewer

$XX.X million, was. I think it

David Duley

be a memory going Okay. seeing robust as going China current yet, big something And at far domestic then as forward, that next that total to China I of happens levels. in revenue imagine, or chunk Chinese the that in mix continue in was spending the would quarter Are it's you to be year?

Mary Puma

No increase. we are currently that expectation and seeing is our that will that

David Duley

you. thank Okay,

Mary Puma

Thanks.

Kevin Brewer

Thanks.

Operator

Thank you.

Quinn comes next Bolton question from & Your from Needham Company.

is line open. now Your

Quinn Bolton

just guys. want and outlook. about I the Nice results on that up last indigenous question Hi, China. follow on to the job

look Chinese follow-on you are broader-based? quarter driven And XX% the to business you the the a memory shifting that question. or into As is seeing that back with guys, memory, of indigenous largely by December

especially ramps the that kind then turn at see by into that you're on for demand of a talk expectations you you full XXXX? line activity pilot customers memory some where volume and driven now to the pilot side orders and point NAND recovery, the lines in seeing is first As gradual those

Mary Puma

Okay.

other not memory this in point by QX customers. in that driven by the is being So it's mainly memory we're driven seeing at China, being time

currently is out before, see much and in said believe so. and can be that's what that As going the I we a quarter increase memory very mix to or our reflected broad-based is what we

Kevin Brewer

very and number companies, And every ones day. actually there's them Chinese popping large of up there's as new far as the a indigenous

we foundry there. the And primarily company mature that's a more consider player. then global so And activity continued Chinese memory we that see the exception over large with of from large of do one

Quinn Bolton

talked more the start my line then the Okay, you've is global sort is of memory demand pilot then And this question you be do through about you. from think is or that if data process. just going today the share able as buys? points or you're capacity eval of Dragon Thank at lead a great. to last customer. that co-developed folks that the you feedback from there's activity, customer that eval that being in Wondering And of sort might that

Kevin Brewer

Yes.

So as expect. going as good performing tool with process well And as it and going that far to customer goes dragging is eval think extremely it's is pleased we we product very very the date. so to is be a

As think goes, a far is memory market a in brought Quinn. mix in as the I it's Typically implant ramp. early

actually in so across case, this particular And several customers. it's

lot pretty energy and generation the between we've of split so a next initial and current expecting this the high of early And memory. seen particular And ramp we DRAM begin QX that or in NAND. of business evenly node as see needs the the to in we're next goes the in high case,

capacity, So probably of some ramp but next for preparing also to ramping it's a generation. for combination the

Quinn Bolton

Thank you.

Kevin Brewer

Thanks.

Mary Puma

you. Thank

Operator

you no this portion will closing [Operator Ma'am, to questions Mary remarks. at back a I of turn will the Q&A make have call. the Puma, who concludes few the Instructions] This over time. call now

Mary Puma

you, Thank Gigi.

We New times the in York during months. will next be several City few

also mid-January. annual events one enjoy X; hope We on at these us at the finally, XXnd New holiday Conference First, New on can it's next D.A.'s York city. York and and of in December Conference to join season Annual take the you Discovery XX; Summit One-on-One in for the the in Growth some to time City December Benchmark Needham

city in December We on will be bus the research and bus Beverly tour Massachusetts also our hosting headquarters XX. semis at

for support. you your Thank

Axcelis (ACLS) 1 Nov 192019 Q3 Earnings call transcript