AXCELIS TECHNOLOGIES INC Q3 FY2024 earnings call

• Q3 Performance: Executed well, delivering revenue of $257 million and earnings per diluted share of $1.49. Bookings softer than expected due to customers digesting capacity investments. • Power Markets: Silicon Carbide market expected to grow from $2.7 billion in 2023 to $9.9 billion in 2029 (24% CAGR). Received first PO for optimized Purion VXE implanter for Silicon IGBT. General mature revenue moderated. • Image Sensors: Strong revenue driven by China, expected to normalize in Q4. • Advanced Logic and Memory: Progress in evaluation systems; early memory activity with some revenue expected in Q4. • Long-Term Opportunities: Growth in silicon carbide, cyclical recovery in memory and general mature, share gains in advanced logic, penetration of Japan market.

Power Markets: Revenue was approximately 57% of total, down sequentially from 63% in Q2 2024. Shipments to Silicon Carbide applications moderated in Q3 but year-to-date 2024 was strong. Silicon IGBT revenue up sequentially but muted. Image Sensors: Revenue strong driven by demand out of China, particularly for smartphone applications, expected to normalize in Q4. Advanced Logic: No revenue in Q3 but making progress with evaluation systems. Memory: Early signs of activity from memory customers, sold one system in Q3, expect additional revenue in Q4.

• Q4 revenue expected ~$245M, gross margins ~42.5%, operating expenses ~$60M, tax rate ~15%, EPS ~$1.25. • Preliminary view: First half of 2025 revenue lower than second half of 2024.

• Bad debt expense from a bankrupt European gallium nitride company totaling ~$3.4 million. • Soft bookings due to customers digesting capacity investments. • Macro-economic risks affecting end markets served by general mature segment.

Q: Can you frame up what you've seen with orders on an end use basis and maybe a geographic basis starting with the momentum that existed in the business, exiting 2Q, how things played out in 3Q and what you've seen fourth quarter-to-date?

A: Softness in the general mature and power space is driving lower order activity, with preliminary view that first half of 2025 will be lower than second half of 2024. Order activity placement of purchase orders continues to push out.

Q: A few days ago, there was a report that some other capital equipment companies are directing their suppliers to kind of eliminate the use of Chinese components. I'm not really sure to what degree Axcelis uses Chinese suppliers for your components, but have you taken any similar actions or do you plan on taking any similar actions?

A: Actively manage supply chain, reviewing supply base, looking to improve localization to limit cross border shipping, tariffs, and freight costs. Have strong supply base in US and other parts of world outside China, and have second sourced into low cost regions.

Q: How do you see the GaN opportunity changing going forward given the European customer negative outcome led to increased OpEx?

A: GaN is a niche application compared to silicon carbide. Silicon carbide drives a lot of implant steps, while GaN does drive implant steps but not to the same intensity. Customer specific issue, not foretelling broadly about GaN or power device segment.

Q: Just touching on the weakness that you're seeing in power in China. They seem to be the last bastion of EV growth. So could you provide some color on the capacity and the digestion in that region that you're seeing what needs to occur?

A: Separate EV mobile market vs domestic supply of silicon carbide chips. Companies are ramping mini lines, taking time to mature processes, improve productivity, yields, and reliability. More about maturing processes than excess capacity.

Q: I was wondering. I saw that the China revenue, I think, was 71% of revenue in the third quarter. Could you give us an idea of what you think the percentage will be in Q4 and in the first half of next year?

A: China exposure to come down back into 40% to 60% range by quarter. Expect actual dollar values to come down in first half of 2025 due to softness in general mature and power broadly, particularly in China.

Q: I want to understand. I just want to understand the utilization rates of your equipment. You can hear on the U.S. and European SIC conference calls of your customers that business is not really growing or at this point or they're in digestion mode or trying to figure out lowering their CapEx and whatnot. So I'm just kind of curious what the utilization rates are in the U.S. and Europe and then are they much different in China than they are in those geographic regions?

A: Continued softness, with memory having some spike in utilization due to HBM, but limiting new tool sales until capacity is added. Utilizations down generally, with CS&I numbers down period over period indicating lower utilization rates.