Axcelis Technologies, Inc. Q2 FY2025 earnings call

• Relentless focus on innovation and deep engagement with customers on their technology road maps, with customers increasing R&D during quieter times.
• CS&I business is foundational, making up ~30% of total revenue, with higher margins, reflecting a strong installed base and resilient revenue stream through cycles.
• Prudently managing cost structure, with adjusted EBITDA margin of approximately 20% in the first half of 2025, allowing strong profitability despite cyclical soft demand.

In the second quarter, Axcelis had revenue of $195 million. System revenue was $134 million and CS&I revenue was $61 million. Bookings were $96 million, with a book-to-bill of 0.8x. Geographically, China increased to 65% of shipped system sales in Q2 and 55% of total revenue. In the power segment, systems revenue from other power applications grew sequentially, especially in China, while general mature segment revenue declined slightly. Advanced logic saw a follow-on order from a customer. Memory shipped system revenue declined sequentially, but the company is executing on strategies to penetrate new opportunities. CS&I revenue made up approximately 30% of total revenue, with higher gross margins compared to the corporate average.

• Anticipates Q3 revenue of approximately $200 million.
• Initial view for Q4 is relatively similar to Q3 revenue.
• Non-GAAP gross margins expected to be approximately 43% in Q3, similar in Q4.
• Non-GAAP operating expenses expected to be approximately $53 million in Q3, slightly increasing in Q4.
• Adjusted EBITDA in Q3 expected to be approximately $39 million.
• Non-GAAP diluted earnings per share in Q3 estimated at approximately $1.

• Monitoring the fluid tariff environment and potential impact on business through risk mitigation strategies.
• Market cyclicality, including cyclical digestion of capacity in some segments affecting bookings and revenue.
• Competition from new companies in China, which are still immature but being closely monitored.

Q: As we look to the memory market in 2026, do you have any initial indications of wafer start growth there yet?

A: We're not forecasting 2026 yet. But for DRAM, wafer starts need to increase for more implanters, and new capacity may come online in late 2025/early 2026.

Q: Do you see the general mature marketplace improving in the second half of '25?

A: We believe second half revenue will be slightly up from first half, but general mature is in a digestion period.

Q: Customers using current period for R&D and technology transition, implying inflection in demand when ready for volume production?

A: There's a bifurcation in silicon carbide technology. Within China, focus on 6-inch planar and some 200-millimeter planar. Outside China, drive to 200 and advanced devices, using high-energy implanters which plays to our strength.

Q: Can you talk more about structural gains in COGS drivers like warranty and ongoing cost gains?

A: Mix of systems and CS&I, warranty performance, and trailing multiyear cost reduction are drivers. Structural changes include below-standard cost items in warranty and maximization of global operations footprint, with cost reduction being a multiyear path.

Q: Tariff pull-ins contributing to CS&I performance?

A: No material pull-in driven by tariffs. Driver was upgrades and upgrade-related activity, with customers finding ways to increase utilization of current tool sets leading to higher upgrade activity.

Q: Update on competition in China in systems and spares business?

A: New companies in China are immature, with tools requiring high throughput, beam uniformity, etc., taking time to mature. We're watching them carefully as they're early in their road map.

Q: Reconcile China EV sales strength with projected flat China sales in second half?

A: China built significant capacity in '24 and is using '25 to increase productivity/efficiency while adding capacity at a lower rate. Silicon carbide penetration in EVs is increasing, with customers pushing into hybrid vehicles.

Q: Memory sales being muted but higher than 2024?

A: Memory spending remains muted, with customers digesting capacity. They're making opportunistic buys for incremental implanters, and memory will be higher than 2024 but still muted relative to history.