ACLS

LLM Evaluations

Transcript Summary

Axcelis Technologies (ACLS) reported Q1 2026 revenue of $199 million and EPS of $0.72, exceeding expectations despite a $5 million customer settlement headwind. The company is in a transitional phase, with David Ryzhik serving as interim CFO and the pending Veeco merger on track for a second-half 2026 close, pending final regulatory approval in China. The quarterly performance was bolstered by a strong Customer Support & Innovation (CS&I) segment and a significant uptick in memory market demand driven by AI applications like HBM and DRAM. While the silicon carbide and general mature markets are currently experiencing capacity digestion, management highlighted encouraging signs in tool utilization and new technology inflections, such as 200mm transitions and 800-volt EV subsystems. Axcelis maintained its full-year 2026 outlook of flat year-over-year revenue, expecting the second half to be stronger as memory momentum continues and power markets stabilize. The company maintains a robust balance sheet with $570 million in cash and marketable securities. Strategic focus remains on expanding the Purion product family's footprint in advanced logic and power markets to set the stage for a return to growth in 2027.

5-year share-count history (top 10 holders by peak, incl. exited) + price

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Axcelis Technologies: Administrative Metadata Analysis Lacking Material Substance

Full Earnings Call Transcript — Q1 • 2026-05-07

Operator: Good day, ladies and gentlemen, and welcome to the Axcelis Technologies call to discuss the company's results for the first quarter of 2026. My name is Ripka, and I'll be your coordinator for today. I would now like to turn the presentation over to your host for today's call, David Ryzhik, Senior Vice President and Interim Chief Financial Officer. Please go ahead.
David Ryzhik: Thank you, operator. This is David Ryzhik, Senior Vice President and Interim Chief Financial Officer. And with me today is Russell Low, President and CEO. If you have not seen a copy of our press release issued earlier today, it is available on our website. In addition, we have prepared slides accompanying today's call, and you can find those on our website as well. Playback service will also be available on our website as described in our press release. Please note that comments made today about our expectations for future revenues, profits and other results are forward-looking statements under the SEC's safe harbor provision. These forward-looking statements are based on management's current expectations and are subject to the risks inherent in our business. These risks are described in detail in our annual report on Form 10-K and other SEC filings, which we urge you to review. Our actual results may differ materially from our current expectations. We do not assume any obligation to update these forward-looking statements. Given the pending merger with Veeco, we will not be addressing questions related to the transaction. During this call, we will be discussing various non-GAAP financial measures. Unless otherwise noted, all income statement-related financial measures will be non-GAAP other than revenue and other income. Please refer to our press release and accompanying materials for information regarding our non-GAAP financial results and a reconciliation to our GAAP measures. Now I'll turn the call over to President and CEO, Russell Low.
Russell Low: Thank you, David. Good afternoon, everyone, and thank you for joining us for our first quarter 2026 earnings call. Before I get into our results today, I'd like to briefly address the change in our finance organization leadership, which we announced in March. Jamie Coogan, who served as our Chief Financial Officer, left the company to pursue an opportunity in the aerospace industry. I'm grateful to him for his contributions in building a strong finance organization, driving operational discipline and positioning Axcelis well for sustained value creation. I'm confident he'll continue to succeed in his new role. The transition has been very smooth, thanks to David stepping in seamlessly as our interim CFO. David has deep industry experience and strong knowledge of the business and he's been instrumental in advancing our work to complete the pending merger with Veeco. We are grateful to have a leader of David's caliber to serve in this role while we progress our search process for a permanent CFO. With that, I'll dive into our first quarter performance. We delivered revenue of $199 million and earnings per diluted share of $0.72, slightly above our expectations. This includes a onetime impact associated with a $5 million customer settlement. Absent the settlement, our revenue, gross margin and earnings per share would be even higher in the quarter. In the quarter, while our CS&I revenue moderated on a sequential basis, it came in better than we expected and grew more than 30% on a year-over-year basis. CS&I has been a deliberate multiyear strategic focus for Axcelis, and we are pleased to see momentum build with our expanded installed base, increased utilization rates and continued product innovation. In addition, we saw a strong sequential increase in system shipments to the memory market, which reached the highest level since the fourth quarter of 2023. We're also encouraged to see a consistent rate of bookings on a sequential basis, marking the second consecutive quarter of year-over-year growth on the trailing 12-month basis. Strength in the quarterly bookings was driven by an increase in memory and silicon carbide demand, offset by softer general mature. As a reminder, bookings can fluctuate from quarter-to-quarter. Turning to Slide 5. Sales to mature node applications accounted for majority of system shipments, particularly in power and general mature. We also saw a notable uptick in sales to the memory market as anticipated. Now on Slide 6, let me review our trends by end market. In our power business, while shipments of silicon carbide moderated on a sequential basis, we are beginning to see encouraging demand signals, reflecting strong bookings and increased engagement with customers and their capacity plans and technology road maps. At SEMICON China in March, silicon carbide was a prominent area of focus, particularly around super junction development and high energy implant requirements. We also had more robust customer discussions around channeling capabilities and the transition to 200 millimeters, which reinforces our view that technology inflections are progressing. We've seen improvements in silicon carbide end markets as well. While the rate of growth in global electric vehicle sales has moderated, we are seeing increased penetration of silicon carbide within the EV market as well as greater content per vehicle. Discussions with customers also point to increasing adoption in a wide array of commercial goods such as HVAC refrigerators and washing machines. In addition, customers are increasingly focused on the emerging opportunity in AI data centers given the unique benefits that compound semiconductors provide for efficient power conversion. In short, we are well positioned to benefit from the higher demand from our customers once capital spending in this market recovers. In our other power market segment, while demand remained muted, we believe Silicon Power will remain a foundational part of the overall power semiconductor market, especially across auto, industrial, commercial and data center markets. In general mature, customers continue to manage their capacity with stabilizing auto and recovering industrial volumes along with growing demand associated with AI data center applications. In fact, we saw a continued improvement in spares and consumables in this market, which is a reflection of higher tool utilization rates. At the same time, we are building on our continued progress in the high current market. In the first quarter, we introduced our next duration high current product of Purion H6 and are engaging with multiple customers on this product. In addition, we secured a high current win with a new customer in China. Turning to Slide 7. In advanced logic, we did not generate system revenue in the first quarter. However, we shipped a system early in the second quarter for material modification application for 2-nanometer production and are actively working with this customer on next-generation technology road map. Moving to our memory market, both revenue and bookings increased meaningfully in the first quarter driven by strong demand in DRAM and high-bandwidth memory applications as customers ramp up investment in -- capacity investments to support AI-driven demand. We continue to execute well on our strategy to expand our penetration of the memory market. As you recall from last quarter, we highlighted a new order for our Purion high-current system with a leading North American memory manufacturer. Since then, we've completed our systems evaluation and continued to work with this customer to drive adoption of our technology across technology nodes and regions. While revenue and bookings can fluctuate from quarter-to-quarter throughout the year, we continue to expect strong growth in memory for full year 2026 with momentum entering into 2027. On Slide 8, let me wrap up my thoughts and provide our perspective on the remainder of 2026. We executed well in the quarter and are especially pleased with the strength of our CS&I business, which delivered-ings another quarter of year-over-year growth. From a market segment perspective, our memory market is on track for strong growth in 2026, offset by a continued digestion of capacity in general mature and power, albeit with some encouraging signs in silicon carbide. Taking this all together, we continue to expect 2026 revenue to be relatively flat year-over-year with improving trends across multiple markets setting the stage for a return to growth in 2027. We continue to anticipate our pending merger of Veeco to close in the second half of 2026 and we are working closely with the state administration for market regulation in China to obtain regulatory approval, which is the only approval remaining to close the transaction. We remain excited about the opportunity to bring our 2 companies together, unlock the full potential of the combined organization and drive long-term value creation for all stakeholders. I want to thank our customers, employees, partners and shareholders for their continued support and trust in Axcelis. With that, let me turn the call over to David for a closer look at our results and outlook.
David Ryzhik: Thank you, Russell. I'll first start with the financial details of the first quarter before turning to our outlook for the second quarter. Starting on Slide 9. First quarter revenue was $199 million, with system revenue at approximately $126 million and CS&I revenue at $73 million. As Russell mentioned, this result includes a onetime impact associated with the customer settlement in the quarter, which resulted in a headwind to system revenue of $5 million, gross margins of approximately 70 basis points and EPS of $0.09 per share. CS&I exceeded our expectations this quarter, driven by service and consumables, along with robust demand for system upgrades. By geography, revenue in China increased sequentially to 40%, up from 32% in the prior quarter. Korea was our second largest revenue-generating region in the first quarter and notably 28% of our total revenues as a result of higher memory sales. In our other regions, Europe was 16%, the United States 12%, while Taiwan and Japan were both at 1%. We generated 2% of our revenue from the Rest of World in the first quarter. Bookings were roughly flat on a sequential basis at $128 million but marked our second consecutive quarter of firming order rates. We exited the first quarter with a backlog of $453 million. Now turning to Slide 10. I'd like to share some additional detail on our results. Gross margin was 40.7%, which came in slightly below our outlook of 41%, primarily due to the customer settlement discussed earlier. First quarter operating expenses were $57.7 million, slightly below our outlook of $59 million. Tying it all together, our operating margin was 11.7%. First quarter adjusted EBITDA was $27.7 million, reflecting an adjusted EBITDA margin of 13.9%. Other income of $2.7 million was lower on a sequential basis as a result of lower interest income as well as foreign exchange-related losses. The tax rate was 14%, relatively in line with our expectations. And finally, first quarter earnings per diluted share was $0.72. Moving to our cash flow and balance sheet data shown on Slide 11. In the first quarter, free cash flow was $16 million. Our cash flow includes $12 million in cash transaction expenses associated with the pending Veeco merger. We did not repurchase any shares in the first quarter. We exited the first quarter with a strong balance sheet consisting of $570 million of cash, cash equivalents and marketable securities on hand. This includes $203 million of long-term securities. With that, let me discuss our second quarter outlook on Slide 12. We expect revenue in the second quarter of approximately $205 million. We expect a higher mix of revenue from general mature, offset by a lower mix of revenue from memory in silicon carbide. We expect gross margins of approximately 43%. The sequential improvement in gross margin is primarily due to more favorable mix in the quarter as well as the absence of nonrecurring items that impacted our first quarter. We expect operating expenses of approximately $59 million in the second quarter, adjusted EBITDA is expected to be approximately $34 million. And finally, we estimate net earnings per diluted share in the second quarter of approximately $0.90. We continue to expect full year 2026 revenues to be approximately flat compared to 2025 levels. We expect revenue to be second half weighted driven by an improvement in silicon carbide revenue and a continuation of strength in memory. We continue to anticipate full year gross margins to be in the low- to mid-40% range with some quarterly variation based on mix. We expect operating expenses for the balance of the year to be approximately $60 million per quarter. And finally, we continue to anticipate our tax rate to be approximately 15% for the full year. In summary, we executed well in the first quarter and remain focused on disciplined cost management while continuing to make targeted investments to capture the attractive growth opportunities ahead of us. This is supported by a strong balance sheet and healthy free cash flow which provide a solid foundation as we navigate an exciting period for the semiconductor industry. With that, operator, we are ready to take questions.
Operator: [Operator Instructions] Our first question comes from the line of Jed Dorsheimer of William Blair.
Jonathan Dorsheimer: I was just wondering, Russell, maybe you could -- I know that gallium nitride and indium phosphide are mostly deposition, which makes your merger that much more exciting. But there is some implant associated with containment, et cetera. So I was wondering if you might just spend a minute just talking about that opportunity. And then I have a follow-up.
Russell Low: Jed, so are you talking about the implant opportunity in silicon photonics, particularly in data centers, where you're heading?
Jonathan Dorsheimer: Yes. Well, yes, that's where I'm heading. But specifically around Indium phosphide and then gallium nitride on the power side.
Russell Low: Sure. So there's not really many but there are a couple of implants in gallium nitride, but they're not significant. What I would say when you think about data center and optical transmission, we don't partake especially in the laser manufacturing part. But to put the data to encode the laser with the data, that requires a modulation unit. And that modulation unit is a silicon unit, and that does require implantation. I think it's essentially an isolation implant that is doing. So again, it's not a massive use of implantation, but it's definitely an application in silicon photonics for that particular area.
Jonathan Dorsheimer: Got it. So it will mostly be on the Veeco product line post-merger, correct?
Russell Low: Yes. I think that's true. I think they have -- I think you're on their call -- they have the MOCVD and the thin film capability for the optical components.
Operator: Our next question comes from the line of Denis Pyatchanin from Needham & Company.
Denis Pyatchanin: Great. So on the outlook, it sounds like you're seeing some strength in power IC and memory, but general mature remains weaker, it may be getting even weaker. Can you discuss in some more detail of what you're seeing in general mature? And it seems like this quarter that some IDM business is picking up globally for some of the mature products, but it doesn't seem like you're seeing any of that. Can you talk a little bit more, please, about what you're seeing in general mature?
David Ryzhik: Yes, Denis, this is David. So I think we would agree that the end markets are picking up. I think auto is stabilizing, industrial recovering, and we're starting to see AI pick up for this general mature segment. When we talk about the Q1 bookings, yes, we did see a little bit softer bookings in general mature. But the key takeaway there is that utilization rates are rising. And so for us, that's a really nice data point. We still expect 2026 general mature to be down year-over-year. But as we think about the business trending into 2027, we feel a little bit better today than we did 3 months ago in general mature. And on the silicon carbide side, in Russell's prepared remarks, it was quite clear that we are seeing also relative to 3 months ago, I would say, encouraging signals from our customers. Conversations are very constructive. There's a lot of inbound about technology, engagement, channeling, super junction and then you're starting to hear more and more about Silicon Carbide in the data center. So we think the combination of these things is pretty encouraging, and again, sets the stage for maybe some momentum into 2027. And from quarter-to-quarter, it can move around but our -- we're taking a bigger picture view that we think that next year looks a little better for these markets.
Denis Pyatchanin: Great. And then for my follow-up. So on a related note, the book-to-bill for the quarter was up to about 1%, I think, up from 0.8%. Could you share a little more about what you expect to see order wise next quarter? Is the book-to-bill going to be the same or moving even higher?
David Ryzhik: Yes, we're not going to guide bookings per quarter, it can fluctuate. But we are encouraged that Q1 was relatively consistent with Q4, which was a big step up from earlier in 2025. So this is a good sign. But we're not going to be forecasting bookings on a quarterly basis.
Operator: [Operator Instructions] Our next question comes from the line of David Duley of Steelhead Securities.
David Duley: I guess I'll ask the question I think I've asked in the last couple of conference calls. If you could elaborate on what you're seeing as far as silicon carbide adoption in other markets, specifically in the data center. I think in the past, you've talked about voltage step-down applications. I was just wondering if you're getting closer to the rack or if there's other applications that you might be addressing inside the data center as well?
Russell Low: Dave, it's Russell. Thanks for the question. So yes, obviously, data center is an application. I just want to start off with the electric vehicle. I think they're actually very exciting right now. A lot of the cars are going to 800-volt subsystems, which allows them to actually charge so much quicker as well. So you've seen that trend in those using silicon carbide. And the first application will be the traction inverter and you're seeing more and more of the silicon carbide cars now taking sort of -- sorry, of the electric vehicles is now taking silicon carbide but we're also seeing more and more silicon carbide per EV. So you have the traction inverter which is typically the first device they take, then you start to see the DC-to-DC step-down also the onboard charging and of recent times, we've seen the AC system, the compressor having silicon carbide. So we're really seeing this next generation of cars much greater range and much faster charge time. So I think those are -- that's a really good trend. And although it may be a little bit soft now the long-term trends that's going to continue to grow. So that's kind of the electric vehicles. Like I mentioned before I get on to data centers, this has actually -- it surprised me when we're in China, we were talking about these being white goods. That really was surprising. But yes, for many of these high-end systems that are running about a kilowatt, they needed to achieve their certification for power efficiency in multiple markets. And then the data center because it was interesting. So maybe 3 to 6 months ago, we'd be talking about is it going to be gallium nitride? Is it going to be silicon carbide? I think at this stage, it's becoming clear that it's both. As the rack transitions to 800 volts, I think what you're going to see is  gallium nitride inside the rack. That's a great sweet spot for gallium nitride. But if you drop down from the grid, which is 13 kilovolts or more, that's going to be a great application of silicon carbide. So as it drops from the grid down towards the rack, you're going to see silicon carbide taking that opportunity as it really is a good application of that material.
David Duley: And as a follow-up or just an extension of that question, do you think this -- the 800-volt rollout in the data centers which I guess kind of starts in the middle of this year really gets going next year, is that when you might see more of a pickup in your silicon carbide implant business for that market? Or when will this start to hit in a more significant way, I guess, is the best way to ask it?
David Ryzhik: Yes, Dave, that's a good question. It's still low volume relative to EVs. But I would say our conversations with customers, they're talking a little bit more about it. And so we're paying attention. And this could be an application that over time could grow, whether it's the transformers or other parts of the data center power architecture. So I think TBD, Dave, how big this could be. I'd say our customers are definitely paying a lot more attention to that.
Operator: Our next question comes from the line of Duksan Jang of Bank of America Securities.
Duksan Jang: One on the full year '26 guide. I think you said you want to -- you're maintaining that flattish year-over-year guide. I'm just curious because clearly, memory sentiment and the wafer starts are likely much better than 90 days ago. And then at the same time, I think you said your bookings for the general mature and the power business are still doing pretty well. So I'm curious why not raise that full year guide?
David Ryzhik: Yes. So we feel comfortable with flat year-over-year. Absolutely memory, we expect to be a strong year for us in 2026, offset by a digestion in power and general mature. So we're seeing encouraging signs. We like what we saw in the bookings in Q1. One quarter is not a trend. But I think that some of that momentum is probably going to carry into 2027. For this year, based on our backlog, based on the scheduled shipments that we have, we still feel that those markets are going to be down this year. And so net-net, you're going to get -- we expect about flat but with a nice setup into 2027.
Duksan Jang: Got it. And then a follow-up more specifically on the memory side. So I think at one point, you said memory is going to be up year-over-year. And clearly, the trends are looking that way. How should we think about the full-year trajectory when, obviously, it tends to be a little bit lumpy on a quarterly basis, but we had a pretty strong start to the year. And I think also the NAND activities have begun to pick up. So any color on the full year memory would be helpful.
David Ryzhik: Yes. That's right. From quarter-to-quarter, it could be lumpy. It just depends on when customers are taking them, when we're shipping to customers and fab availability space. So for example, in Q2, memory is going to be a little softer sequentially. But we think for the full year, it's -- we expect pretty strong growth in memory. And that's all DRAM. Our expectation embedded in our 2026 expectation is not much NAND. So that's something that we're paying attention to. As you know, Duksan, a lot of the NAND manufacturers are focused on vertical scaling. And so that doesn't require a lot of incremental implants. But once the industry starts to add wafers, that's when we would start to see a pickup.
Duksan Jang: Got it. And then if I may, just one quick one. Within memory, I'm sorry for being too specific, maybe, but I think the industry is trending shifting away a little bit from HBM and diversifying more into other types of memory. And I assume the wafer consumption ratio is not as high on those, for example, like the LPDDRs. So obviously, I think that will be a positive trend for you. Have you seen any signs that the demand signals are stronger because of that?
David Ryzhik: I don't think we've seen any meaningful change based on any mix shift in memory. So customers are still really trying to build out HBM capacity in DRAM for AI.
Russell Low: Yes. And when I think about HBM, it's essentially DRAM stacked. So the implant intensity doesn't change much between DRAM and HBM. And NAND is not different. It's a slightly different mix of high current and medium current. But I'd say the NAND and even node to node to node as well, it's not changing significantly. I'd say the implant intensity is relatively stable.
Operator: I'm showing no further questions at this time. I would now like to turn it back to David Ryzhik for closing remarks.
David Ryzhik: Thank you, operator. I just wanted to thank everybody for joining the call and your interest in Axcelis. You can close the call.
Operator: This concludes the presentation. Thank you for your participation in today's conference. You may now disconnect. Have a good day.