Axcelis Technologies, Inc.

Good day, ladies and gentlemen, and welcome to the Axelis Technology call to discuss the company's results for the first quarter. My name is Liwei, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mary Puma, President and CEO of Access Technologies. Please proceed, ma'am.

Thank you, Liyue. With me today is Kevin Brewer, Executive Vice President and CFO, Russell Lowe, Executive Vice President of Global Customer and Engineering Operations, and Doug Lawson, Executive Vice President of Corporate Marketing and Strategy. If you have not seen a copy of our press release issued yesterday, it is available on our website. 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 Form 10-K Annual Report 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. Good morning and thank you for joining us for our first quarter 2023 earnings call. In March, we celebrated the 45th anniversary of the founding of Excellus. As we pass this milestone and as I pass the leadership baton to Russell, I'm happy to report that Excellus is in a great place. We have a solid balance sheet, the strongest product portfolio in our 45-year history, and an excellent team of employees, suppliers, and customers. We are well positioned for future growth and profitability. Exiting the first quarter of 2023, demand for the Purion product family remains extremely strong. especially in the high-growth silicon carbide power segment. Revenue for the first quarter was $254 million, with earnings per share of $1.43. Backlog set a record at $1.27 billion, with quarterly bookings of $298 million, driven by period demand and strength in the power market. For the second quarter of 2023, we expect revenue between $255 and $260 million, gross margin of roughly 42%, operating profit of around $55 million, and earnings per share of $1.44 to $1.48. At the beginning of this year, we expected 2023 revenue to exceed $1 billion. We are now forecasting to beat that estimate by $30 million, exceeding $1.03 billion. This represents revenue growth of approximately 12% in a year in which overall wafer fab equipment is expected to decrease by over 20%. In the second half, in addition to stronger revenues, we expect significant margin expansion driven by mix and improved costs. The mature process technology market continues to be an area of strength for Excellus, with 89% of first quarter system shipments going to mature foundry logic customers and 11% to memory customers composed entirely of DRAM. The geographic mix of our system shipments continues to be distributed globally and representative of spending patterns in each geography. In the first quarter, China accounted for 45%, the U.S. 17%, Korea 14%, Taiwan 4%, Europe 2%, and the rest of the world 18%. The power device market continues to drive our growth during this industry downturn. We are actively engaged with all customers in this high-growth market segment. winning business from new customers and expanding our footprint at existing customers. We expect over 55% of our system revenue in 2023 to come from this segment, with greater than 50% of total power device system revenue coming from silicon carbide applications. In addition to significant pull for our Purion M silicon carbide tool, we also see increasing adoption of Purion H200 silicon carbide and Purion XE silicon carbide systems. As a result, we expect revenue from silicon carbide customers to be spread relatively evenly across the Purion Power Series product family. Purion Power Series products for silicon carbide have been designed to support the technical challenges facing our customers as they ramp to high volume in support of their automotive customers. Excellus is the only ion implant company that can deliver complete recipe coverage for all power device applications. The full Purion Power Series family of products allows customers to optimize their fabs for high volume manufacturing and to continuously improve their power device performance. Excellus is considered by power device customers to be the technology leader and supplier of choice providing the best product family and manufacturing capabilities. This means that using Excellus tools provides the lowest risk path to high volume manufacturing required to support aggressive fab ramp plans. Excellus places significant value on enabling our customers to succeed in this exciting market by providing differentiated product performance and a high level of customer satisfaction. Although our memory and advanced logic customers are experiencing a downturn, Excellus continues to stay close to them to support their install bases and understand their technology and manufacturing needs. It is during downturns that there is an increased ability to collaborate with our customers to expand opportunities for Excellus during the next upturn. We have multiple evaluation systems in the field and many customer engagements designed to increase our footprint in these market segments. As the industry exits this downturn, Excellus will experience significant growth as these traditional semiconductor segments recover. This, combined with continued strength in the power and mature markets, will drive Excellus to our $1.3 billion model and beyond. Now I'd like to turn it over to Kevin.

Thank you, Mary, and good morning. We are pleased with our first quarter 2023 financial results and are excited about our full year revenue, which is now expected to exceed $1.03 billion, representing year-over-year growth of approximately 12%. Looking at our first quarter, revenue finished well above guidance due to solid execution and continuing strong demand for period. We won revenue with $254 million, with systems revenue at 195.2 million and CS&I at 58.8. From bookings and quoting activity for systems in the power segment continued in the quarter, which supports our expectation that greater than 55% of revenue will come from this market in 2023. CS&I revenue will fluctuate quarter to quarter, but should be modeled at approximately $245 million for 2023 and $300 million in our $1.3 billion revenue model. Q1 gross margin finished at 40.9%, slightly lower than guidance due to CS&I being a lower percent of total revenue. We expect margins to improve to approximately 42% in Q2, but still remain under pressure caused by higher material costs and mix. We are forecasting significant gross margin improvement in the second half of the year as costs improve and we move to a more favorable product mix. This should allow us to achieve our full year gross margin target of approximately 44%. We remain laser focused on margin improvement and have numerous initiatives underway to lower the cost of goods and drive higher sales of period and product extensions. This allows us to target gross margin at greater than 45% in the $1.3 billion model. Turning to operating expenses, the first quarter ended at 20.7% of revenue and better than our guidance. We expect OPEX to be relatively flat in the second quarter at approximately 21%. As always, we will continue to tightly control spending while investing in areas of the business that support business growth solidify our technology advantage in the specialty market, and increase our footprint in memory and advanced logic markets. Additionally, we will continue to invest in our employees and the infrastructure required to achieve our financial models. One example of infrastructure investment is our new state-of-the-art logistics center in Beverly, Mass., located just a short walk from our headquarters. The facility is scheduled to open this summer, and provides centralized logistics and flex manufacturing capacity. We also plan to further ramp our Beverly and Korean operations as capacity needs grow. We are comfortable at this point that we have the initiatives underway that support a $1.3 billion model. We ended Q1 with $445 million of cash, cash equivalent in short-term investments. and generated $34.6 million of cash from operations. In a quarter, we repurchased $12.5 million of stock, and it returned over $145 million of cash to our shareholders while curtailing share account growth. Excellus has the rare opportunity to grow revenue and profitability during a significant industry downturn. This is a result of the strong product positioning in the power device market and continued strong execution in a challenging environment. We also look forward to continued growth in memory and advanced logic as the overall semiconductor market recovers. Once again, I want to thank the entire Excellus team for their continued outstanding performance. I also want to thank our supply chain partners for their hard work supporting Excellus and our customers for their confidence in Excellus to deliver. I will now turn the call back to Mary for closing comments.