Axcelis Technologies, Inc.

Good day, ladies and gentlemen, and welcome to the Excellus Technologies call to discuss the company's results for the first quarter 2024. My name is Crystal Love, 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. 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, Doug Lawson, Executive Vice President of Corporate Marketing and Strategy. Please proceed.

Thank you, Operator. This is Doug Lawson, Executive Vice President of Corporate Marketing and Strategy. And with me today is Russell Lowe, President and CEO, and Jamie Coogan, Executive Vice President, and CFL. 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 the comments made today about our expectations for future revenues, profits, and other results are forward-looking statements under the SEC 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. Now I'll turn the call over to President and CEO, Russell Lowe.

Good morning and thank you for joining us for our first quarter 2024 earnings call. We are off to a strong start to the year with first quarter financial results exceeding our forecast. Our revenue came in at $252.4 million. On the bottom line, our earnings per diluted share were $1.57, which increased 10% from $1.43 in the year-ago period. Higher earnings were primarily driven by more than a 500 basis point improvement in gross margin. As a result, the product mix shipped during the period partially offset by higher selling costs, R&D, and taxes. Continued execution by the Xcelis team combined with strength in the implant-intensive silicon carbide power device segment and strong customer shipments to China enabled Xcelis to achieve this performance. Based on current booking levels and quoting activity, We expect these two trends to continue for the foreseeable future. Looking forward, our goal is to extend our lead in the power market and establish a position in advanced logic. We have focused R&D, sales, and marketing efforts in key areas critical to the next phase of growth. These include joint development engagements and the use of evaluation systems to help grow our market share. Currently, we have evaluations at customers across nearly all market segments and multiple technical customer engagements designed to improve capabilities and increase our footprint. We have the Purin Dragon, our most advanced high-current implanter, in a leading European research institute focused on advanced logic process development. We also have a second Purin Dragon under evaluation with a leading advanced logic customer, These tools and the associated technical collaboration will be critical to the customer's development of the next generation logic technology. In Japan, we continue to experience success in the power market due to the strength of the Pure Empower series, and we're engaged with multiple Japanese customers in additional market segments. Turning to our systems revenue breakdown of the quarter and beginning geographically, China represented 59% of sales, US 17%, Japan 7%, Europe 4%, Korea 4%, and the rest of the world at 9%. By market segment, mature nodes, which include power devices, comprised 99% of shipped systems revenue in the first quarter, with only 1% of shipments to DRAM. Comparing this to the first quarter of 2023, where we saw 89% of systems shipped revenue to mature nodes and 11% to DRAM. Breaking down the mature nodes in more detail, Power continued to lead systems shipments with 55% of total systems revenue. The other general mature segment was 41%, and image sensors contributed 3%. Breaking down total revenue in Power a little further, of the 55% recognized in the quarter, Silicon carbide and silicon IGBTs were split 76% and 24% respectively. We continue to monitor the recovery in our end markets, specifically memory and other general mature process technologies. The exact timing of this recovery is difficult to predict. We expect revenue levels to increase in the second half of 2024 over our expected performance in the first half, with power continuing to be an area of strength. We anticipate silicon carbide and silicon IGBTs will combine to represent approximately 60% of our system shipments for the second consecutive year. Our other markets are expected to strengthen in the second half, depending upon economic conditions. This will be underscored by a long-term trend for increasing demand as mature technologies are utilized in Internet of Things, connected devices, consumer electronics, and our growing advanced electronics markets. The timing of a DRAM recovery is now expected later in the year than our previous expectations, and NAND is not expected to recover until 2025, when DRAM and NAND are forecast to have a strong year. We expect China to represent 40% to 60% of our quarterly systems revenue, with the remaining revenue spread relatively evenly across the other geographies. In the power segment, in particular silicon carbide, we have developed a large and diverse customer base. and we continue to win business globally from our customers, as well as expanding our product footprint with existing customers. The full portfolio of Purion Power Series products is valued by these customers, allowing them flexibility at both 150 millimeter and 200 millimeter to ramp their fabs in the most productive and cost-effective manner. Fabs will often start up by establishing a core of Purion M-Silicon carbide tools, and then adopt the use of the pure H200 silicon carbide and pure XC silicon carbide systems to improve productivity, cost of ownership, and device performance. As a result, we have seen a significant increase in the adoption of pure H200 and pure XC silicon carbide systems. Xcelis is the only ion implantation company that can deliver complete recipe coverage for all power device applications. We are considered the technology leader and the supplier of choice, providing the best product family and manufacturing capabilities. This means that using Excel as tools provides the lowest risk path to high volume manufacturing required to support aggressive fab ramp plans. Looking ahead, we're even more excited about the upcoming several years. We will discuss this in more detail at our July 11th investor day, But here is a quick summary of how our future growth will be driven by several fundamental industry trends. First, rapidly growing electrical power requirements for transportation, industrial, and overall energy needs will demand a significant increase in semiconductor power device capacity. Silicon carbide, silicon, and gallium nitride chips will be used in high volume applications, such as EVs, various forms of hybrid automobiles, and their charging support. Energy generation, transmission, and storage applications, including the global adoption of solar and wind, and AI data center power requirements, including generation, storage, distribution, tooling, and servers. Remember, the power chips are one of the most implant-intensive semiconductor devices to manufacture, making this a strong growth driver for Excellus. The second significant industry trend is AI. This trend will impact every device segment in the industry. First, the GPU requirements will drive advanced logic processes and require significant manufacturing capacity additions. Second, in addition to high bandwidth memory associated with each GPU, AI will drive DRAM demand beyond the AI data center, including increased PC and phone requirements. Third, AI will generate data that will drive storage demand, including NAND requirements, And finally, AI will also drive a third wave of IoT, using the sensors and connected devices as a primary source of data. This will drive capacity in image sensors, analog chips, and mature logic process nodes. AI will drive fab capacity growth in all segments, including implant-intensive memory and IoT types of chips. At Excellus, we're excited to play a significant role in the next wave of technical change. and expected to drive our growth for several years. Now I'd like to turn it over to Jamie.