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spk00: Good day, ladies and gentlemen, and welcome to the Excelis Technologies call to discuss the company's results for the second quarter, 2024. My name is Antoine, and I will be your coordinator for today. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you need to press star-1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to turn the presentation over to your host for today's call, David Ridgick, Senior Vice President of Investor Relations in Corporate Strategy. Please proceed.
spk06: Thank you, Operator. This is David Ridgick, Senior Vice President of Investor Relations in Corporate Strategy. And with me today is Russell Lowe, President and CFO Executive Vice President and CFO. If you have not seen our copy of our press release issued yesterday, 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 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.
spk10: Good morning and thank you for joining us for our second quarter 2024 earnings call. As you can see on slide three, we delivered strong second quarter results above our expectations with revenue coming in at $257 million and earnings per diluted share of $1.55. Our results were driven by better than expected conversion of evaluation units into revenue as well as continued robust demand for iron implantation systems into the silicon carbide market. I am also pleased with how we executed our margins, which Jamie will touch on a bit later. On slide four, we show the breakdown of systems revenue by segment, which totaled $199 million in the quarter. Now let me touch on some key trends by market segment, starting with the mature segment on slide five, which comprised 98% of total system revenue in the quarter. As a reminder, a mature segment represents power applications, including silicon carbide and silicon IGBTs, as well as general mature and image sensors. Within power applications, demand for EVs and hybrid EVs remain a key driver. Demand for silicon carbide applications remains strong as customers continue to expand capacity to meet the domestic production goals for the EV market. We believe we are still in the early innings of this trend. Meanwhile, demand for silicon IGBT applications remains soft in the quarter, consistent with our expectations. While EV and various forms of hybrid EVs are a key driver of our power business, we see other emerging applications requiring energy efficiency, such as power sources for data centers, which is a trend we're keeping a very close eye on, given the increased demand for power associated with artificial intelligence. In fact, just in the second quarter, we've seen customers announce new silicon carbide-based trench MOSFET products targeting AI data centers, which is an attractive opportunity for Xelis, given the high implant intensity associated with trench technology. Looking into the second half, we expect demand for silicon carbide customers to remain healthy. In General Mature, in the first half, demand remained relatively consistent, but we may see some moderation in the second half depends on the macroeconomic environment and its impact on our customer spending patterns. Image-sensitive demand has been robust in China, but it's been subdued in the rest of the world due to consumer spending. We are seeing some signs of growth in this market as customer quoting activity has picked up. Turning to slide six, In advanced logic, revenue is 2% of total system revenue, yet we made significant progress in our advanced logic strategy. We successfully closed a Purin Dragon evaluation unit that was an advanced R&D for a leading edge application, received a follow-on Purin H order for volume manufacturing at 3 nanometers, and we received an order for a Purin M production unit from a new customer. As discussed at our investor event in July, the advanced logic market is an under-penetrated opportunity for Xelis, where we're driving interest with our evaluation units and investing in R&D to solve some of the industry's growing challenges. We're in the early stages, and this is a multi-year effort, but we are encouraged with the progress of our engagements, and this will remain a focus for us moving forward. Moving to memory, in line with our expectations, we did not generate any systems revenue from the market in this quarter. Unimplantation is a critical process step in the production of DRAM and NAND chips, and it's worth noting that incremental demand is expected to be driven by new wafer starts rather than technology transitions. In DRAM, given the surge in demand for high bandwidth memory chips for AI applications, which is absorbing DRAM capacity, we expect DRAM customers to start adding capacity as we exit 2024 and into 2025. In NAND, overall wafer front end spending remains soft. However, we are encouraged to improving pricing and bit demand fundamentals, which needs to happen before customers invest in additional capacity. We currently expect our revenue for NAND applications to begin picking up in 2025. It's worth noting that memory customers typically place purchase orders shortly before shipment. As a result, we've started to pre-build some inventory for importers for the memory market and stand ready to respond once demand returns. Turning to slide seven, in summary, I'm pleased with the execution of the Excellus team in the second quarter. As we look to the second half of the year, we expect revenue to be slightly better than the first half, with momentum expected to build into 2025. I want to also thank many of you who joined us in July for our investor event. We hope you came away with a better appreciation of Excellus's long-term growth drivers, which are as follows. First, secular growth in power, particularly silicon carbide, which we believe will be ubiquitous in applications that require energy efficiency, including EVs, renewables, and the insatiable power demand for AI data centers. The silicon carbide device market is estimated by Yale to grow at a 25% CAGR from 2023 to 2029, and we are the leading ion implant provider for this market, which is one of the most critical steps in the manufacturing of these devices. Second, while memory spending is at exceptionally low levels today, we expect spending to recover as customers will ultimately need to add capacity to meet global compute and storage needs driven by AI, EVs, Internet of Things, and the continued growth in electronic devices. Third, once consumer industrial spending recovers, we expect general mature spending to follow suit as well. Fourth, as mentioned, we have an opportunity to gain share in advanced logic as new applications are opening up beyond just the front end, but also in the middle end of line as well. For example, as we move from 7 nanometer to 2 nanometer technology, we forecast a more than doubling of our implantation steps in the middle of line processes. And finally, a geographic expansion in Japan. We are focused on increasing penetration into this market by leveraging our customer relationships while also growing our physical presence in the country. With this backdrop, our long-term model calls for growth to approximately $1.6 billion by 2027. I'm very excited about the opportunities that lie ahead for Excellus and how that translates into attractive long-term earnings growth and value creation for shareholders. With that, let me turn the call over to Jamie.
spk07: Thank you, Russell, and good morning, everyone. I'll start first with some additional detail on our second quarter results before turning to our third quarter outlook. Turning to slide eight, second quarter revenue at $199 million and CS&I at $58 million. This exceeded the outlook we provided in our first quarter call of $245 million and included some pull-in activity from the third quarter. We benefited from the better-than-expected conversion of evaluation systems into revenue, as well as a customer pull-in to meet their production needs. In addition, we saw continued strength in our power market, particularly from silicon carbide. Our CS&I revenue was relatively in line with our expectations. As a reminder, CS&I is driven by our installed base and represents consumables, spares, services, and upgrades. The typical life of an ion implant system can be as long as 20 years, and CS&I provides a stable and growing revenue stream with an attractive margin profile. As we continue to grow our installed base, we expect CS&I to deliver sustainable and profitable growth in the coming years. From a geographic perspective, China continued to remain our strongest region at 55% of total system sales. In the second quarter, system bookings totaled $105 million, and we ended the period with systems backlog of approximately $1 billion. We are bouncing along the bottom from a bookings perspective, and while it can fluctuate from quarter to quarter, we expect bookings to improve as our end markets recover. As a reminder, systems are not included in our bookings. or backlog until we have received a firm purchase order. Moreover, our backlog may not include bookings received from memory customers given the short lead times following the receipt of order and also do not include expected revenues associated with our CS&I business. Turning to slide 9 for additional detail on the second quarter. Second quarter gross margins were 43.8%, slightly above our outlook of 43.5%, owing to better volumes as well as favorable systems mix. Operating expenses totaled $60 million, or 23.2% of revenue. We continue to invest in the organic growth of our business while prudently managing our cost structure. As a result, operating profit was $53 million, reflecting a 20.6% operating margin. It is worth noting that in the second quarter, we incurred restructuring charges of approximately $1.4 million associated with our retirement incentive program, which had an estimated 50 basis point impact on operating margins for the period. We generated approximately $4.5 million in other income, primarily as a result of interest income on our cash balance. Our tax rate in Q2 was 11%. For the balance of the year, we estimate a 15% tax rate. Our weighted average diluted share count in the quarter was 32.8M shares, and this reflects continued execution on our share repurchase program. In fact, over the past 3 years, we have reduced our diluted share count by approximately 5%. We exited the second quarter with $160 million remaining in share repurchase authorization. This all translates into a diluted earnings per share of $1.55, well above our outlook provided in the first quarter call of $1.30. Moving to our balance sheet and cash flow, we ended the second quarter with $548 million of cash, cash equivalents, and short-term investments on hand, and we generated $38 million of free cash flow in the quarter, driven by our earnings for the period and our focus on working capital management. Now let me turn to our third quarter outlook on slide 10. Given the strength in Q2 systems revenue compared to our forecast, which benefited from some pull-in activity, we expect Q3 revenue to be flattish with Q2 at approximately $255 million. As we think about Q4, we expect revenue to be slightly higher than Q3. We expect third quarter gross margins to be approximately 43.5%, with operating expenses estimated at approximately $60 million. We expect our tax rate to be approximately 15%, leading to an estimated diluted earnings per share of approximately $1.43. In summary, we're very pleased with our financial performance. Our strong margins and cash flow are a testament to the critical and proprietary nature of our ion implant technology that is differentiated Thank you, Jamie.
spk10: As I think about the defining trends of our time, AI, Internet of Things, electrification, including power efficiency and clean energy, it's semiconductors that serve as the foundation of all of them. In fact, it's the performance such as power efficiency and cost of semiconductors that matters the most. And Excellus's ion implantation technology is a critical enabler of that and why I'm really excited about the future for Excellus. I want to thank our employees, customers, shareholders, and partners for their continued support and trust in Excellus. With that, operator, let's open it up for questions.
spk00: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you need to press star 11 on your telephone. and wait for your name to be announced. To withdraw your question, please press star 11 again. We ask that you please limit your inquiries to one question and one follow-up. Please stand by while we compile the Q&A roster. Our first question comes from Jed Dorsheimer from William Blair. Please go ahead.
spk08: Hi. Thanks for taking my question. I guess just, you know, it's been less than a month since your capital markets day. I'm curious, you know, as you look at the business and you kind of segment the systems, it seems like, you know, the power business continues to maybe bounce on the bottom or get a little bit worse while you're seeing, you know, continued strains from silicon carbide. You know, has there been any changes since your capital markets day, recognizing it's relatively recent, that would change that opinion or give you more or less confidence, you know, in terms of near term as well as going into next year? And then I have a follow up.
spk07: Yeah, so you know Jed, good morning and thanks for jumping on the call here. You know is kind of zooming out and look at the full year. You know our expectations for the full year have not really materially changed since our Q1 call. We continue to expect the second half to be slightly higher than the first half. You know, despite seeing some pulling activity into the second quarter, we also had expected the second half to be weighted towards the fourth quarter, and that continues to remain the case here for us for the period. as we think about the market segments and as you noted power continues to be strong led by silicon carbide general mature was consistent in the first half but we do expect a little bit of moderation in the second half but this is going to depend largely on the macroeconomic activities and impacts on our customer spending patterns as sort of russell mentioned in a pair of remarks specifically around consumer industrial and the auto end markets You know, memory has been quite soft. You know, we've had no memory activity here in the second quarter, although we do expect some initial spending for DRAM as we exit the year. And so we're seeing some opportunities potentially in the fourth quarter for that to pick back up. And NAND is going to continue to sort of be dormant for us, you know, probably into 2025, where we do expect some level of spending to commence. You know, in short, we really do feel pretty good about revenue growing slightly in the second half. Our backlog remains really healthy. Our conversations with our customers suggest a slight pickup in revenue in Q4, and we expect that momentum to continue and to extend into 2025.
spk08: Well, thank you, and that kind of leads me to my follow-up. I mean, all of that sounds very reasonable, but as we look at 2025 and the 1.3, It seems like the pathways to that are getting narrower and narrower. So I'm just curious, at what point do you reassess that expectation in 2025?
spk07: yeah so you know we we laid out that new long-range bottle jet in the you know in the july event that called for the 1.6 billion in 2027 uh we really are now entering the you know phase of our process where we know through the third fourth quarter here you know is where we go through our annual planning profit planning process you know for the course of this year we've really provided specific guidance on you know looking one looking one quarter out But when we think about achieving the $1.3 billion model in 2025, it's possible, but it's going to require a step up in demand across our segments, particularly in memory and general mature. And the timing and magnitude of those recoveries is hard to predict, especially given the uncertain macro environment. Naturally, as we get closer, we'll have a better sense and we'll be able to provide some kind of color on 2025 as part of our Q4 call as we enter into that annual profit planning process. But, you know, we really do feel good about the long-term opportunities that we outlined in that investor event. Power is going to continue to be a key driver for the business, particularly silicon carbide. We expect memory to eventually recover from the current levels. And as we noted, it's basically zero, you know, here in the second quarter. General mature can recover back to those prior levels as the macro environment improves. And ultimately, we're focused on executing on those market share opportunities we talked about in advanced logic in Japan. And so, you know, Long and short, we're really focused on everything that we can control. So we're making sure we've got the right people, the right inventory, the right capacity, and the right technologies to be able to go after those opportunities that we outlined.
spk10: yeah just to reiterate jamie that's exactly right so it's still there's still a possible path to the 1.3 billion dollars next year it's going to require you know market cooperation so continuous strength in power as you mentioned recovery and memory and general mature i think at this stage you know the the secular growth drive is still very much in place uh growth in ai growth in electrification the long-term trends are definitely there And, you know, as we said at our investor day, the path to $1.6 billion is something we believe we could achieve in the next few years. So I think it's definitely a when the market recovers, not an if. I think, you know, that's fairly apparent. So the exact layering of revenue year on year to get to the 1.6, we'll comment more about that. as we get closer, but we do obviously see that as the market recovers and it grows that this path is 1.6 billion dollar model.
spk00: Thank you. One moment for our next question. Our next question comes from Tom Diffley from DA Davidson and Company. Please go ahead.
spk03: Yeah, good morning and thank you for the question. Just curious on the backlog in bookings. It looks like the backlog fell by more than the delta between the bookings and the revenue. And I'm just curious if there were any cancellations or push-outs that you saw.
spk07: Yeah, there was, you know, we will see from time to time, you know, some purchase order movements. Tom, nothing overly material there. You know, generally, it was largely it was the revenue load plus the bookings that drives the differential in the backlog. So...
spk03: Okay, so nothing of note. All right. And then, Russell, I was hoping you could maybe point us towards a few of the end markets that you're really paying attention to or end market products to drive the general mature business over the next year. I mean, are there certain key product launches out there that you think are kind of key to your recovery?
spk10: So when I say macroeconomic trends for general mature, I guess really we're talking about consumer spending, industrial, and automotive. I think it's fair to say that automotive and I mean, obviously, we love automotive because it's a computer on wheels. But really, at this stage, we're looking at consumer. We are seeing consumer spending picking up. It's hard to say what the killer app is, but I do think that all chip devices are going to be driven by consumer improvements. Can't say that Apple phones are going to take off crazy, but I know that I'm ready for the next version, especially if Siri gets smarter. But yeah, we definitely are seeing a firming up of consumer spending, if that makes sense, Tom.
spk03: Okay. And then just finally on the automotive front, do you need to see an automotive recovery before you make more progress in the Japanese market or are those two things not necessarily tied together?
spk10: I think the automotive recovery, the consumer level is probably further down the line compared to the investment in chips required for those machines. So we've actually had some pretty good success in Japan, particularly with power. And, you know, it's partly because One, we have a full portfolio of products to supply the all-customer applications for, say, silicon carbide and silicon, and that wasn't locally available. So that's given us our opportunity, which we're now capitalizing upon. So that's one point. The other part I'd say is that we're actually making progress beyond just power in Japan. So we have been making progress in memory. We did actually receive a PO this last quarter for an advanced logic tool going to a new customer. So we are making progress in Japan, and I think that's going to be a bright spot for us.
spk03: Great. Well, thanks for the extra color.
spk10: Thanks, Tom.
spk00: Thank you. One moment for our next question. Our next question comes from Craig Ellis from B. Reilly Securities. Please go ahead.
spk04: Yeah, thanks for taking the questions and nice execution. Jamie, I wanted to start by following up on one of Jed's questions. It's more near term. As we look at the potential for modest half-on-half gains, it seems like What we're saying is that revenues for the full year could be around $1.25 to $1.45 billion. So the question is, is that the right range? And I know you indicated that there was some pull-in activity in 2Q, but beyond that, is there any change to what you were expecting in the second half versus three months ago?
spk07: Yeah, so again, Craig, as we look at it, we're not providing specific guidance for the full year as of right now. Our commentary is we gave the third quarter expectation here, and we do expect the fourth quarter to be slightly higher than what we saw here or what we expect to see in the third quarter. As it relates to the initial commentary around expectations relative to Q1, the year still looks relatively similar in terms of what we were expecting as we were exiting the Q1 call. We talked about the fact that we had a little bit of pull-in activity into the second quarter, which moderated that sort of Q2 to Q3 step up in expectations. But largely speaking, the year is still relatively intact to what our prior expectations were.
spk04: That's really helpful. Thanks, Jamie. And then the second question is more of a longer-term question, and it also follows up an earlier inquiry. So I totally get where you are in the annual planning process and that leaving the company challenged with making a call on next year's 1.3B potential. But I'm wondering if you can comment on where the business might be if we just set aside, you know, the potential for end market improvement, which requires a crystal ball from here to year end. But absent any improvement and kind of a market neutral environment, any color on what calendar 25 might look like so we can better interpret how it might shake out as we go through the next three to six months. Thanks.
spk07: Yeah. So, again, difficult to predict that, Craig, right? You know, again, we look at where the markets are today. You know, we need to see memory recovery, you know, in order for us to get to those numbers. We need to see some incremental strength in general mature for us to get to those numbers. So, you know, again, from where we are today, we would need to see those markets recover. You know, I think those markets are in various stages of their recovery. You know, we talked about the fact that we are starting to see the opportunity here in the fourth quarter for some memory sales, which we think will build some momentum into 2025. And we're watching the general mature space, you know, kind of just like everybody else is, you know, to see when the spending is going to kick back on there.
spk04: Yeah, it sure helped to get better PCs and smartphones. So appreciate the help, Jamie. Good luck, guys. You got it. Thanks, Craig.
spk00: Thank you. One moment for our next question. Our next question comes from Ross Cole from Needham Inc. Company. Please go ahead.
spk09: Hi, and thank you for taking my question on behalf of Charles Shee. I was wondering, looking into the third quarter, do you expect the breakdown of system revenue to remain rather consistent with what you're seeing this quarter? And then do you expect any shifts in the revenue by segment going into the fourth quarter or full year? Thank you.
spk07: Yeah, Ross, I mean, as we think about the system segments, right, I mean, again, this quarter we saw, you know, Little to no memory here through the first half of the year. Again, we're predicting the memory to really kick back on in the fourth quarter. To some extent, we're starting to see those early signs of that. As a result of that, we did have some advanced logic. As you know, advanced logic does sort of tick around from quarter to quarter based on the progress that we're making with our customers. So, I'd still expect power specifically silicon carbide to be strong for the period and general mature broadly to be the lion's share of the revenues for the period overall. but we'll have to see how that plays out. Yeah, I think that that's, that's correct.
spk10: Right. So, so certain carbide continues to be strong. Uh, we've talked about general mature outside of China. It seems to be a little bit softer. We actually have seen a little bit of business on image sensors within China. Uh, and that actually has been very positive and that would be, uh, focused on consumer. And then I think the other one is we have started to talk with customers about firming up their plans regarding DRAM. So the tone of the conversation is changing, which is giving us a little bit more confidence.
spk09: Great. Thank you. And then if I can follow up on your expectations for NAND recovery. As the market does remain stock, are you expecting the demand to drive growth in earlier 2025 or maybe later on in the year? Thank you.
spk10: Yeah, so I guess when I think about NAND, things are looking better for NAND in the sense that the ASPs are going up. And obviously, before people want to expand their capex, they want to actually make a little bit of money. So those things are happening. NAND will trail the demand recovery. And I think at this stage, it's fair to say it's a 2025 event.
spk09: Great. Thank you, Gus.
spk00: Thank you. One moment for our next question. Our next question comes from Duxin Zhang from Bank of America Securities. Please go ahead.
spk01: Hi. Thank you for taking my question. Just following up on an earlier polling question, because you've already pre-announced results for Q2 in early July, I was just curious what changed since then. And then if you could just provide a little bit more color on the customer profile, how much the pull-in was and if it's a one-time phenomenon.
spk07: yeah so again the ducks and i think on the pre-announce was really done as ahead of the investor event you know broadly speaking as we talked about in our commentary we were early on in our closed period it was really representative of a flash we needed the team to go through and finalize all their procedures we've got other revenue buckets that can that ebb and flow based on estimation deferrals and others uh that can change from time to time so we wanted to make sure we provided you some level of indication of where the quarter was going um you know ahead of that investor event uh while we finalized our processes and procedures you know um ultimately you know the evaluation units that came in um you know that was a but really honestly a good thing for us getting those closed sooner actually closes down our obligation to continue to provide cost and support um you know for those units Um, it allows us to begin the process of really fanning out. And on the one that got pulled into the period, um, you know, from, you know, it was really that customers actually already started to talk to us about follow on orders ahead of the ultimate sign off. The other, uh, unit, um, you know, represented, um, really a customer need for production requirements. And so, you know, when you take the overperformance, you know, for the period, it was largely attributed, you know, relative to guide, it was largely attributable to those two units.
spk01: Understood. And then one on select and LGBT, and hopefully my math is correct, but I think in Q2, you've done around 39 million in sales. That's quite an uplift from Q1, it seems like. So do you continue to see that strength going into second half? And over the long term, how much of a contribution does this have to be to get to your $1.3 billion model and then your $1.6 billion? Thank you so much.
spk10: I'm not sure we've given a breakdown of our power business between silicon carbide and silicon IGBT. I think what we've said is that our silicon carbide business continues to be strong, and the silicon IGBT business is actually soft, as we expected.
spk11: There was more to the question.
spk07: Yeah, as we think through the numbers overall, power continues to be strong broadly for us. Silicon carbide continues to be very strong relative to our expectations. We're watching the transitions here relative to... uh the ev hybrid evs and what that ultimately means for silicon igbt in the marketplace as we talked about as part of our investor day as we think about what it means for the long-term model right power is going to be a very significant contributor to our long-term model into the future both on the silicon carbide and the silicon igbt performance Ultimately, what we are monitoring and what we're working with our research folks, both internally and external research third parties, is trying to understand exactly what the magnitude of Silicon IGBT opportunity set looks like with this new portfolio approach that the automakers are ultimately rolling out, specifically here in the United States. Ultimately, as we think about our Q3 expectations and kind of bring us back to 2024, our expectations are that power is going to really continue to be strong for us, a position of strength both within the Q3 timeframe and the Q4 timeframe, with that being in line with our prior expectations with silicon carbide being higher than silicon IGBT for the full year.
spk01: Got it. And then if I just may have one more. We've been hearing a lot that China EVs are doing quite well, but the Western demand is a little bit more subdued. So I'm curious if you're seeing similar profiles out there just around that demand would be great. Thank you.
spk10: So, just to clarify the last point, we did disclose the IGBT ratio. Sorry, we didn't specifically guide for Q3, so I want to clear that up. Regarding demand for silicon carbide, so yes, China has a really strong demand for silicon carbide. I think we've talked in the past that they're currently supplying 10% domestically to their own vehicles, but they have a goal of achieving 25%. And probably beyond that, they'd like to probably supply the entire world domestically. because this is a really great opportunity for them. However, like I say, our silicon carbide business is very global. So we have multiple customers in every region. So North America, Europe, Korea, Taiwan, Japan, and obviously China. But I'd say that silicon carbide remains strong in general. China is certainly a very bright spot for us. Thank you.
spk00: Thank you. One moment for our next question. Our next question comes from Jack Egan from Charter Equity Research. Please go ahead.
spk05: Hey, guys. Thanks for taking the questions. So you got it for a slight increase in revenue in the fourth quarter, and then you mentioned memory is probably going to kick back, you know, in that quarter and in the fourth quarter. So does that imply that with the flat to up or slightly up revenue guide that there might be some weakness elsewhere? Or is it just that the actual impact of the memory rebound in the fourth quarter is pretty small?
spk10: Yeah. Hey, Jack. It's Russell. So yeah, just to kind of reiterate. Our second carbide remains strong. We do see a little bit of weakness outside of China regarding general mature, but that's kind of being more than made up for, we believe, by image sensors within China and only in China. That's where we see the image sensor business flourishing. memory as well. So I'd say that immune sensors and memory are looking a little bit firmer. General mature outside of China has come down a little bit, we believe. I mean, there's still five months of the year to go, but based on the visibility we have, that's what we're seeing.
spk05: Okay, that makes sense. And on the IGBT softness, there have been a few prominent trends there over the past few years. Obviously, we've seen China build out a pretty good bit of capacity for IGBTs. And then also some of the leaders in Europe and the U.S. have kind of started moving to 300 millimeter power wafers. So can you kind of give us a general idea of where that IGBT softness is coming from? I mean, it sounds like it's probably outside of China with China being pretty strong. But, you know, is it just kind of a general slowdown after a few years of strong growth or is there something else at play?
spk10: So, OK, so. I think we've said in the past, if you compare IGBT to silicon carbide, the absolute market, historically, the silicon carbide, so the IGBT has been a lot bigger than silicon carbide. And you've kind of seen from our own revenues, we transitioned, I think, this year to be more silicon carbide than IGBT, and IGBT has continued to soften. So that's our own business. Outside of that, IGBTs, I actually believe there's going to be an uptick in demand, but I also believe that you're going to see the upper end of IGBTs being cannibalized or replaced by silicon carbide. So I think it's a relatively complex dynamic. When we think about EVs and hybrid EVs, there's going to be a combination of silicon carbide and IGBTs going into those vehicles, for example. The higher end is probably going to like to use silicon carbide over IGBTs. But we're relatively agnostic. We don't mind whether they use IGBTs or silicon carbide because they're both very implant-intensive vehicles. So that's kind of the first thing. And obviously, any of that is taking away market share from internal combustion engines. But I do honestly believe that you're going to see a lot more use of power devices in general, whether it's going to be because of electrification or AI. I think you're going to see a growth there. But you're also going to see quite the dynamic where silicon carbide pricing is coming down quite rapidly. So that might temper any growth you see by replacement. on it. Thank you.
spk00: Thank you. As a reminder, to ask a question, please press star 1 1 and wait for your name to be announced. Please limit your inquiries to one question and one follow-up. Our next question comes from Mark Miller from the Benchmark Company. Please go ahead.
spk02: Thank you for the question. I just wonder if you can give some detail on the emails that are currently underway.
spk10: Oh, I thought it was emails. I'm not going to send an email. Sorry, Mark. The evals. So we currently have a number of evals underway. They're obviously in areas where we're looking to grow our business. Were you interested in the ones that we have underway or the ones that we closed out in Q2, Mark?
spk02: The ones underway, please.
spk10: Okay. So we do have... a an eval uh for what i'd consider to be well so i think we mentioned this in july there's a tool in the field for for high energy proton implantation to igbts so that is uh basically would complete our full portfolio of products for um power devices uh with that product actually that product i think we mentioned that's why it has an opportunity of about 50 million dollars per year of additional revenue and we're actually quite excited about that we had a lot of inquiries about that The other one is a silicon carbide tool in Taiwan that we're looking at, and we actually started yet another eval with a large customer in Taiwan for General Mature. So last quarter, we closed an eval with this customer for General Mature, and now we're doing a second eval in a different location with this customer, so we're getting some traction there. And as I might have already mentioned, we did sign off last quarter, a Dragon, a Purin Dragon at an Advanced Logic Research location. We did get an H200 silicon carbide tool, Purin tool signed off in North America for silicon carbide, and there was actually an H200, a Purin H200 that was signed off in China for General Mature. So we continue to have quite an active funnel And even though there's a few going on right now because we closed so many, Mark, we are looking at the next tranche as well. We find this is a really useful strategic tool for us to break in. So there's a number of customers, whether it be additional memory customers or advanced logic where we're looking to use the evaluations as a way to demonstrate our abilities to our customers and build that relationship.
spk02: When do you expect the tools currently under evaluation to be signed off on?
spk10: I think those will be signed off before the end of the year, I believe. The Proton tool, I think, is imminently coming up, and also the silicon carbide tool in Taiwan is imminently coming up, so I expect to have news on those in the near future. The one that we just shipped out for general mature in Taiwan, obviously that's going to be a one-year evaluation. So that won't be until the middle of 2025 to late 2025 that we'll have any update there. But we do have a very high success rate with evaluations.
spk02: Thank you.
spk00: Thank you. I'm showing no further questions at this time. I will now turn it back over to David Riddick for closing remarks.
spk06: Thank you, Operator. I want to thank everyone for joining the call. We look forward to seeing many of you at some investor conferences this quarter. With that, Operator, let's close the call.
spk00: Thank you. Thank you for your participation on today's call. This does conclude the program. You may now disconnect.
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