Axcelis Technologies, Inc.

Good day, ladies and gentlemen, and welcome to the Excellus Technologies call to discuss the company's results for the third quarter 2024. My name is Corinne, and I will be your coordinator for today. I would now like to turn the presentation over to your host for today's call, David Rizek, Senior Vice President of Investor Relations and Corporate Strategy. Please go ahead.

Thank you, operator. This is David Rizek, Senior Vice President of Investor Relations and Corporate Strategy, and with me today is Russell Lowe, President and CEO, and Jamie Coogan, Executive Vice President and CFO. If you have not seen a 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. Please note that included in our slide presentation is a table summarizing a correction to our historical backlog numbers, which Jamie will discuss in his prepared remarks. 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 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 third quarter 2024 earnings call. Beginning on slide three, we executed well in the third quarter, delivering revenue of $257 million and earnings per diluted share of $1.49. Overall, revenue is largely in line with our expectations as a strong sequential increase in revenue from our image sensor market offset a sequential decline in our power and general mature markets. That said, bookings in the quarter were softer than we expected, as we see some customers digest the investments made into global mature node capacity over the past few years. I'll provide more color on this later in the prepared marks. Turning to slide four, we show the breakdown of SHIP systems revenue by segment, which is almost entirely comprised of mature nodes in the quarter, with power being the largest components. Now, let me review ship system revenue by end market. We'll begin with the mature notes on slide five. Revenue from our power markets is approximately 57% of total, down sequentially from 63% in Q2 2024. Shipments to silicon carbide applications moderated in the third quarter. However, on a year-to-date basis for 2024, silicon carbide has been strong, growing year over year, reflecting continued build-out of capacity. We expect fourth quarter revenue for silicon carbide to remain relatively consistent on a sequential basis. A long-term opportunity in silicon carbide remains an important growth driver for Xelis. Yale estimates the silicon carbide market will grow from $2.7 billion in 2023 to $9.9 billion in 2029, or a 24% CAGR. An iron implantation is one of the most critical manufacturing steps to make a silicon carbide device. We are well positioned as the market leader in implant for silicon carbide, given the breadth of our portfolio of focused investments we've made in this market for several years. We are deeply embedded in our customers' technology roadmaps and widely engaged with customers to help them transition from 150 millimeters to 200 millimeters wafer capacity. In addition, we are seeing interest in our solutions to enable customers' transitions to trench MOSFETs. The transition to trench architecture is a tailwind for Xelos, given the need for deeper implants which require our high energy tools, where we are the technology and market leader. From an end market perspective, we are keeping a close eye on the transition from 400 volts to 800 volts electric vehicles over time, which is enabled by silicon carbide, giving better efficiency compared to traditional silicon. As many of you know, 800 volt EVs can deliver faster charging times and better battery efficiency. As such, this can be an important catalyst for silicon carbide penetration into EVs, which ultimately translates to more ion implantation required. In silicon IGPT, revenue in the third quarter was up sequentially, but remained generally muted as we expected, given the slow rate of recovery in the auto industry, and we anticipate demand to remain muted in the near term based on recent order trends. However, I'm pleased to say that we've received our first PO from a customer for our optimized Purion VXE implanter used for the critical silicon IGBT power device backside proton implant application. Recall from our investor day in July, we talked about the benefits of this implant and reducing switching time in high-voltage operation of these silicon IGBT power devices for our customers. The adoption of this optimized implanter based on our production-proven Purion VXE platform It's a shining example of the innovation engine at Exelis. We identified a key application and customer needs, designed a specific technology to address it, worked closely with a customer in qualifying our tool, and now intend to commercialize this to drive incremental revenue. In General Mature, revenue moderates in the third quarter, also consistent with expectations. We continue to monitor key end markets, namely auto, industrial, and consumer, which are drivers of our general mature segment, which have yet to show signs of recovery in the near term. That said, upon a macroeconomic rebound in the end markets we serve, we would expect to benefit from the breadth of our customer base. Turning to image sensors, revenue is strong, driven by demand out of China, particularly for smartphone applications. Shipments to the image sensor market can be lumpy, and we expect revenue in the fourth quarter to normalize back to prior trends. Turning to slide six, in advanced logic, we did not have any revenue in the quarter, but we continue to make progress with our evaluation systems, including our Dragon tool and an advanced research institution in Europe, and are having meaningful conversations with our customers in the advanced logic space. As a reminder, this is a multi-year development effort, and we are encouraged by the market acceptance and customers' interest to date. Moving to memory, we are seeing some early signs of activity from memory customers as they look to start adding some DRAM capacity. While we only sold one system in the third quarter, we expect additional revenue in the fourth quarter and are monitoring the scope and pace of market recovery as we look to 2025. Generally, we see DRAM investments outpacing that of NAND, primarily due to strong adoption of high-bandwidth memory for AI applications, which is absorbing some DRAM capacity. As we noted last quarter, memory customers typically place purchase orders shortly before shipment. As a result, we have pre-built some inventory for implanters to the memory market and stand ready to respond as demand grows. Going to slide seven, to summarize, our team executed well in the third quarter as we focus on what we can control. As referenced earlier, we've seen continued softness in customers' bookings below our prior expectations and moderation in growth expectations for our key markets in 2025. This is primarily tied to the digestion of capacity in our power and general mature markets, and particularly in China. As a result, our preliminary expectation is for revenue in the first half of 2025 to be lower than the second half of 2024. Near-term dynamics aside, we remain very excited about the following long-term growth opportunities that lie ahead for Exelis. First, continued growth in adoption of silicon carbide as a key enabler of electrification, power efficiency, and decarbonization. Electric vehicles are the poster child of what silicon carbide can do. We expect greater penetration into the EV market, but we also see silicon carbide proliferating to a wide array of applications, such as industrial and renewable energy, to name just two. With the cost of silicon carbide wages declining and device makers generating better economies of scale from growing EV adoption of silicon carbide, We believe the lower cost profile overall silicon carbide devices will lead to more widespread adoption across a variety of applications, and this in turn drives the need for more ion implantation, which is foundational to silicon carbide. Second, a cyclical recovery in memory and general mature markets. Once spending on consumer electronics, auto and industrial rebounds. Third, share gains in the advanced logic market, where we're exploring new applications for ion implantation in the middle of line and back end of line. And we are actively engaging with customers and driving interest with our evaluation units. And finally, penetration of the Japan market, where we aim to extend the success we've made in power to other markets within Japan. Summing it all up, we are well positioned to drive attractive long-term growth and profitability through the cycles. Finally, I want to thank our employees, customers, shareholders, and partners for their continued support and trust in Excellus. With that, let me turn the call over to Jamie for a closer look at our results and outlook. Jamie?