Axcelis (ACLS) 1 Aug 24 2024 Q2 Earnings call transcript

In a recent earnings call, Axcelis Technologies provided an update on its financial performance for the second quarter of 2024, highlighting strong revenue and earnings per diluted share, driven by better-than-expected conversion of valuation units into revenue and continued robust demand for ion implantation systems into the silicon carbide market. The company's executives, including Russell Low, President and CEO, and James Coogan, Executive Vice President and CFO, discussed key trends and strategic initiatives, offering insights into Axcelis's financial health and future growth prospects.

Key Themes and Trends

Axcelis Technologies reported a strong second quarter, with revenue coming in at $257 million and earnings per diluted share of $1.55, surpassing expectations. The company attributed this success to improved conversion of evaluation units into revenue and ongoing demand for ion implantation systems in the silicon carbide market. Russell Low, the President and CEO, emphasized the importance of the silicon carbide market, particularly in power applications, and the company's position as the leading ion implant provider for this sector. This trend is expected to continue, with the silicon carbide device market estimated to grow at a 25% CAGR from 2023 to 2029.

Looking at market segments, Axcelis's Mature segment, which comprises 98% of total system revenue, is a key driver for the company. Within this segment, demand for silicon carbide applications remains strong, driven by the electric vehicle (EV) market and expanding capacity to meet domestic production goals. Demand for silicon IGBT applications, however, has been soft, consistent with expectations. The company is also seeing opportunities in power sources for data centers, given the increased demand for power associated with artificial intelligence.

In Advanced Logic, Axcelis made significant progress, particularly in the Advanced R&D for a leading edge application, securing a Purion Dragon evaluation unit and a follow-on Purion H order for volume manufacturing at 3 nanometers. The company is focusing on driving interest in the underpenetrated opportunity in Advanced Logic, investing in R&D to address industry challenges.

In Memory, Axcelis did not generate any systems revenue in the second quarter, but expects demand to pick up as customers begin adding capacity to meet global compute and storage needs, driven by AI, EVs, and the Internet of Things. The company is prepared to respond once demand returns, with inventory pre-built for implants for the memory market.

Strategic Priorities and Challenges

Axcelis's executives outlined several strategic priorities and challenges for the company moving forward. These include a focus on expanding in Japan, leveraging customer relationships and growing physical presence in the market. The company also highlighted the importance of executing on market share opportunities in Advanced Logic, particularly as new applications open up beyond the front-end and into the middle-end of line processes.

Investor Engagement and Market Outlook

During the earnings call, key shareholders and investors posed questions about Axcelis's market trends, growth opportunities, and strategic initiatives. These interactions provided valuable insights into the concerns and priorities of influential stakeholders, highlighting the company's relationship with its investors and the market's perception of its performance and growth prospects.

Looking Ahead

Axcelis Technologies is positioned for continued growth, driven by secular trends in power, particularly silicon carbide, and the expected recovery in memory spending. The company is focused on executing on its strategic initiatives, expanding its presence in Japan, and capitalizing on opportunities in Advanced Logic. With a strong financial performance in the second quarter and a clear path to future growth, Axcelis Technologies is well-positioned to navigate the challenges and opportunities in the semiconductor industry.