Axcelis Technologies, Inc. (ACLS) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary reflects a positive sentiment with strong financial performance, strategic supply chain diversification, and increased share repurchase plans. The Q&A session did not reveal significant negative trends, and management's cautious optimism about future growth, especially in silicon carbide and high-energy applications, adds to the positive outlook. The market cap suggests a moderate reaction, leading to a prediction of a 2% to 8% stock price increase over the next two weeks.
Key Financial Performance
Revenue $195 million, a slight increase compared to expectations. Reasons for the increase include better-than-expected Systems and CS&I revenue.
Non-GAAP Earnings Per Diluted Share $1.13, exceeding the outlook. Reasons include better-than-expected revenue, gross margin, and a lower-than-expected tax rate.
Bookings $96 million, down slightly on a sequential basis. The decline reflects customers digesting capacity.
Gross Margins (GAAP) 44.9%, exceeding the outlook of 41.7%. Reasons include higher CS&I revenue, lower warranty and installation costs, and favorable systems mix.
Gross Margins (Non-GAAP) 45.2%, exceeding the outlook of 42%. Reasons include higher CS&I revenue and cost-saving measures.
Operating Expenses (Non-GAAP) $53.6 million, in line with the outlook of $54 million.
Operating Margin (Non-GAAP) 17.7%, contributing to an adjusted EBITDA margin of 20%. Reasons include disciplined cost control and higher CS&I revenue.
Adjusted EBITDA $38.9 million, reflecting a 20% margin. Reasons include better-than-expected profitability and cost control.
Tax Rate (Non-GAAP) Approximately 11%, lower than expected due to foreign-derived intangible income deduction and federal R&D credits.
Free Cash Flow $38 million, driven by better-than-expected profitability and improved days sales outstanding.
Share Repurchases $45 million in shares repurchased during the quarter.
Cash, Cash Equivalents, and Marketable Securities $581 million, including $31 million of long-term securities added in the quarter.
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Operating Highlights
Purion XE High Energy tool: Shipped to a customer investing in 200-millimeter super junction technology, with active discussions on trench and super junction technology road maps.
High current system for DRAM application: Secured an order with potential for additional follow-on orders based on customer investment plans.
China EV industry: Continued firm demand for 150mm and 200mm silicon carbide applications driven by the growing EV industry.
Advanced logic market: Received a follow-on order from a customer, targeting next-generation implant applications at M+1, M+2, and M+3 nodes.
CS&I revenue: Made up approximately 30% of total revenue in the first half of 2025, reflecting a resilient revenue stream and higher gross margins.
Cost structure management: Prudently managed costs, achieving a first-half adjusted EBITDA margin of approximately 20%.
Focus on R&D engagement: Increased collaboration with customers during slower periods to drive better cost performance and yields.
Geographic revenue reporting: Transitioning to reporting geographic split of total revenue only, aligning with industry peers.
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Risk or Challenges
Bookings and Revenue Fluctuations: Bookings in Q2 2025 were $96 million, reflecting a book-to-bill ratio of 0.8x, indicating a decline in customer orders. This fluctuation in bookings and revenue could impact financial stability and predictability.
Silicon Carbide Industry Challenges: The silicon carbide industry is digesting capacity built over the past two years, leading to flat shipments and potential delays in new investments. This could slow growth in this segment.
Geopolitical and Regional Risks: 65% of system sales in Q2 2025 were concentrated in China, exposing the company to geopolitical risks and potential over-reliance on a single region.
Muted Memory Spending: Memory spending remains muted, with DRAM and NAND investments paused. This could limit growth opportunities in the memory segment.
Macroeconomic Uncertainty: The company acknowledges macroeconomic uncertainty and cyclical digestion in 2025, which could impact overall demand and financial performance.
Tariff and Supply Chain Risks: The company is monitoring tariffs and leveraging its global supply chain, but any changes in the tariff environment could pose risks to cost structures and operations.
Advanced Logic Market Underpenetration: Advanced logic remains an underpenetrated market for Axcelis, limiting growth potential in this segment.
Customer Capacity Management: Customers are managing capacity investments cautiously, particularly in auto, industrial, and consumer electronics, which could delay new orders and revenue growth.
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Guidance & Outlook
Silicon Carbide Demand: The company anticipates long-term demand drivers for silicon carbide, driven by declining device prices and the need for greater energy efficiency. Growth is expected in the EV industry, with increasing penetration rates for both battery electric and hybrid vehicles, as well as higher silicon carbide content per vehicle. Additionally, higher voltage silicon carbide applications, such as faster charge times, are expected to drive investment in trench and super junction designs.
EV Market Growth: Global EV sales are forecasted to grow at a robust pace, with a 25% year-over-year growth in 2025. This growth is expected to increase the penetration rate of EVs as a percentage of overall auto sales, creating a multiplier effect on silicon carbide demand.
Non-Auto Silicon Carbide Applications: The company expects growing adoption of silicon carbide outside the auto industry, including renewable energy, industrial motor drives, railway applications, and data center power supplies. Collaboration on higher voltage power solutions for next-generation AI data centers is also anticipated.
Revenue Projections for Second Half of 2025: The company expects a modest improvement in revenue in the second half of 2025, with continued pockets of demand for silicon carbide applications.
Advanced Logic Market: The company is actively targeting next-generation implant applications at the M+1, M+2, and M+3 nodes, including applications for implant such as the backside power distribution network integration. This market remains underpenetrated for Axcelis.
Memory Market Outlook: Memory spending is expected to remain muted for the balance of the year, with modest growth anticipated on a year-over-year basis compared to 2024. Demand for NAND applications is expected to remain muted due to focus on scaling to higher layer counts.
Third Quarter 2025 Revenue and Margins: Revenue is expected to be approximately $200 million in Q3 2025, with non-GAAP gross margins of approximately 43%. Fourth quarter revenue and gross margins are expected to be similar to Q3 levels.
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Shareholder Return Plan
Share Repurchase: In the second quarter, Axcelis repurchased approximately $45 million in shares. At the end of the second quarter, the company had $168 million remaining in share repurchase authorization.
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Key Q&A
Q:As we look to the memory market in 2026, do you have any initial indications of wafer start growth there yet?
A:Russell J. Low stated that they are not forecasting 2026 yet. He mentioned that HBM has been consuming DRAM capacity and suppliers are constrained. Wafer starts need to increase for more implanters to be shipped. New capacity might come online by late 2025 or early 2026, but no predictions were made.
Q:Do you see the general mature marketplace improving in the second half of '25 or is it a calendar 2026 event?
A:Russell J. Low indicated that revenue for the second half of '25 is expected to be slightly up compared to the first half, but not due to the general mature market. He mentioned a slight uptick due to power, while the general mature market is in a digestion period.
Q:Are silicon carbide customers acquiring tools for R&D lines versus volume production, and will there be a further inflection in demand when they are ready for volume production?
A:Russell J. Low explained that silicon carbide is expected to be slightly stronger in the second half of '25. He noted a bifurcation in technology, with China focusing on 6-inch planar and some 200-millimeter planar, while outside China, customers are advancing to trench and super junction devices. High-energy implanters are required for these advanced devices, and Axcelis is working closely with customers to develop processes.
Q:Can you elaborate on structural gains in COGS drivers like warranty or cost reductions, and how these could help sustain strong performance?
A:James G. Coogan highlighted that mix (systems and CS&I) is the primary gross margin driver. Structural changes include improvements in warranty, installation, and global operations footprint. Cost reductions are a multi-year effort, and while margins may slightly decline in the back half of '25 due to mix, other benefits remain favorable.
Q:Are you implying that the mix sold into China is high current and medium current skewed, or is it high energy for planar versus trench and rest of the world?
A:Russell J. Low clarified that standard planar does not require high energy, which is needed for trench and super junction devices. High energy is increasingly utilized for advanced devices, and the intensity of high-energy implants is rising, particularly for silicon carbide.
Q:Are there any applications demanding high energy similar to silicon carbide?
A:Russell J. Low stated that high energy is used in various applications like NAND, DRAM, and image sensors. Silicon carbide is a significant driver, but high energy is also utilized in advanced devices like avalanche devices. Axcelis covers a wide range of high-energy capabilities.
Q:What were the drivers behind the strong performance in CS&I, and did tariff pull-ins contribute?
A:James G. Coogan mentioned that Q2 CS&I performance was driven by upgrades and increased utilization of existing tools, not tariff pull-ins. Customers are finding ways to improve efficiency, leading to higher upgrade activity and spares. Axcelis has been investing in upgrades, leveraging its large installed base.
Q:Should we expect higher baseline share repurchases going forward?
A:James G. Coogan indicated that Axcelis plans to buy shares at a higher rate than the historical $15 million per quarter. While the exact amount for Q3 was not forecasted, the elevated repurchase rate is expected to continue.
Q:What is the state of competition in China for systems and spares?
A:Russell J. Low noted that Chinese competitors are still immature and primarily operate in accounts off-limits to U.S. manufacturers. These tools require significant expertise to meet compliance requirements, and Chinese competitors are early in their development.
Q:Does the backlog include systems and CS&I, and what is the projected timing of the backlog?
A:James G. Coogan clarified that the backlog includes only systems-related orders, not CS&I. The backlog extends into 2026, providing a runway for future execution. Bookings are higher than in late 2024, and Axcelis is preparing for an upturn by maintaining higher inventory levels.
Q:Why are China sales projected to be flat in the second half despite strong EV sales, and why were memory sales down?
A:James G. Coogan explained that China built significant capacity in 2024 and is focusing on improving productivity in 2025. Silicon carbide penetration in EVs is increasing, but capacity additions are slower. Memory sales are muted as customers digest capacity, with opportunistic buys for incremental capacity.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer to the question about initial indications of wafer start growth in the memory market for 2026. They provided general observations but refrained from making specific predictions or forecasts.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Axcelis
Craig
EV industry
Investor Relations
LLC Research
President Investor
RD
Relations Corporate
Research Division
Slide
application China
auto
capacity investment
carbide application
category
combination
commentary
demand EV
device price
engagement
environment
generation
junction technology
measure
need energy
node
non
outlook margin
penetration rate
pocket
profitability
rate EVs
reflection
road map
security
share outlook
silicon carbide
silicon demand
solution
tariff
tax rate
technology road
vehicle
ACLS Transcript
Axcelis Technologies, Inc. (ACLS) Q1 2026 Earnings Call Transcript
Positive5-8
The financial performance shows strong growth in revenue, gross margin, operating income, and EPS, indicating robust operational efficiency. The lack of strategic updates or operational insights might limit further positive sentiment, but the solid financial metrics suggest a positive stock price movement. With a market cap of $4.5 billion, the positive reaction is likely to be moderate, within the 2% to 8% range.
Axcelis Technologies, Inc. (ACLS) Q4 2025 Earnings Call Transcript
Positive2-17
The earnings call indicates strong financial performance, with GAAP EPS exceeding expectations and positive guidance for memory market growth. The merger with Veeco and share repurchases are additional positives. Despite some cautiousness in power segments and negative free cash flow due to merger expenses, the overall sentiment is positive. The company's market cap suggests a moderate reaction, hence a Positive rating is appropriate.
Axcelis Technologies, Inc. (ACLS) Q3 2025 Earnings Call Transcript
Positive11-4
The company demonstrates strong performance with record CS&I revenue, a healthy demand for silicon carbide, especially in EVs, and a robust growth outlook for global EV sales. However, some uncertainties exist, such as unclear U.S. EV growth and limited visibility into 2026 bookings. Despite these, the overall sentiment is positive due to the optimistic guidance, strong market demand, and strategic positioning in emerging markets like AI data centers.
Axcelis Technologies, Inc. (ACLS) Q2 2025 Earnings Call Transcript
Positive8-5
The earnings call summary reflects a positive sentiment with strong financial performance, strategic supply chain diversification, and increased share repurchase plans. The Q&A session did not reveal significant negative trends, and management's cautious optimism about future growth, especially in silicon carbide and high-energy applications, adds to the positive outlook. The market cap suggests a moderate reaction, leading to a prediction of a 2% to 8% stock price increase over the next two weeks.
ACLS Slides
ACLS Report
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