Axcelis Technologies Reports Q2 2026 Results: Full Earnings Call Transcript

Axcelis Technologies (NASDAQ: ACLS ) reported second-quarter financial results on Thursday. The transcript from the company's second-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

06, both surpassing expectations. The company saw strong sequential growth in systems revenue due to improvements in power and mature markets, despite expected declines in memory due to fab space timing. CS&I (Customer Support and Innovation) division showed strong performance, driven by a growing install base and expanded aftermarket offerings. Bookings increased slightly with a book-to-bill ratio nearing one, indicating market stability.

Revenue in China increased significantly, comprising 46% of total revenues, with Korea as the second largest contributor. 7% due to mix within CS&I and higher service costs. 11. Full-year 2026 revenue is expected to grow mid-single digits year-over-year, with continued growth into 2027 supported by strong memory and power market demand.

The company is optimistic about the pending merger with Veeco, expected to close in the second half of 2026, enhancing capabilities and growth opportunities. Full Transcript OPERATOR Good day, ladies and gentlemen, and welcome to the Axcelis Technologies call to discuss the Company's results for the second quarter of 2026. My name is Grace 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 Rizzik, Senior Vice President and Interim Chief Financial Officer.

Please proceed. David Rizzik, Senior Vice President and Interim Chief Financial Officer Thank you. Operator, this is David Rizzik, Senior Vice President and Interim Chief Financial Officer, and with me today is Russell Lowe, President and CEO. If you have not seen a copy of our press release issued earlier today, 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 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 Annual Report on Form 10-K 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. Given the pending merger with Veeco, we will not be addressing questions related to the transaction.

During this call we will be discussing various non-GAAP financial measures. Unless otherwise noted, all income-statement-related financial measures will be non-GAAP other than revenue and other income. Please refer to our press release and accompanying materials for information regarding our non-GAAP financial results and a reconciliation to our GAAP measures. Now I'll turn the call over to President and CEO Russell Lowe.

Russell Low, Chief Executive Officer Thank you, David. Good morning, everyone, and thank you for joining us on our second quarter 2026 earnings call. 06, both above our expectations. Our results reflect strong operational execution as we capitalize on favorable demand trends in several of our key markets in the quarter.

Sequential growth in systems revenue was driven by an improvement in our power and general mature markets, partially offset by the expected moderation in memory due to timing of available fab space. Importantly, customer investment plans in memory remain robust and we continue to make progress executing our strategy to expand our position within this market. CS&I delivered a strong quarter and continues to be an important driver of our overall performance. Revenue growth in the business has been supported by a growing install base, increased customer utilization and a continued expansion of our aftermarket products and service offerings.

As we shared, CS&I has been a deliberate multi-year strategic focus for us to drive growth and stability through market cycles. We are pleased to see these efforts gain traction and we look forward to continuing to build this momentum. Bookings in the quarter grew slightly, driven by general mature and power, and book-to-bill has neared one over the past three quarters, suggesting greater stability in the end markets we serve. Turning to slide 5, sales to mature node applications accounted for approximately 84% of system shipments, with memory and advanced logic making up the balance of our sales.

Now on slide 6, let me review our trends by end market. Within our power market, revenue for silicon carbide applications declined sequentially, consistent with our expectations, as quarterly revenue can fluctuate based on shipment timings. However, bookings improved on a sequential basis and through the first half of the year exceeded the average levels we experienced over the past two years. In addition, we continue to expand our customer base, securing orders for two new customers in China during the quarter.

We are also seeing next-generation technology development create opportunities for our high energy implant capabilities. During the quarter, we secured orders from multiple customers for high energy channeling applications using advanced superjunction architectures, further validating the value of our differentiated implant technology. From an end market perspective, long-term demand fundamentals for silicon carbide remain highly attractive.

We continue to expect increasing penetration in electric vehicles, broader adoption in AI data center power infrastructure and expanding use across a wide range of commercial and industrial applications that require greater power efficiency, particularly at higher voltages. In our other power market, second quarter sales grew sequentially and we continue to view silicon power as a foundational part of the broader power semiconductor market, serving applications across automotive, industrial, commercial and data center end markets. During the quarter, we completed a successful evaluation of our Purion XE Max at a leading foundry for use in power management IC production.

The evaluation demonstrated the system's ability to address increasing customer requirements for high energy implant applications, leveraging its dual linac architecture and patented Boost technology to deliver implant energies up to 15 MeV, with industry-leading beam purity. In general, mature sales improved sequentially during the quarter. While we have not yet seen a pickup in our order rates, we are encouraged by improving end market trends following a period of capacity digestion that began in 2024. Customers in China continue to add capacity and we are beginning to see signs of improving activity outside of China as well, supporting higher tool utilization rates.

Our customers are benefiting from demand for AI-related data center applications manufactured on 28 nm and above process technologies, including optical connectivity, microcontrollers and analog ICs. General mature remains an important market for Axcelis given its high implant intensity and our broad portfolio spanning high energy, high current and medium current systems. We're also seeing growing customer interest in our recently introduced Purion H6 high current platform across general mature applications.

Turning to advanced logic on slide 7, as we noted on our last call, we shipped a system early in the second quarter for a materials modification application supporting 2-nanometer production, and we also shipped a follow-on system in the third quarter for this application. We continue to work closely with this customer in support of its next-generation technology roadmap. In memory, despite the anticipated sequential decline from a strong first quarter, customer engagement remains robust. As a reminder, memory sales can be lumpy from quarter to quarter depending on customer fab space availability.

We continue to anticipate strong year-over-year growth in 2026 with momentum extending into 2027 as customers accelerate clean room investments to support growing demand for DRAM and high bandwidth memory applications driven by AI. We're also seeing a memory customer portfolio expand, highlighted by a recent order for multiple high current systems in the current quarter, reinforcing the strength and competitiveness of our offerings. Reflecting this momentum, we continue to make progress with the leading North American memory manufacturer we referenced last quarter.

Following the successful completion of our system evaluation last quarter, we received additional orders during the period to support new fab investments. On slide 8, let me wrap up my thoughts and provide our perspective on the second half of 2026. I am pleased with the momentum we are seeing so far in 2026 and our team has executed well, delivering solid results while capitalizing on the attractive secular growth opportunities across our end markets. In addition to a strong memory outlook for 2026, we are seeing improved demand in our power market.

We're also encouraged by improving customer engagement and utilization trends in our general mature market, while our CS&I revenue continues to build a growing base of revenue and profitability. As a result, we now expect second half 2026 revenue to be stronger than our initial expectations and expect to deliver year-over-year revenue growth in 2026 compared to our prior outlook for revenue to be relatively flat with 2025.

Looking ahead, we believe the favorable demand trends we are seeing today are likely to continue into 2027, with memory investments expected to remain strong as customers expand fab capacity, continued improvement in our silicon carbide market, and encouraging underlying trends across general mature applications. We anticipate another year of revenue growth in 2027. Before I turn the call over to David, I'd like to provide a brief update on the pending merger with Veeco. We continue to make progress on the remaining requirements for the Veeco merger, including with the State Administration for Market Regulation in China.

We continue to expect the transaction to close in the second half of 2026. We remain very excited about the pending combination and the opportunity to build on our momentum and create a stronger company with enhanced capabilities, broader growth opportunities and meaningful long-term value creation potential. I want to thank our customers, employees, partners and shareholders for their continued support. Axcelis.

With that, let me turn the call over to David for a closer look at our results and outlook. David Rizzik, Senior Vice President and Interim Chief Financial Officer Thank you, Russell, and good morning, everyone. I'll first start with the financial details of the second quarter before turning to our outlook for the third quarter. Starting on slide 9, second quarter revenue was $215 million, consisting of system revenue of $132 million and CS&I revenue of $83 million.

Both exceeded our forecast by geography. Revenue in China increased sequentially to 46%, up from 40% in the prior quarter. Korea was our second largest revenue-generating region at 26% of our total revenues. In our other regions, Europe was 11%, the United States 6%, Taiwan was 2%, and Japan was 1%.

The remaining 8% of revenue came from the rest of the world. Bookings were $131 million, slightly higher sequentially, continuing the trend of improving order activity with a book-to-bill ratio of approximately 1x. We exited the quarter with total backlog of $452 million. Turning to slide 10, I'd like to share some additional detail on our results.

7%, slightly below our outlook of 43%, primarily due to mix within our CS&I business, as well as higher-than-anticipated services costs, which can fluctuate from period to period. Second quarter operating expenses were $60 million, slightly above our outlook of $59 million, primarily due to higher variable compensation associated with stronger performance and, to a lesser extent, higher fringe costs. 7%. 7%.

Other income was $5 million higher on a sequential basis due primarily to foreign exchange gains. Our tax rate was 11%, below our forecast of 15%, due to the windfall benefit associated with our equity compensation. 06. Turning to slide 11, free cash flow for the second quarter was $15 million.

This includes approximately $6 million of cash transaction expenses associated with the pending VEEQO merger. We exited the second quarter with a strong balance sheet consisting of $577 million of cash, cash equivalents, and marketable securities on hand. This includes $175 million of long-term securities. With that, let me discuss our third quarter outlook on slide 12.

We expect revenue of approximately $230 million. Revenue is expected to benefit from a higher contribution from power and memory, partially offset by lower revenue from the general mature market. We expect gross margins of approximately 43%. We expect operating expenses of approximately $62 million.

Adjusted EBITDA is expected to be approximately $41 million. We anticipate a tax rate of approximately 15%. 11. Looking beyond the third quarter, we currently expect revenue to increase sequentially in the fourth quarter, supported by the business trends we're seeing across our markets that Russell touched on earlier.

As a result, we now anticipate full year 2026 revenue growth of approximately mid-single digits year over year compared to our prior expectation of flat revenue. We also anticipate gross margin to improve slightly in the fourth quarter relative to third quarter levels. At the same time, we remain committed to investing in the business, particularly in technology innovation and other long-term growth initiatives. As a result, we expect fourth quarter operating expenses to be slightly higher than third quarter levels.

In summary, we're executing our strategy and remain focused on disciplined cost management while continuing to make targeted investments to capture attractive growth opportunities. We're encouraged by the trends we're seeing across the business and remain focused on delivering strong results and value creation for our shareholders. With that, operator, we're ready to take your questions. OPERATOR Thank you.

At this time we will conduct the question-and-answer session. As a reminder, to ask a question, you will 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 participants to ask one question and one follow-up question.

Please stand by while we compile the Q&A roster. Our first question comes from the line of Craig Ellis with B. Riley Securities. Your line is live.

Craig Ellis, Analyst at B. Riley Securities Yeah, thank you for the question, and congratulations on the nice execution, team. Russell, I wanted to start off with a question on memory, understanding how the tenor of interaction with your more established customers and your newer customers has changed over the last three months. And as we look at near-term dynamics, which I think were indicated with memory up in the third quarter, are we at a point where we should expect memory system sales to grow sequentially, or are we still in a period where there can be two steps forward and one step back?

Russell Low, Chief Executive Officer Hey Craig, thanks for the question. So I think we're going to see memory being slightly lumpy this year again until the new clean room space comes online. I think the customers are mostly focused on solving bottleneck issues in their existing fabs, so it's a little bit lumpy. One thing I would say though is 2026 is a significant improvement over 2025.

Although 2025 is a low baseline, we are seeing significant DRAM memory revenue this year. And then, like we said, once those clean rooms start to come online, we expect to see the momentum continue into 2027. Yeah, if you think about it, Craig, just to add, you know, if you think about the second half for memory, probably at this point probably looks similar to the first half, and then for the full-year basis, obviously strong growth into 2027, and growth rate into 2027 probably, you know, at a lower growth rate than the one in 2026 because we're coming off a very low base. But we definitely see that momentum in memory.

Craig Ellis, Analyst at B. Riley Securities Yeah, and next year we get NAND capacity help, not just DRAM. Thanks for that. And then the follow-up question is on the CS&I business.

So congratulations on the real nice quarter there. My question is really what drove the magnitude of sequential strength? Is it really just, in this environment, customers are looking at CS&I as one of the quickest paths to incremental capacity where they need it, or is it really just the efficacy of better attach rates on Purion tools that are out there in the install base?