Axcelis (ACLS) Q1 2026 Earnings Call Transcript

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DATE

Thursday, May 7, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Russell J. Low
• Senior Vice President and Interim Chief Financial Officer — David Ryzhik

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TAKEAWAYS

• Revenue -- $199 million, including a $5 million one-time customer settlement, resulting in first quarter figures being "slightly above our expectations".
• Earnings Per Diluted Share -- $0.72, with a $0.09 per share headwind from the customer settlement.
• Gross Margin -- 40.7%, marginally below the 41% outlook due to the customer settlement's 70 basis point impact.
• Segment Revenue: Systems -- Approximately $126 million in system revenue, including the settlement's $5 million effect.
• Segment Revenue: CS&I -- $73 million, exceeding expectations and increasing over 30% year over year.
• Geographic Revenue Mix -- China rose to 40% (up from 32% sequentially), Korea accounted for 28%, Europe 16%, United States 12%, and Taiwan and Japan each 1%.
• Bookings -- $128 million, stable sequentially; second consecutive quarter of year-over-year growth (trailing twelve months basis).
• Backlog -- $453 million at quarter end.
• Operating Margin -- 11.7% for the quarter.
• Adjusted EBITDA -- $27.7 million, with an adjusted EBITDA margin of 13.9%.
• Other Income -- $2.7 million, lower sequentially due to reduced interest income and foreign exchange losses.
• Tax Rate -- 14%, consistent with expectations.
• Free Cash Flow -- $16 million, impacted by $12 million in cash transaction expenses for the pending VCO merger.
• Cash Position -- $570 million in cash, cash equivalents, and marketable securities, including $203 million of long-term securities.
• Q2 2026 Guidance: Revenue -- Approximately $205 million expected with mix shift toward general mature and away from memory and silicon carbide.
• Q2 2026 Guidance: Gross Margin -- Approximately 43% expected, reflecting improved mix and absence of nonrecurring items.
• Q2 2026 Guidance: Operating Expenses -- Approximately $59 million projected.
• Q2 2026 Guidance: Adjusted EBITDA -- Estimated at $34 million.
• Q2 2026 Guidance: Earnings Per Diluted Share -- Approximately $0.90 expected.
• Full-Year 2026 Guidance: Revenue -- Management expects full-year revenue to be "approximately flat compared to 2025 levels".
• Full-Year 2026 Guidance: Gross Margin -- Anticipated in the low- to mid-40% range, with quarterly variation possible.
• Full-Year 2026 Guidance: Operating Expenses -- Roughly $60 million expected per quarter for the remaining three quarters.
• Full-Year 2026 Guidance: Tax Rate -- Approximately 15% anticipated.
• System Shipments: End Markets -- Majority to mature node (notably power and general mature); memory shipments reached highest level since 2023.
• Silicon Carbide -- Sequential moderation in system shipments, though increasing bookings and customer engagement signaled a positive outlook.
• High Current Product -- Introduction of next-generation Purion H6 and a high current system win with a new China customer reported.
• Advanced Logic -- No system revenue recognized; system shipment for 2-nanometer material modification completed early Q2.
• Memory Segment -- Revenue and bookings rose sequentially and year over year, led by DRAM and high-bandwidth memory applications; management expects strong segment growth for the full year.
• Merger Update -- Management stated the only approval remaining for closing the VCO merger is from the State Administration of Market Regulation in China.

SUMMARY

Management executed a smooth transition in finance leadership with David Ryzhik named interim CFO following James G. Coogan's departure. The quarter saw memory and CS&I segments outperform expectations, while system shipments to the memory market reached a two-year high. Customer demand in silicon carbide and general mature remained modest but showed leading indicators of recovery, such as utilization increases and customer engagement. Guidance for the second quarter calls for a sequential revenue and margin increase, driven primarily by product mix shifts and the absence of unique charges. Merger timing and regulatory progress with VCO remain central to management’s near-term focus, with only the China market regulator’s clearance outstanding.

• CS&I segment demonstrated deliberate multiyear growth strategy momentum, with "expanded installed base, increased utilization rates, and continued product innovation" cited by the CEO.
• President and CEO Russell J. Low highlighted that "bookings can fluctuate from quarter to quarter," but backlog remains strong at $453 million.
• Both memory and silicon carbide bookings notably drove the quarterly order trend; management specified muted revenue expectations for NAND in 2026.
• Customer discussions in power segments indicated increasing silicon carbide adoption in global EV, white goods, and data center markets.
• Management acknowledged that full-year revenue and certain segments are "second-half weighted," citing improvements in silicon carbide and memory as drivers.
• No share repurchases occurred during the quarter.

INDUSTRY GLOSSARY

• CS&I: Customer Support & Innovation, representing aftermarket lifecycle products and services, including spare parts, equipment upgrades, maintenance, and customer training.
• Silicon Carbide: A wide bandgap semiconductor material primarily used in power electronics for applications such as electric vehicles and data centers, enabling higher efficiency compared to traditional silicon.
• Purion H6: Next-generation high current ion implantation system produced by Axcelis Technologies, Inc.
• Superjunction: A technology for power semiconductor devices, improving efficiency by structuring alternating p- and n-type regions—referenced in discussions about silicon carbide market developments.
• MOCVD: Metal Organic Chemical Vapor Deposition, a technique for depositing complex semiconductor structures, referenced as a VCO product line capability relevant to the merger.

Full Conference Call Transcript

I will be your coordinator for today. I would now like to turn the presentation over to your host for today's call, David Ryzhik, senior vice president and interim chief financial officer. Please go ahead.

David Ryzhik: Thank you, operator. This is David Ryzhik, senior vice president and interim chief financial officer, and with me today is Russell J. Low, 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'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 annual report on Form 10-Ks 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 VCO, 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. I will now turn the call over to President and CEO, Russell J. Low.

Russell J. Low: Thank you, David. Good afternoon, everyone, and thank you for joining us for our first quarter 2026 earnings call. Before I get into our results today, I would like to briefly address the change in our finance organization leadership, which we announced in March. James G. Coogan, who served as our chief financial officer, left the company to pursue an opportunity in the aerospace industry. I am grateful to him for his contributions in building a strong finance organization, driving operational discipline, and positioning Axcelis Technologies, Inc. well for sustained value creation. I am confident he will continue to succeed in his new role. The transition has been very smooth, thanks to David stepping in seamlessly as our interim CFO.

David has deep industry experience and strong knowledge of the business, and he has been instrumental in advancing our work to complete the pending merger with VCO. We are grateful to have a leader of David’s caliber to serve in this role while we progress our search process for a permanent CFO. With that, I will dive into our first quarter performance. We delivered revenue of $199 million and earnings per diluted share of $0.72, slightly above our expectations. This includes a one-time impact associated with a $5 million customer settlement. Absent this settlement, our revenue, gross margin, and earnings per share would have been even higher in the quarter.

In the quarter, while our CS&I revenue moderated on a sequential basis, it came in better than we expected and grew more than 30% on a year-over-year basis. CS&I has been a deliberate multiyear strategic focus for Axcelis Technologies, Inc., and we are pleased to see momentum build with our expanded installed base, increased utilization rates, and continued product innovation. In addition, we saw a strong sequential increase in system shipments to the memory market, which reached the highest level since 2023. We are also encouraged to see a consistent rate of bookings on a sequential basis, marking the second consecutive quarter of year-over-year growth on a trailing twelve-month basis.

Strength in the quarterly bookings was driven by an increase in memory and silicon carbide demand, offset by softer general mature. As a reminder, bookings can fluctuate from quarter to quarter. Turning to slide five, sales to mature node applications accounted for a majority of system shipments, particularly in power and general mature. We also saw a notable uptick in sales to the memory market, as anticipated. Now on slide six, let me review our trends by end market. In the power business, while shipments of silicon carbide moderated on a sequential basis, we are beginning to see encouraging demand signals reflecting stronger bookings and increased engagement with customers on their capacity plans and technology roadmaps.

As seen in China, silicon carbide is a prominent area of focus, particularly around superjunction development and high-energy implant requirements. We also had more robust customer discussions around channeling capabilities and the transition to 200 millimeters, which reinforces our view that technology inflections are progressing. We are seeing improvements in silicon carbide end markets as well. While the rate of growth in global electric vehicle sales has moderated, we are seeing increased penetration of silicon carbide within the EV market, as well as greater content per vehicle. Discussions with customers also point to increasing adoption in a wide array of commercial goods such as HVAC, refrigerators, and washing machines.

In addition, customers are increasingly focused on the emerging opportunity in AI data centers, given the unique benefits that compound semiconductors provide for efficient power conversion. In short, we are well positioned to benefit from the higher demand from our customers once capital spending in this market recovers. While demand remains muted, we believe silicon power will remain a foundational part of the overall power semiconductor market, especially across auto, industrial, commercial, and data center markets. In general mature, customers continue to manage their capacity amidst stabilizing auto and recovering industrial volumes, along with growing demand associated with AI data center applications.

In fact, we saw a continuous improvement in spares and consumables in this market, which is a reflection of higher tool utilization rates. At the same time, we are building on our continued progress in the high current market. In the first quarter, we introduced our next-generation high current product, the Purion H6, and are engaging with multiple customers on this product. In addition, we secured a high current win with a new customer in China. Turning to slide seven, in advanced logic, we did not generate system revenue in the first quarter. However, we shipped a system early in the second quarter for a materials modification application for 2-nanometer production.

We are actively working with this customer on the next-generation technology roadmap. Moving to our memory market, both revenue and bookings increased meaningfully in the first quarter, driven by strong demand in DRAM and high-bandwidth memory applications, as customers ramp up investment in capacity to support AI-driven demand. We continue to execute well in our strategy to expand our penetration of the memory market. As you recall from last quarter, we highlighted a new order for our Purion high current system with a leading North American memory manufacturer. Since then, we have completed our systems evaluation and continue to work with this customer to drive adoption of our technology across technology nodes and regions.

While revenue and bookings can fluctuate from quarter to quarter throughout the year, we continue to expect strong growth in memory for full-year 2026 with momentum entering into 2027. On slide eight, let me wrap up my thoughts and provide our perspectives on the remainder of 2026. We executed well in the quarter, and are especially pleased with the strength of our 2026 pipeline, offset by a continued digestion of capacity in general mature and power, albeit with some encouraging signs in silicon carbide. Taking this altogether, we continue to expect 2026 revenue to be relatively flat year over year, but with improving trends across multiple markets setting the stage for a return to growth in 2027.

We continue to anticipate our pending merger with VCO to close in 2026, and we are working closely with the State Administration of Market Regulation in China to obtain regulatory approval, which is the only approval remaining to close the transaction. We remain excited about the opportunity to bring our two companies together, unlock the full potential of the combined organization, and drive long-term value creation for all stakeholders. I want to thank our customers, employees, partners, and shareholders for their continued support and trust in Axcelis Technologies, Inc. With that, let me turn the call over to David for a closer look at our results and outlook.

David Ryzhik: Thank you, Russell. I will first start with the financial details of the first quarter before turning to our outlook for the second quarter. Starting on slide nine, first quarter revenue was $199 million with system revenue at approximately $126 million and CS&I revenue at $73 million. As Russell mentioned, this result includes a one-time impact associated with a customer settlement in the quarter, which resulted in a headwind to system revenue of $5 million, gross margins of approximately 70 basis points, and EPS of $0.09 per share. CS&I exceeded our expectations this quarter, driven by service and consumables, along with robust demand for system upgrades.

By geography, revenue in China increased sequentially to 40%, up from 32% in the prior quarter. Korea was our second-largest revenue-generating region in the first quarter and notably 28% of our total revenues, as a result of higher memory sales. In our other regions, Europe was 16%, the United States 12%, while Taiwan and Japan were both at 1%. We generated 2% of our revenue from the rest of world in the first quarter. Bookings were roughly flat on a sequential basis at $128 million, but marked our second consecutive quarter of firming order rates. We exited the first quarter with a backlog of $453 million.

Now turning to slide 10, I would like to share some additional detail on our results. Gross margin was 40.7%, which came in slightly below our outlook of 41%, primarily due to the customer settlement discussed earlier. First quarter operating expenses were $57.7 million, slightly below our outlook of $59 million. Tying it all together, our operating margin was 11.7%. First quarter adjusted EBITDA was $27.7 million, reflecting an adjusted EBITDA margin of 13.9%. Other income of $2.7 million was lower on a sequential basis as a result of lower interest income, as well as foreign exchange-related losses. The tax rate was 14%, relatively in line with our expectations. And finally, first quarter earnings per diluted share was $0.72.

Moving to our cash flow and balance sheet data shown on slide 11. In the first quarter, free cash flow was $16 million. Our cash flow includes $12 million in cash transaction expenses associated with the pending VCO merger. We did not repurchase any shares in the first quarter. We exited the first quarter with a strong balance sheet consisting of $570 million of cash, cash equivalents, and marketable securities on hand. This includes $203 million of long-term securities. With that, let me discuss our second quarter outlook on slide 12. We expect revenue in the second quarter of approximately $205 million.

We expect a higher mix of revenue from general mature, offset by a lower mix of revenue from memory and silicon carbide. We expect gross margins of approximately 43%. The sequential improvement in gross margin is primarily due to more favorable mix in the quarter, as well as the absence of nonrecurring items that impacted our first quarter. We expect operating expenses of approximately $59 million in the second quarter. Adjusted EBITDA is expected to be approximately $34 million. And finally, we estimate net earnings per diluted share in the second quarter of approximately $0.90. We continue to expect full-year 2026 revenue to be approximately flat compared to 2025 levels.

We expect revenue to be second-half weighted, driven by an improvement in silicon carbide revenue and a continuation of strength in memory. We continue to anticipate full-year gross margins to be in the low- to mid-40% range, with some quarterly variation based on mix. We expect operating expenses for the balance of the year to be approximately $60 million per quarter. And finally, we continue to anticipate our tax rate to be approximately 15% for the full year. In summary, we executed well in the first quarter and remain focused on disciplined cost management while continuing to make targeted investments to capture the attractive growth opportunities ahead of us.

This is supported by a strong balance sheet and healthy free cash flow, which provide a solid foundation as we navigate an exciting period in the semiconductor industry. We will now open the call for questions.

Operator: Thank you. At this time, we will conduct the question and answer session. To ask a question, you will need to press 11 on your telephone and wait for your name to be announced. We ask that you please only ask one question and one follow-up. Please stand by while we compile the Q&A roster. The first question comes from the line of Jed Dorsheimer of William Blair. Your line is now open.

Jed Dorsheimer: I was just wondering, Russell, maybe you could—I know the gallium nitride and indium phosphide are mostly deposition, which makes your merger that much more exciting, but there is some implant associated with containment, etcetera. So I was wondering if you might just spend a minute talking about that opportunity, and then I have a follow-up.

Russell J. Low: Thanks. Hi, Jed. Are you talking about the implant opportunity in silicon photonics, particularly in data centers? Is that where you are heading?

Jed Dorsheimer: Well, yes, that is where I am heading, but specifically around indium phosphide and then gallium nitride on the power side.

Russell J. Low: Sure. There are a couple of implants in gallium nitride, but they are not significant. I would say, when you think about data centers and optical transmission, we do not partake especially in the laser manufacturing part. But to encode the laser with the data, that requires a modulation unit. And that modulation unit is a silicon unit, and that does require implantation. I think it is essentially an isolation implant that it is doing. So, again, it is not a massive use of ion implantation, but it is definitely an application—silicon photonics for that particular area.

Jed Dorsheimer: Got it. Thanks. So it will mostly be on the VCO product line post-merger, correct?

Russell J. Low: Yes, I think that is true. I think they have the MOCVD and thin film capability for the optical components.

Jed Dorsheimer: Thank you. I will jump back in queue.

Operator: Thanks. One moment for our next question. Our next question comes from the line of Denis Pyatchanin at Needham and Company. Your line is now open.

Denis Pyatchanin: Great. Thank you very much. So on the outlook, it sounds like you are seeing some strength in power-side SiC and memory, but general mature remains weaker. Is it maybe getting even weaker? Can you discuss in some more detail what you are seeing in general mature? It seems like this quarter some IDM business is picking up globally for some of the mature product, but it does not seem like you are seeing any of that. Can you talk a little bit more, please, about what you are seeing in general mature?

David Ryzhik: Yes, Denis. This is David. I think we would agree that the end markets are picking up. Auto is stabilizing, industrial is recovering, and we are starting to see AI pick up for this general mature segment. When we talk about the Q1 bookings, we did see a little bit softer bookings in general mature. But the key takeaway there is that utilization rates are rising, and for us, that is a really nice data point. We still expect 2026 general mature to be down year over year. But as we think about the business trending into 2027, we feel a little bit better today than we did three months ago in general.

Denis Pyatchanin: Great. And then for my follow-up, the book-to-bill for the quarter was up to about 1.0, I think up from 0.8. Can you share a little more about what you expect to see order-wise next quarter? Is the book-to-bill going to be the same or moving even higher?

David Ryzhik: We are not going to guide bookings per quarter. It can fluctuate. But we are encouraged that Q1 was relatively consistent with Q4, which was a big step up from earlier in 2025. This is a good sign, but we are not going to be forecasting bookings on a quarterly basis.

Denis Pyatchanin: Understood. That is it for me. Thank you very much.

Operator: As a reminder, to ask a question, please press 11 on your phone and wait for your name to be announced. One moment for our next question. Our next question comes from the line of David Duley of Steelhead Securities. Your line is now open.

David Duley: Good afternoon and thank you for taking my questions. I guess I will ask the question I think I have asked in the last couple of conference calls. If you could elaborate on what you are seeing as far as silicon carbide adoption in other markets, specifically in the data center. I think in the past you have talked about voltage step-down applications. I was just wondering if you are getting closer to the rack, or if there are other applications that you might be addressing inside the data center realm.

Russell J. Low: Hey, Dave. It is Russell. Thanks for the question. Yes, obviously data center is an application for it. I just want to start off with electric vehicles. I think they are actually very exciting right now. A lot of the cars are going to 800-volt subsystems, which allows them to charge much quicker as well. You are seeing that trend, and those are all using silicon carbide. The first application would be the traction inverter, and you are seeing more and more of the electric vehicles now taking silicon carbide. We are also seeing more and more silicon carbide per EV. You have the traction inverter, which is typically the first device they take.

Then you start to see the DC-to-DC step-downs, also the onboard charging. And in recent times, we are seeing the AC system, the compressor, having silicon carbide. We are really seeing this next generation of cars deliver much greater range and much faster charge times. Although it may be a little bit soft now, the long-term trend is going to continue to grow. On the consumer side, as I mentioned before I get on to data centers, we were told about these big white goods—HVAC, refrigerators, washing machines—in China. That really was surprising, but for many of these high-end systems that are running about a kilowatt, they need this to achieve their certification for power efficiency in multiple markets.

In the data center, it was interesting—maybe three to six months ago, we would be talking about whether it is going to be gallium nitride or silicon carbide. I think at this stage, it is becoming clearer that it is both. As the rack transitions to 800 volts, I think you are going to see gallium nitride inside the rack—that is a great sweet spot for gallium nitride. But as you drop down from the grid, which is 13 kilovolts or more, that is going to be a great application of silicon carbide.

So as it drops from the grid down toward the rack, you are going to see silicon carbide taking that opportunity, as it really is a good application of that material.

David Duley: And as a follow-up or just an extension of that question, do you think the 800-volt rollout in the data centers, which I guess kind of starts middle of this year and really gets going next year, is when you might see more of a pickup in your silicon carbide implant business for that market? Or when will this start to hit in a more significant way?

David Ryzhik: Yes, Dave, that is a good question. It is still low volume relative to EVs. But I would say our conversations with customers—they are talking a little bit more about it, and so we are paying attention. This could be an application that over time could grow, whether it is the transformers or other parts of the data center power architecture. So TBD, Dave, how big this could be, but I would say our customers are definitely paying a lot more attention to that.

David Duley: Alright. That is good news. Thank you.

Operator: Thanks. One moment for our next question. Our next question comes from the line of Analyst of Bank of America Securities. Your line is now open.

Analyst: One on the full-year ’26 guide. I think you said you are maintaining that flattish year-over-year guide. I am just curious because clearly, memory sentiment and the new wafer starts are likely much better than 90 days ago. And at the same time, I think you said your bookings for the general mature and the power business are still doing pretty well. So I am curious why not raise that full-year guide. Thank you.

David Ryzhik: Yes. We feel comfortable with flat year over year. Absolutely, memory—we expect it to be a strong year for us in 2026, offset by digestion in power and general mature. We are seeing encouraging signs. We like what we saw in the bookings in Q1. One quarter is not a trend, but I think some of that momentum is probably going to carry into 2027. For this year, based on our backlog and the scheduled shipments that we have, we still feel that those markets are going to be down this year. Net-net, we expect about flat, but with a nice setup into 2027.

Analyst: Got it. And then a follow-up more specifically on the memory side. So I think at one point, you said memory is going to be up year over year, and clearly, the trends are looking that way. How should we think about the full-year trajectory when, obviously, it tends to be a little bit lumpy on a quarterly basis, but we had a pretty strong start to the year? And I think also NAND activities have begun to pick up. So any color on the full-year memory would be helpful. Thank you.

David Ryzhik: Yes, that is right. From quarter to quarter, it could be lumpy. It just depends on when we are shipping to customers and fab availability/space. For example, in Q2, memory is going to be a little softer sequentially. But for the full year, we expect pretty strong growth in memory, and that is all DRAM. Our expectation embedded in our 2026 outlook is not much NAND. That is something that we are paying attention to. As you know, a lot of the NAND manufacturers are focused on vertical scaling, and that does not require a lot of incremental implant. But once the industry starts to add wafers, that is when we would start to see a pickup.

Analyst: Got it. And then if I may, just one quick one. Within memory—and I am sorry for being too specific— but I think the industry is shifting away a little bit from HBM and diversifying more into other types of memory. I assume the wafer consumption ratio is not as high on those, for example, LPDDR. Obviously, I think that would be a positive trend for you. Have you seen any signs that the demand signals are stronger because of that?

David Ryzhik: I do not think we have seen any meaningful change based on any mix shift in memory. Customers are still really trying to build out HBM capacity and DRAM for AI.

Russell J. Low: Yes, and when I think about HBM, it is essentially a DRAM stack, and so the implant intensity does not change much between DRAM and HBM. NAND is different—it is a slightly different mix of high energy, high current, medium current—but I would say that even node-to-node, the implant intensity is relatively stable.

Analyst: Alright. Thank you so much.

Operator: I am showing no further questions at this time. I would now like to turn it back to David Ryzhik for closing remarks.

David Ryzhik: Thank you, operator. I just wanted to thank everybody for joining the call and your interest in Axcelis Technologies, Inc. You can close the call.

Operator: This concludes the presentation. Thank you for your participation in today's conference. You may now disconnect. Have a good day.

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