Axcelis Technologies - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 revenue and non-GAAP EPS both beat S&P Global consensus: revenue $192.6M vs $184.9M*, and non-GAAP EPS $1.04 vs $0.38*; strong gross margin execution (GAAP 46.1%, non-GAAP 46.4%) drove the upside.
• Bookings improved to $110M (book-to-bill 0.8x), the highest since Q4’23, while backlog ended at $618M; mix shifted regionally with China 37% of Shift system sales, U.S. 23%, Korea 20%.
• Q2 outlook: revenue ≈$185M, GAAP EPS ≈$0.57, non-GAAP EPS ≈$0.73; management expects H2 revenue to be “relatively consistent” with H1 and non-GAAP gross margins in H2 similar to Q2 (~42%) despite tariff noise.
• Stock narrative catalysts: margin/earnings beat, sequential bookings improvement, and clear mitigation plans for tariffs (impact “relatively small”), offset by muted NAND and moderated SiC investments near term.

What Went Well and What Went Wrong

• What Went Well

  • Margin execution: GAAP gross margin 46.1% (non-GAAP 46.4%) vs outlook of ~40%, helped by lower warranty/installation costs and favorable deferred revenue/CS&I mix; non-GAAP operating margin 18.3%.
  • Bookings/backlog improvement: Bookings $110M, book-to-bill 0.8x, backlog $618M; both systems and CS&I slightly above internal expectations.
  • Strategic positioning: “We executed well… strong profitability despite a moderation in customer investments… agile global manufacturing and supply chain footprint,” CEO said; tariff impact expected to be small with mitigation plans in place.

• What Went Wrong

  • Topline compression: Revenue fell to $192.6M from $252.4M YoY (Q1’24) and from $252.4M QoQ (Q4’24) as mature-node digestion and SiC moderation persisted.
  • Operating leverage: GAAP operating margin fell to 15.1% from 22.4% YoY; non-GAAP operating margin to 18.3% from 24.1% YoY.
  • End-market softness: NAND demand remains muted (no new wafer starts), SiC investments moderated; China mix expected to fluctuate while trending lower vs 2024 over the year.

Transcript

Operator (participant)

Good day, ladies and gentlemen, and welcome to the Axcelis Technologies call to discuss the company's results for the first quarter of 2025. My name is Sean Ottmer, 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 Ryzhik, Senior Vice President of Investor Relations and Corporate Strategy. Please proceed.

David Ryzhik (SVP of Investor Relations and Corporate Strategy)

Thank you, Operator. This is David Ryzhik, Senior Vice President of Investor Relations and Corporate Strategy. With me today is Russell Low, President and CEO, and Jamie Coogan, Executive Vice President and CFO. 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 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. As we mentioned on our previous earnings call, we have decided to add non-GAAP measures to our first quarter results and those going forward. As a result, during this call, we will be discussing various non-GAAP financial measures. 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 Low. Russell.

Russell Low (President and CEO)

Good morning, and thank you for joining us for our first quarter 2025 earnings call. Beginning on slide number four, we executed well during the first quarter with revenue of $193 million and earnings per diluted share of $0.88, both exceeding our outlook with particular strength in our gross margins and disciplined cost control. On a non-GAAP basis, we delivered earnings per share of $1.04. Jamie will discuss our financial results in further detail, including non-GAAP measures, which we're introducing today. Within overall revenue, both systems and CS&I sales were slightly better than our expectations. In the first quarter, we generated $110 million in bookings, reflecting a sequential increase compared to fourth quarter levels. This translates into a book-to-bill of 0.8 times, the highest level we've seen since Q4 of 2023.

While we are encouraged by the improvement in bookings in the first quarter, we believe bookings can fluctuate from quarter-to-quarter as we move through 2025. Before I turn to providing more detail on the trends we are seeing by market segment, I'd like to touch on the global tariff situation and how this impacts Axcelis. To date, while the tariff and macroeconomic environment is dynamic, Axcelis has not seen any meaningful change in demand from our customers as a result of the announced tariffs. Moreover, Axcelis has plans in place to lessen the direct tariff impact. From a supply chain perspective, as many of you know, Axcelis possesses a global supply base with partners inside and outside of the United States. Over the past several years, we've made significant progress in diversifying our supply chain to drive better resilience in our sourcing.

From a manufacturing perspective, our corporate headquarters and primary manufacturing facility is located in Massachusetts. However, several years ago, we invested in a new Asian operations center capable of supporting our global customers. Our locations and facilities allow us to be highly adaptive to the rapidly changing policy environment. We are executing well in developing solutions so we can continue to support our customers across the world, lessen the impact associated with the tariffs to support our gross margin goals while maintaining our focus on innovation to capture the long-term growth opportunities that lie ahead. With that, let me add some additional color on the trends we are seeing by market segment. Turning to slide five, in the quarter, sales to mature node applications remained the lion's share of our business, in particular Power and General Mature.

As we noted on fourth quarter earnings call, beginning with first quarter results, ship system sales to the image sensor market will now be included in our overall General Mature category to simplify our disclosure. Now, on slide six, let me review our trends by end market. Within our Power business, shipments to silicon carbide applications declined sequentially in the quarter, consistent with expectations as customers are moderating investments due to softer end demand. From a regional perspective, we are seeing continued pockets of investment in China, while the rest of the world is managing through a broader digestion of capacity. While companies in China have made significant progress with the production of silicon carbide wafers, we believe our customers are earlier in their journey on silicon carbide device manufacturing, where ion implantation is foundational.

In fact, on a global basis, despite an overall moderation in investments into silicon carbide, we are seeing strong engagement in technology transitions, which includes increased customer pool for us to support them in the transition from 150 mm to 200 mm wafers, as well as the transition from planar to trench device architecture and also growing collaboration on superjunction devices. All of these trends play to Axcelis's core strengths. We are the market leader in ion implantation for silicon carbide with the largest install base and extensive application know-how. We are also the global market leader in high-energy implant, which is increasingly relevant for next-generation device architectures in silicon carbide. Finally, we have robust product and service upgrade offerings that allow customers to enhance their solutions to the latest generation of implant technology within the existing factory footprint. This is a key driver for long-term growth in CS&I revenue.

As we think about this business over the next several quarters, we see continued pockets of investments that are remaining at more muted levels compared to 2023 and 2024. Over the long term, however, we believe that the drivers for silicon carbide remain intact, namely rising penetration of EVs and silicon carbide content within those EVs, particularly as 800-volt models and above are introduced to enable super-fast charging. Growing adoption of silicon carbide in data center applications given the critical need for more power efficiency. Finally, proliferation of silicon carbide across a wide array of other industrial and commercial applications. For example, HVAC systems, which globally consume a significant amount of electricity. This can be an interesting application for silicon carbide, giving us the ability to drive better power efficiency, which ultimately can lead to less strain on our power grid.

Turning to silicon IGBTs, revenue is muted as a result of continued cyclical softness in the auto end market, combined with the secular impact of growing adoption of silicon carbide. Nonetheless, we anticipate silicon IGBTs to remain a sizable SAM for our implant solutions over the long term, requiring our proprietary technology. In our General Mature segment, customers continue to manage their capacity investments given the current demand environment in auto, industrial, and consumer electronics. As a reminder, our General Mature segment spans a broad array of planar devices with process nodes of 28 nm and above. While we expect the overall market to remain in a digestion period through 2025, following several years of strong buildout, we are seeing some pockets of increased tool utilization, which, if it continues, is an important step forward towards a recovery in implant investments.

It's also important to note that the General Mature market is ubiquitous to almost every aspect of our lives, including our phones, computers, cars, home appliances, TVs, and factories, to name a few. As the world becomes more connected and digitized, we expect demand for these foundational technologies to grow accordingly. We are well positioned as a critical enabler, especially given the higher intensity of implant required. Turning to slide seven in advanced logic, we continue to engage closely with customers on their evaluation units as we work to expand this initiative. As noted on our prior call, we anticipate a follow-on order from a customer that we added last year. Moving to memory, we saw a nice sequential improvement in sales to the memory market, specifically for DRAM.

In NAND, customers are focusing on technology transitions to higher layer counts, such as 1xx to 2xx and beyond, to drive better bit density rather than wafer capacity additions, which would be more impactful to ion implantation demand. As a result, we expect demand from NAND applications to remain muted over the balance of the year. On slide eight, let me wrap up my thoughts prior to handing the call over to Jamie. We are adapting to the rapidly evolving macroeconomic landscape, particularly as it relates to tariffs, and our primary focus is to continue to serve our customers to the best of our ability while striving to control costs and drive resilience in our global operations. Despite the macroeconomic and cyclical backdrop and uncertainty associated with tariffs, we are seeing robust engagement with customers on the next-generation roadmaps across Power, General Mature, Memory, and Advanced Logic.

We believe that the long-term secular drivers for the semiconductor industry remain intact, with ion implantation being an enabling process step for every single chip that is manufactured in the world today. In fact, it happens to be one of the most complex technologies used in the semiconductor manufacturing process. At its core, ion implantation is a particle accelerator at scale. It requires the complexity of advanced nuclear physics combined with the throughput, quality, and extreme precision demanded for semiconductor manufacturing. Each implant can boast more than 10,000 unique part numbers and more than 5 million lines of software code. We are able to deliver up to 15 million electron volts of energy in an ion beam. Our solutions are designed to implant more than 50 quadrillion ions per square cm of a wafer. This has to be done with a 0.5% uniformity across the whole wafer.

Finally, our solutions are designed to implant pretty much any element in the periodic table into a wafer. All of this is the culmination of almost 50 years of expertise, know-how, close collaboration, and trial and error with nearly every semiconductor manufacturer in the world today. As a result, with the world needing more than $1 trillion of semiconductor devices by 2030 across all different categories, we expect the market for implant will continue to grow through the cycles. We believe we are well positioned to capitalize on this opportunity with our differentiated and highly proprietary technology. With that, let me turn the call over to Jamie for a closer look at our results and outlook. Jamie.

James Coogan (EVP and CFO)

Thank you, Russell. And good morning, everyone. I'll start with some additional detail on our first quarter before turning to our outlook for Q2. Starting on slide nine, first quarter revenue was $193 million, with systems revenue at $138 million and CS&I at $55 million, both slightly above our expectations for the quarter. From a geographic perspective, as expected, China declined sequentially to 37% of total shipped system sales, down from 49% in the prior quarter. While we anticipate revenue from China in 2025 to be down on a year-over-year basis as customers digest the robust investments they've made into mature node capacity, we expect revenue from China to fluctuate from quarter-to-quarter. Case in point, we currently estimate the mix of shipped systems revenue to China to increase sequentially in the second quarter.

Turning to the other regions, we saw shipped system sales to the U.S. grow to 23% of the total, while Korea also improved to 20%, which was mainly due to improved shipments for DRAM in Korea. As Russell mentioned, we are pleased to see bookings grow nicely on a sequential basis to $110 million, and we exited the first quarter with backlog of $618 million. Turning to slide 10, let me share some additional detail on our GAAP and non-GAAP results. As we previously announced, we're introducing non-GAAP measures in 2025 following a thorough review of our peer group. These non-GAAP measures reflect adjustments for the impact of share-based compensation expense and certain items related to restructuring and severance and any other associated adjustments.

For more information on our GAAP to non-GAAP reconciliation, I can refer you to the appendix of this slide presentation, as well as the tables in our earnings release. With that, we delivered strong GAAP gross margins of 46.1% in the quarter, exceeding our outlook of 40%. Our non-GAAP gross margins were 46.4%. Our better-than-expected margins were primarily due to lower-than-expected warranty and installation costs, favorable mix for our deferred revenue recognized, as well as more favorable mix within our CS&I business. In addition, our gross margins were benefiting from our continued focus on managing our expenses. We expect gross margins in the second quarter to moderate, primarily due to mix. In addition, as Russell noted, we have plans in place to lessen the impact from tariffs.

GAAP operating expenses totaled $59.6 million, below our outlook of $63 million, primarily due to lower employee-related costs associated with variable compensation and benefit expenses, as well as prudent cost controls. In the quarter, we took a number of additional actions to reduce expenses for the balance of the year, which resulted in a restructuring charge of $1.1 million. On a non-GAAP basis, operating expenses were $54.1 million. As a result, GAAP operating profit was $29.2 million, reflecting a 15.1% operating margin. Our non-GAAP operating margin was 18.3%. As part of our introduction of non-GAAP measures, we are also including adjusted EBITDA as one of the key metrics we track. In the first quarter, adjusted EBITDA was $39.5 million, reflecting a 20.5% margin. Despite the softer revenue on a quarter-over-quarter and year-over-year basis, we are pleased with the execution of the team to deliver strong operating profitability.

This is a testament to the proprietary nature of our products, the value we create for our customers, and our disciplined approach to managing costs. We generated approximately $3.9 million in other income, and our tax rate was 14% in the first quarter on both a GAAP and non-GAAP basis. For the balance of the year, we estimate our tax rate to be at the 15% level. Our weighted average diluted share count in the quarter was 32.3 million shares. This all translates into GAAP diluted earnings per share of $0.88, which exceeded our outlook of $0.38. The higher-than-expected EPS was primarily due to better-than-expected revenue and gross margins. Finally, non-GAAP diluted earnings per share was $1.04.

Moving to our cash flow and balance sheet data shown on slide 11, we generated $35 million of free cash flow in the first quarter, as we benefited from better-than-expected profitability, as well as robust working capital management. Turning to our share repurchases, on March 12th, we announced that the board of directors approved a $100 million increase to our share repurchase authorization, which reflects our continued confidence in the attractive long-term fundamentals of our business. In the first quarter, we repurchased $18 million of shares and exited the quarter with $212 million remaining in share repurchase authorization. To date, in the second quarter, as of market close on May 5th, we have already repurchased $23 million in shares, and we plan on continuing to repurchase at an elevated level over the balance of the quarter relative to our prior quarterly spend.

Looking ahead, we intend to continue to deploy capital to share repurchases while ensuring we maintain a strong balance sheet that gives us added flexibility to invest in our business while also evaluating inorganic growth opportunities. In fact, we exited the first quarter with a strong balance sheet consisting of $587 million of cash, cash equivalents, short-term investments on hand with no debt. With that, let me discuss our second quarter outlook on slide 12. All measures will be non-GAAP with the exception of revenue. We expect revenue in the second quarter of approximately $185 million. As we look into the second half, while the dynamic macroeconomic and tariff-related environment has created some uncertainty, our discussions with our customers indicate that they intend to continue making investments and executing on their technology roadmaps.

As a result, we currently anticipate revenue in the second half to remain relatively consistent with first-half levels. We expect non-GAAP gross margins of approximately 42%. The sequential decline is primarily due to mix, as well as slightly lower volumes. In addition, this includes the impact from tariffs, which we estimate to be relatively small. Beyond the second quarter, non-GAAP gross margins may fluctuate based on volume and mix. We would expect gross margins in the second half to be relatively similar to second-quarter levels, inclusive of the estimated impact of tariffs. We expect non-GAAP operating expenses of approximately $54 million. For the full year, we anticipate non-GAAP operating expenses to be relatively flat on a year-over-year basis. Adjusted EBITDA in the second quarter is expected to be approximately $29 million. Finally, we estimate non-GAAP diluted earnings per share in the second quarter of approximately $0.73.

In summary, we are pleased with our execution in the first quarter, as we maintain strong profitability amidst a muted demand environment. This reflects the resilience of our operating model. We exited the quarter with a strong cash position and no debt. We repurchased shares in a disciplined but opportunistic manner and are ensuring that we continue to invest in our business to emerge in a stronger position once end markets recover. With that, let me hand the call back to Russell for closing remarks. Russell?

Russell Low (President and CEO)

Thank you, Jamie. We are navigating a dynamic environment, but one thing remains very clear to us: the world's need for semiconductors will continue to grow, and this cannot be possible without the highly complex and priority equipment that is required to manufacture them. That is what we do. We believe that Axcelis is well positioned with a global and resilient operational footprint, leading technology in ion implantation with a relentless focus on innovation and a deeply ingrained customer-first culture, all of which we believe will position Axcelis to drive long-term growth and value creation for shareholders. I want to thank our customers, employees, shareholders, and partners for their continued support and trust in Axcelis. With that, operator, we are ready to take your questions.

Operator (participant)

Thank you. At this time, we will conduct the question-and-answer session. To ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. We ask that you limit yourself to one question and one follow-up. Please hold on while we complete the Q&A roster. Our first question comes from Craig Ellis with B. Riley Securities. Your line is now open.

Craig Ellis (Director of Research and Senior Semiconductor and Capital Equipment Analyst)

Yeah. Thanks for taking the question. Guys, congratulations on the real robust gross margin. I wanted to start.

James Coogan (EVP and CFO)

Thank you. Start.

Craig Ellis (Director of Research and Senior Semiconductor and Capital Equipment Analyst)

My inquiry. Yeah. You're welcome. I wanted to start the inquiry on some of the things that are contributing to that. We are in a period, which is our first period of macro troubles, where we really have a substantial Purion install base. As you look at the install base of Purion systems and as we think about the propensity of customers to often upgrade in periods where there is better capacity availability and they can flex changes more easily than when capacity is full, how are you feeling about CS&I's momentum into the back half of the year from what has been a real strong last few quarters and looks like a real strong 2Q?

James Coogan (EVP and CFO)

Yeah. No. Appreciate the question, Craig. We look at it. Q1 for CS&I, really, the mix here was around spares. We had a higher volume of higher margin spare sales in the periods. There is still opportunity here for us to see incremental upgrade opportunities as we move through the course of the year as people take care of sort of their tool system and planning during these periods of lower utilization. I think you hit the nail on the head, though. The CS&I business is relatively sticky, right? We saw systems volume come down year over year, while CS&I remained sort of relatively flat on a year-over-year basis from Q1 of last year to Q1 of this year, despite the lower utilization. We think that that is benefited by the increase in the install base around Purion.

Relative to margins overall, mix is always going to be a primary driver of margin performance within that period. As I noted on CS&I, that higher volume of higher margin spare sales. We also saw a little bit of systems benefit in our systems margin as well from the favorable deferred revenue recognition in the period. I think most importantly, we have a focus, we put a focus in 2024 on making sure we drive margins towards our long-term goals that we've discussed previously. One of those was around installation and warranty and driving that cost down. As I mentioned in the prepared remarks, we actually saw some benefit of that in Q1 as well at a higher rate than what we had anticipated and a little bit sooner coming into the model. I think we're well positioned to continue to drive margin performance.

As we look to the second quarter, we do see that moderation. As we said in our prepared remarks, the second-half margin should be relatively in line with what we see in the back half of the year, inclusive of the tariff impacts. Overall, we are really well positioned to see margin appreciation on return to volume in market recovery.

Craig Ellis (Director of Research and Senior Semiconductor and Capital Equipment Analyst)

Thanks for that, Jamie. The follow-up question, I'll combine a couple of things. We had a really nice increase in orders quarter on quarter, almost 30%. Can you talk about the level of order intensity 2Q to date? On a headline basis, it looks like there's not a significant mix change in the business in the second half versus what we see in 2Q. Can you talk about any expectations you'd have for a shift either within the mature foundry business or just within memory, which seems very DRAM weighted? Thank you.

Russell Low (President and CEO)

Hey, Craig. It's Russell. Thanks for the question. Yes, we had a nice booking quarter. Like we said on the call, in the prepared remarks, it was a 0.8 multiplier compared to basically the average for 2024, which was about 0.5. It was a good uptick. I would say that, obviously, we're very pleased and encouraged by that, but it's a bit premature to call that an inflection point. Looking a little bit more closely into the bookings that we had in Q1, you're right. They do match pretty much the profile of our business going forward. General mature and power would be where a lot of those bookings came from.

Craig Ellis (Director of Research and Senior Semiconductor and Capital Equipment Analyst)

Thanks, guys. I'll hop back in the queue.

James Coogan (EVP and CFO)

Thanks, Craig.

Operator (participant)

Our next question comes from Jed Dorsheimer with William Blair.

Jed Dorsheimer (Group Head of Energy and Power Technologies)

Hi. Thanks for taking my question. And congrats on the better-than-expected, particularly on the margins and the bookings. I just want to come at the margin question maybe slightly differently. And maybe you answered this, and it was not as clear to me. But can you just help me with the granularity of the 600 basis points and kind of the 400 basis points that you are looking into? What I am trying to get at is really around in terms of mix and the predictive analytics of sort of what you are seeing during the quarter. It seems like that mix shifted rapidly in the quarter to your benefit. I am just trying to gauge how much of that 600 basis points was specific to that and what is kind of going against the headwind in the 400 basis point decline.

James Coogan (EVP and CFO)

Yeah. As we think about the mix, the largest contributor of that was mix. As we go through the period, right, we'll see periods of buying volume, specifically on the CS&I side, that can shift and move throughout the quarter. Obviously, we pull together plans and forecasts relative to what we anticipate. As customer requests come in, we'll satisfy those as required. That can change the mix within a period pretty quickly, depending on what is bought and what is procured in that period of time. In addition to that, on the deferred revenue base, right, that really is just what we'll call a cleanup of prior system sales as we deliver and execute against our commitments associated with system sales.

We can see that mix shift within a period, given sign-offs from customers and how they look at the completion of system installations and related activities, can result in a shift in deferred revenue relative to expectations as well. As we think about what's driving, we don't anticipate the same level of positive mix benefit in the second quarter as we look at what we see today versus our systems and related CS&I volumes. We do anticipate to be able to continue to benefit from some of the cost actions and other activities, which has given us confidence to increase margins relative to our prior expectations.

Jed Dorsheimer (Group Head of Energy and Power Technologies)

Got it. And then as my follow-up, maybe just a slightly different angle on the tariffs. I know that you've done a great job in terms of mitigating the potential impact. I think Secretary Bessent talked about 14 deals in the next few weeks to be signed. Assuming that if we maybe exclude China, how much is sort of constrained from a margin perspective on the tariff side? I'm trying to get to what the potential impact would be positively if you see those come to more normal type of trade relations.

James Coogan (EVP and CFO)

Yeah. I think there could be some on the margin side.

Jed Dorsheimer (Group Head of Energy and Power Technologies)

Ex-China.

James Coogan (EVP and CFO)

Yeah. Ex-China, right? I think there could be some opportunity on the upside. I think too early to tell. As you know, it's been very volatile over the last few weeks, trying to take the puts and takes in the daily news readings. The team has been sort of working through the various iterations and permutations here for us to be able to size the potential impact. We had developed plans, though, that largely mitigated a significant portion of that by leveraging our global supply base and, I think, more importantly, our global manufacturing footprint. We did make those investments in our Asian operations center a number of years ago, which provides us with an opportunity to continue to serve our customers across the globe. It also provides us an opportunity to mitigate a potential impact associated with the geopolitical tensions and the trade.

In addition to that, we have a large portion of our sales base, which is exportable. Although not all of the proposed tariffs are drawbackable, a large significant portion of them are for us. We have processes in place that allow us to also draw back tariffs that we do pay on the exported goods.

Russell Low (President and CEO)

Yeah. And that's kind of.

Jed Dorsheimer (Group Head of Energy and Power Technologies)

Thank you.

Russell Low (President and CEO)

This is Russell. We did say that the impact was relatively small. Obviously, the upside would also be relatively small as well. Jamie did give the numbers for the remainder of the year, inclusive of tariffs.

Jed Dorsheimer (Group Head of Energy and Power Technologies)

Understood. Thanks, guys.

Russell Low (President and CEO)

Thanks.

Operator (participant)

Our next question comes from Charles Shi with Needham & Company.

Russell Low (President and CEO)

Hey, Charles.

Charles Shi (Senior Analyst)

Hey. Good morning, Russell and Jamie. Maybe the first question is about the composition of the backlog. First off, I think you guys did a good job getting the very decent bookings for Q1, but that also leads to a backlog that is still, roughly speaking, four to five times your system revenue run rate. That's a pretty high number, I would say, compared to historical norm. It should have been somewhere between one to two times of the system revenue run rate. I wonder what is the composition of the backlog there. Maybe one way I would like to look at, or maybe you can provide some color on, is what's the mix of the backlog between your China versus non-China customers? If I look at your revenue, China has been somewhere between 40%-60% of the total revenue for the company.

Is China slightly overrepresented in that $618 million backlog or underrepresented or roughly in line with that?

Russell Low (President and CEO)

Hey, Charles. It's Russell. Yes, we are pleased to have a large backlog. Obviously, as you note, historically, we've been running at, say, two quarters' worth of backlog, which at today's run rate of systems, that's probably like in the $300 million kind of regime. We are 2x that. I do expect those numbers to come down with time. I think you're going to see that coming down, and then you'll start to see the book-to-bill get more standard. Regarding kind of the backlog composition, as you can imagine, it looks an awful lot like our business in the sense that it's going to be predominantly General Mature. It's going to be Mature Foundry and Power. That's what you're going to see. I think last year, we kind of saw quarter-to-quarter our Chinese revenue being in the 40%-60% range.

I think overall, you're going to see that bouncing around in 2025, but I think it will be going lower as a mix. You will see the China percentage throughout 2025 becoming less than it was, say, in 2024.

Charles Shi (Senior Analyst)

Hey, Russell. Maybe I wasn't very clear. Yeah, I got your point that China revenue percentage is going to come down this year. In the backlog, is China still in that 40%-60% range or higher or lower in the backlog? I'm not talking about your expected revenue this year.

Russell Low (President and CEO)

Charles, we don't really give that information. That's not something we've provided. I would say that our bookings and our backlog match very much our revenue profile that we've shared with you for Q1.

Charles Shi (Senior Analyst)

Thank you. Maybe a very quick clarification, if you can provide some color. The U.S. revenue had some decent sequential growth in the March quarter. Wonder if you can provide some color. What's the application for the strength of that particular geography? Thank you.

Russell Low (President and CEO)

Okay. Obviously, when we talk about U.S. revenue, it's landed U.S. revenue, right? It can be multinationals from other countries building out inside that location. I'd say that it's actually quite broad. It's been with General Mature. It's been Power, SiC and Carbide specifically. I'd say there's also been a little bit of other business tucked in there as well. Ultimately, it's nice to see the U.S. domestic coming on stronger. It's basically General Mature, as you'd imagine.

James Coogan (EVP and CFO)

Yeah. As we look quarter-to-quarter, right, that is going to fluctuate over time, both the U.S. load, just given the customer delivery schedules and timing of orders expected out of backlog. From period to period, we are going to see both the U.S. fluctuate. We will see our memory business fluctuate from period to period. As you know, today, that is primarily serving the Korean memory makers today. We will also see our China revenue fluctuate. As Russell said, although we expect revenues on a year-over-year for China to be down relative to 2024, we do expect from quarter-to-quarter that could move up. Specifically in Q2, we could see China as a higher proportion of sales in the second quarter. Overall, on a year-to-year basis, it will be lower. Yeah.

Charles Shi (Senior Analyst)

Thank you, guys. Appreciate it.

Russell Low (President and CEO)

Thanks, Charles.

Operator (participant)

Our next question comes from Tom Diffely with D.A. Davidson & Company.

Tom Diffely (Managing Director and Director of Research)

Yes. Good morning. Thank you for taking the questions. Maybe along the same lines with Charles' last question, Japan, we used to talk about Japan as a pretty nice growth driver. I'm just surprised it hasn't had any activity for the last couple of quarters. Maybe just a quick update on your presence there.

Russell Low (President and CEO)

Right. I think regarding Japan, we've actually had quite a good amount of progress there. We have placed tools into silicon power, silicon carbide power. I think there's also some kind of like General Mature as well. I think we're just beginning to see people having their utilization rates move up and to see the repeat orders. I'm actually optimistic that we'll see those areas go up as a percentage of our total revenue towards the back end of this year. We've kind of like put the seeds in there, and now we're waiting for the repeat orders. As we kind of talked about, all of our customers are in a slightly different place right now. If you looked at power, for example, some are looking to optimize their processes and improve their yields and reduce their costs.

Others are looking to do a node change. It might take one machine or two machines. We do see people taking high-energy machines in order to help them in their transition from, say, planar to trench devices. The revenue is relatively low, but the future opportunities are relatively high because once they're successful with those devices, you start to see the ramp. Yeah, I actually feel relatively positive about Japan.

Tom Diffely (Managing Director and Director of Research)

Yep.

Okay. Yeah. Your answer there kind of spurred my next question. So Russell, when you look at the three technology transitions that your clients are using right now, the 150 mm to 200 mm, planar to trench, and superjunction, how do each of those transitions specifically impact you and your business?

Russell Low (President and CEO)

Right. The 150 mm to 200 mm, obviously, we can ship 200-mm machines, and we can also do upgrades. We actually have a large installed base of silicon carbide tools across the entire Purion Power portfolio. That is the high energy, the high current, and the medium current. All of those tools would be eligible for upgrades. There is a great opportunity for upgrades. Regarding the transition from planar to trench, those devices require high energy. It moves the market even closer to where we have historically been very strong, which is in high energy. One of the things we are seeing is that they are going to even higher energy. As you go from, say, trench to superjunction, we are actually seeing some customers going up into the multiple mega electron volts energies. That is playing really well to our high-energy technology.

We see an opportunity to capture more of the business as those devices transition. All of this, Tom, is increasing the wafer size and kind of reducing the device sizes, increasing the number of devices, and obviously reducing the cost. We see this as the early innings for silicon carbide with lots of new applications being switched on as the cost continues to fall. We are kind of excited by this, and obviously, we benefit as well.

Tom Diffely (Managing Director and Director of Research)

So we'll see this activity both in new systems as well as CS&I for some of the upgrades?

Russell Low (President and CEO)

I think what we see is that many of our customers are making their money out of 150 mm. Consequently, they're going to want to continue to do that. I think pretty much most customers, particularly the non-Chinese customers, have moved on to 200 mm. They start with, obviously, the R&D, get the process down pat. I think some of them are waiting for the yields to come up. Others are waiting for the price parity point because I think there's still a little bit of time for the price to be more attractive for 200 mm. I think what you're going to see is they'll ramp the 200 mm. That's probably the new machines. Once they've got that new 200-mm line up and running, there may be an opportunity to then retrofit the 150 mm to make them more cost-efficient.

I don't think you're going to see somebody take down their 150 mm line for a couple of months as they transition it over because they're then going to reduce their run rates. I think you're going to see this new tool systems going out and then ramping and then seeing the aftermarket. That's my impression.

Tom Diffely (Managing Director and Director of Research)

Very helpful. Looks like a multi-year transition. Thanks for the time.

Russell Low (President and CEO)

Yes. Yes.

Operator (participant)

As a reminder, we ask that you limit yourself to one question and one follow-up. Our next question comes from Jack Egan with Charter Equity Research.

Jack Egan (Equity Research Analyst)

Great. Thanks for taking the questions. You saw a pretty good increase in your book-to-bill, and memory shipments were pretty strong in the first quarter. As you've said before, those customers usually give you pretty short lead times. Is it fair to assume that the bulk of that increase in your book-to-bill is from non-memory segments, or are you getting better visibility from those memory customers?

James Coogan (EVP and CFO)

Yeah. I think, again, no. The memory customers are still acting as they have historically in terms of we have some very robust conversations and discussions relative to their expected plans. We still wait for purchase orders to arrive to make sure that we line everything up with the quarters and periods in which we expect to ship those devices relative to the expectations. What we did see in our book-to-bill, though, and as Russell commented a little bit earlier, is it does largely mirror that of our revenue splits for the periods as well. That trend around where the orders are coming in from for the quarter really does look and feel a lot like our revenue splits that we saw relative to General Mature and Power.

Jack Egan (Equity Research Analyst)

Got it. And then on OpEx, for the guidance for the full year being basically flat, you're probably going to see a pretty material decline in full-year revenue, but that spending is going to be still flat. I guess what's the thinking there on keeping OpEx a bit elevated?

James Coogan (EVP and CFO)

Yeah. It's investing, right? So a large portion of that is going into our R&D, right? We made some really meaningful and significant progress. I can have Russell talk about some of the things that we're looking forward to in that space. The goal here is to continue to invest in the base business. We've talked about our capital allocation strategy really focused on organic growth first. Putting money into the business for R&D, CapEx, and others to make sure that we're positioned coming into the recovery to really make sure that we capitalize on the upswing. Partnering very closely with our customers during this period of time to make sure that we drive our technologies to their needs and requirements is going to be the most important part for us.

Russell Low (President and CEO)

Yeah. Jack, this is Russell just to kind of add more. We know this is a cyclical industry, and I think it has been down a little bit longer than most of us would have anticipated. We believe we have great opportunities ahead of us, the secular growth of this industry and the cyclical recovery. We are continuing to make sure we invest in our products and services, stay close to our customers so that when the market does start to recover, we are ready with these new products. We want them to be differentiated, innovative, and we want to obviously continue to grow our margins and revenue. I think it would be a very bad idea to kind of like reduce significantly our OpEx given that we know there is a good, there is an upturn coming.

The other thing is it takes a long time to train people in our industry, right? I mean, it can take easily between two years-five years for people to become like expert level. Given that we have these cycles that are considerably smaller than that, we want to make sure we maintain those people and, like we said, continue to do our execute on our product roadmaps.

Jack Egan (Equity Research Analyst)

That makes sense. Thanks for the color.

Russell Low (President and CEO)

Okay. Thanks, Jack.

Jack Egan (Equity Research Analyst)

Thanks.

Operator (participant)

Our next question comes from Duksan Yang with Bank of America Securities.

Duksan Jang (Research Analyst)

Hi. Good morning. Thank you for taking the question. I know earlier you said you do have some international manufacturing, but you still have a large portion of your products being manufactured out of the U.S., and you obviously have a large share of the China mix. I am curious if you have seen any pulling activities from customers, and is that perhaps included in your outlooks? Thank you.

Russell Low (President and CEO)

Right. I'd say that the turmoil around tariffs kicked in the 2nd of April. Obviously, Q1 was closed pretty much at that stage. There was no activity to be talked about in Q1. Really, it's about Q2. I would say there hasn't really been any pull forwards of note. We've had the usual push pulls depending on where customers' plans are, but I would say there hasn't been what you consider a panic pulling. That's on the system side. You'd think that might also happen. You'd think you might get some activity on the aftermarket. One month into this quarter, we haven't seen that either. Our customers are behaving normally, and I think that's because they believe that we have a really good plan to support them going forward.

This is obviously globally as well. We are very pleased to have built up over multiple years a global operations footprint, and that is allowing us to continue to serve our customers.

Duksan Jang (Research Analyst)

Got it. Thank you for the color. Excluding all the tariffs, what are you seeing overall in customer inventory and utilization out of silicon carbide tools? Because I think you said you're still seeing a little bit of demand out of China.

Russell Low (President and CEO)

Right. I guess we've been talking about the green shoots and the opportunities for our end markets to recover. Since we are quite focused on the general mature, then you're talking about consumer spending, industrial, and automotive primarily. We are kind of expecting to see things start to improve, although at this stage, it's hard to say there's any evidence of that. One of the second-order effects of the tariffs, though, is I would say that it's actually caused a little bit of uncertainty in the market. What might have been improvements have maybe caused a little bit more uncertainty. We're definitely seeing pockets of improved utilization, but it's not broad-based yet. Jack, are you still there?

Jack Egan (Equity Research Analyst)

Nope.

Russell Low (President and CEO)

Oh, okay.

Operator (participant)

Our next question comes from David Duley with Steelhead Securities.

David Duley (Managing Principal)

Thanks for taking my question, and congratulations on the nice margin performance.

Russell Low (President and CEO)

Yeah. Thanks, David.

Thanks.

David Duley (Managing Principal)

Sure. Sure. My first question has to do with China. You mentioned, I think, that China revenue percentage declined to 37% in the quarter and then might be up in Q2. Could you give us a guess as to where you think it declines to for the whole year? I'm guessing that probably represents the bottom in Chinese revenue. Maybe I'm wrong, but maybe comment a little bit on that for us.

James Coogan (EVP and CFO)

Yeah. We have not provided full-year expectations necessarily for China just yet, but we do anticipate, like I said, we do anticipate it to increase here in the second quarter and then moderate through the rest of the year here. Based on what we understand today, we do anticipate China revenue being lower than what we saw for mix overall in 2024 versus 2025. As a result of that, that is kind of all the commentary we are going to provide at this point. We need to kind of see where the rest of the year flows out and what type of activity and opportunities may present themselves before we make any more meaningful comment on that.

David Duley (Managing Principal)

Okay. Just to be clear, the comments that you have made, I think it would indicate that the 37% that you achieved in Q1, most likely for the year, that that percentage would be down. Is that the message that you're trying to send us?

James Coogan (EVP and CFO)

It's going to all depend on the mix in the back half of the year and the averages over those periods of time, Dave. Again, we expect it to be lower than what we saw. I can say definitively is as of right now, we do expect it to be lower than what we saw in 2024 overall. Year-on-year, we do expect that percentage to be lower.

David Duley (Managing Principal)

Okay. And as far as the memory business goes, I think it's been kind of upticking the last few quarters. I was curious, and coincidentally, the Korean revenue was up as well. I'm sure those are related. I'm kind of wondering, has the memory business started to broaden out? Is it all three customers, or is it just one customer? Maybe some commentary on the breadth of the memory recovery.

Russell Low (President and CEO)

Okay. Hey, Dave. It's Russell. If you look at the uptick we had in memory last quarter, it was a pretty good uptick. It was all DRAM. Addressing NAND first, we haven't seen orders from NAND for a long time. If you remember, for us to receive NAND orders, it has to be an increase in the number of wafer starts.

You are aware that the NAND guys are basically looking to go more and more vertical. It is 1xx to 2xx and beyond. They are using this relatively quiet time to do a node change, which is very typical. That is increasing the bits dramatically, but it is not actually increasing the number of wafer starts. Regarding DRAM, which is pretty much where all of our revenue came from, we are seeing multiple customers look to grow their DRAM. Obviously, there are some customers that are doing well on HBM, and that is actually taking down capacity. There are other customers that are doing well on DRAM because of the DRAM capacity being taken down by HBM. We would say that DRAM is probably going to be modest for around for 2025. It is bouncing around a little bit. That is really the story at this stage, DRAM.

David Duley (Managing Principal)

Thank you.

Russell Low (President and CEO)

Thanks, Dave.

Operator (participant)

Our next question comes from Christian Schwab with Craig-Hallum Capital.

Christian Schwab (Senior Research Analyst)

Hey, good quarter, guys. I just want to follow up on the earlier line of questioning by Tom Diffely. Do you guys see increased capital intensity, in other words, obviously impact on equipment sales per wafer starts as the industry upgrades from 150 mm to 200 mm and moving from planar to trench, adding high energy? It seems that your dollar content per wafer start going forward should increase over time. Would you have any idea what percentage that would be?

Russell Low (President and CEO)

Hey, Christian. I think actually that's a great question. As people go from planar to trench, absolutely, it moves to a different toolset, and it's going to leverage the entire Purion platform. That does actually increase the density of implants, particularly in the high energy. You definitely see, I don't think there's any high-energy implants in a planar device that I'm aware of. It's moving to trench. You've now got to put the deeper implants in. Obviously, superjunction is the next level beyond that. As you also probably remember, there's basically no ability to diffuse dopant efficiently in silicon carbide. If you want to go deep, you now actually have to overlap a whole bunch of chained implants. Yes, we are seeing an increase in intensity of implant steps in silicon carbide devices as they go from mode to mode.

I don't think we've actually quantified that at this stage. I think we've kind of had in prior examples, we've talked about the rough number of machines you need for 100,000 wafer starts because we were trying to compare to memory. That's probably the closest we've come. I think you're going to see that you're going to see a transition in machine types. That's kind of what we've shown in the past as well. We used to start off just by shipping Purion M tools, and then people started to take the H200s and the XEs as they started to go into high-volume manufacturing and make a device transition. Yeah. I mean, does that answer your question, Christian?

Christian Schwab (Senior Research Analyst)

It does. Thank you. My next question is, of the silicon carbide production today, do you have a rough estimate of what percentage of the wafers are planar today and expectation of what percentage will move to trench over a given period of time?

Russell Low (President and CEO)

Okay. So I'd say that right now, I mean, this is kind of like there's transitions going on from 150 mm to 200 mm planar to trench. I can only think of one customer that's kind of like entrenched in planar. I think everybody else is looking to move to trench because it gives you a higher performance device. It's also a lot smaller, so you can pack an awful lot more devices on a wafer. It's also going to have a higher yield because it's less susceptible to crystal damage. I think you're going to see as people's capabilities grow, you will see this transition to trench and then on to superjunction, and you'll see this transition from 150 mm to 200 mm. The most advanced companies are going to move much more quickly. We've said before, we are the leaders in high-energy.

As they move to trench and superjunction, that plays very nicely into our strengths.

Christian Schwab (Senior Research Analyst)

Great. If I could just sneak in one last question. You guys mentioned inorganic growth opportunities. Can you give us an idea of is this bolt-on acquisitions that you're looking at, if there is such a thing in an industry with only two people? Are you looking, or is there a, are you looking for something that could be more transformative or something? Any kind of color of what that means, I guess, would be helpful.

James Coogan (EVP and CFO)

Yeah, understood. I think the goal here is to want to keep the aperture as wide open as we possibly can, right? We want to leverage the fact of our expertise and experience in the semiconductor capital equipment space to the best of our ability. We have talked about leveraging our global footprint, the fact that we have got field service folks, inventory depots, and operations next to all the sort of major customers throughout the world here. We believe there is opportunity for us to leverage that by potentially introducing new technologies into our ecosystem. As you noted, implant is a little bit of a niche application today, and there are not a ton of opportunities within that space to try to expand inorganically. That is one of the reasons why we are looking as wide and broad as we are.

As we go through it, though, we're going to continue to assess those opportunities relative to the other return characteristics we have, both on organic as well as shareholder return basis in making decisions on how and when to execute that. Unfortunately, that's probably all I can say relative to our efforts at this point in time. Like I said, it's wide open.

Christian Schwab (Senior Research Analyst)

Great. Thank you.

Russell Low (President and CEO)

Yep. Thanks.

Operator (participant)

Our next question comes from Mark Miller with The Benchmark Company.

Mark Miller (Senior Equity Research Analyst)

Thank you for your question. I'm wondering if you can give us any additional color or what's going on with your image customers.

Russell Low (President and CEO)

Sorry, Mark. Image sensor customers?

Tom Diffely (Managing Director and Director of Research)

Yes.

Russell Low (President and CEO)

Oh, okay. We are, again, it's very regional. We actually do have a customer, sorry, that's actually adding significant capacity. I think, obviously, the number one use of image sensors is phones, which is by far and away the biggest use, followed by cars. We are seeing a lot of sensors going into cars. I would say this one particular customer is adding significant capacity, and that's a little unusual. I do not think many of the other image sensor customers are adding much capacity at the moment. It's relatively quiet. I mean, again, mobile phones and automotive are the end markets, and they are fairly muted.

James Coogan (EVP and CFO)

Yeah. Just as a point of clarity for everyone, we did this quarter, we did embed image sensor sales as part of our general mature. I think we noted that in our prepared remarks. It will not be broken out on a go-forward basis. By all means, happy to talk about the trends that we see within that space and the opportunities that present themselves.

Mark Miller (Senior Equity Research Analyst)

I was a little surprised with your comments about not seeing a lot from NAND because NAND CapEx for the first time in a couple of years is increasing. I assume most of it's for capacity additions. Are you seeing any quoting activity, or is it still pretty dead?

Russell Low (President and CEO)

I would say that NAND is still pretty muted from our point of view. I remember, Mark, that we need new wafer starts. I'd say that NAND right now, they're beginning to build the Manhattan skyline. They're just going vertical. That adds significant depth and edge. It adds significant bits per wafer. It does not add a lot of new wafers. We need new wafers in order to drive new implants.

Mark Miller (Senior Equity Research Analyst)

Thank you.

Russell Low (President and CEO)

Thanks.

Operator (participant)

This concludes the question and answer session. I would now like to turn it back to David for closing remarks.

David Ryzhik (SVP of Investor Relations and Corporate Strategy)

Thanks, Operator. I want to thank everyone for joining the call and your interest in Axcelis. Operator, you can close the call.

Operator (participant)

Thank you for participating in today's conference. This does conclude the program. You may now disconnect.