Q4 2025 Axcelis Technologies Inc Earnings Call

February 17, 2026

Operator 1: Good day, ladies and gentlemen, and welcome to the Axcelis Technologies call to discuss the company results for the fourth quarter and full year 2025. My name is Victor, and I'll be your coordinator for today. I would 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.

Speaker #1: My name is Victor, and I'll be your coordinator for today. I would like to turn the presentation over to your host for today's call, David Ryzhik, Senior Vice President of Investor Relations and Corporate Strategy.

Speaker #1: Please proceed.

Speaker #2: Thank you, operator. This is David Ryzhik, Senior Vice President of Investor Relations and Corporate Strategy. With me today are Russell Low, President and CEO, and James Coogan, Executive Vice President and CFO.

David Ryzhik: Thank you, operator. This is David Ryzhik, Senior Vice President of Investor Relations and Corporate Strategy, and 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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.

David Ryzhik: 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. Please note that today's call is neither an offering of securities nor a solicitation of a proxy vote in connection with our previously announced transaction with Veeco. 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.

Speaker #2: 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 VICO, we will not be addressing questions related to the transaction.

Speaker #2: Please note that today's call is neither an offering of securities nor a solicitation of a proxy vote in connection with our previously announced transaction with VICO.

Speaker #2: During this call, we'll 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.

Speaker #2: Now, I'll turn the call over to President and CEO Russell Low.

Speaker #3: Thank you, David. And good afternoon, everyone, and thank you for joining us for the fourth quarter and full year 2025 earnings call. Beginning on slide four, we generated solid results in the fourth quarter with revenue of $238 million and non-GAAP earnings per diluted share of $1.49, both exceeding our outlook.

Russell Low: Thank you, David, and good afternoon, everyone, and thank you for joining us for the Fourth Quarter and Full Year 2025 Earnings Call. Beginning on slide 4, we generated solid results in the fourth quarter, with revenue of $238 million and non-GAAP earnings per diluted share of $1.49, both exceeding our outlook. Our better-than-expected results were primarily driven by stronger CS&I aftermarket revenue in the quarter, which had a favorable mix impact on our gross margins. Bookings in the fourth quarter improved significantly on a sequential basis, primarily led by power, general mature, and memory, specifically DRAM. Before I provide more details on the trends we're seeing by market segment, I'd like to provide a brief update on our pending merger with Veeco. We continue to make meaningful progress towards securing all the approvals required to close the merger.

Speaker #3: Our better-than-expected results were primarily driven by stronger CS&I aftermarket revenue in the quarter, which had a favorable mixed impact on our gross margins. Bookings in the fourth quarter improved significantly on a sequential basis, primarily led by power, general mature, and memory, specifically DRAM.

Speaker #3: Before I provide more details on the trends, we are seeing by market segment, I'd like to provide a brief update on our pending merger with VICO.

Speaker #3: We continue to make meaningful progress towards securing all the approvals required to close the merger. We are pleased that shareholders of both companies voted in favor of the transaction at our special meetings on February 6th.

Russell Low: We are pleased that shareholders of both companies voted in favor of the transaction at our special meetings on 6 February. We have also received regulatory clearance in several important jurisdictions and are actively engaged with the regulatory authorities in China for the final approval needed to complete the merger. We continue to expect closing in the second half of 2026. In the meantime, we are working closely with Veeco on integration planning to help ensure the combined organization is fully aligned and ready to hit the ground running on day one. As we collaborate more deeply with our Veeco counterparts, we are increasingly impressed by the clear alignment in our cultures, values, and our shared commitment to innovation and customer satisfaction.

Speaker #3: We have also received regulatory clearance in several important jurisdictions and are actively engaged with regulatory authorities in China for the final approval needed to complete the merger.

Speaker #3: We continue to expect closing in the second half of 2026. In the meantime, we are working closely with VICO on integration planning to help ensure the combined organization is fully aligned and ready to hit the ground running on day one.

Speaker #3: As we collaborate more deeply with our VICO counterparts, we are increasingly impressed by the clear alignment in our cultures, values, and our shared commitment to innovation and customer satisfaction.

Speaker #3: The integration planning process has reinforced our confidence in the potential of this merger and in our plans to come together as one company to unlock even greater value for all of our stakeholders.

Russell Low: The integration planning process has reinforced our confidence in the potential of this merger and in our plans to come together as one company to unlock even greater value for all of our stakeholders. Turning to slide five. In the quarter, as well as the full year, sales to mature node applications accounted for the majority of our system shipments, in particular, power and general mature. Now, on slide six, let me review our trends by end market. Within our power business, shipments to silicon carbide moderated slightly on a sequential basis. Consistent with our commentary over the past several quarters, customers continued to take a disciplined approach to capacity investments, following the significant build-out a few years ago, with many customers now prioritizing technology transitions.

Speaker #3: Turning to slide five, in the quarter, as well as the full year, sales to mature-node applications accounted for the majority of our system shipments in particular, power and general mature.

Speaker #3: Now, on slide six, let me review our trends by end market. Within our power business, shipments to silicon carbide moderated slightly on a sequential basis.

Speaker #3: Consistent with our commentary over the past several quarters, customers continued to take a disciplined approach to capacity investments, following the significant build-out a few years ago, with many customers now prioritizing technology transitions.

Speaker #3: As an example, a key driver of our CS&I strength in the quarter was system upgrades for a number of our silicon carbide tools at a customer location, where a customer converted their tools from 150 to 200 millimeter and chose to do this with our recently introduced Purion Power Series Plus platform while staying within the same footprint.

Russell Low: As an example, a key driver of our CS&I strength in the quarter was driven by system upgrades for a number of our silicon carbide tools at a customer location, where the customer converted their tools from 150 to 200 mm and chose to do this with our recently introduced Purion Power Series Plus platform, while staying within the same footprint. We also continue to see select customers in China expanding their silicon carbide device capacity and capabilities, while customers in other regions are focused on the next-generation technology investments, such as trench and super junction. We are seeing growing interest for our newly developed high-energy channeling capabilities, which are essential and necessary for super junction development.

Speaker #3: We also continue to see select customers in China expanding their silicon carbide device capacity and capabilities, while customers in other regions are focused on the next generation technology investments such as trench and superjunction.

Speaker #3: We are seeing growing interest for our newly developed high-energy channeling capabilities, which are essential and necessary for superjunction development. Broadly speaking, while near-term iron implant demand for silicon carbide applications is anticipated to remain muted as customers absorb their capacity, we expect strong long-term demand through the cycles, driven by clear secular trends such as the growing penetration rate of silicon carbide into electric vehicles, particularly as we see more 800-volt models released.

Russell Low: Broadly speaking, while near-term ion implant demand for silicon carbide applications is anticipated to remain muted as customers absorb their capacity, we expect strong long-term demand through the cycles, driven by clear secular trends, such as the growing penetration rate of silicon carbide into electric vehicles, particularly as we see more 800-volt models released. Growing content of silicon carbide within EVs, the growing overall volume of EVs on a global basis, and the growing adoption of silicon carbide outside of the automotive sector, such as solid-state transformers, circuit breakers, solar battery inverters, HVAC systems, industrial motor drives, aerospace and defense, just to name a few applications. Adding this all up, we remain excited about the long-term demand profile for silicon carbide, and we believe we are well-positioned in ion implant for this application.

Speaker #3: Growing content of silicon carbide within EVs the growing overall volume of EVs on a global basis and the growing adoption of silicon carbide outside of the automotive sector such as solid-state transformers, circuit breakers, solar battery inverters, HVAC systems, industrial motor drives, aerospace and defense, just to name a few applications.

Speaker #3: Adding this all up, we remain excited about the long-term demand profile for silicon carbide, and we believe we are well positioned in ion implant for this application.

Speaker #3: In our other power market segment, ship system revenue also moderated slightly on a sequential basis, primarily due to a muted demand trends in silicon IGBTs.

Russell Low: In our other power market segment, SiC system revenue also moderated slightly on a sequential basis, primarily due to a muted demand trends in silicon IGBTs. In general mature, revenue improved sequentially as customers made select investments, particularly in our high current tools. Overall, customers continue to manage capacity investments amid stabilizing auto industrial demand. However, we noticed a continued improvement in implant tool utilization rates across multiple customers in Q4. While we are not yet seeing signs of cycle recovery in CapEx spending for general mature process technologies, we are encouraged with the improved utilization rates. Turning to Slide 7. In advanced logic, we generated revenue on a follow-on order from an existing customer, and we continue to work closely with customers on next-generation technology needs, including implant for backside power contacts, as well as other mature modification implant applications.

Speaker #3: In general mature, revenue improved sequentially as customers made select investments, particularly in our high-current tools. Overall, customers continue to manage capacity investments amid stabilizing auto industrial demand; however, we noticed a continued improvement in implant tool utilization rates across multiple customers in the fourth quarter.

Speaker #3: While we are not yet seeing signs of a cycle recovery in CAPEX spending for general mature process technologies, we are encouraged with the improved utilization rates.

Speaker #3: Turning to slide seven, in advanced logic, we generated revenue on a follow-on order from an existing customer, and we continue to work closely with customers on next-generation technology needs, including implant for backside power contacts as well as other mature modification implant applications.

Speaker #3: Moving to our memory market, demand improved sequentially for DRAM and HBM applications, and we expect this momentum to extend into 2026 as customers expand capacity to address growing demand for AI-related applications.

Russell Low: Moving to our memory market, demand improved sequentially for DRAM and HBM applications, and we expect this momentum to extend into 2026 as customers expand capacity to address growing demand for AI-related applications. I'm also pleased to say that we secured an order for a high current system from a leading North American memory manufacturer, which is an important customer win that broadens our presence beyond our strong position in Korea. Interestingly, we received this new order prior to the completion of an existing system evaluation, which we view as an endorsement of our technology. In NAND, customers remain focused on higher layer counts, which does not drive incremental ion implantation demand. As a result, we continue to expect demand for NAND applications to remain muted in the near term.

Speaker #3: I'm also pleased to say that we secured an order for a high-current system from a leading North American memory manufacturer, which is an important customer win that broadens our presence beyond our strong position in Korea.

Speaker #3: Interestingly, we received this new order prior to the completion of an existing system evaluation, which we view as an endorsement of our technology. In NAND, customers remain focused on higher-layer counts, which does not drive incremental ion implantation demand.

Speaker #3: As a result, we continue to expect demand for NAND applications to remain muted in the near term. That said, recent improvements in NAND bit demand and pricing are encouraging, and we believe we are well positioned once our customers resume wafer capacity additions.

Russell Low: That said, recent improvements in NAND bit demand and pricing are encouraging, and we believe we are well-positioned once our customers resume wafer capacity additions, which we expect as a matter of when, not if. On Slide 8, let me wrap up my thoughts on 2025. I am pleased with our team's focused execution, given the changing macro environment throughout the year. We navigated the cyclical digestion period across our markets exceptionally well and focused aggressively on product development and customer engagement. Early this month, we announced the introduction of the Purion H6, our next generation high current ion implanter. The Purion H6 incorporates a series of notable technology advancements across the beam line, source, particle control, and dosimetry subsystems. The system delivers industry-leading dose repeatability as well as significant advancements in purity, precision, and productivity, supporting high current applications across advanced logic, memory, and mature process technology nodes.

Speaker #3: Which we expect as a matter of when not if. On slide eight, let me wrap up my thoughts on with our team's focus execution given the changing macroenvironment throughout the year.

Speaker #3: We navigated the cyclical digestion period across our market's exceptionally well and focused aggressively on product development and customer engagement. Earlier this month, we announced the introduction of the Purion H6, our next-generation high-current iron implanter.

Speaker #3: The Purion H6 incorporates a series of notable technology advancements across the beamline, source, particle control, and dosimetry subsystems. The system delivers industry-leading dose repeatability as well as significant advancements in purity, precision, and productivity, supporting high-current applications across advanced logic, memory, and mature process technology nodes.

Speaker #3: As devices scale and architectures become more challenging, customers are demanding tighter implant control and lower contamination, higher uptime, and lower overall cost of ownership, requirements the Purion H6 was engineered specifically to meet.

Russell Low: As devices scale and architectures become more challenging, customers are demanding tighter implant control, lower contamination, higher uptime, and lower overall cost of ownership, requirements the Purion H6 was engineered specifically to meet. In the fourth quarter, we delivered our strongest quarter of high current shipments in two years, and the introduction of Purion H6 builds on that momentum. We also delivered double-digit year-over-year growth in our CS&I aftermarket business, supported by our growing installed base and a deliberate strategic focus on upgrades and services, both of which we've reached record levels in 2025. Despite overall revenue declining in 2025, our non-GAAP gross margins grew by thirty basis points. In combination with disciplined cost control, we delivered strong profitability and cash flow in 2025. Now, on Slide 9, let me discuss our initial perspectives on 2026.

Speaker #3: In the fourth quarter, we delivered our strongest quarter of high-current shipments in two years, and the introduction of Purion H6 builds on that momentum.

Speaker #3: We also delivered double-digit year-over-year growth in our CS&I aftermarket business, supported by our growing installed base and a deliberate strategic focus on upgrades and services, both of which reached record levels in 2025.

Speaker #3: Despite overall revenue declining in 2025 and non-GAAP gross margins growing by 30 basis points, in combination with disciplined cost control, we delivered strong profitability and cash flow in 2025.

Speaker #3: Now, on slide nine, let me discuss our initial perspectives on 2026. We expect our memory business, led by DRAM, to grow as customers invest in capacity to meet accelerating AI-driven demand.

Russell Low: We expect our memory business, led by DRAM, to grow as customers invest in capacity to meet accelerating AI-driven demand. In the power and general mature markets, while utilization trends are improving, customers are continuing to manage existing capacity following a strong investment cycle over the past several years. As a result, we expect this to result in slightly lower year-over-year revenue in these end markets. However, over the long term, we anticipate power and general mature to be a key beneficiary of electrification and the increase in demand for efficient power generation, delivery, and use. Importantly, while the rapid growth of AI, large language models has been a strong catalyst for advanced compute and memory demand, we expect the power semiconductor market to also benefit from the growing need for power associated with AI.

Speaker #3: In the power and general mature markets, while utilization trends are improving, customers are continuing to manage existing capacity following a strong investment cycle over the past several years.

Speaker #3: As a result, we expect this to result in slightly lower year-over-year revenue in these end markets. However, over the long term, we anticipate power and general mature to be a key beneficiary of electrification and the increasing demand for efficient power generation delivery and use.

Speaker #3: Importantly, while the rapid growth of AI large language models has been a strong catalyst for advanced compute and memory demand, we expect the power semiconductor market to also benefit from the growing need for power associated with AI. This includes silicon, silicon carbide, and gallium nitride applications distributing power all the way from the grid to the core.

Russell Low: This includes silicon, Silicon Carbide, and Gallium Nitride applications, distributing power all the way from the grid to the core. Moreover, we also anticipate the emergence of physical AI, such as robotics, autonomous vehicles, and many other devices on the edge, to become yet another secular driver of power devices as well as general mature technologies such as MCUs, image sensors, analog, and others. Finally, in advanced logic, we anticipate relatively similar revenue levels in 2025. We are making progress in our long-term strategy to penetrate this market, though it will take time before our evaluations translate into meaningful volume as we engage with customers on next generation logic architectures. Taken together, we currently anticipate overall revenue to be relatively flat compared to 2025 levels.

Speaker #3: Moreover, we also anticipate the emergence of physical AI such as robotics autonomous vehicles and many other devices on the edge to become yet another sector driver of power devices as well as general mature technologies such as MCUs, image sensors, analog, and others.

Speaker #3: And finally, in advanced logic, we anticipate relatively similar revenue levels in 2025. We are making progress in our long-term strategy to penetrate this market, though it will take time before our evaluations translate into meaningful volume as we engage with customers on next-generation logic architectures.

Speaker #3: Taken together, we currently anticipate overall revenue to be relatively flat compared to 2025 levels. With that, let me turn the call over to Jamie for a closer look at our results and outlook.

Russell Low: With that, let me turn the call over to Jamie for a closer look at our results and outlook. Jamie?

Speaker #3: Jamie?

Speaker #1: Thank you, Russell, and good afternoon, everyone. I'll first start with some additional detail on our fourth quarter and full-year results before turning to our outlook for Q1.

Jamie Coogan: Thank you, Russell, and good afternoon, everyone. I'll first start with some additional detail on our fourth quarter and full year results before turning to our outlook for Q1. Starting on slide 10, fourth quarter revenue was $238 million, with systems revenue at $156 million, and CS&I revenue reaching another quarterly record of $82 million, both above our expectations for the quarter. Our better-than-expected CS&I revenue was primarily driven by strong demand for upgrades as customers look to optimize their technology within the same footprint. In addition, the quarter also benefited from some pull-in activity, given improving utilization rates. We are pleased with our execution in CS&I, and our aftermarket offerings are resonating with customers. For the full year, CS&I revenue grew 14% on a year-over-year basis, led by strong growth in upgrades and services revenue.

Speaker #1: Starting on slide 10, fourth-quarter revenue was $238 million. With systems revenue at $156 million, and CS&I revenue reaching another quarterly record of $82 million, both above our expectations for the quarter.

Speaker #1: Our better-than-expected CS&I revenue was primarily driven by strong demand for upgrades, as customers looked to optimize their technology within the same footprint. In addition, the quarter also benefited from some polling activity, given improving utilization rates.

Speaker #1: We are pleased with our execution in CS&I and our aftermarket offerings are resonating with customers. For the full year, CS&I revenue grew 14% on a year-over-year basis, led by strong growth in upgrades and services revenue, a key driver here is the deliberate strategic initiatives we've undertaken over the past few years to drive better adoption of upgrades and service contracts.

Jamie Coogan: A key driver here is the deliberate strategic initiatives we've undertaken over the past few years to drive better adoption of upgrades and service contracts. Moving to consolidated revenue, from a geographic perspective, China decreased sequentially to 32% of total revenue, down from 46% in the prior quarter, which was consistent with our expectations as customers continued to digest the robust investments they've made in mature node capacity over the past few years. Turning to the other regions, we saw revenue in Europe at 15%, the US at 14%, Korea at 13%, Japan at 9%, Taiwan at 3%, and the rest of the world at 13%.

Speaker #1: Moving to consolidated revenue, from a geographic perspective, China decreased sequentially to 32% of total revenue, down from 46% in the prior quarter, which was consistent with our expectations as customers continue to digest the robust investments they've made in mature node capacity over the past few years.

Speaker #1: Turning to the other regions, we saw revenue in Europe at 15%, the US at 14%, Korea at 13%, Japan at 9%, Taiwan at 3%, and the rest of the world at 13%.

Speaker #1: For the full year 2025, our revenue from China was 42% of total revenue, while the US came in at 16%, Korea at 13%, Europe at 11%, Taiwan and Japan at 5%, and the rest of the world at 7%.

Jamie Coogan: For the full year 2025, our revenue from China was 42% of total revenue, while US came in at 16% and Korea at 13%, Europe at 11%, Taiwan and Japan at 5%, and the rest of the world at 7%. As Russell mentioned, bookings increased notably on a sequential basis to $128 million, and we exited the fourth quarter with a backlog of $457 million. Now, turning to slide 11. I'd like to share some additional detail on our GAAP and non-GAAP results. GAAP gross margin was 47% in the quarter, and on a non-GAAP basis, gross margin was 47.3%, above our outlook of 43%, primarily due to a higher mix of CS&I, as well as a more favorable mix of upgrades within CS&I.

Speaker #1: As Russell mentioned, bookings increased notably on a sequential basis to $128 million, and we exited the fourth quarter with a backlog of $457 million.

Speaker #1: Now turning to slide 11, I'd like to share some additional detail on our gap and non-gap results. Gap gross margin was 47% in the quarter, and on a non-gap basis, gross margin was 47.3%, above our outlook of 43% primarily due to a higher mix of CS&I as well as a more favorable mix of upgrades within CS&I.

Speaker #1: Gap operating expenses totaled $76 million, and on a non-gap basis, operating expenses were $62 million. Above our outlook of $56 million, primarily due to higher variable compensation expenses associated with the better-than-expected fourth-quarter performance.

Jamie Coogan: GAAP operating expenses totaled $76 million, and on a non-GAAP basis, operating expenses were $62 million, above our outlook of $56 million, primarily due to higher variable compensation expenses associated with the better-than-expected Q4 performance. Our non-GAAP results exclude transaction-related expenses associated with the pending Veeco merger, along with other typical non-GAAP adjustments, such as share-based compensation and restructuring charges. In this context, Q4 reflects an expense from a one-time voluntary retirement program, and we recorded a portion of that expense in the period. As a result, our GAAP operating margin was 15.2%, while our non-GAAP operating margin was 21.1%. Moreover, in Q4, we delivered adjusted EBITDA of $55 million, reflecting an adjusted EBITDA margin of 22.9%.

Speaker #1: Our non-gap results exclude transaction-related expenses associated with the pending VICO merger, along with other typical non-gap adjustments such as share-based compensation and restructuring charges.

Speaker #1: In this context, the fourth-quarter reflects an expense from a one-time voluntary retirement program, and we recorded a portion of that expense in the period.

Speaker #1: As a result, our GAAP operating margin was 15.2%, while our non-GAAP operating margin was 21.1%. Moreover, in the fourth quarter, we delivered adjusted EBITDA of $55 million, reflecting an adjusted EBITDA margin of 22.9%.

Speaker #1: We generated approximately $4 million in other income with the sequential increase primarily due to foreign currency. Our tax rate was approximately 14% in the fourth quarter, both on a gap and non-gap basis.

Jamie Coogan: We generated approximately $4 million in other income, with the sequential increase primarily due to foreign currency. Our tax rate was approximately 14% in the fourth quarter, both on a GAAP and non-GAAP basis. Our weighted average diluted share count in the quarter was 31.1 million shares. This all translates into GAAP diluted earnings per share of $1.10, which was higher than our outlook of $0.76. Non-GAAP diluted earnings per share was $1.49, also exceeding our outlook of $1.12. The higher-than-expected non-GAAP diluted earnings per share was primarily due to better-than-expected revenue and a favorable mix. For the full year, we delivered GAAP gross margin of 44.9% and non-GAAP gross margin of 45.2%, a 30 basis point increase year-over-year despite the lower revenue.

Speaker #1: Our weighted average diluted share count in the quarter was 31.1 million shares. This all translates into GAAP diluted earnings per share of $1.10, which was higher than our outlook of $0.76.

Speaker #1: Non-gap diluted earnings per share was $1.49, also exceeding our outlook of $1.12. The higher-than-expected non-gap diluted earnings per share was primarily due to better-than-expected revenue and a favorable mix.

Speaker #1: For the full year, we delivered GAAP gross margin of 44.9% and non-GAAP gross margin of 45.2%, a 30 basis point increase year-over-year despite the lower revenue.

Speaker #1: This was due to a favorable mix and the continued focus on cost control. For the full year, adjusted EBITDA was $177 million, reflecting an adjusted EBITDA margin of 21.1%.

Jamie Coogan: This was due to favorable mix and a continued focus on cost control. For the full year, adjusted EBITDA was $177 million, reflecting an adjusted EBITDA margin of 21.1%. We generated approximately $19 million in other income this year, and our tax rate was approximately 13% for the full year on a GAAP and a non-GAAP basis. This all translates into GAAP diluted earnings per share of $3.80, or a non-GAAP diluted earnings per share of $4.88. Moving to our cash flow and balance sheet data shown on slide 12. In the fourth quarter, free cash flow was negative $9 million, driven by the timing of our sales, which were skewed more to the month of December. In turn, this increased our days' sales outstanding.

Speaker #1: We generated approximately $19 million in other income this year and our tax rate was approximately 13% for the full year on a gap and a non-gap basis.

Speaker #1: This all translates into GAAP diluted earnings per share of $3.80, or a non-GAAP diluted earnings per share of $4.88. Moving to our cash flow and balance sheet data, shown on slide 12, in the fourth quarter, free cash flow was negative $9 million, driven by the timing of our sales, which were skewed more to the month of December.

Speaker #1: In turn, this increased our day's sales outstanding. In addition, our cash flow was negatively impacted by approximately $5 million in cash transaction expenses associated with the pending VICO merger.

Jamie Coogan: In addition, our cash flow was negatively impacted by approximately $5 million in cash transaction expenses associated with the pending Veeco merger. For the full year 2025, however, we generated robust free cash flow of $107 million, and despite the decline in our revenue, this reflects strong cash generation of our business. Turning to share repurchases. In the fourth quarter, we repurchased approximately $25 million in shares and have $110 million remaining under the share repurchase program previously authorized by the Axcelis Board of Directors. For the full year, we repurchased approximately $121 million of shares. We exited the fourth quarter with a strong balance sheet consisting of $557 million of cash, cash equivalents, and marketable securities on hand.

Speaker #1: For the full year 2025, however, we generated robust free cash flow of $107 million, and despite the decline in our revenue, this reflects strong cash generation by our business.

Speaker #1: Turning to share repurchases, in the fourth quarter, we repurchased approximately $25 million in shares and have $110 million remaining under the share repurchase program, previously authorized by the Axcelis Board of Directors.

Speaker #1: For the full year, we repurchased approximately $121 million of shares. We exited the fourth quarter with a strong balance sheet consisting of $557 million of cash, cash equivalents, and marketable securities on hand. It's important to note that this includes $182 million of long-term securities.

Jamie Coogan: It's important to note that this includes $182 million of long-term securities. With that, let me discuss our Q1 outlook on slide 13. All measures will be non-GAAP, with the exception of revenue. We expect revenue in the Q1 of approximately $195 million. The sequential decline is expected to be across both systems and CS&I. In systems, we have seen a few pushouts due to the timing of available clean room space. And in CS&I, there's some seasonality at play, which typically results in higher volume in the Q4, given customers like to manage their budgets into year-end. In addition, as Russell noted, we saw a large customer upgrade in the Q4 that we do not expect to recur in the Q1.

Speaker #1: With that, let me discuss our first quarter outlook on slide 13. All measures will be non-gap, with the exception of revenue. We expect revenue in the first quarter of approximately 195 million dollars.

Speaker #1: The sequential decline is expected to be across both Systems and CS&I. In Systems, we have seen a few push-outs to the timing of available clean room space, and in CS&I, there's some seasonality at play, which typically results in higher volume in the fourth quarter, given customers like to manage their budgets into year-end.

Speaker #1: In addition, as Russell noted, we saw large customer upgrade in the fourth quarter that we do not expect to recur in the first quarter.

Speaker #1: And finally, a portion of the CS&I upside we saw in the fourth quarter was pulled forward from the first quarter. We expect non-gap gross margins of approximately 41%.

Jamie Coogan: Finally, a portion of the CS&I upside we saw in the Q4 was pulled forward from the Q1. We expect non-GAAP gross margins of approximately 41%. The sequential decline is primarily due to less favorable mix and lower volume relative to the Q4. More specifically, we anticipate a higher volume of sales into the memory market, which typically carry lower gross margins due to the nature of the systems they are buying. In addition, we anticipate a sequential decline in CS&I revenue, combined with a lower mix of upgrades, which typically carry higher gross margins. Finally, to a lesser extent, we anticipate a modest incremental impact from tariffs, as a greater mix of our inventory includes the tariff impact and older inventory is cycled out. We expect non-GAAP operating expenses of approximately $59 million in the Q1.

Speaker #1: The sequential decline is primarily due to less favorable mix and lower volume relative to the fourth quarter. More specifically, we anticipate a higher volume of sales into the memory market, which typically carry lower gross margins due to the nature of the systems they are buying.

Speaker #1: In addition, we anticipate a sequential decline in CS&I revenue combined with a lower mix of upgrades, which typically carry higher gross margins. And finally, to a lesser extent, we anticipate a modest incremental impact from tariffs as a greater mix of our inventory includes the tariff impact in older inventory is cycled out.

Speaker #1: We expect non-gap operating expenses of approximately 59 million dollars in the first quarter, adjusted EBITDA in the first quarter is expected to be approximately 26 million dollars, and finally, we estimate non-gap diluted earnings per share in the first quarter of approximately 71 cents.

Jamie Coogan: Adjusted EBITDA in the first quarter is expected to be approximately $26 million. Finally, we estimate non-GAAP diluted earnings per share in the first quarter of approximately $0.71. As Russell indicated, we anticipate full year 2026 revenue to be approximately flat compared to 2025 levels. We expect revenue to be second half weighted. We anticipate growth in our memory market to offset a decline in our power in general mature markets. We currently estimate full year 2026 non-GAAP gross margins of approximately low to mid 40%. The year-over-year decline is primarily due to the anticipated stronger mix of memory business in 2026 relative to our other markets. In addition, as I referenced earlier, we anticipate a modest year-over-year impact from tariffs, which we estimate at less than 100 basis points.

Speaker #1: As Russell indicated, we anticipate full year 2026 revenue to be approximately flat compared to 2025 levels, and we expect revenue to be second half weighted.

Speaker #1: We anticipate growth in our memory market to offset a decline in our power and general mature markets. We currently estimate full year 2026 non-gap gross margins of approximately low to mid-40%.

Speaker #1: The year-over-year decline is primarily due to the anticipated stronger mix of memory business in 2026 relative to our other markets. In addition, as I referenced earlier, we anticipate a modest year-over-year impact from tariffs, which we estimate at less than 100 basis points.

Speaker #1: As we think about operating expenses for the year, we expect to continue to balance investments in product innovation to drive organic growth in our business while remaining disciplined on cost.

Jamie Coogan: As we think about operating expenses for the year, we expect to continue to balance investments in product innovation to drive organic growth in our business while remaining disciplined on cost. As a result, we expect quarterly non-GAAP operating expenses for the balance of the year to remain relatively similar to anticipated first quarter levels. And finally, we anticipate our tax rate to be approximately 15% for the full year. In summary, we're pleased with how we performed in 2025, despite a softer demand backdrop in our power and general mature markets. While systems revenue declined on a year-over-year basis, we delivered strong growth in our CS&I business. We grew our gross margins, and we delivered robust free cash flow while opportunistically increasing our pace of share buyback.

Speaker #1: As a result, we expect quarterly non-GAAP operating expenses for the balance of the year to remain relatively similar to anticipated first quarter levels. And finally, we anticipate our tax rate to be approximately 15% for the full year.

Speaker #1: In summary, we're pleased with how we performed in the backdrop in our power and general mature markets. While systems revenue declined on a year-over-year basis, we delivered strong growth in our CS&I business.

Speaker #1: We grew our gross margins, and we delivered robust free cash flow while opportunistically increasing our pace of share buyback. We enter 2026 in a solid financial position and are excited to close our pending merger with VICO, which we believe will enable us to unlock the full potential of the combined company and drive long-term value creation for our shareholders.

Jamie Coogan: We entered 2026 in a solid financial position and are excited to close our pending merger with Veeco, which we believe will enable us to unlock the full potential of the combined company and drive long-term value creation for our shareholders. With that, let me hand the call back to Russell for closing remarks. Russell?

Speaker #1: With that, let me hand the call back to Russell for closing remarks. Russell?

Speaker #2: Thank you, Jamie. As we look ahead, we remain focused on disciplined execution and advancing our technology roadmaps that differentiate Axcelis across our end markets.

Russell Low: Thank you, Jamie. As we look ahead, we remain focused on disciplined execution and advancing our technology roadmaps that differentiate Axcelis across our end markets. The progress we made in 2025, from product innovations to acceleration our CS&I business, to operational excellence, positions us well as we enter an important year for the company. With respect to our pending merger with Veeco, we anticipate significant long-term opportunities as a combined company. Together, we expect to be even better positioned to capitalize on the secular tailwinds driven by AI and electrification, and expect to leverage the complementary strengths across our portfolios and our people to deliver greater value for all stakeholders. I want to thank our customers, employees, partners, and shareholders for their continued support and trust in Axcelis. With that, operator, we are ready to take questions.

Speaker #2: The progress we've made in 2025 from product innovations to acceleration in our CS&I business to operational excellence positions us well as we enter an important year for the company.

Speaker #2: With respect to our pending merger with VICO, we anticipate significant long-term opportunities as a combined company. Together, we expect to be even better positioned to catalyze on the secular tailwinds driven by AI and electrification, and expect to leverage the complementary strengths across our portfolios and our people to deliver greater value for all stakeholders.

Speaker #2: I want to thank our customers, employees, partners, and shareholders for their continued support and trust in Axcelis. With that, operator, we're ready to take questions.

Speaker #3: Thank you. And 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.

Operator 1: Thank you. And as a reminder, 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. Please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. One moment. One moment for our first question. Our first question will come from the line of Jed Dorsheimer from William Blair. Your line is open.

Operator: Thank you. And as a reminder, 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. Please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. One moment. One moment for our first question. Our first question will come from the line of Jed Dorsheimer from William Blair. Your line is open.

Speaker #3: Please give yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. One moment. One moment for our first question.

Speaker #3: Our first question will come from the line of Jed Doroshimmer from William Blair. Your line is open.

Jed Dorsheimer: Hi, thanks, guys, and congrats on Q4. I guess question for me is just in the memory market, congratulations on getting, you know, the high current into the US memory manufacturer. I'm wondering if you might be able to provide a bit more color as to whether or not this was, you know, more of a second sourcing opportunity or, you know, I just look at the Q4 to Q1 transition, and I know you said that memory is gonna be stronger. Do you anticipate that that new customer is ramping up on the capacity expansion? Or, you know, how to think about that, and then I have a follow-up question.

Speaker #4: Hi. Thanks, guys. And congrats on Q4. I guess question for me is just that in the memory market, congratulations on getting the high current into the US memory manufacturer.

Speaker #4: I'm wondering if you might be able to provide a bit more color as to whether or not this was more of a second sourcing opportunity, or if I just look at the Q4 to Q1 transition. And I know you said that memory is going to be stronger.

Speaker #4: Do you anticipate that that new customer is ramping up on the capacity expansion, or how to think about that? And then I have a follow-up question.

Speaker #2: Yeah. Hey, Jed. It's Russell. So when I think about memory, obviously, I'm talking about DRAM specifically, and the demand is going up and up pretty much driven by AI.

Russell Low: Yeah. Hey, Jed, it's Russell. So, when I think about memory, obviously, I'm talking about DRAM specifically, and, you know, the demand is going up and up.

Russell Low: ... pretty much driven by AI. What we're seeing right now is that, basically, it is clean room space limited. So we're seeing many, many customers trying to slide an extra couple of tools in to increase their capacity, but you won't really see large numbers of tools until you actually open up the new, the new fabs that are coming through. So I think you see them in the press. Each one of the really large DRAM manufacturers have plans to open new factories in the near term. So I think what you'll see is that that's we, we'll see, you know, our DRAM significantly up in 2026 compared to 2025, although somewhat off a lower base in 2025.

Speaker #2: What we're seeing right now is that, basically, it is cleanroom space-limited. So we're seeing many, many customers trying to slide an extra couple of tools in to increase their capacity.

Speaker #2: But you won't really see large numbers of tools until you actually open up the new fabs that are coming through. So I think you see them in the press.

Speaker #2: Each one of the really large DRAM manufacturers have plans to open new factories in the near term. So I think what you'll see is that that's we'll see our DRAM significantly up in 2026 compared to 2025, although somewhat of a lower base in '25.

Speaker #2: But we're looking to see that momentum continue in to 2027 as the basically the bottleneck, which is clean room space, starts to dissipate. And there'll be more tools coming out.

Russell Low: But we're looking to see that momentum continue into 2027 as the, basically, the bottleneck, which is clean room space, start to dissipate, and there'll be more tools coming out, and that'll be across all the, all the DRAM manufacturers.

Speaker #2: And that'll be across all the DRAM manufacturers.

Jed Dorsheimer: That's helpful. Thanks. And then just on this, CS&I, and specifically the silicon carbide, you know, if you look at your base that's out there, what percentage has converted from the 150 to 200 already? And where I'm going with this is just to try and understand sort of that conversion premium, in the CS&I business that you saw in Q4. You know, what's left out there, to kind of run through or capture?

Speaker #4: That's helpful. Thanks. And then just on this CS&I and specifically the silicon carbide if you look at your base that's out there, what percentage has converted from the 150 to 200 already?

Speaker #4: And where I'm going with this is just to try to understand, sort of, that conversion premium in the CS&I business that you saw in Q4.

Speaker #4: What's left out there to kind of run through or capture?

Russell Low: That's a great question, Jed. So I guess the question is, what is the market potential for a 6-inch to 8-inch transition, yeah, in terms of upgrades?

Speaker #2: That's a great question, Jed. So I guess the question is, what is the market potential for a six-inch to eight-inch transition, yeah, in terms of upgrades?

Russell Low: That's a great question, Jed. So I guess the question is, what is the market potential for a 6-inch to 8-inch transition, yeah, in terms of upgrades?

Speaker #4: Yes. Yep.

Jed Dorsheimer: Yes. Yep.

Russell Low: So I would say that only a very small part of our installed base has gone to 200mm. It's still very much in that transition phase, and kind of the leaders are trying to get there. I'd say the leaders, typically outside of China, are trying to get there first. I think that's where they're gonna have the biggest cost advantage. So I think there's ample opportunity to continue to, you know, provide these really high-value upgrades into the field. I think, you know, I should just clarify that, yes, there was a large customer going from 6-inch to 8-inch, but they also upgraded the system as well to our Purion Power Plus series, which was kind of an upgrade on top of an upgrade.

Speaker #2: So I would say that only a very small part of our installed base has gone to 200 millimeter. It's still very much in that transition phase and kind of the leaders are trying to get there.

Speaker #2: And I'd say the leaders, typically outside of China, are trying to get there first. I think that's where they're going to have the biggest cost advantage.

Speaker #2: So, I think there's ample opportunity to continue to provide these really high-value upgrades into the field. And I think I should just clarify that, yes, there was a large customer going from six-inch to eight-inch, but they also upgraded the system as well to our Purion Power Plus series, which was kind of an upgrade on top of an upgrade.

Speaker #2: So that really did reduce the cost of ownership. And like Jamie said in his prepared remarks, that was within the same footprint of the tool.

Russell Low: So, that really did reduce the cost of ownership. Like Jamie said in his prepared remarks, that was within the same footprint of the tool. So this really is a field upgradable system that, you know, continues to give value.

Speaker #2: So this really is a field upgradable system. That gives continues to give value.

Speaker #4: Great. I'll jump back in the queue. Thanks, guys.

Jed Dorsheimer: Great. I'll jump back in queue. Thanks, guys.

Speaker #2: Thanks.

Russell Low: Thanks.

Speaker #3: Thank you.

Operator 1: Thank you.

Operator: Thank you.

Jamie Coogan: Thanks. Thanks, Jed.

Speaker #4: Thanks, Jed.

Operator 1: One moment for our next question. Next question comes from the line of Dennis Piatchanin from Needham. Your line is open.

Operator: One moment for our next question. Next question comes from the line of Dennis Piatchanin from Needham. Your line is open.

Speaker #3: One moment for our next question. Next question will come from the line of Dennis Piaccinin from Needham. Your line is open. Great. Thanks, Flynn.

Denis Pyatchanin: Great. Thanks for letting us ask a few questions. So regarding the strong bookings that you guys are seeing, can you tell us maybe a little bit more about which two or three segments are driving this growth?

Speaker #3: To ask a few questions. So, regarding the strong bookings that you guys are seeing, can you tell us maybe a little bit more about which two or three segments are driving this growth?

Russell Low: I'd say that it's actually so if you look at our revenue history and where those segments have been, I'd say that our bookings have pretty much matched, you know, our prior, so it's nothing unusual. And while we're seeing a bump up in memory, I just wanna mention that memory typically books and ships in the same quarter, so you don't typically see a lot of memory in our backlog. There's a little bit there, depending on where the quarter ends, but ultimately, it's still general, mature, and power are the main parts of our bookings.

Speaker #2: I'd say that it's actually so if you look at our revenue history and where those segments have been, I'd say that our bookings have pretty much matched our prior.

Speaker #2: So it's nothing unusual. And while we're seeing a bump up in memory, I just want to mention that memory typically books and ships in the same quarter.

Speaker #2: So you don't typically see a lot of memory in our backlog. There's a little bit there depending on where the quarter ends. But ultimately, it's still general mature and power are the main parts of our bookings.

Denis Pyatchanin: Understood. And given the outlook for, you know, approximately flat revenue year over year for 2026 versus 2025, and given the strength that we're seeing in DRAM from both, you know, HBM and DDR5, can we assume that both general mature and both segments within power are showing some weakness throughout the year?

Speaker #3: Understood. And given the outlook for approximately flat revenue year over year for 2026 versus 2025, and given the strength that we're seeing in DRAM from both HBM and DDR5, can we assume that both general mature and both segments within power are showing some weakness throughout the year?

Speaker #2: So I think we've kind of said that general mature is slightly down, but we are seeing the utilization rates coming up. So obviously, our customers are seeing, hopefully, a rebound in revenue, but that's because they're now getting to utilize the tools they already have.

Russell Low: So I think we've kind of said that, you know, general mature is slightly down, but we are seeing the utilization rates coming up. So obviously, our customers are seeing, you know, hopefully a rebound in revenue, but that's because they're now getting to utilize the tools they already have. Once those tools are up to high utilization rates, that's when they'll start to buy more tools. So certainly, a very positive sign; it's just that we're further down the supply chain, so that I would say that we're slightly down year over year with rising, you know, utilization rates. Regarding power, I'd say power is slightly down, although it's still a large part of our revenue and is still doing, I'd say, relatively well.

Speaker #2: Once those tools are up to high utilization rates, that's when they start to buy more tools. So it's certainly a very positive sign. It's just that we're further down the supply chain.

Speaker #2: So, I would say that we're slightly down year over year with rising utilization rates. Regarding power, I'd say power is slightly down, although it's still a large part of our revenue, and it's still doing, I'd say, relatively well.

Russell Low: And when I look at power, I think about the long-term secular trends, electrification, for example, all the way from generating, you know, efficient energy, transporting efficient energy, and using less of it. I really do think that there's a great opportunity in the long-term secular trends for power. So while they're taking a bit of a pause, and I say, it's a slight down, you're seeing, you know, the slack being picked up by memory, and like I said before, memory. Right now, the bottleneck is the clean room space.

Speaker #2: And when I look at power, I think about the long-term secular trends. Electrification, for example, all the way from generating efficient energy, transporting efficient energy, and using less of it, I really do think that there's a great opportunity in the long-term secular trends for power.

Speaker #2: So while they're taking a bit of a pause, and I say it's a slight down, you're seeing the slack being picked up by memory and, like I said before, memory, the right now, the bottleneck is the clean room space.

Denis Pyatchanin: Understood. And-

Speaker #3: Understood.

Jamie Coogan: Yeah, I did-

Speaker #4: Yeah, I did.

Speaker #3: Sorry?

Denis Pyatchanin: Sorry?

Speaker #4: Oh, go ahead, Dennis.

Jamie Coogan: Oh, go ahead, Dennis.

Speaker #3: Oh, I was just going to say, is there any way to provide a little bit more color on whether Power SiC or other power is looking a little bit stronger over the next few quarters, or even throughout 2026?

Denis Pyatchanin: I was gonna say, is there any way to provide a little bit more color on, like, whether power SiC or other power is looking a little bit stronger over the next few quarters or, you know, even throughout 2026?

Speaker #4: I would—yeah, I would say our current view is, it's like, what we're really talking about is a handful of systems, Dennis, right? And probably both of those segments, right, lower than the year-over-year prior year.

Jamie Coogan: Yeah, I would say our current view is it's like what we're really talking about is a handful of systems, Dennis, right? In probably both of those segments, right? Lower than the year-over-year prior year. You know, as we look out, what we're trying to just be cautious on is calling the timing of a recovery, right? We're seeing those encouraging signs, as Russell said, in utilization rates. You know, that's helping to contribute to some of the incremental CS&I volume that we are seeing as well. So, you know, we are getting some beneficial, you know, financial performance from those improved utilization rates.

Speaker #4: And as we look out, what we're trying to just be cautious on is calling the timing of a recovery, right? We're seeing those encouraging signs, as Russell said.

Speaker #4: In utilization rates, that's helping to contribute to some of the incremental CS&I volume that we are seeing as well. So, we are getting some beneficial financial performance from those improved utilization rates.

Speaker #4: And similar to our approach last year with calling a memory recovery, we want to just kind of see it in the data before we kind of we're willing to put that out there.

Jamie Coogan: You know, similar to our approach last year with, you know, calling a memory recovery, we want to just kind of see it in the data before we kind of, you know, we're willing to put that out there. What I'd suggest is we're seeing those encouraging signs, but we're not yet seeing those order rates pick up at that rate just yet for us to call that a slight recovery in the cycle for those markets.

Speaker #4: What I'd suggest is we're seeing those encouraging signs, but we're not yet seeing those the order rates pick up at that rate just yet for us to call that a slight the recovery in the cycle for those markets.

Speaker #3: Understood. Yeah. Appreciate the color, guys. Thank you.

Denis Pyatchanin: Understood. Yeah. Appreciate the color, guys. Thank you.

Speaker #4: Yep.

Jamie Coogan: Yep.

Speaker #5: Thanks, Dennis.

Jack Egan: Thanks, Dennis.

Jamie Coogan: Thanks, Dennis.

Speaker #3: Thank you. One moment for our next question. Our next question will come from the line of Christian Swab from Craig Halem. Your line is open.

Operator 2: Thank you. One moment for our next question. Our next question will come from the line of Christian Schwab from Craig-Hallum. Your line is open.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Christian Schwab from Craig-Hallum. Your line is open.

Christian Schwab: Great. Thanks for taking my question. I just want to get back to memory for a second. So, you know, your largest customer in Korea is taking, you know, some capacity off of NAND for DRAM, for high-bandwidth memory. Plus, we really need a substantial increase of wafer starts in DRAM specifically, not NAND, given layer count increases, in order to get supply and demand more in balance. So are you suggesting that you think, you know, others in the space are talking about, you know, a super memory CapEx cycle, since you really only have one competitor and our leading supplier is the largest. Are you suggesting that you don't have the orders in hand for the second half of 2026 yet, or are you suggesting that 2027 should be a fantastic year?

Speaker #6: Great. Thanks for taking my question. I just want to get back to memory for a second. So your largest customer in Korea is taking some capacity off of NAND for DRAM for high bandwidth memory, plus we really need a substantial increase of wafer starts in DRAM specifically, not NAND.

Speaker #6: Given layer count increases, in order to get supply and demand more in balance. So, are you suggesting that you think others in the space are talking about a super memory capex cycle, since you really only have one competitor and are the leading supplier to the largest?

Speaker #6: Are you suggesting that you don't have the orders in hand for the second half of 2026 yet, or are you suggesting that 2027 should be a fantastic year?

Russell Low: So a couple of things there, Christian. So I think what we're saying is that typically we build to forecasts, which is why we often get the PO, i.e., the booking, in the same quarter the tool ships. You know, just to kind of clarify where we are with 2026. We believe that we're going to have significant improvements in our DRAM business in 2026, and that's based upon staying very close to our customers and understanding what their needs are. However, I think it's also clear that while they're kind of begging and borrowing space, they have made public announcements of really significant increases in their capacity.

Speaker #2: So, a couple of things, Christian. I think what we're saying is that typically we build to forecasts, which is why we often get the PO, i.e., the booking, in the same quarter the tool ships.

Speaker #2: So just to kind of clarify where we are with 2026, we believe that we're going to have significant improvements in our DRAM business in 2026.

Speaker #2: And that's based upon staying very close to our customers, understanding what their needs are. However, I think it's also clear that while they're kind of begging and borrowing space, they have made public announcements of really significant increases in their capacity.

Russell Low: So if you think about the Yongin cluster, for example, with SK Hynix, it's going to be four mega fabs of 200,000 wafer starts a week, and that's where they've been investing a lot of money for quite some time. So they got the CapEx going into building the fabs, and then they'll be looking in, I think, you know, early 2027, for example, to be taking a, for taking systems to then start ramping up that factory. And I think you've seen in the public, you know, disclosures, multiple companies saying they are they're looking to build more capacity. But right now, that's what you're seeing with DRAM, is that, you know, the prices are spiking because the supply is very constrained.

Speaker #2: So if you think about the Yongin cluster, for example, with SK Hynix, it's going to be four megafabs of 200,000 wafer starts a week.

Speaker #2: And that's where they've been investing a lot of money for quite some time. So they've got the capex going into building the fabs, and then they'll be looking in, I think, early 2027, for example, for taking systems to then start ramping up that factory.

Speaker #2: And I think you've seen in the public disclosures, multiple companies saying they're looking to build more capacity. But right now, that's what you're seeing with DRAM is that the prices are spiking because the supply is very constrained.

Christian Schwab: Right. Right. Can you remind us, you know, on the capital intensity, how much I&M plant equipment is needed for every 100,000 wafer start?

Speaker #6: Right, right. On the capital intensity, can you remind us how much I&M plant equipment is needed for every 100,000 wafer starts?

Russell Low: Yeah, sure. So I think, you know, NAND and DRAM are mostly similar in terms of the requirements, but the mix within that number would vary between high energy, high current, and medium current. So if I go with DRAM, for example, typically it's about $150 to 200 million worth of capital for implants for every 100,000 wafer starts that are brought online. And that, I would say, is. There's a little bit of high energy in there, but a large amount of that is high current. So, you know, when we talk about growth in memory, we have a very good position in high energy, and we're looking to build upon our good position in high current as well.

Speaker #2: Yeah, sure. So I think NAND and DRAM are slightly mostly similar in terms of the requirements, but the mix with inside that number would vary between high energy, high current, and medium current.

Speaker #2: So if I go with DRAM, for example, typically it's about $150 million to $200 million worth of capital for implants for every 100,000 wafer starts that are brought online.

Speaker #2: And that, I would say, is there's a little bit of high energy in there, but a large amount of that is high current. So when we talk about growth in memory, we have a very good position in high energy.

Speaker #2: And we're looking to get to build upon a good position in high current as well. So that's why we've been positive about high current.

Russell Low: So that's why, you know, we've been positive about high current.

Christian Schwab: Right.

Speaker #3: Great. I think that's an important note, Christian, is that all this commentary really is around DRAM at this point in time, right? And our expectations are for NAND to continue to be relatively muted as we go through 2026.

Jamie Coogan: I think that's an important, important note, Christian, is that all this commentary really is around DRAM at this point in time, right? And our expectations are for NAND to continue to be, you know, relatively muted as we go through 2026. That could free up as we go into 2027, you know, depending on how those NAND, you know, what those NAND producers need to increase their capacity. So...

Speaker #3: That could free up as we go into 2027, depending on how those NAND—what those NAND producers need to increase their capacity. So, got it.

Christian Schwab: Got it. Thank you.

Speaker #6: Thank you.

Speaker #2: Thanks.

Russell Low: Thanks.

Speaker #3: Thank you. One moment for our next question. Our next question will come from the line of Craig Ellis from B. Riley Securities. Your line is open.

Operator 2: Thank you. One moment for our next question. Our next question comes from the line of Craig Ellis from B. Riley Securities. Your line is open.

Russell Low: Thank you. One moment for our next question. Our next question comes from the line of Craig Ellis from B. Riley Securities. Your line is open.

Speaker #5: Yeah, thanks for taking the question. Guys, I was hoping to get a better understanding of what you're seeing in the mature foundry business, with some insight geographically.

Craig Ellis: Yeah, thanks for taking the question. Guys, I was hoping to get a better understanding of what you're seeing in the mature foundry business, with some insight geographically. We're hearing from companies that they're seeing foundry utilization approaching 90% in China, in the 80% area in Southeast Asia. I suspect it's much lower than that, in mature in the US and Europe. But as you're engaged with your many customers in mature, can you help us understand where we're getting closer to levels where they need to really start adding more capacity versus areas where there may be less very near-term pressure?

Speaker #5: We're hearing from companies that they're seeing foundry utilization approaching 90% in China, in the 80% area in Southeast Asia. I suspect it's much lower than that in mature in the US.

Speaker #5: And Europe. But as you're engaged with your many customers in mature can you help us understand where we're getting closer to levels where they need to really start adding more capacity versus areas where there may be less very near-term pressure?

Russell Low: Hey, Craig, it's Russell. So yeah, so utilization rates do obviously vary by customer. I'd say that, you know, high utilization would then drive to high CapEx or the, or use of CapEx. And we've seen some of our customers state that their CapEx may not be that high this year. I think there's been a couple of very vocal customers about that. So, you know, obviously, they've got to fill up what they have, and they may be slightly behind where they would like to be, and then they'll start spending. But, you know, if you-- are you focusing on China? Yes, they, they certainly want to provide more chips for domestic use. So this is very much about the self-sufficiency. So they're gonna, they-- and I, and I believe they're quite a long way behind their goals.

Speaker #2: Hey, Craig. It's Russell. So yeah. So utilization rates do obviously vary by customer. I'd say that high utilization would then drive to high capex or use of capex.

Speaker #2: And you've seen some of our customers state that their capex may not be that high this year. I think there have been a couple of very vocal customers about that.

Speaker #2: So obviously, they've got to fill up what they have, and they may be slightly behind where they would like to be. And then they'll start spending.

Speaker #2: But are you focusing on China? Yes. They certainly want to provide more chips for domestic use. So this is very much about self-sufficiency.

Speaker #2: So they're going to, and I believe they're quite a long way behind their goals, so they're going to continue to buy equipment and ramp up factories.

Russell Low: So they're gonna continue to buy equipment and ramp up factories. And, you know, since these are quite demanding technologies, it may take them a while to get the costs down as they kind of get the yields up and ramp up the factory. But yes, you're seeing that the in China there are certainly still high utilization rates and also, you know, a demand for additional growth. The other thing is, I think we said this many times before, I mean, our Chinese customers behave like any of our other customers. They absolutely want the best technology. They want world-class service and support. And, you know, we've got great relationships in China.

Speaker #2: And since these are quite demanding technologies, it may take them a while to get the costs down as they kind of get the yields up and ramp up the factory.

Speaker #2: But yes, you're seeing that in China, there are certainly still high utilization rates and also a demand for additional growth. The other thing is, I think we've said this many times before.

Speaker #2: I mean, our Chinese customers behave like any of our other customers. They absolutely want the best technology. They want world-class service and support. And we've got great relationships in China.

Russell Low: You know, we spent over $100 million last year on R&D, and that goes to innovation, and our Chinese customers are looking for that innovation as much as anybody else. They're looking to do, basically, they need cutting-edge technology to give them the, the, you know, the benefit in their own businesses that they're looking for to survive.

Speaker #2: And we spent over $100 million last year on R&D, and that goes to innovation. And our Chinese customers are looking for that innovation as much as anybody else.

Speaker #2: They're looking to do—basically, they need cutting-edge technology to give them the benefit in their own businesses that they're looking for to survive.

Speaker #5: Thanks, Russell. That's really helpful. And just sticking with the China theme, versus the 32% of revenues in the fourth quarter or if we want to baseline off of the 42% for 2025.

Craig Ellis: Thanks, Russell. That's really helpful. Just sticking with the China theme versus the 32% of revenues in Q4, or if we want to baseline off of the 42% for 2025, and I know the company's not giving full year guidance, but can you help us understand where you feel the demand intensity would be from that region in 2026, given in part that we've heard a number of companies suggest trends could be flattish rather than down year-over-year? I know you have over 20 customers, but as you look at what's possible in China, what does it look like for 2026?

Speaker #5: And I know the companies are not giving full-year guidance, but can you help us understand where you feel the demand intensity would be from that region in 2026, given in part that we've heard a number of companies suggest trends could be flattish rather than down year-on-year?

Speaker #5: I know you have over 20 customers, but as you look at what's possible in China, what does it look like for 2026?

Speaker #3: Yeah, we see it to be relatively flat to down slightly, right? And I'd maybe stress the word 'slightly' there, Craig, to some extent.

Jamie Coogan: Yeah, we see it to be relatively flat to down slightly, right? And, you know, I kind of maybe stress the word slightly there, Craig, to some extent. You know, when we start to think about the ASPs and the number of units we ship, right? You're not talking about, you know, massive number of, I'll call it, quantity-wise down. You know, we do expect China to continue to remain a really durable part of the overall market, and business for us, as they build out that capacity.

Speaker #3: When we start to think about the ASPs and the number of units we ship, right, you're not talking about a massive number of, I'll call it, quantity-wise down.

Speaker #3: We do expect China to continue to remain a really durable part of the overall market and business for us as they build out that capacity.

Speaker #3: As Russell said, they're still really far away from their self-sufficiency goals and targets, and the conversations that the team is having over there with those customers continue to sort of stress the expansion that they continue to plan, with more fabs coming online in order to meet those self-sufficiency goals and targets.

Jamie Coogan: As Russell said, they're still really far away from their self-sufficiency goals and targets, and the conversations that the team is having over there with those customers continue to sort of stress the expansion that they continue to plan with more fabs coming online in order to meet those self-sufficiency goals and targets. So, you know, again, we're prepared to continue to support that ramp, you know, in the market. And, you know, as they work through the we call this digestion of capacity, we really have seen that more as a mixed bag outside of China, more so than really inside of China.

Speaker #3: So again, we're prepared to continue to support that ramp in the market and as they work through the we call this digestion of capacity.

Speaker #3: We really have seen that more as a mixed bag outside of China, more so than really inside of China.

Speaker #5: Very helpful. And if I could sneak in one more, Jamie: With regard to the 41% gross margin guide for the first quarter, clearly CS and I had less of a tailwind than that spectacular fourth quarter gross margin number.

Craig Ellis: Very helpful. If I could sneak in one more. Jamie, with regard to the 41% gross margin guide for Q1, clearly, CS&I had less of a tailwind than that spectacular Q4 gross margin number, but are there any one-offs impacting gross margin just coming in a little bit lower than I would have otherwise expected?

Speaker #5: But are there any one-offs impacting gross margin? It's coming in a little bit lower than I would have otherwise expected.

Speaker #3: Yeah, no, it's a good question. And we sort of dissected the dip we were anticipating here. I think that, again, the strength of that margin in Q4 was driven by really record levels of CS9 volume that we saw in the period.

Jamie Coogan: Yeah, no, it's a good question. And, you know, sort of we dissected the dip we said we're anticipating here. I think that, again, the strength of that margin in Q4, right, was driven by, you know, really record levels of CS&I volume that we saw in the period, you know, as well as the mix within the upgrades, right? Upgrades being a larger mix of CS&I load. So on a normalized basis, right, I would say that the, you know, margin decrease is not as material as it might otherwise look from Q4 to Q1.

Speaker #3: As well as the mix within the upgrades—right, upgrades being a larger mix called CS9 load. So, on a normalized basis, right, I would say that the margin decrease is not as material as it might otherwise look from Q4 to Q1.

Speaker #3: Within that, we do see a higher mix of memory systems making up the systems volume in the period, as well as sort of the moderation of CS&I, and expectation for moderation of CS&I volume, given that there's some seasonality that happens from Q4 to Q1, as our customers will use up some of their budgets to buy incremental CS&I in the period.

Jamie Coogan: Within that, we do see a higher mix of memory systems making up the systems volume, you know, in the period, as well as, you know, sort of the moderation of CS&I and expectation for moderation of CS&I volume, given that there's some seasonality, that happens from Q4 to Q1, as our customers will, you know, use up some of their budgets, to buy incremental CS&I in the period. And then, you know, I don't want to overstress this, but, you know, we are seeing a Q1. There's a little bit of a tariff impact in Q1, just given the way our inventory flows out from. You know, we procure inventory last year, which gets used, you know, in Q1 of this year. That is now at a slightly higher cost.

Speaker #3: And then I don't want to overstress this, but we are seeing a Q1. There's a little bit of a tariff impact in Q1, just given the way our inventory flows out from we procure inventory last year, which gets used in Q1 of this year.

Speaker #3: That is now at a slightly higher cost. We anticipate that to be a little less than 100 basis points for the full year. But the impact in Q1 is higher, and we expect that to moderate over the course of the year as we sort of catch up with our Q4 COGS levels.

Jamie Coogan: You know, we anticipate that to be, you know, a little less than 100 basis points for the full year, but the impact in Q1 is higher, and we expect that to moderate over the course of the year as we sort of catch up with our sort of Q4 COGS levels.

Speaker #5: Thanks for all that detail, Jamie. Very helpful. Good luck, guys.

Craig Ellis: Thanks for all that detail, Jamie. Very helpful. Good luck, guys.

Jamie Coogan: Good. Thanks, Craig.

Speaker #3: Good. Thanks, Craig. Thank you.

Russell Low: Thanks.

Jamie Coogan: Thank you.

Operator 1: One moment for our next question. Our next question will come from the line of Jack Egan from Charter Equity Research. Your line is open.

Operator: One moment for our next question. Our next question will come from the line of Jack Egan from Charter Equity Research. Your line is open.

Speaker #1: One moment for our next question. Our next question will come from the line of Jack Egan from Charter Equity Research. Your line is open.

Speaker #5: Great, thanks for taking the question. So the first was on power and general mature. I just kind of want to make sure I understand your guidance correctly.

Jack Egan: Great. Thanks for taking the question. So, the first is on power and general mature. I just kind of want to make sure I understand your guidance correctly. So because based on if you look at a lot of the commentary from the big analog and power companies in just from this quarter, it seems, you know, spending will come down pretty materially across the board, but then, you know, as you mentioned, there are some tailwinds, like, you know, the higher utilization and some one-time upgrades to larger wafers or in other areas, and then, you know, some build-outs by newer Chinese customers in SiC.

Speaker #5: So, based on if you could look at a lot of the commentary from the big analog and power companies, and just from this quarter, it seems spending will come down pretty materially across the board. But then, as you mentioned, there are some tailwinds, like the higher utilization and some one-time upgrades to larger wafers or in other areas.

Speaker #5: And then some build-outs by newer Chinese customers in '26. So, I mean, does that kind of encapsulate the situation, where I think you said it's going to be down slightly year over year, and it's mainly capacity investments being down, and then offset a bit by some of those other idiosyncratic factors?

Jack Egan: So, I mean, does that kind of encapsulate the situation where, you know, I think you said it's gonna be down slightly year-over-year, and it's mainly capacity investments being down and then offset a bit by some of those other idiosyncratic factors?

Speaker #4: Yeah. Hey, Jack, it's Russell. So I think the question was, we're saying it's kind of like flat to slightly down. You're saying, what are the factors in there?

Russell Low: Yeah. Hey, Jack, it's Russell. So I think the question was, you know, we're saying it's kind of like flat to slightly down, you're saying, what are the factors in there? And I think it's, you know, I think China is still, you know, looking to add capacity, but, you know, they're adding it, you know, carefully, I'd say. You know, they've got to absorb what they got, make sure they ramp up effectively with costs in control. And I think you're finding some of the non-Chinese people are also. Yeah, the utilization rates are definitely going up, and it matters which customer you're talking about. The utilization rates are going up, and since we're that little bit further down the supply chain, they need to get their utilization rates up before they start thinking about new tools.

Speaker #4: And I think it's—I think China is still looking to add capacity, but they're adding it carefully, I'd say. They've got to absorb what they've got and make sure they ramp up effectively, with costs in control.

Speaker #4: And I think you're finding some of the non-Chinese people are also—the utilization rates are definitely going up. And it matters which customer you're talking about, but the utilization rates are going up.

Speaker #4: And since we're that little bit further down the supply chain, they need to get their utilization rates up before they start thinking about new tools.

Speaker #4: So, I think that's kind of like we'll see a lot of customers this year start to recover their capacity, and then that's what we'll then see, hopefully, as an opportunity going into 2027.

Russell Low: I think that's kind of like, we'll see a lot of customers this year start to recover their capacity, and then, that's what we'll then see, hopefully, as an opportunity going into 2027.

Speaker #5: Okay, sure. Thanks. That's helpful. And then, as you've said earlier, for memory, those orders come in with a really short lead time, but something that we're seeing at the memory companies is that their customers are kind of becoming more willing to sign these unusually long LTAs, just given the severity of the shortage.

Jack Egan: Okay, sure. Thanks. That's helpful. And then as you've said earlier, for memory, you know, those orders come in with a really short lead time, but something that we're seeing, like at the memory companies, is that their customers are kind of becoming more willing to sign these unusually long LTAs, just given the severity of the shortage. And so I was just kinda curious, is any of that trickling down to Axcelis, just maybe in kind of your customer, you know, discussions with customers, have they indicated that, you know, maybe we'll give you longer lead times, or is it largely, you know, the same as it has been for Axcelis in recent quarters?

Speaker #5: And so I would just kind of curious on is any of that trickling down to Accelis just maybe in kind of your customer discussions with customers have they indicated that maybe we'll give you longer lead times or is it largely the same as it has been for Accelis in recent quarters?

Speaker #4: Yeah, Jack, so whenever I hear about long-term contracts being signed, it always makes me a bit worried because I've kind of seen these happen before.

Russell Low: Yeah, Jack, so whenever I hear about long-term contracts being signed, it always makes me a bit worried because I've kind of seen these happen before, and I think somebody in the newspaper today called it RAMageddon, as kind of the demand for RAM is so high, and you're absolutely right. You're seeing people buying up large amounts of RAM in long-term contracts. So yes, the price is spiking up. I think that you're definitely seeing that. But I also... We're talking about RAM, right? I think-

Speaker #4: And I think somebody in the newspaper today called it 'Ramageddon,' as kind of the demand for RAM is so, so high. And you're absolutely right, you're seeing people buying up large amounts of RAM in long-term contracts.

Speaker #4: So yes, the price is spiking up. I think that you're definitely seeing that. But also, we were talking about RAM, right? I think you're going to see—

Jamie Coogan: Yeah, Russell, I, I think it's important we do maybe just like a process check on how our customers order with us, just to clarify.

Speaker #3: I think it's important we do maybe just like a process check on how our customers order with us, just to clarify. When we talk about, yeah.

Russell Low: Oh, sorry.

Jamie Coogan: When we talk about-

Russell Low: Yeah.

Jamie Coogan: Short order cycles, it's PO placement, Jack. But what we do get from our customers, you know, in this space, is we get a long-range forecast that can cover, you know, sort of multi-quarters. So we get a multi-quarter forecast. Our historic experience has been that those forecasts are very sound, right, in terms of what the needs and requirements are. And sometimes we actually will see requirements go above what is in that initial forecast as they are able to free up incremental capacity and space. That activity is occurring, continues to occur with these customers. This is why when we talk about our confidence in memory recovery, right, it's founded in those discussions that we're having relative to our customers' needs for the period.

Speaker #3: Short order cycles. It's PO placement, Jack. But what we do get from our customers in this space is we get a long-range forecast that can cover sort of multi-quarters.

Speaker #3: So we get a multi-quarter forecast. Our historic experience has been that those forecasts are very sound, right, in terms of what the needs and requirements are.

Speaker #3: And sometimes we actually will see requirements go above what is in that initial forecast, as they are able to free up incremental capacity in space.

Speaker #3: That activity is occurring and continues to occur with these customers. This is why, when we talk about our confidence on memory recovery, right, it's founded in those discussions that we're having relative to our customers' needs for the period.

Jamie Coogan: What follows shortly behind that is the, I'll call it, the legal framework for which, you know, we enter into the purchase order. That is just the timing of that purchase order can be a week, a month, and maybe, if we're lucky, a quarter ahead of time.

Speaker #3: What follows shortly behind that is—I'll call it—the legal framework for which we enter into the purchase order. It's just the timing of that purchase order can be a week, a month, and maybe if we're lucky, a quarter ahead of time.

Russell Low: Yeah.

Speaker #5: Yeah. Got it.

Speaker #4: Yeah, that's exactly what I meant. Sorry, I was in Korea last week, and that's the jet lag kicking in. I was in Korea last week.

Jack Egan: Got it.

Russell Low: That's, that's exactly what... I'm sorry. I was in Korea last week, and that's the jet lag kicking in, and I was in Korea last week-

Jamie Coogan: Yeah.

Russell Low: Talking to their customers about, you know, what, what they see going on. And yeah, Jamie is absolutely right. We work on forecasts. The forecasts, as you can imagine, are quite positive. But-

Speaker #4: Customers talk about what they see going on. And yeah, Jamie's absolutely right. We work on forecasts. The forecasts, as you can imagine, are quite positive.

Speaker #4: But we're making sure that we're ready for that demand.

Jamie Coogan: Mm-hmm.

Russell Low: but, you know, and we're making sure that we're ready for that, you know, that demand.

Jack Egan: Got it. That makes sense.

Speaker #5: Got it. That makes sense.

Jamie Coogan: Yeah. It will be interesting to see, Jack, as they free up their constraints, how quickly they can free up their constraints if those buying patterns accelerate, right? But as of right now, that's why we're forecasting an acceleration of memory into 2027. You know, we'll see higher volumes here, and then we'll see acceleration into 2027. We're gonna watch pretty closely, you know, our customers' expansion, as we move through the course of the year, as they try to, you know, pull in some incremental fab space. So we want to position, leverage the balance sheet and position ourselves to take advantage of incremental opportunities for 2026 if they're able to free up some incremental space.

Speaker #3: Yeah. It would be interesting to see, Jack, as they free up their constraints, how quickly they can free up those constraints if those buying patterns accelerate, right?

Speaker #3: But as of right now, that's why we're forecasting an acceleration of memory into '27. As we'll see higher volumes here, and then we'll see acceleration into '27, we're going to watch pretty closely our customers' expansion as we move through the course of the year, as they try to pull in some incremental fab space.

Speaker #3: So we want to leverage the balance sheet and position ourselves to take advantage of incremental opportunities for '26, if they're able to free up some incremental space.

Jack Egan: Got it. That makes sense. Thanks, Russell. Thanks, Jamie.

Speaker #5: Got it. That makes sense. Thanks, Russell. Thanks, Jamie.

Speaker #4: Thanks.

Russell Low: Thanks.

Operator 2: Thank you. One moment for our next question. Next question will come from the line of Dustin Jang from Bank of America Securities. Your line is open.

Operator: Thank you. One moment for our next question. Next question will come from the line of Dustin Jang from Bank of America Securities. Your line is open.

Speaker #2: Thank you. One moment. For our next question, we'll go to Dukeson Jang from Bank of America Securities. Your line is open.

Duksan Jang: Hi, thank you for taking the question. I have a question on the Q1 guide of $195 million sales. So I think that's about a $20 million delta from your, from what you alluded to last quarter. I know you talked about some pull-ins, but at the same time, I think you said memory's gotten much stronger in your bookings, which is more of general, mature, and power. That has also improved a lot. So, I'm curious what the puts and takes are into that $195 million guide. How much is pull-in versus how much is real end demand? Thank you.

Speaker #5: Hi. Thank you for taking the question. I have a question on the Q1 guide of 195 sales. So, I think that's about a $20 million delta from what you alluded to last quarter.

Speaker #5: I know you talked about some pull-ins, but at the same time, I think you said memory has gotten much stronger. And your bookings, which is more of general mature and power, that has also improved a lot.

Speaker #5: So, I'm curious what the puts and takes are into that 195 guide—how much is pulled in versus how much is real end demand.

Speaker #5: Thank you.

Speaker #3: Yeah, so it's actually a combo factor in Duckson. Thanks for asking the question. I think it's important to get it clear. So, we did see some incremental volume in the fourth quarter for CS&I.

Jamie Coogan: ... Yeah. So, the it's actually a combo factor, and Dustin, thanks for asking the question. I think it's important to get it clear. So we did see some incremental volume in the fourth quarter for CS&I, that, you know, probably would have floated into Q1 had it not come into, not overly material, but enough to sort of move our expectations for Q1 relative to that. On top of that, we saw some push out of systems from Q1 into later in the year, given fab readiness for our customers. And, you know, not necessarily focused on any one specific market. We just have these things happen. So, you know, as we look, you know, ahead, timing, right, of system delivery is always one that we manage very closely with our customers.

Speaker #3: That probably would have floated into Q1 had it not come in—not overly material, but enough to sort of move our expectations for Q1 relative to that.

Speaker #3: On top of that, we saw some push-out of systems from Q1 into later in the year, given fab readiness for our customers, and not necessarily focused on any one specific market.

Speaker #3: We just have these things happen. So, as we look ahead, timing of system delivery is always one that we manage very closely with our customers.

Speaker #3: Again, we don't want our system sitting in parking lots or warehouses. We want the fabs to be ready. We want our installation teams to follow closely, thereby.

Jamie Coogan: Again, we don't want our system sitting in parking lots or warehouses. You know, we want the fabs to be ready. We want our installation teams to follow closely thereby. So, you know, what we really saw was some push out of systems, coupled with some modest pull-in activity on the CS&I front.

Speaker #3: So, what we really saw was some push-out of systems, coupled with some modest pull-in activity on the CS&I front.

Speaker #5: Got it. Thank you for that clarification. That sort of leads into my second question, which is on your 2026 outlook of being flattish. When you say it's going to be second-half weighted this year, is that mostly coming from memory, or is it also more broad-based?

Duksan Jang: Got it. Thank you for that clarification.

Jamie Coogan: Yeah.

Duksan Jang: That sort of leads into my second question, which is on your 2026 outlook of being flattish. When you say it's gonna be second half weighted this year, is that mostly coming from memory, or is it also more broad-based? And what, what's giving you really the confidence, I mean, to that visibility? Thank you.

Speaker #5: And what's really giving you the confidence in that visibility? Thank you.

Speaker #4: So I think you're going to see, go for it, Jamie. No, it's really both.

Russell Low: So I think you can really-

Jamie Coogan: Yeah, it's really both.

Russell Low: Well, go for it, Jamie.

Jamie Coogan: Sorry, go ahead, Russell.

Russell Low: No, it is really both.

Jamie Coogan: Yeah, both, both of those things are occurring right here for us. At the end of the day, we're seeing, you know, some incremental memory volume at a higher rate than we expected coming in the back half of the year. So that when we talk about those encouraging signs relative to memory and some of the, our ability to, you know, you know, seeing the recovery occur, it is that memory volume coming in that we anticipate going higher. We are also anticipating, just based on the timing of customer needs, we're seeing systems volume weighted towards the back half of the year.

Speaker #3: Yeah, both of those things are occurring right here for us at the end of the day. We're seeing some incremental memory volume at a higher rate than we expected coming in the back half of the year.

Speaker #3: So when we talk about those encouraging signs relative to memory and some of our ability to see the recovery occur, it is that memory volume coming in that we anticipate going higher.

Speaker #3: We are also anticipating, just based on the timing of customer needs, we're seeing systems volume weighted towards the back half of the year. And then we are forecasting, sort of similarly, a little bit of CS&I uptick over the course of the year as we introduce upgrades and upgrade activity that can occur as customers take those things on.

Jamie Coogan: And then we are forecasting sort of similarly a little bit of, you know, CS&I uptick over the course of the year as we introduce upgrades and upgrade activity, you know, that can occur, you know, as customers take those things on.

Speaker #5: Awesome. Thank you.

Duksan Jang: Awesome. Thank you.

Speaker #2: Thank you. One moment for our next question. The next question will come from the line of David Dooley from Steelhead Securities. Your line is open.

Operator 2: Thank you. One moment for our next question. Next question comes from the line of David Dooley from Steelhead Securities. Your line is open.

Operator: Thank you. One moment for our next question. Next question comes from the line of David Dooley from Steelhead Securities. Your line is open.

Speaker #6: Yeah, thanks for taking my questions. I guess, first off, if I listened to you carefully about your memory business, it sounds like you're going to have higher growth in memory in 2027 than you're going to have in 2026, driven by the clean room space constraint.

David Duley: Yeah, thanks for taking my questions. I guess first off, if I listen to you carefully about your memory business, it sounds like you're gonna have higher growth in memory in 2027 than you're gonna have in 2026, driven by the clean room space constraint. But in 2026, you know, do you think this business can get to, like, 12 or 15% of revenue? I'm just kind of curious how much growth you think there will be in 2026.

Speaker #6: But in 2026, do you think this business can get to, like, 12 or 15 percent of revenue? I'm just kind of curious how much growth you think there will be in 2026.

Speaker #3: Yeah, so we're not giving a specific number, Dave, just yet on that. But I would say, again, we're coming off a fairly low base in 2025, and we do expect, volumetrically, to see an increase here to kind of keep the revenues, call it flattish, as we see some downward trajectory in the power.

Jamie Coogan: Yeah. So we're not giving a specific number, Dave, just yet on that, but I would say, you know, again, we're coming off a fairly low base in 2025, and we do expect, you know, volumetrically, to see an increase here to, you know, kind of keep the revenues, call it flattish, as we see some, you know, downward trajectory in the power, general mature space overall. You know, we do anticipate acceleration of memory activity as we move into 2027. You know, and obviously, the growth rate from 25 to 26 to 27 is all going to predicate on the volume that we're able to deliver within 2026. You know, but as of right now, I would say, you know, the growth rate in 26 is a healthy number.

Speaker #3: General mature space overall. We do anticipate acceleration of memory activity as we move into 2027. Obviously, the growth rate from '25 to '26 to '27 is all going to be predicated on the volume that we're able to deliver within 2026.

Speaker #3: But as of right now, I would say the growth rate in '26 is a healthy number.

David Duley: Do you think 2027, you know, since that's probably going to be the higher growth year and the higher dollar amount of memory systems shipped, do you think you can get back to your historical range? I think that was 18% to 20% a long time ago when there was a memory cycle.

Speaker #6: And do you think 2027, since that's probably going to be the higher growth year and the higher dollar amount of memory systems shipped, do you think you can get back to your historical range?

Speaker #6: I think that was 18 to 20 percent a long time ago when there was a memory cycle.

Speaker #4: Yeah. So, sorry, let me—okay. So, Dave, I think if you go back to historic records, it's probably better to do it in absolute dollars than it is to do as market share, because I think as a company, we've progressed significantly.

Russell Low: Yeah, so-

Jamie Coogan: The percentage of sales is up.

Russell Low: So today, I think if you go back to historic records, it's probably better to do it in absolute dollars than it is to do as market share, because I think as a company, we've progressed significantly. I mean, when I joined 10 years ago, we were selling tools to Korea, right? And I think since then, you've seen us get into silicon carbide power, silicon power, got a nice business in general, mature image sensors. So I think it's more about the absolute numbers. Our last highest memory year, I think, was like, I want to say, Jamie, it's like $120 million, but that was NAND and DRAM.

Speaker #4: I mean, when I joined 10 years ago, we were selling tools to Korea, right? And I think since then, you've seen us get into silicon carbide power, silicon power, and we've got a nice business in general mature.

Speaker #4: Image sensors. So I think it's more about the absolute numbers. Our last highest memory year, I think, was—I want to say, Jamie, it was like $120 million, but that was NAND and DRAM.

Speaker #4: So you then have to pair it out to what was the highest amount of revenue we ever made within a year. On DRAM alone, that'll probably get you close to where we would be wanting to get, plus some, right?

Russell Low: So you then have to pare it out to what was the highest amount of revenue we ever made within a year on, on DRAM alone. That'll probably get you close to, you know, where we would be wanting to get, plus some, right? I mean, I'm, I'm always the optimist, and I'm always looking to take on more market share. And I think you've also got to look at the size of the market, and I don't think I've ever seen the DRAM market in such short supply before. So I think as ever, you're going to start to see a large amount of supply come on. And we, we know how the cycle works, but I think, I think we're looking to get a, a piece of that action.

Speaker #4: I mean, I'm always the optimist, and I'm always looking to take on more market share. And I think you've also got to look at the size of the market.

Speaker #4: And I don't think I've ever seen the DRAM market in such sort of supply before. So I think, as ever, you're going to start to see a large amount of supply come on.

Speaker #4: And we know how the cycle works. But I think we're looking to get a piece of that action. And like we've said, we're very pleased with the fanning out of our memory into a large North American manufacturer. That gives us an even bigger footprint and bigger opportunity going forward.

Russell Low: Like we've said, we're very pleased with the fanning out of our memory into a large North American manufacturer. I think that gives us an even bigger footprint and bigger opportunity going forward.

Speaker #6: Okay. I think, Russell, that's really important. The last DRAM high was 90 million, right? And that was before the introduction of these systems into the North American memory manufacturer.

David Duley: Okay.

Jamie Coogan: Yeah, I think, Russell, that's really important, is that that last DRAM high was $90 million, right? And that was before the introduction of these systems into the North American memory manufacturer. And then, you know, as we think about the number of wafer starts, right, that predicated the $90 million build out, right, I think the projections for that are higher. But again, we're gonna, you know, again, we'll be sort of moderate in our, you know, tone here, because again, we need to see those wafer starts occur. We need to see the customers expand their fabs. We need to see the orders and the forecast come in. But all the signs right now are encouraging for that. You know, that 2027, we will accelerate out of 2026 into 2027.

Speaker #6: And then, as we think about the number of wafer starts, right, that predicated the $90 million buildout, right? I think the projections for that are higher.

Speaker #6: But again, we're going to, again, we'll be sort of moderate in our tone here because, again, we need to see those wafer starts occur.

Speaker #6: We need to see the customers expand their fabs. We need to see the orders and the forecasts come in. But all the signs right now are encouraging for that.

Speaker #6: That '27, we will accelerate out of '26 into '27. Okay. And the final thing from me is—I think you've already answered, but I just want to make sure—I think you said you had record demand for high-current systems or tools in the quarter.

David Duley: Okay. And then final thing for me is, I think I, I think you've already answered, but I just want to make sure. I think you said you had record demand for high current systems or tools in the quarter. Is that just because the memory business is turning on? Or maybe you could elaborate a little bit about that.

Speaker #6: Is that just because the memory business is turning on, or maybe you could elaborate a little bit about that?

Russell Low: So there's a couple of things. Yes, memory business is turning on, but like I say, it's still on a pretty low base in 2025. I'd say that we're actually moving out. So the goal was always, Dave, was to get in on an application that was critical, that really had value, and then start to fan out within a customer, and then also take on new customers where we know our products will have significant value, like we did with the North American memory manufacturer. So we are seeing a broader base in memory, a broader base in general, mature, and power. And I think that's also testament to the value that our tools bring to our customers. So we are seeing an uptick in our high current market share.

Speaker #4: So, we do have—so there’s a couple of things. Yes, memory business is turning on. But, like I say, it’s still on a pretty low base in 2025.

Speaker #4: I'd say that we're actually moving out. So the goal was always, Dave, was to get in on an application that was critical, that really had value, and then start to fan out within a customer.

Speaker #4: And then also take on new customers where we know our products will have significant value, like we did with the North American memory manufacturer.

Speaker #4: So, we are seeing a broader base in memory, a broader base in general mature, and power. And I think that's also a testament to the value that our tools bring to our customers.

Speaker #4: So, we are seeing an uptick in our high-current market share.

Speaker #6: Thank you.

David Duley: Thank you much.

Jamie Coogan: Yeah, Dave, just to add to that, that's the highest we've had in a two-year time frame, not an all-time record for high current. But so over the, you know, if we look over the last two years, this was a record for high current product.

Speaker #3: Yeah, Dave, just to add to that, the highest we've had in a two-year timeframe, not an all-time record for high-current. But so over the if we look over the last two years, this was a record for high-current product.

David Duley: Great. Thank you.

Speaker #5: Great.

Speaker #6: Thank you.

Speaker #5: Thanks, Dave.

David Ryzhik: Thanks, Dave.

Russell Low: Thanks, Dave.

Speaker #2: Thank you. And this concludes the question-and-answer session. I would now like to turn it back over to David for closing remarks.

Operator 1: Thank you. This concludes the question and answer session. I would now like to turn it back over to David for closing remarks.

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

Speaker #7: Thank you, operator. I want to thank everyone for joining the call and for your interest in Axcelis. Operator, you can close the call.

David Ryzhik: Thank you, operator. I want to thank everyone for joining the call and your interest in Axcelis. Operator, you can close the call.

Operator 1: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

Q4 2025 Axcelis Technologies Inc Earnings Call

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