Axcelis Technologies Q4 2025 Earnings Transcript

Call Participants

The key participants in this earnings discussion included Russell Low, serving as President and Chief Executive Officer; James G. Coogan, acting as Executive Vice President and Chief Financial Officer; and David Ryzhik, functioning as Vice President of Investor Relations.

Key Risks Highlighted

Looking ahead to the first quarter of 2026, company leadership anticipates a sequential drop in both revenue and gross margin. This projection stems from reduced volumes in the Customer Support and Integration (CS&I) segment, a less advantageous product mix, and a minor influence from tariffs, as outlined by the management team.

Furthermore, executives foresee marginally lower revenue compared to the previous year in the power and general mature end markets. This outlook reflects ongoing subdued demand patterns and the absorption of existing customer capacity.

The negative free cash flow of $9 million recorded in the fourth quarter arose from the timing of sales that were concentrated toward December, coupled with $5 million in cash expenses tied to the ongoing Veeco merger transaction.

Management also pointed out a modest year-over-year effect from tariffs, projected to diminish gross margins by under 100 basis points throughout 2026.

Primary Takeaways from the Quarter

Revenue for the quarter reached $238 million, comprising $156 million from systems and $82 million from CS&I, with both figures surpassing the company’s internal projections.

Non-GAAP earnings per diluted share came in at $1.49, outperforming the anticipated $1.12, thanks to elevated revenue levels and a beneficial business composition.

Bookings saw a sequential uptick to $128 million, and the quarter concluded with a backlog standing at $457 million.

From a geographic standpoint, China accounted for 32% of quarterly revenue, a decrease from 46% in the preceding quarter. Over the full year, China contributed 42% of total revenue, followed by the U.S. at 16%, Korea at 13%, and Europe at 11%.

Non-GAAP gross margin achieved 47.3%, exceeding the guided 43%, propelled by a greater proportion of CS&I and upgrade activities.

Non-GAAP operating expenses amounted to $62 million for the quarter, surpassing the $56 million forecast primarily because of increased variable compensation tied to the superior performance.

Non-GAAP operating margin registered at 21.1%, in contrast to the GAAP operating margin of 15.2% for the same period.

Adjusted EBITDA for the quarter was $55 million, delivering a margin of 22.9%; for the full year, it totaled $177 million with a 21.1% margin.

The tax rate hovered around 14% for the quarter on both GAAP and non-GAAP measures.

Full-year non-GAAP gross margin expanded to 45.2%, marking a 30 basis point improvement despite reduced revenue, fueled by optimal mix and rigorous cost management.

Free cash flow posted a negative $9 million in the quarter, attributable to December-heavy sales timing and $5 million in expenses linked to the Veeco merger; however, the full-year figure was a positive $107 million.

Share repurchases totaled $25 million in the quarter and $121 million for the year, with $110 million still authorized for future buybacks.

The balance sheet closed the quarter with $557 million in cash, cash equivalents, and marketable securities, incorporating $182 million in long-term securities.

For Q1 2026, the outlook projects revenue at $195 million, non-GAAP gross margin near 41%, non-GAAP operating expenses at $159 million, adjusted EBITDA of $26 million, and non-GAAP diluted EPS at $0.71.

Regarding 2026 revenue overall, management projects it to remain relatively flat versus 2025, with expansion in memory sectors counterbalancing downturns in power and general mature markets.

The 2026 gross margin guidance points to a low to mid-40% range on a non-GAAP basis for the full year, reflecting a year-over-year dip due to a heavier memory sales mix and a tariff impact of less than 100 basis points.

A notable product development was the rollout of the Purion H6 high-current ion implanter, which boasts industry-leading dose repeatability alongside breakthroughs in purity, precision, and productivity.

The CS&I segment demonstrated robust growth, with revenue up 14% year over year, and upgrades and services hitting all-time highs in 2025.

On the pending merger front, all shareholder approvals for Axcelis Technologies and Veeco have been secured positively; remaining steps involve regulatory clearances, particularly the final nod from China. The company still targets completion in 2026.

Executive Summary

Axcelis Technologies delivered quarterly revenue and non-GAAP diluted earnings per share that surpassed internal expectations, bolstered by exceptional CS&I aftermarket results and an optimal business mix. Executives affirmed steady advancement on the Veeco merger, noting completed shareholder votes and only pending Chinese regulatory approval. Guidance for 2026 indicates flat revenue overall, with memory sales growth in DRAM and HBM offsetting reductions in power and general mature segments. The launch of the Purion H6 ion implanter targets advanced logic, memory, and mature nodes, poised to meet escalating demands from increasingly intricate semiconductor designs.

• Bookings advanced sequentially, driven by memory, power, and general mature areas, culminating in a $457 million backlog for enhanced short-term predictability.
• Executives emphasized substantial untapped potential in CS&I upgrades, especially 150mm to 200mm conversions for silicon carbide tools in the installed base, signaling sustained opportunities ahead.
• Quarterly CS&I and gross margin beats were partly credited to non-recurring upgrade projects, influencing the more conservative Q1 2026 projections.
• China’s revenue share dropped to 32% from 46%, mirroring customer capacity digestion; 2026 demand from China is viewed as relatively stable to slightly lower.
• Memory sector expansion faces supply limits from cleanroom constraints, with acceleration anticipated as new facilities ramp up through 2027.
• The firm executed $25 million in share repurchases quarterly and maintains robust liquidity at $557 million in cash, equivalents, and securities.

Industry Terminology Guide

• CS&I: Stands for Customer Support and Integration, representing Axcelis Technologies’ aftermarket operations that deliver upgrades, services, and maintenance for deployed ion implantation systems.
• Ion Implanter: Critical semiconductor fabrication tool that introduces ions into wafers to modify electrical characteristics and facilitate circuit operations.
• Silicon Carbide (SiC): A wide-bandgap material employed in high-efficiency power semiconductors, vital for electric vehicles and industrial uses.
• Purion H6: Axcelis Technologies’ latest high-current ion implanter, enhanced for superior dose repeatability, purity, and productivity in cutting-edge semiconductor processes.
• DRAM: Dynamic Random-Access Memory, essential for computing and server applications, with surging needs from AI and high-bandwidth uses.
• HBM: High Bandwidth Memory technology designed for rapid data transfer in sophisticated AI and computing workloads.
• IGBT: Insulated Gate Bipolar Transistor, a key power device for energy conversion and industrial systems.

Complete Earnings Call Transcript

Thank you, David, and good afternoon to everyone. We appreciate you participating in our fourth quarter and full-year 2025 earnings conference. Starting with slide four, we posted strong performance in the fourth quarter, achieving revenue of $238 million alongside non-GAAP earnings per diluted share of $1.49, both surpassing our prior guidance. The outperformance was largely fueled by robust CS&I aftermarket contributions, which positively influenced our gross margins through a superior mix.

Bookings in the fourth quarter showed substantial sequential growth, predominantly propelled by segments in power, general mature markets, and memory, with a particular emphasis on DRAM.

Prior to delving into detailed market segment trends, allow me to update you briefly on our forthcoming merger with Veeco. We are advancing steadily toward securing all necessary approvals for closure. We are gratified that shareholders from both entities approved the deal overwhelmingly during special meetings held on February 6. Regulatory approvals have been obtained in multiple key regions, and we are in constructive dialogue with Chinese authorities for the remaining clearance essential to finalize the merger. Our expectation remains for closure sometime in 2026.

Concurrently, we are collaborating intensively with Veeco on integration strategies to guarantee the unified entity is primed for immediate success upon merger completion. As our interactions with Veeco deepen, we are continually struck by the strong synergy in our corporate cultures, core values, and mutual dedication to innovation and client success. This preparatory phase has further solidified our belief in the merger’s transformative potential and our blueprint for creating enhanced value across all stakeholder groups. Now, moving to slide five.

During the quarter and throughout the full year, shipments to node-specific applications dominated our systems revenue, especially in power and general mature categories. Proceeding to slide six, let us examine end-market developments in greater depth.

In the power segment, silicon carbide shipments experienced a slight sequential moderation. As we have observed consistently over recent quarters, customers are maintaining a cautious stance on capacity expansions after substantial investments a few years back, now shifting focus toward technological evolutions.

For instance, a significant factor in our quarter’s CS&I success involved upgrading silicon carbide systems for a major client, transitioning tools from 150mm to 200mm wafers using our innovative Purion Power Series Plus platform—all without expanding the physical footprint. We also observe targeted capacity enhancements in silicon carbide by select Chinese customers, whereas those in other geographies prioritize next-gen technologies like trench and superjunction designs. Interest is building in our advanced high-energy channeling features, which are indispensable for superjunction advancements.

In summary, although short-term ion implant needs for silicon carbide are likely to stay subdued amid capacity digestion, we project vigorous long-term demand across cycles. This is underpinned by enduring trends including rising silicon carbide adoption in electric vehicles—especially with more 800-volt architectures—higher SiC content per vehicle, expanding global EV volumes, and broadening applications beyond autos such as solid-state transformers, circuit breakers, solar inverters, HVAC, industrial drives, aerospace, and defense.

Overall, we stay enthusiastic about silicon carbide’s demand trajectory and confident in our ion implant leadership for this space. In our complementary power segment, system shipments also eased slightly sequentially, mainly from softer silicon IGBT demand. For general mature markets, revenue rose sequentially as clients pursued targeted investments in high-current equipment. Customers persist in optimizing capacity against stabilizing automotive and industrial demand, yet we detected rising implant tool utilization across several accounts in Q4.

Although CapEx recovery signals for general mature technologies are absent so far, the uptick in utilization rates offers encouragement. Advancing to slide seven.

In advanced logic, we realized revenue from a repeat order at a longstanding customer and remain deeply engaged with clients on forthcoming tech requirements, encompassing backside power contact implants and additional wafer modification techniques. Shifting to memory, sequential demand strengthened for DRAM and HBM, and we foresee this trajectory continuing into 2026 as capacity builds to fulfill surging AI application needs.

We are especially delighted to announce securing a high-current system order from a premier North American memory producer—a pivotal win expanding our footprint outside our dominant Korean base. Notably, this order preceded the full evaluation of an ongoing system, which we interpret as strong validation of our technological prowess.

For NAND, customer emphasis on elevating layer counts limits additional ion implantation requirements. Consequently, we anticipate subdued NAND demand near-term. Nevertheless, recent NAND bit growth and price recoveries are positive indicators, positioning us advantageously when wafer expansions resume—a timing issue rather than improbability.

Concluding my 2025 reflections on slide eight: Our team executed with remarkable focus amid shifting macroeconomic conditions. We adeptly managed cyclical digestion across markets while prioritizing product innovation and client relationships. Earlier this month, we unveiled the Purion H6, our newest high-current ion implanter platform. This system integrates breakthrough improvements in beam line, source, particle management, and dosimetry components.

It provides unmatched dose repeatability, alongside leaps in purity, precision, and throughput, catering to high-current demands in advanced logic, memory, and mature nodes alike. As semiconductor scaling intensifies and architectures grow complex, clients require precise control, minimal contamination, maximal uptime, and reduced ownership costs—precisely what the Purion H6 delivers.

Q4 marked our highest high-current shipments in two years, and the Purion H6 launch amplifies this momentum. Additionally, CS&I aftermarket revenue grew double-digits year over year, backed by our expanding installed base and strategic upgrade/service emphasis, both peaking in 2025.

Even with 2025 revenue contraction, non-GAAP gross margins rose 30 basis points through mix optimization and cost vigilance, yielding robust profitability and cash generation. Transitioning to slide nine for initial 2026 insights.

We project memory growth, spearheaded by DRAM, as capacity investments align with accelerating AI demand. Conversely, power and general mature face slight year-over-year revenue softness as utilization improves but follows prior investment peaks. Long-term, these markets stand to gain from electrification, efficient power management, and AI-driven power needs spanning silicon, SiC, and GaN from grid to chip.

Physical AI emergence—like robotics, AVs, and edge devices—will further propel power semis and general mature tech such as MCUs, sensors, and analog. Advanced logic revenue should hold steady in 2026 as we advance market penetration, though evaluation-to-volume timelines extend. Collectively, we foresee 2026 revenue roughly flat to 2025. I will now pass to James G. Coogan for detailed financial review and guidance.

James G. Coogan’s Financial Review

Thank you, Russell, and good afternoon, all. I will expand on Q4 and full-year outcomes before addressing Q1 outlook, beginning on slide 10. Q4 revenue totaled $238 million, with systems at $156 million and CS&I at a record $82 million—both beating forecasts. CS&I strength derived from upgrade demand for footprint-neutral tech optimization, plus pull-ins from better utilization. Our CS&I execution pleases us, as aftermarket solutions align well with client priorities.

Annually, CS&I rose 14% year over year, powered by upgrades and services, reflecting multi-year strategic pushes for greater adoption. Geographically, China fell to 32% of revenue sequentially from 46%, as mature node digestion continues post heavy investments.

Other areas: Europe 15%, U.S. 14%, Korea 13%, Japan 9%, Taiwan 3%, rest of world 13%. Full-year: China 42%, U.S. 16%, Korea 13%, Europe 11%, Taiwan/Japan 5%, rest 7%. Bookings jumped sequentially to $128 million, ending with $457 million backlog.

Slide eleven details GAAP/non-GAAP metrics. GAAP gross margin 47%, non-GAAP 47.3% vs. 43% guide, from elevated CS&I/upgrade mix. GAAP opex $76 million, non-GAAP $62 million vs. $56 million guide, due to performance-linked variable pay. Non-GAAP excludes Veeco transaction costs, stock comp, restructuring.

Q4 included one-time voluntary retirement expense. GAAP op margin 15.2%, non-GAAP 21.1%. Adjusted EBITDA $55 million (22.9% margin). Other income ~$4 million from FX. Tax ~14% GAAP/non-GAAP. Diluted shares 31.1 million. GAAP EPS $1.01 (> $0.76 guide), non-GAAP $1.49 (> $1.12), from revenue/mix.

Full-year: GAAP GM 44.9%, non-GAAP 45.2% (+30 bps despite rev drop, via mix/cost control). Adj EBITDA $177 million (21.1%). Other income $19 million, tax ~13%. GAAP EPS $3.80, non-GAAP $4.88.

Slide 12: Q4 FCF -$9 million from Dec-skewed sales (higher DSO) + $5 million Veeco cash costs. Full-year FCF $107 million, strong amid rev decline. Q4 repurchases $25 million ($110 million remains authorized); full-year $121 million. Balance sheet: $557 million cash/equiv/securities ($182 million long-term).

Q1 outlook (slide 13, non-GAAP except rev): Rev $195 million (seq decline in systems/CS&I from cleanroom delays, seasonality, non-recurring Q4 upgrade, pull-forward). Non-GAAP GM ~41% (mix/vol drop, memory tilt, lower CS&I/upgrade, minor tariff). Opex ~$159 million. Adj EBITDA $26 million. Non-GAAP EPS ~$0.71.

2026 rev ~flat to 2025, 2H-weighted; memory growth offsets power/mature declines. Full-year non-GAAP GM low-mid 40s (YoY dip from memory mix + <100 bps tariff). Opex balances innovation investment with discipline.