Axcelis Technologies, Inc. (ACLS) Earnings Call Transcript & Summary

All right. Good morning. Welcome to the Axcelis Investor event. I appreciate everybody coming today. A lot of you have talked to us 2, 3, 4 times this week. So looking forward to sharing some new information. And so just -- I'm going to just quickly run through sort of some logistics. So what to expect? First of all, we have the full management team. Russell is going to introduce you to everybody in just a couple of minutes. The presentation is about 90 minutes long, and we'll have about 30 minutes of Q&A following that. Please hold your questions until after the presentations, if you would. As with our past Axcelis investor events, we have a little takeaway gift. In this case, it's a cool little charging device with 3 positions to charge phones and watches and various things, but mostly to optimize your travel backpack, and remind you, when you set it up on the nightstand that Axcelis uses 3, all of our Purion products to optimize our customers' fabs, and we're especially strong in power. No, no, this is not silicon carbide. But it represents that. So anyway, so thank you very much again. I have to remind everybody that we will be discussing mostly forward-looking statements in today's presentation. I'm not going to read this whole thing, just encourage you to look at our SEC filings and 10-Ks to understand the risk associated with our business and everything we're discussing today that's forward-looking is based on our current knowledge of the markets and situations. So anyway, with that, I'm going to turn it over to Russell Low, our President and CEO.

Great. Thanks, Doug. Well, good morning, everybody. Really great to see you all. I wanted to introduce the presenters for today. So Greg Redinbo. Hopefully, you've had a chance to meet Greg. He's our Head of Marketing. He's going to talk a little bit about the how do we get to the new model. Jamie, our CFO, will talk about okay. So what's it going to look like financially when we get to these models and Doug will be giving the -- will be the moderator. I just wanted to mention, so I think many of you know that Doug is retiring this month. He's been with Axcelis a long time, and you guys know him very, very well. So naturally, we wish Doug the absolute best in retirement. And hopefully, you've actually had a chance to meet Dave Ryzhik, who is our new IR person, and he'll be taking over. He's been with us a couple of weeks now. So he's all ready to go. Okay. I see what's happening. So I will be taking you through some of the secular growth drivers of our business, how we are positioned within those markets and then what we believe will be the opportunities for us. This is our investment case. So I'll take you through the presentation, I'll talk to you a little bit about how foundational ion implantation is. You really cannot manufacture a device without ion implantation. It's a critical step. There's a number of really strong growth drivers. So we'll be talking a little bit about electrification and artificial intelligence. We talk about the fact that these growth trends are going to impact pretty much every type of device, and we'll talk a little bit about how we are positioned within those markets to take advantage of that. And then the last 2 pieces, Jamie will talk about what that means in terms of the financials. So that's kind of the outline of our investment case. So hopefully, at the end of this, you'll see all the pieces come together. So a little bit of an introduction for those of you that aren't as familiar with Axcelis as others. So we solely focus on ion implantation. We design them, we develop them, we manufacture them. And then we also support them in the aftermarket once they've been shipped. We've been around for over 45 years. We have 1,600 employees globally. So everywhere where our customers are we are. So we have a truly global infrastructure. And last year was our record revenue year. We achieved over $1.1 billion of revenue last year. And you can see that, that's actually flowed very nicely through the P&L. So you can see some of the financial metrics that we achieved. So we're actually pretty excited about that. So many of you are very familiar with the semiconductor industry. These are the basic building blocks, really, for building devices, either in the substrate or on top of the substrate, this is what you need. And obviously, these devices are teeny, teeny, tiny, and we've got to do this with really high yield. So ion implantation is a critical step. Like I've said before, you really can't make any devices without ion implantation. I can think of maybe one device, like, a pHEMTs that doesn't have too much ion implantation. And if any of you are saying, what's pHEMTs, exactly. So and then when I talk about ion implantation is not just one size fits all. We have a platform of products. So when a customer is looking to develop devices, ultimately, they're going to need a portfolio of implanters. And I'm going to talk a little bit more about that in a moment as well. So this is one of my favorite slides. One, I have this dream that 1 day, my kids are going to ask me, "Hey, dad, what's ion implanter?" It hasn't happened so far. So we basically introduce material into substrates. So those substrates can be gallium nitride, they can be silicon carbide, they can be silicon. But we're basically introducing material into those substrates incredibly precisely. And what that does is it can change the electrical characteristics or the physical characteristics. When I was a kid, we mostly did electrical changes. So to form the transistor, the source, the drain, the connector that was the device. Fast forward, there's a whole bunch of material implants where you're basically changing the physical characterizations, introducing stress and strain and amorphization for various reasons to optimize the performance of the device. So we really are implanting these tiny ions into substrates, and we can change the depth they go into, and we can also change the amount of dose we put into those wafers. These tools, I think I should mention are about the size of a double garage. So that guy standing in front of that machine is probably a good 6 foot. And you can see foups. Those are 300-millimeter wafer foups, you can see how big this machine is. I kind of think that we have more in common with a litho tool than we do, say, a cluster tool. So this is really large amounts of core hardware that's driven by physics. The recipes are relatively trivial dose, energy spacious, but the hardware is really complex. On the other side, you say a cluster tool, the hardware is relatively simple. You can put your arms around it, right? But the recipes are incredibly complex, right? That's just like pure Black Magic chemistry going on there. So I think those are kind of differences. Although obviously, one very different aspect between an ion implant and a litho tool is that we are precise and fast. So that's an unusual combination. So you can be really productive and not precise, so think of like a batch furnace or you can be incredibly precise and slow, so think about ALD, but it's unusual that you can be incredibly productive and precise. So that's kind of why the ion implanter gets used around the fab to solve other issues that weren't -- that's how we moved from electrical to physical, we could solve issues around the fab that required material modifications, and that was great for an implanter because it was so precise. And it'd be remiss for me to say that we -- like I mentioned, there are multiple flavors of ion implanters. So if you're going to build a fab and start a device, you will need a portfolio of products. We've built our portfolio on the Purion platform. The Purion platform is commonality across the systems, right. The same control software, ion source technology and station wafer handling and that has huge advantages for our customers and also has huge advantages for us as a company, and we're talking a little bit more about some of the derivative products we've been developing and how those come from this platform. So where are these devices that we help fabricate, they're everywhere, absolutely are everywhere. So we like to say our ions are everywhere. So whether they are in the Internet of Things, I don't actually have a refrigerator that talks to me yet, but I think it's coming. My doorbell doesn't do that yet, but every single pump in my house, having had been flooded recently, now have water sensing pumps everywhere, and they're constantly telling me what's going on with my house. Obviously, if I'm in California, I can't do anything about it. Automotive, we talk a lot about the electrification of autos. They are everywhere. I'm going to talk about those certainly in a few minutes. Mobile, all of your phones, all of your PCs, advanced compute, all the way through to clean energy. And we'll talk a little bit about clean energy in a moment as well. But our ions are everywhere. So I'll talk a little bit about the growth now then. So we have multiple initiatives across all of the markets. So clearly, power devices is a growing opportunity. We believe it's in the first innings, and we want to take -- we want to hold on to all of the customers we have and add all the new customers that get into this area, whether they be GaN, silicon carbide, this is an area that we have significant opportunity while also having significantly differentiated products. A number of you have heard us talk about geographic expansion. Clearly, we have a very strong business in China, and China continues to buy a lot of chips. We are looking to get a bigger footprint in Japan. Japan is getting into the power markets and that's really good for us because we have the full portfolio allowing us to sell to the Japanese customers where their local suppliers are unable to do that. And then as ever, once we get into these accounts with products where we're demonstrating a unique value with the product, we then start to fan out to taking all the other applications, and then we try and bring our other products in as well. So we kind of -- we penetrate and then we fan out. So that's kind of growing the footprint. So we are in every major customer. And once we've -- and as you know, we are the market share leader for high energy, and we've always used that as that kind of opportunity to get in and then start bringing out the rest of the portfolio of our product, particularly high current and medium current. But along the way, as we're kind of working with our customers to find that application where we can add significant value, sometimes you find new implant applications. And that typically comes through interacting with the R&D people either through TRM or evaluations. And Greg will talk a little bit more about that in a second. So a very simple slide with a really strong message. So the next few slides are going to focus on 2 big, somewhat, related long-term growth drivers, namely electrification and artificial intelligence, reviewed specifically from the power market. So I don't really think, at this stage, we have much choice about reducing greenhouse gas emissions. I think Mary Puma, our prior CEO and Board -- Chairperson of the Board said, it's no longer climate warming -- global warming. It's global boiling. I think there's something to be said for that. So we really do need to have cleaner electricity, cleaner transport electricity and then use less of it. So we'll be talking a little bit more about generating that clean energy, transporting it and using it sparingly. Clearly, renewables and the use of power devices, particularly silicon carbide power devices can certainly go a long way in driving us along that path to generating clean energy and using less of it. AI. So as this graph shows, data centers already use an increasing amount of energy, that's the blue part of this. And compute-intensive applications such as crypto mining and now AI data centers are accelerating that demand for power. So AI, in addition to being a compute hog and it wants the best and fastest chips to being a data hog. It wants all of your information is also, you can see a power hog.The power needs are putting additional strain on our abilities as a nation to support the power generation. I mean power efficiency is absolutely key here. So even though, say, NVIDIA and AMD are talking about chips that are going to be less power hungry, they're still using a huge amount of energy. And we need reduce the amount of energy. So I think recently, for example, Infineon and On Semi announced silicon carbide chips like 400-volt chips specifically aimed at data center. So I'm not talking about inside the boxes. I'm talking about the power infrastructure. So a huge amount of power is coming into these data centers being used in addition to all the battery backup. So these systems have the kind of the UPS, uninterrupted power suppliers that all uses, lots and lots of power devices. And if you specifically use a silicon carbide device, you get a 10% bang straight there for power usage. So I think as I kind of like said that -- it's -- AI is a data hog. It's a compute hog and a power hog. AI is going to impact every single type of device. It's not just NVIDIA. It really isn't all the HBM, it's every single type of advice can get impacted by AI. And although there can be a little bit of hype around AI, it's not going away. There are real business applications driving value for this technology. Renewables. So I'll talk a little bit about renewables. So globally, we continue to add more renewable energy. So you can kind of see here that it's going up and up and up. I'm not sure I've ever mentioned this before, but Beverly, our headquarters actually is 100% renewables. We use hydro power from Canada, I think it is. And Korean manufacturing site will be 100% renewables by the -- I think it's by the end of this year. So we are definitely all on board with renewables. But the reason I mentioned that is we're not alone. So if you look at the hyperscalers, Microsoft announced a $10 billion investment recently for renewables to support their business. Amazon have been quite vocal, saying they're going to be 100% renewables in 2025. And this is really happening. We need more energy, and we need to reduce the carbon footprint. So this really is happening. Interestingly, all these advances made in storage, and I'm kind of like talking about battery, whether it'd be a data center, battery backup or a car batteries, we're making lots of advances in batteries. So now those systems, solar or wind, coupled with a battery are now becoming an awful lot more valuable. So when people talk about whether the sun goes out, what are you going to do? Well, you basically fill these batteries up. And it's becoming actually a very good stand-alone technology. Our very owner, Doug Lawson, has on his island install a very large solar array with all of its batteries. So when Armageddon comes, he's good. He's got his own little system. And we all know that there are always going to be power interruptions, whether it be on the islands where you have hurricanes blowing through or there's too much load like in Texas, these systems are great because not only do they have the storage to support the cyclicality of the wind or the solar but they also mean you have a backup. They're not glitching. So that's a certain value to those things. But once again, all of these things, solar, wind, battery backup infrastructure, all going to use power devices. And if you use silicon carbide, those power devices are going to be 10% more efficiency. Silicon carbide is an incredible material. I mean, the density of current that it can take is superior than pretty much any other material. So I left automotive to the end. This is kind of like a slide just on kind of like automotive. So this -- so automotive is the killer app for silicon carbide. It's driving really large volumes of silicon carbide, which as we know from other technologies, that drives the price down and down and down. So that's why I'm excited about seeing silicon carbide turning up in all sorts of other applications. So absolutely electric cars. And quite honestly, hybrid cars, electric cars, we are somewhat agnostic because they use silicon IGBTs or they use silicon carbide MOS transistors, they still use a large amount of ion implantation steps. But I do think that silicon carbide, specifically, it's an amazing material and it's going to find new applications. I mean, kind of just anecdotally, I was talking to a customer yesterday, and they mentioned, well, what if you could digitize the electricity net. So you've all seen those really large transistors sitting on poles by the power cables, they could be replaced with silicon carbide and you get a 10% improvement. He also mentioned about like large motors, so take an HVAC motor, there's lots of those around, really high current motors, okay, in time as the price comes down, you'll start to see lots of applications. The reason I mentioned that is because I think that's very exciting for Axcelis, but we've seen this before. I remember, probably it wasn't that long ago, maybe 15 years ago, I replaced all my bulbs in my house with LED bulbs. I went down to Home Depot and had a heart attack about the price. And now they're in kids' toys. They're in McDonald's Happy Meal. They're just everywhere. I mean we've almost given LEDs is kind of just ubiquitous now. But in the old days, like holy moly look at this. So I do think these things will come down dramatically in price every single time the price drops as new parity point for a new application to be transferred out. I do believe that silicon carbide uses a lot less energy, and it's going to be efficient for us. So then just to kind of talk about cars, cars, electric cars, people kind of saying, well, yes, they're slowing down. Yes. Yes, they are, but like that's relative to 60% growth versus now the 25%. 25% growth in electric cars is still a really big number. And that's globally. So look outside of the U.S. China is about 30% penetrated, getting to 50% really soon. Electric cars are taking off really dramatically. And hybrid cars as well, like I said, we're relatively agnostic because they still use a lot of power devices. And I think hybrids will be a great solution for the U.S. I think it takes away the range anxiety. And I think it takes away concerns regarding, say, charging network. So I think we've heard that the Camry, the best-selling car in the world is going to only be available as a hybrid in 2025. So these things are coming. So Jamie bought a hybrid. I bought an electric. I think Jamie is now like, I'm not worried about the anxiety, I want electric now. And I got to tell you, I love my electric car. I love the acceleration, it is so much fun. And I love the fact that living in Massachusetts, I don't have to stand out in the cold, filling it up anymore. So I do think -- I'd just like to plug it in and walk away, it's great. But I really do think that these trends are continuing to happen. They're not slowing down -- sorry, slowing down, they're still growing at 25% though. So as I mentioned, artificial intelligence is going to impact every type of device. So we talked about it's a compute hog. So it wants the fastest processes. It wants the most amount of memory like HBM memory. It's going to want to store all that wonderful stuff that it creates. So that's going to touch advanced logic, DRAM, NAND. It also wants all of your data. So it wants the information from your fridge, your doorbell, but it also wants it all from your phone and from your laptop and wherever this data is coming from, and it's going to transfer all of that data. So it's going to store it locally. So it's even more memory and storage. And then it's going to transfer it. So it's going to be communication, it's going to be WiFi, it's going to be mobile networks, it's going to be Bluetooth, all of those mature nodes. And then as I mentioned, it's a power hog. It's going to need more and more energy, and we need to reduce the amount of energy that it needs. Electrification, so we talked about that, that's why I kind of say they're kind of interrelated. Clean energy. Clean energy, stuff, solar, there is DC, wind mills, wherever there is high current, any step-up, step down, any conversion, you're going to see power devices. So solar, wind turbines, the battery storage, really good for silicon carbide and silicon IGBTs. Cars, you're going to see hybrids may have more silicon IGBTs initially, and the silicon carbide might be in more of the battery ones. That mix is going to change over time, but it still uses a lot of power devices. And then finally, cars, they really are basically a computer on wheels. So you're going to still see the info systems. You're going to see the driver, the autonomous driving features. All of those are going to be in every car and in addition, you're going to add in these drivetrains. And the nice thing about the drivetrains, whether it be some form of hybrid, some form of battery, they're all taking away market share from combustion engines, right; they're not competing with each other, which is why we say it's great to see this growth. So this is my last slide. So to summarize, I really do believe we're well placed with our Purion platform to take advantage of these 2 long-range secular drivers. Advances in artificial intelligence and power. And when I say power, I'm trying to get across electrification in general was cars, which people think is power. Yes, they are. They are the big application. There's so much more out there as well. So I think we're very well placed. There are 2 large drivers I think that's going to drive growth in every type of device out there. So it's going to be power, it's going to be memory, it's going to be mature, it's going to be advanced logic, and that's also going to support geographic expansion as well. So with all of that, we believe we can achieve a $1.6 billion revenue target in the 2027 time frame. So with that, I'm going to hand you over to Greg, who's going to tell you a little bit more about the how do we get there. Thank you.

Good morning, everybody. I'm Greg Redinbo. Good to see you all. Thank you for joining us today. Really appreciate it. So Russell talked about our position in the market and the direction we're going as a company. I'm going to spend some time talking about a little bit more detail on the markets and then the path that we're going to take to achieve that target that he just talked about. So we're going to talk about market drivers and positioning for future growth. So a good place to start off is just a reminder about the way we think about markets. And this is an example of our revenue by device and market segment. So our 2023 systems revenue last year was $884 million. And the way we break that down is really into 2 big categories. We break it down into mature nodes, which include power devices like Russell just talked about. So that includes silicon IGBT as well as silicon carbide, it includes general mature and also image sensor. That mature nodes portion of the revenue made up about 88% of our revenue last year. The other 12% was comprised of memory and image sensor. So this is the way that we think about our market and the way that we break things down, and this is how we're going to focus on the market opportunity going forward. So if you take a look at the overall. Ion implant TAM, it's really more than doubled in the last several years, and it continues to grow. So for those of us who have been involved in ion implant for a long time, it used to be that the overall market would cycle around $1 billion. But starting about 5 years ago, the market really started to take off. And this is really driven by several things. It's driven by increased wafer starts across all segments but it's also especially driven by the rapid growth of implant intensive mature nodes, so power and image sensor devices as well. So that's been one of the main drivers. So if you look at the TAM, we see it being around $2.5 billion this year and last year with the opportunity to grow in 2027 up to $3.3 billion. So the opportunity for Axcelis is that we can bring those high-value Purion product extensions that Russell talked about that are required by specialty markets like power devices and image sensors. So very strong market growth. If we take a little bit more of a detailed look again at the ion implant TAM segment breakdown, again, the mature process technology segment is really driving this market growth and it's growing that mature process technology is growing based on increases in wafer starts, high implant capital intensity, which I'm going to talk about as well as higher-value implanters for specialty applications and those product extensions. So that part of the mature process technology makes up about 70% of the overall implant TAM. Memory, which makes up about 16% of the market is expected to be driven by new wafer start activity to support good growth demand. And then Advanced Logic, which is about 13% of the market is really being increased based on accelerating wafer start growth. So if you look within the mature process technology, the power device portion, it's about 36%. We'll talk more about how that breaks down between silicon and silicon carbide. But it's a good reminder as Russell focused on the opportunity and the growth possibility with -- continuing growth possibility in different applications for silicon carbide. Those devices are expected to grow within the power device segment, driven by that end market growth that he talked about. Device performance enhancements as well as fab optimization opportunities. So this is the market segment breakdown. So just taking a step back, maybe in a really basic way, we think about things in terms of where is ion implant is used and how do our customers use it to make their products. And ion implant is used in all of these different market and device segments. So starting on the left-hand side, advanced logic. The way to think about that is those are the devices that do the math, that do the computations. So the types of devices that fit in that category would be microprocessors also known as CPUs, GPUs, which you've probably heard a lot about. And they typically contain billions of transistors. So a very complicated, the device technology is fairly advanced. So it's less than 5 nanometers in terms of technology node. And these advanced logic devices are increasingly being used in data servers shown in the picture below. So a lot of growth potentially around artificial intelligence, which we've heard a lot about. So that's advanced logic. Memory, as the name suggests, saves the data. And so typical devices here would be DRAM, NAND, which I think we've all heard about. And these are also devices that contain billions of transistors. Fairly sophisticated technology involved there. And these are used in any place you want to save information, so desktop computers, laptops, our phones, everywhere we need to save things. So memory saves the data, obviously. So power devices, as we've talked about, are a little bit different. As the name suggests, power devices manage the power. What we show here, but the difference here is that power devices are a single transistor. And unlike memory and advanced logic, which are typically done in silicon, there's a lot of growth in silicon carbide, which is a pretty amazing material. And so single transistor controls power and is used in EVs, industrial applications and growing areas, as Russell talked about. It's an amazing material. I had a customer visit us in Massachusetts. And in this case, he brought an example of one of these transistors out of the package. So you could actually see the small chip. It's about 2 millimeters on the side. When I asked them how much current can this little 2-millimeter on the side device handle and he said about 150 amps. So that's about the same amount of current that your entire household would take in a very small device. So the use of these things in inverters and EVs is really obviously empowering. So that's power devices. Moving on to image sensors are also known as CIS, CMOS image sensors, these are the things that allow us to take the picture. And ion implant is used in making the pixels, which are shown here on the slide. And we're all very familiar, I think, with CIS devices because we have them in our phones today. So very prevalent. And this is where all the data gets pulled into what is the next segment, mature logic. So mature logic are the devices that control, collect and convert information. So everything from RF signals to analog processing to digital processing. And while these are sophisticated, they're not typically used or built with the most advanced process technology. So we look at this as more like a 28-nanometer node. Very implant intensive as I'll talk about, but these things are everywhere. So they're everything from washing machines to automobiles to lawnmowers that are self-driving and they also connect us wirelessly to many things. So this is how we think about how our ion implant enables our customers' products. So when we talk about growth, our growth road map is really aligned with the market segment opportunities, broken down in the way that I just talked about. So in addition to wafer start growth, different parts of the market actually are more intensive in terms of ion implant versus others. So what we show here is the market segment breakdown, the estimated percentage of implant CapEx and some examples of leading chip makers that exist in this space. We've also calculated the capital intensity, in other words, the number of implanters that would be required in a typical facility or fab that are building these devices relatively normalized. And what you can see here is that, especially for power devices, but also for mature process technology nodes. It's very implant intensive. So these facilities would need between 50 and 70 implanters, which is great. Power devices. Similarly, the mature process technology needs a large number of implanters as well. Memory needs a fair number, advanced logic a little bit less. All of these device segments require implant to help define the device but especially in power devices and mature process technology, that's the case. So just a few slides on the power market and the opportunity. So this is a breakdown of the overall power market, the end use market, which we see growing over the next several years to $33 billion with a compound annual growth rate of around 8%. And this market is broken down into silicon, which is the predominant part of the market today, silicon carbide and gallium nitride. If you look at the end use of the devices that are power devices, the top one, of course, is automotive and mobility, followed by industrial applications and then it goes down from there. The other interesting thing to note is if you look at the silicon carbide portion of the overall power market, that's growing faster. That's growing more like 25% over the same relative time frame. And the automotive and mobility will account for more than 80% of that silicon carbide market. And as Russell talked about, battery electric vehicles will remain the main market driver for silicon carbide. If we zoom in a little bit more on silicon carbide, it's the market and talk about that 25% growth, it's expected to grow to be more than $10 billion by 2029, again, driven by automotive, mobility and industrial applications. But the other interesting thing is that silicon carbide being implant intensive requires a significant investment. And the growth of implant over the time frame is expected to be almost 10%. So it's not only implant intensive, but there's also a very healthy growth rate as we see it going forward. Okay. I think as Russell mentioned, we are the power leader in ion implant for power devices. We started working on developing solutions for our customers more than 10 years ago in the medium current space and also in the silicon carbide space. So we've been involved in this since 2014. We believe we've created a significant incumbency advantage. And we've developed a Purion power series product portfolio that covers all elements of ion implant. So high energy, medium current, high current, and we've developed tools that really serve that entire range of what our customers need. These systems are production proven. They've been used for quite a while now and we design them to be flexible. So one of the benefits I'm working with customers for so long is we're able to identify what their specific needs are and incorporate it into our product portfolio. The other key thing is that the Purion power series is extendable. So today, power devices are largely built on what's called a planar technology. But customers want to move to new device types like trench or super junction, which allowed them to get both better performance and also scalability out of power devices. So to show that extendability, if you look at the graph on the upper right this shows an example of kind of a representative example of the kinds of implant recipes that our customers are using. Broken out by the implant dose, how many ions customers want to put in versus the implant energy, how far they want to put the ions into the substrate. So each one of those dots is an individual representative of recipe. And we've overlaid the Purion power series product elements on top of that. And what you can see is 2 things. There's a very good overlap of what customers are looking for today. But as we see them wanting to go to a higher dose and also higher energy to achieve better and scalable device performance, the Purion power series has product extensions that allow us to help them cover that as well. So the products are also extendable from a wafer size standpoint. So not only are customers moving from planar to trench, they're moving from 150 to 200 millimeter. We've had good evidence of success in this market. We worked very hard with customers in it. And you can see the graph on the lower right shows the revenue growth across all products that we developed in this segment. So in short, we view the power market is really the basis of our business on which to grow. So Russell talked about some growth opportunities. The first one I'm going to talk about is Japan. So we have a full product offering that can address all of the available markets in Japan. It's a pretty big market. It's $450 million a year roughly, and we have a relatively modest penetration in Japan today, less than 10%. However, we have a good number of resources in country working with customers, and we've been working with leading device manufacturers to evaluate technologies and products in a variety of different market segments. Recently, we've been winning applications over local ion implant competitors in the power market given the strength of our Purion power series like I just talked about. So we've had some good success there, but we also plan in power, but we also are looking to extend into image sensor, memory and advanced logic. And recently, you may have seen the press release where we've expanded our footprint in Japan by opening 2 new offices, one up north in Hokkaido and one down south in Kumamoto. So Japan is an area of opportunity of growth with a healthy, fairly big market. We don't have that strong of a presence, but we've got some good upside opportunity to grow into it. The other focus area for growth is advanced logic. So this is a market that grows with direct correlation to wafer starts and technology shrinks. It's also a pretty healthy size market, it's about $400 million a year, and we also don't have a really strong presence in that honestly. We're less than 5% in this today. However, we have a product in Purion Dragon that we developed specifically to meet the needs of advanced logic customers. And if you take a look at some of the results of our current efforts on the right-hand side, we have what we call a learner system, which we have placed at a leading European advanced logic research institute, where we're working with that group to identify what things on customers advanced logic road maps would be needed to be incorporated into our product most effectively. We also have what we call an earner, which is an evaluation system with a customer's advanced logic R&D center, where we've been working with them for more than a year now identifying applications in the advanced logic space. And as a reminder, we've had production systems in advanced logic facilities for a number of years already. So the Purion Dragon is being positioned for advanced logic. We are developing extensions to the product including upgrades, refinements and new capabilities to serve this advanced logic space. So the timing for this, although we're getting some traction in it, in terms of meaningful revenue is probably in the 3- to 5-year time frame. Okay. So now I want to shift to talk a little bit more about the products and some of the customer challenges that we're addressing through new products and product extensions. So as we said, I think before, Purion is really the core of our growth strategy, and we started developing this product platform, again, about 10 years ago. And we designed it so that we could address all elements of high -- of the ion implant TAM, including high current, high energy and medium current. So we have a common Purion platform on which we have core products that we can then build extensions to. We develop those extensions like the Purion power series to address specific market opportunities. We've also developed specific products for image sensors and as I said, advanced memory and logic. So we use this product road map to really address several customer challenges. So in terms of those customer challenges that we're focused on, I'm going to go through 4 of them, 2 of them are focused on power devices and 2 of them are focused on advanced logic. And these are all customer challenges that we're working directly with customers today. The first 2 involve power devices. One is a silicon IGBT implant, a proton implant. And the second one is addressing that evolving device design that I talked about before. In terms of advanced logic, we're looking for targeted new applications in advanced logic that we can use Purion Dragon with. And then the last one is the unique capability we've developed that I'll go through that addresses both power and advanced logic customers' challenges. So the first one is a power device solution regarding a silicon IGBT backside implant. So we talked about the power market being broken into silicon carbide and silicon, one of the prominent silicon devices is IGBT insulated gate bipolar junction transistor. And this device in order to work efficiently and to work with high frequency benefits from having a backside implant with proton. So the customer challenges is how to increase the speed and reduce the power during the device operation. We've developed an optimized solution, which is based on a Purion high-energy platform, it's based on a Purion VXE, it's a proton implanter. And that product is based on that Purion high-energy platform, as I said, of which we have more than 300 installed around the world today. So that's the product basis on which we're building this new solution. Our high-energy product is linac-based. So it's designed for higher reliability and throughput. And we've also developed optimized cooling. So these devices are made on thin wafers because of the way that they operate. So you have to be able to handle much thinner substrates, which we've also worked on carefully. So customers are very excited about this. We have systems in the field that we're working with customers on now. And the opportunity, we believe for the addressable market on an annual basis is more than $50 million. So we're very excited about this and customers are as well. So the second customer challenge area is that evolving power device design and the transition to new product requirements. So what I'm -- what we're showing on the right-hand side is a cross-section of the device, and this is showing a silicon carbide trench MOSFET power device. And it's showing different implant examples of how customers would use our product solutions to make the device. As customers are moving from planar to trench, they need to be able to better refine the device meet -- be able to reach deeper depths in the device to actually form it. So we've developed extensions to that Purion power series which enable the customers to make these trench devices and eventually super junction devices to improve the device capability. An example of that is the high energy Purion EXE silicon carbide, part of the portfolio, and we've developed it to have higher throughput across the platform; new wafer heating technology, which customers need to make the devices an updated ion source technology, so the source of the ions going into the device and optimized cooling. And like the other Purion products, it is upgradable from 150 to 200 millimeters if customers make that transition. So the goal here is to capture that device transition and to get to, as Russell said, the production fan-out of power devices using this solution for the customer challenge. Okay. So transitioning from power device is kind of the basis of our business to advanced logic, where we're focusing on growth. The customer challenge here is that advanced logic devices require more material modification implants and new applications. So Russell talked about electrical doping applications and material modification. This is one where we see an opportunity for potentially new applications for implant. And what we show on the right-hand side are examples of the number of implant steps per technology node going from 7-nanometer down to 3 nanometer. So if you look at it, there's a fair number in the front end of line, which is where implant has been used for a number of years for electrical doping, but they are growing and new applications in what is called middle-of-line and back-end-of-line. Again, our proposal and our plan is that we're using Purion Dragon with the Scanned Spot Beam technology, which is a little bit different than what else is available in the market today to be able to address these new applications in advanced logic. And Dragon brings productivity advantages, angle control advantages and the ability for customers to control the uniformity and the angles of the implanted ions. So we see incremental opportunities for high current growth in advanced logic using this approach and focusing on this different part of the advanced logic process flow. Okay. The last example of customer challenges that we're focusing on to enable our growth helps both power and advanced logic customers. So the customer challenge here, it's a little bit technical but not too bad, customers need to create what's called a box profile with uniform dopant concentration versus depth with multiple implants. So the way to think about this is if you look at the graph on the lower right-hand side, this is showing the concentration of implanted ions as a function of depth, basically. And what customers do today is they implant a series of different energy recipes into the wafer, which they can then add up to form that box like profile that you can see on the graph, so it's called the chained implant. Customers like this because it allows them to kind of refine and optimize their device performance and chained implants have been around for quite a while, but they take a while to do because for each one of those implants, you need to tune up the beam and stabilize it before you can actually execute the recipe. So it's not always that cost effective to do it this way. We've developed something novel, which we call MUSIC, which stands for Multiple Steps Implant Chain, it's a unique process capability to implant multiple energy recipes in a single recipe step. So this provides a significant throughput gain to customers. And you can see that in the graph, in the upper right-hand side, which shows the comparison of throughput between a conventional chain implant and the approach using MUSIC. It could be tens of percent faster. So customers are very excited about this possibility. Purion has an architectural entitlement, which allows us to deliver this to customers with this throughput advantage and it's also IP protected. So the high-value opportunity is to be able to capture applications in both power and advanced logic, which use change implants. Okay. So we've gone through a number of the customer challenges that we are tackling right now and have stepped through a couple of the power examples as well as advanced logic examples. So hopefully, in the time that we've gone through here giving you an idea of how we think about the market, where the market is growing, the specific targeted areas, both geographically with Japan and market segment wise with advanced logic that we're using to build on our power basis for growth. And with that, I will turn it over to Jamie Coogan, who's going to talk about finance.

All right. So this morning, again, we talked through with Russell some of the macro events and drivers that we see that are going to drive some long-term growth. And Greg, I think did a nice job of breaking down the sort of implant TAM, the technologies, how we fit into that space. And then ultimately, what we're doing to drive new opportunities through new products extensions and to continue to drive our technological moat. Fortunately, all that costs money. So we've got to figure out now how to pay for that. And over time here, what we've done. So before I go into some more details on the long-range model, we did allow Russell to kind of give you the top line revenue number, but I saved some of the margins for myself. I want a little bit of the glory here today, too. But ultimately, what I want to do is show you where we've been. We've had a lot of new interest in the company. We've done a lot of on-boarding meetings. And so we felt it was important through Russell's section, through Greg's sections to be able to educate people on sort of what is an implanter, right? Why is it important? And ultimately, how do we fit into the space. I think then it's also important to show you on a historical basis, where our financial performance has been and before we get to where we think it can ultimately go. If you look at the chart here, you can see in 2019, we are approximately $343 million, right? At that time, the implant TAM was about $1 billion. We had begun the journey at this point already to work and partner with our customers on the challenges that they were seeing, specifically on the power side and specifically with silicon carbide and really developed a novel solution here to be able to launch into the market and take that sort of a lead in the space on silicon carbide as both Russell and Greg talked about. As the implant TAM grew, right, it grew in part due to the addition of silicon carbide into the TAM, but it also grew given the sort of, I'll call it, explosion of general mature technologies. The implant TAM has more than doubled, right? It's grown to almost $3 billion over the course of this period of growth. And with that, given the implant intensity in those general mature spaces, the need for our technology has really proliferated to help support that growth. And so you see here us growing to over $1 billion, which is record performance for the company in 2023. As we look at the operating margin performance, there's a couple of really nice stories here. We had -- the team had done a lot of work over the last 10 years to drive gross margins significantly higher. But from 2019 to 2023, during supply chain challenges, right, during issues with COVID, rising cost, labor pressures, right, and the risk of an efficiency, we were still able to drive gross margins another 150 basis points improvement. Given the growth in the business, we were able to leverage, right, our SG&A base more significantly, and we saw almost an 800 basis point improvement of SG&A as a percentage of sales over that period of time. We anticipate to continue to work through those improvements, add technology to our stack here to continue to drive efficiencies. And the team is working very closely with our suppliers to drive cost down on our systems and units as we go forward. Looking at how that dropped through to EPS, a couple of benefits here. One is the improved profitability really did drive EPS. So operational improvement overall saw us go from about $0.50 a share in 2019 to almost $7.50, right? So we're just shy of $7.50 here as we exited 2023. That is, given the operational profit improvement and margin improvement that we saw over that period of time helped drive that growth. In addition, we had share repurchase program, and we executed against that share repurchase program in a really kind of thoughtful and methodical manner. We initially designed to be able to offset dilution from management grants. But as you can see, we reduced the share count over that period by approximately 3.8 million shares. So we were opportunistic and continue to buy, continue to be steady in the market and buy on a systematic and rational basis over that period of time, which reduced the share count outstanding, which then helped to drive the incremental earnings per share. Conversion to cash flow, though, is most important. And you can see we've done a great job of driving incremental cash flow into the business. This has positioned us to be able to make incremental investments in the operations. We opened up our Asian operations center over this time. We made the investments that were necessary to expand capacity. We opened up a new logistics center as well over that period of time. Those investments are going to drive incremental efficiencies, which aren't fully realized in the P&L today. We expect that reduced our warehousing footprint very significantly in the greater Beverly area and we're now in one facility with automated tools and systems that are really driving the operational performance, making us more efficient to get product to the shop floor and more efficient to get that back out to the customers. So really looking ahead, what do we see for the long-range model for each one of these components. As Russell noted, in the 2027 time frame, we anticipate revenues to be approximately $1.6 billion. With that, we do see, given the systems mix, given our CS&I revenue mix and those expectations of growth in the various end markets, we see margins at greater than 45%. That's about a 150 basis point improvement from where we are today. We believe that we can get there. It's fairly consistent with our prior models. But as many of you are aware and for those that are new, system mix really does drive how we see margin performance. So where we're going to see the growth is ultimately going to drive the margin performance overall. If we see higher high-energy tools, if we see outsized growth inside of our power device segment, if our image sensor business returns more dramatically than we are anticipating in the model, you could see performance in excess of the 45% that we're putting forward today. On the operating margins, we see that at 27%. So again, a nice basis point improvement there. That's continued leverage of the business. There are some offsets, though, that have come with that. So we are going to make investments in technology to increase our efficiency. With that's going to come, incremental depreciation and amortization. Our CapEx from 2019 to 2023 has more than doubled as well. So those historical investments we made were sort of now going to live with higher depreciation, so that noncash expense is going to be flowing through that operating margin in those future periods. And we expect that to continue as we make investments in the business. In addition, we've more than doubled our R&D spend from the 2019 to the 2023 time frame. We're going to be opportunistic. So it's roughly kind of, call it, 9% to 10% of sales is what we're targeting on a more long-range basis. However, we want to make sure Gerry has got as much money as he needs to be able to drive those incremental opportunities. And so as we identify those opportunities for the business, we're going to allocate capital to those that have the highest and best return on the R&D side. We can't get to this organic growth rate, right, without those investments. And so you will see us putting a little bit more money towards R&D where necessary in future periods at those high-value opportunities that Greg identified and talked about. Conservative estimates on tax of 15%, really looking at that sort of global minimum tax here and trying to make sure we just stay aligned with that overall. And ultimately, that leads to greater than $11.50 estimate on earnings per share. Very conservative estimates on share repurchase authorization. We want to really let the operational performance of the business shine through as part of this long-range model. But there probably is opportunity for us to go above and beyond the share repurchase estimates we have here. But we didn't want that to necessarily skew the performance of the business relative to that long-range model. On the long range, we are looking at free cash flows of greater than 75%. We still think the business can do a wonderful job of generating cash during our free cash flow over that period of time. We are going to measure that off of EBITDA on a go-forward basis, just to see how efficient our conversion ratios are and likely going to start to see us talk through that level of performance going forward. We're still going to be really focused, though, on making sure we keep a clean operating profit performance for you guys. That's a point of pride for us as we look ahead. We want to make sure that in the operating profit side that we continue to be sort of true to who we are here relative to that. Growth in revenue, really, is going to come from all the markets that Russell talked about as well as Greg talked about. We see -- the approach we took to building this up, it was a bit of a bottoms-up based on where we see the TAM growing, what markets within that TAM are growing, where our penetration is with our customers very broadly. And ultimately, what we think some of these new products, technologies, geographic expansions and the push into advanced logic can do for us. We are anticipating a certain recovery in memory spending kind of modestly above our prior historical highs within this space. So for those that aren't aware, approximately $130 million was our peak memory prior to the downturn in NAND. We are anticipating memory to be a little bit higher than that, but not significantly higher than what we saw in the prior peak. On the image sensor recovery side, we expect this to come back to, what we'll call it, more normalized levels. And then honestly, with general mature technologies continuing to grow, we anticipate power to be very durable for us with some modest growth expectations relative to how power is going to drive the business. There's CS&I revenue load, right? That's really driven by the number of Purion products that we have out in the field as well as our GSD multi-wafer tools that are out there today, that we anticipate the continued addition of Purion power systems into the field will drive incremental CS&I revenue opportunities. And we're also looking at ways to contract with our customers in a more efficient manner that allows us to capture a little bit more share of wallet associated with those products that are in the field today. Improve the customer uptimes and yields and throughputs for those customers through these incremental contracting mechanisms. And so we see that as a contributory factor of driving incremental revenue growth as well. Going into CS&I a little bit. So for those that may not be aware of what that is, this is our aftermarket business. We think of this as our spares, our consumables, our upgrades. And from time to time, you're going to see things, used tools can fly in there as well as some service revenues. Given the growth that we've seen, so this is made up of the top chart here shows all of our installed tools. So this includes our Purion, our multi-wafer tool, which we call GSD as well as some other legacy systems that Axcelis has had over time. The beauty of the systems that we put out there is that the lives of these are very long. On average, you could expect them to be 10 to 20 years. We typically see 15- to 20-year lives on these tools. And once we're through installation and warranty, there's a relative annuity stream that comes along with that. The team's goal and efforts here has been to increase, right, the share of wallet associated with that aftermarket to the best of our ability, and we're going to continue to drive that. Chart on the bottom shows the additions. This is looking just at the multi-wafer, right? So this is just the implant systems that we have out there. And you can see the contribution as Purion continues to push out, you can see the relative contribution that we continue to receive on an annualized basis from the incremental units that we push out into the field. So this is a really nice solid foundation of our business. It's very margin accretive for us. So this is above consolidated margins in the aftermarket business with certain parts of the CS&I business being very margin accretive, that's primarily associated with the upgrades, just given the efficiency and production capabilities that we provide to our customers through that. The Purion product family was designed in a way that allows those to be field upgradable. And so as we identify upgrade opportunities, we do have the chance to go back to customers who bought those prior Purions, push those back through the Purion and then bundle those upgrades together into a new product system and a new product family allows us to drive incremental ASPs, launch new products into the field and really satisfy those emerging and future customer needs and requirements with the Purion. Operating margin expansion. I talked through this a little bit already. But ultimately, what we do see is the mix -- system mix between high energy, high current and medium current are going to drive the operating margin expansion on the gross margin line as well as the growth in the CS&I business. We expect the incremental leverage that's going to come from the sales opportunities to flow through on the G&A line item, offset in part by some incremental R&D spend over that period of time as well as some incremental depreciation as we institute technologies to drive cash efficiencies in the business on a go-forward basis. And I guess to have cost controls. If I don't have cost controls, am I not doing my job, I guess, probably is not. Continuous investments in ion implant. So you can see where we've been with research and development over time. As sales have grown, we've continued to put more dollars on a per dollar basis. We've significantly increased the amount of research and development dollars that we have today. And as I said, we're going to continue to try to find opportunities to put incremental dollars towards research and development to continue to fund the organic growth opportunities we see in the business. The team has done a wonderful job of segmenting our products, creating very specific solutions that meet the customers' needs and requirements, driving up ASPs, driving up gross margins and extending the technological moat that we have around many of our product families today. So with that, we'll continue to be very thoughtful as we go through and make those investments and make sure that we have return characteristics associated with those types of investments. So that they meet our long-term capital allocation goals. Interestingly enough that leads into our capital allocation strategy. As you can see from the model, we do have a significant amount of opportunity on the organic side. This remains our highest and best return and we're going to remain focused on investing in the business to drive towards not only the $1.6 billion model in the 2027 time frame, but beyond that into future periods. As we think through, that's going to be continued views on capacity, capacity expansion, incremental systems for our applications team to test out new products, development of our test center here for our customers to come in and try out recipe sets, understand how the new products are going to work and really increasing research and development opportunities for those new product developments. On top of that, we're going to now weigh the other 2 parts of the component here between M&A, so these are inorganic opportunities and our share repurchase authorizations. We're going to execute, continue. Today, we have a $200 million authorization in place. At the end of the first quarter, we had approximately $175 million left on that authorization. We continue to execute against that in a really thoughtful and rational, methodical way moving forward, but we're going to look to be opportunistic if we can. And so at a minimum, we're going to try to offset dilution. But as you can see from our historical practice, we've done more than that, and we'll continue to find ways to do that in future periods. So with that, I'm going to turn the call back or the presentation, I should say, back over to Russell and allow him to wrap it up and invite the management team on before we begin Q&A.

Great. Thank you, Jamie. Really appreciate all the work from the team, putting this together. So hopefully, through this presentation, we've talked you through why ion implantation is so critical for making devices. We've talked about some really large secular growth trends, power, electrification, artificial intelligence and obviously, our insatiable need for chips in general. I mean, if you talk to the guys from semi, they say basically, we're going to be trillion of sales by 2030 in devices, right? So that's a doubling in the next few years. So lots and lots of devices out there. So hopefully, you've seen the growth, and you've also seen how we're positioned to take advantage of that growth. And then Jamie took us through the numbers. So hopefully, you've kind of seen where we're going. With that, I would like to invite the management team on stage and turn ourselves over to Q&A.

All right. We'll open up for questions. I think there's a couple of things that are interesting. I just want to mention from years of hearing your questions, There's some interesting new slides in this deck. CS&I has always been a question in terms of how it grows and so forth. I think the slide Jamie showed there, provides some new interesting detail on that. The other one is the sort of resurrection of the slide showing the number of implants per 100,000 wafer starts. So we do listen. . And so even when we say you can't talk about that, eventually, it gets into the presentation. So with that, I'll open it up for questions. [Operator Instructions] Charles right here in the middle.

Charles Shi here from Needham. So I wonder if you guys can an update about the original target of $1.3 billion in 2025 because you laid out the journey for the next 3 years to get to like $1.6 billion if you're still holding up -- upholding that $1.3 billion goal for next year. You're going to be halfway there in the first year of that 3-year journey. So I wonder if you want to provide some update that -- obviously, that was a long-term target. Now it's getting a little bit not quite a long term. It's next year, but any thoughts on that.

Okay. So I'm going to just -- so everyone knows I'm just going to rephrase the question a little bit for the folks on the webcast, in case it's not clear. So Charles was asking about the former $1.3 billion model that we had in the presentation until this event. And ask Jamie to make some comments on that?

Yes. Maybe I'll let Russell start, and then I'll jump in.

Sure. So I think we kind of -- so we've said that there's multiple paths to achieve the $1.3 billion in 2025. So obviously, silicon carbide this year has been very strong. It's continued to be strong, but every other market has been taking a pause. So silicon IGBTs, memory until recently general mature, image sensors, so we have said previously. This year, we're a $1 billion run rate based on Q1 and Q2. Second half is going to be slightly better than the first half with the kind of run up in Q4. So we are starting to see things improving. Q4, we're expecting to see some kind of a little bit of DRAM kicking in, a little bit of image sensor kicking in, so some of those markets are coming back. So we do see multiple paths to get to the $1.3 billion next year, but we still need to see an improvement in consumer spending, industrial and also automotive.

Yes. And just as we think about the way the process works, Charles, I think you kind of nailed it on the head, the 2025 $1.3 billion was a long-term model assumption developed under a prior set of assumptions, right, a few years ago. When we think about providing color relative to our expected performance for 2025, we're going to actually kind of go back to our process of sort of annual view, so our annual budgeting and forecasting process, which occurs in the third and fourth quarter of this year, which will ultimately inform where we see the remaining year -- the year going next. As we look ahead to how does that then stage out right to the $1.6 billion going forward, as Russell noted, it's the underlying recovery and the timing of that recovery is going to be difficult to predict and how it layers into each of the years there in between. But we really did try to take a thoughtful approach in creating that 2027 $1.6 billion target to make sure that it was realistic, achievable and the underlying assumptions there were within the reasonable growth expectations for each one of those markets.

Dave?

I was just wondering if you could address in whatever detail that you can, the adoption of SIC in the data center and not on the back end on renewables or anything like that, but on the rack or on the board itself because we're hearing all sorts of things recently that, that's starting to happen. And obviously, that would be kind of an exciting development for the SIC market in TAM.

Okay. So Dave's question is talking about silicon carbide in the data center and how it can expand both in the facilities that Greg talked a little bit about as well as potentially into the rack. So do you want to start?

Yes. So thanks for the question. So I remember a long time ago doing a project at school talking about data centers and what technology they're going to use and it's going to be GaN. I think GaN still has a place inside the boxes, but I think as the price comes down that might get discussed more. But think about the actual infrastructure of how you deliver all of this huge amount of current to those boxes, I think that's where the focus is at the moment. So there's kind of battery backup and power management in these data centers. I was thinking about like 2 or 3 weeks ago, Infineon came out with a 400-volt trench device focused solely on the data center market. And the interesting thing that they mentioned was that the trench architecture is what allowed them to be cost effective against the incumbent. And naturally, silicon carbide is coming down in price and people are thinking at the system level and that's where the real value comes from in addition to the cost reduction. Then about a week later, Onsemi came out with a whole slew of certain carbide devices also focused on the data center. I think at the moment, and we are working with analysts, like the usual kind of market analysts to work out what does this mean? We think it's relatively early at this stage to kind of like try and work out what that means in terms of future business. But I think is a really good indication of a market that's going to be enabled by the sheer volume of the car business that running down to the prices.

Yes. And just maybe add that as Russell noted, this is still -- I think we're all kind of learning, right, the emerging use cases potentially for AI data center usages. And so as we know -- we see that line of path, the sort of facilitization, the power usage as price points and parities increase and as technologies advance, David, is certainly possible, right, that you could see these end up in the data center systems. I think the one thing that we do know is that relative to the current market expectations, we don't necessarily believe that the current market expectations take into consideration some of these other use cases today. And so as we start to get more information and more data on that, we could see that being additive to the TAM and then also being incremental opportunities that are not necessarily fully realized in the long-term projections.

Yes, just to kind of add on to that. So like I said, I was talking to a customer yesterday, a silicon carbide customer, I guess, these are new things that are coming to me out of the woodwork, right? So when they mentioned about the digitization of the grid and saying, you could get rid of transformers on poles, it's going to be a lot cheaper, you're going to get 10% improvement in energy. So well, nobody has actually mentioned that. And he said, yes, high-voltage components have been demonstrated. They just need to get into manufacturing. And then the person talked -- when they talked about silicon carbide or just power devices and generators, it's amps per dollar. okay, that's an interesting way of looking at it. So that's when they were talking about any motor -- any big motor and they mentioned about HVAC motor, so think about the number of HVAC systems that are around the world. I mean, whenever I travel to Asia, every single room has a box bolted on the window. And you think -- if you could reduce the power usage by 10% for that motor, that's significant. And I hadn't really thought about those devices. But then when you think about what happened with LED and the fact it ends up in kids' sneakers, it ended up in McDonald's toys, you realized that the price just comes tumbling down. And I was at Semicon China this year, and I was pleased to see a whole bunch of 6-inch silicon carbide wafers. There was an awful lot of people showing 8-inch silicon carbide wafers and the quality is improving. And when you think about what the most expensive part of a silicon carbide device is versus the substrate, then it's the epitaxi that is the implant. But these substrates are coming down 20%, 30% a year. And every single step of that price reduces, it turns on a new application, which we are just beginning to learn about really. Yes.

So I can't just moderate.

I'd expect nothing else, Doug, right?

I want to bring it home to Axcelis, right? So all of this discussion hinges on the cost reduction of silicon carbide or silicon IGBT continuing to open these markets. All of that is dependent on implant. So the trench device that was discussed that requires the high energy implants. Greg introduced the EXE silicon carbide tool as a tool that's designed to enable that. We talked about the proton tool for the backside implant for IGBT. Again, that improves the performance, lowers the cost of an IGBT chip. So the implant piece of this cost reduction and this enabling of the markets that Russell and Jamie are talking about is critical, which really positions Axcelis well to participate. Back to moderator. Craig.

Yes, Craig Ellis, B. Riley Securities. Team, thanks so much for providing so much very useful information. I appreciate you all being here to do so. The question that I have is for Jamie. Jamie, can you help us understand some of the underlying mechanics in the $1.6 billion target revenue number. For example, it looks like when I do the math from some of the slides, it's flat to slightly up share assumption that you have as a percent of the market. And as you think about the $1.6 billion, how much of a contribution are you baking in from things like either new products success with initiatives like advanced logic in Japan?

Yes. That's a great question, and I have my handwritten notes here, Craig, because I knew that was coming. So the reality is repeat -- I'll let Doug repeat the question.

Just quickly for those out in the webcast. Greg asked for Jamie to give more detail on the $1.6 billion model.

Yes. So I'm not going to give specifics because it's very difficult for us to predict the exact timing and then the full load. So I'll give sort of vague generalizations that you guys can use to triangulate to the best of your ability. We haven't really overweighted any one specific area relative to growth expectations. So as it relates to advanced logic, we do see some, I'll call it, incremental gains that are there, but we are not expecting this to become a very significant a share gain for us in the advanced logic space. So this is going to be incrementally over the opportunities we have. That's really predicated on the success that we see with our Dragon tools inside of those research and development centers at the European Center and at our customers' R&D center and the uptake there. We've always framed that as a bit of a 3- to 5-year play. And so depending on when we start to see adoption of that, we expect to see some incremental adoption of that over the forecast period, but we're not assuming that to be kind of go gangbusters here and grow dramatically within that forecast period. On the image sensor side, it's likely going to kind of trend back to what we call on a percentage of system, system sales, I should say, normalized, sort of revenue levels there for CS&I very broadly. I talked a little bit about DRAM already and let you know there that there is some incremental gains. It's again difficult to size the meaningful impact that HBM is going to have on the DRAM market as well as the evolving needs of the devices and the DRAM requirements inside of those devices. So we do expect to see memory sales up relative to that prior peak. But again, we're kind of trying to be modest in terms of what that ultimate impact could be. On the power side, power is going to continue to be really durable for us over the period of time. So we anticipate some continued growth in the silicon carbide space for sure. The question will be as the adoption of hybrid vehicles and how quickly we see that level of adoption, what happens with silicon IGBT. So again, we tried to make sure that we were -- we didn't overweight ourselves, right, to the potential optimism associated with that. So I think that leads opportunity sets there kind of for the approximately $1.6 billion that we put in place for performance above that, if possible. And then finally, I'll end with on advanced logic, actually, I talked about general mature technologies. General mature technologies, we do see recovering. And so as that recovers back into sort of, call it, the more historical ranges for us on the other general mature technologies. That is a contributory driver for us over the forecast period.

Tom?

I was hoping to get a little bit more on the Dragon. It's been around for several years. We haven't seen a ton of momentum what is the technology or the key differentiator that you think is going to drive success in certain markets going forward?

Okay. So Tom's question is about the Purion Dragon which we announced a few years ago, and a little bit more about the technology and how it drives into the market. I'll start with Greg and maybe Gerry can chime in as always.

Yes, thanks for the question. So we have had Dragon around for a little while. As I said during my presentation, we've identified new and growing applications in advanced logic, where we think we can bring some of the capabilities of Dragon to address those, primarily in materials modification applications. So we've learned a little bit more. We've made some modifications to the product to make it accommodate what customers are looking for. We've also developed more direct experience through some of these engagements with these sites. So that's really helped inform where the problems are and how we develop those solutions a little bit faster. So I'd say in short, we're taking a really focused approach to where the new applications that are growing in different parts of the process flow that we can differentiate around.

So Tom, I just want to add, I mean, so this tool is designed for really low energy, high current, which is great for doing material modification. And it also differentiates itself in the sense that's a scanning beam you can separate angle control from uniformity. So we've been kind of like looking at things that our architecture enables our customers to solve and looking to differentiate ourselves that way, but the technologies are quite differentiated. And we've had a couple of opportunities in really high aspect ratio kind of doping because of the angle control. Some of the stuff we're talking about now in advanced logic is more middle end of line and back end of line where there isn't, actually, an incumbent, which then gives us a greater opportunity because now we're not competing against somebody else. So you work with a customer, you understand the valuable problems, you come up with solutions and then obviously, the best solution wins. So you're not guaranteed of finding opportunities when you start working with customers. But we find that once we're in R&D, we're engaging with the customers, you'd be amazed the number of things they try and do.

And just to add a couple of things. Some of these new applications are critical to sub-20-nanometer type of technologies like backside power, for example, implants being looked at for applications in that space. That's technology that didn't even exist and just going through R&D right now. Second thing I just wanted to remind folks is, we do have Purion Dragons in production in advanced memory applications. So the tool is out there and being used. Focus of the tool and its design was to help penetrate the advanced logic. Okay. We have a question coming from online that David will read.

Thank you. Thank you so much, Doug. Thank you, everybody. So first question comes from Jed Dorsheimer at William Blair. Silicon carbide and industrial. Where do you come out on planar versus trench? It seems clear that planar has been the path for auto, but in data center and other industrial apps, it would seem that trench has some unique features. This would obviously have implications for implant.

So the question was what's our view on the basically that the road map for planar transistors for silicon carbide versus trench. So I would say that -- when I look at planar transistors, they all use medium current, but planars have a higher dopant concentration. They tend to use the H200. We love planar. When it comes to trench, they tend to have much higher energy implants, which uses the high energy implanter. And those devices are deeper and smaller. So think about the planar device maybe being 3x bigger than a trench device. I personally believe, and I guess Jed would probably know more about this, I think a lot of the times, people are moving to trench is it gives you a high yield. I mean a smaller device on a substrate that has multiple crystal defects, you've got to miss the defects more often, I think that makes a lot of sense. I kind of think when we look into the marketplace, definitely, the advanced manufacturers are very much talking about 8-inch trench. That's where they're going. The more rudimentary manufacturers are quite happy churning out lots of 6-inch planar. There is one very, very large player in the market who's adamant that they want to stay with planar, although everybody is looking at a trench at some level. It really is that the next iteration. You can get more devices, higher yields. And obviously, it goes hand-in-hand with the transition at the right time from 6-inch to 8-inch.

Yes. And the beauty of that is, as Russell noted, with the higher energy, those are -- that's our bread and butter, right, tool set. That's where we are the leader, given the architecture of our tools and the ability for us to deliver the highest energy, specifically in the power space. Those also represent good margin opportunities for us as well. And so from a transitionary perspective, the ability trench becomes the predominant power device inside of the data center, whether that's in the facilities, whether it's in the racks themselves or any combination thereof, that will provide an advantage to Axcelis.

And just kind of an interesting tidbit is that as we talk to more and more customers, and we have multiple customers in every area and we see the entire market. People are moving actually to higher and higher energy. So it's almost like silicon all over again where people start off with the medium kind of implanter and added more. But now we're finding that what started off with people requesting a Purion XE, they're now looking to take the Purion EXE because they want a little bit more extra energy to take them to the next step. And that gives us even more differentiation. So I quite appreciate that.

And the last thing I'd like to add to that is the competitive environment. So when we look at these higher energy, high dose applications, this is a place where Axcelis has a tremendous competitive advantage. It's also the higher-margin tools, higher ASPs. It's very good business for Axcelis.

So David has 1 more question I have another one. This comes from Mark Miller at Benchmark. What does Axcelis see as 2027 revenue mix between power, image sensors, mature, advanced logic and memory.

So again, I'll probably keep that in vague term, Mark. I appreciate the question, and glad you're on the webcast here for us. Ultimately, as you can see the breakdown. And by the way, we will post these slides online following this meeting. We just didn't want to read in the head while you were here. So we will post these online for everybody after the event. As we think about it, right, as we look at the growth of the markets and we look at the breakdown, we do expect the general mature technologies and power technologies to continue to be a large portion of the revenue for Axcelis as we move forward. That includes the image sensors, right, that includes the other general mature and as well as silicon IGBT and silicon carbide. We don't have -- memory, like I said, is going to be back on a dollars perspective, we'll be closer modest growth over those prior revenue peaks that we had of around $130 million in the historical period. So some modest growth above and beyond that. And on the advanced logic side that's going to be incremental to what we've seen historically, but it's not going to make up a large -- it's not expected to make up a large portion of the revenue load for the $1.6 billion model. So Mark, thanks again, but it's probably the best I can do right now. And I'm going to burn my notes after reading.

Brian, in the back.

Brian Chin at Stifel. Thanks for the presentations and the discussion. This might kind of pull in a couple of different panelists here. But maybe to start with Jamie, in the $1.6 billion, what's the assumption roughly for the CS&I. It was $250 million last year, maybe it's $300 million at the next or conceptually, it probably grows a little bit lower than the equipment business over that horizon. So that's the first part of question.

Yes. So I'll just repeat it. So Brian is asking for little more detail on the breakdown of CS&I in the $1.6 billion model.

Yes. We do continue to -- so our prior examples on CS&I sort of 25-ish percent or so, right, of sales, plus or minus, right? The difference here is we're going to be continuing to add incremental Purion power units. We do expect there to be some potential significant opportunities for upgrades over this forecast period as well, which is going to continue to drive probably CS&I levels because you're not just adding the sort of annual annuity that comes with the delivered systems in the field, you're also now going back into the entirety of that installed base to push those upgrades through the entire installed base over that forecast period. And then the final piece there is the contracting mechanisms that we're currently using with our customers. We're going to continue to evolve those in a way that increases their productivity, throughput, output while increasing our share of wallet of the aftermarket. So there are certain components within that aftermarket stream that the customers have no choice but to come back for us too, but there are other pieces where there is competition, right, in that space. And so if we can continue to provide higher quality, higher throughput, higher productivity through a more fulsome level of service to that customer, we anticipate being able to capture incremental share in sort of deflect some of the second sourcing that does occur from time to time for some of the more common parts and components that are out there.

Okay. Because if it was 1/4 of the revenue of $1.6 billion, theoretically, it would actually grow faster than the equipment business.

Yes. And that goes back to as we think about the upgrade opportunities, Brian, as well as some of these incremental contracting, precisely where that falls, right, is -- and how quickly we get up there is part of the reason why we have the tilda there. And so whether the incremental growth comes from systems, right? We've talked about some of the opportunities to potentially go above and beyond in some of the other areas of the systems business, that could -- those opportunities could more than offset a little bit of overestimation on the CS&I side.

Okay. So the other part of the question is if I apply that math and you'd still -- to '27, you would still outgrow the implant TAM by about 1% in terms of the CAGR over the -- so in terms of that 100 basis points of maybe premium, how would you break that down? Is it sort of -- is the base case having similar market share than you have today? Do you see a little bit of a tilt towards the power market because -- and also the kind of the last part of that is you shared some math about implant intensity for power. How many -- what sort of wafer capacity do you think could be added from now through 2027 for the power device market.

Maybe I'll start with the first.