ACLS - NASDAQ

Good day, ladies and gentlemen, and welcome to the Axcelis Technologies call to discuss the company's results for the second quarter 2025. My name is Sean Ammer, and I will be your coordinator for today. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the presentation over to your host for today's call, David Ryzhik, Senior Vice President of Investor Relations and Corporate Strategy. Please proceed.

Thank you, operator. This is David Ryzhik, Senior Vice President of Investor Relations and Corporate Strategy. And with me today is Russell Low, President and CEO; and Jamie Coogan, Executive Vice President and CFO. If you have not seen a copy of our press release issued earlier today, it is available on our website. In addition, we have prepared slides accompanying today's call, and you can find those on our website as well. Playback service will also be available on our website as described in our press release. Please note that comments made today about our expectations for future revenues, profits and other results are forward-looking statements under the SEC's safe harbor provision. These forward-looking statements are based on management's current expectations and are subject to the risks inherent in our business. These risks are described in detail in our Form 10-K annual report and other SEC filings, which we urge you to review. Our actual results may differ materially from our current expectations. We do not assume any obligation to update these forward- looking statements. During this call, we will be discussing various non-GAAP financial measures. Please refer to our press release and accompanying materials for information regarding our non-GAAP financial results and a reconciliation to our GAAP measures. Now I'll turn the call over to President and CEO, Russell Low.

Good morning and thank you for joining us for our second quarter 2025 earnings call. Beginning on Slide 4, we delivered solid results in the second quarter with revenue of $195 million and non-GAAP earnings per diluted share of $1.13, both exceeding our outlook. We generated slightly better-than-expected Systems and CS&I revenue, delivered strong gross margins while maintaining disciplined cost control. Bookings in the second quarter were $96 million, down slightly on a sequential basis and reflecting a book-to-bill of 0.8x. While customers continue to digest capacity, we are encouraged that first half bookings reflect a slight improvement compared to the second half of 2024. Consistent with our prior commentary, bookings can fluctuate from quarter-to-quarter. With that, let me add some additional color on the trends we are seeing by market category. Turning to Slide 5. In the quarter, sales to mature node applications comprised almost the entirety of our system shipments, in particular, power and general mature. Now on Slide 6, let me review our trends by end market. Within our power business, shipments of silicon carbide applications were relatively flat on a quarter-over-quarter basis. While the overall silicon carbide industry continues to digest the capacity that has been put in place over the past 2 years, we see pockets of investment across a number of different customers. In China, we see continued firm demand for both 150-millimeter and 200-millimeter applications. Customers are investing to meet growing demand for silicon carbide in the fast-growing China EV industry as well as other applications. Outside of China, customers are using this slower period to increase R&D engagement and invest in technology transitions. In the quarter, we shipped a Purion XE High Energy tool to a customer that is investing in 200-millimeter super junction technology, and we continue to be in active discussions and engagements with other customers on their trench and super junction technology road maps. As we've noted in the past, Axcelis is the market and technology leader in high-energy ion implantation, which is required for deeper and more precise implants and a critical enabling technology for customers transitioning to these next-generation architectures. In addition to the need for high energy implants, we're excited about the long-term demand drivers for silicon carbide, which is underpinned by declining device prices along with the world's need for greater energy efficiency. This creates the following tailwinds for silicon carbide demand. First, in the EV industry, we anticipate the penetration rates into EVs to continue to grow. And this includes not just battery electric vehicles, but hybrid vehicles as well, where we are already seeing signs of adoption. Second, we anticipate the silicon carbide content per vehicle to grow as well. Third, we see growing requirements for higher voltage silicon carbide applications such as faster charge times, driving investment in development of trench and super junction designs. And as I noted, we are a technology enabler with our market-leading high-energy portfolio. Fourth, while overall demand for EVs in the U.S. has decelerated on a global basis, EV sales continue to grow at a robust pace with IEA forecasting 25% year-over-year growth in 2025. As a result, with the penetration rate of EVs as a percentage of overall auto sales continuing to grow, the combination of all these factors creates a multiplier effect on silicon carbide demand, and that's just within the EV industry. Finally, with device prices declining, we also expect growing adoption outside of the auto industry, including renewable energy, industrial motor drives, railway applications, data center power supplies and many others. In fact, one important proof point of this is the recent public announcements from leading power device makers over the past several months, which signals increased attention and collaboration on delivering higher voltage power solutions for next-generation AI data centers. We believe silicon carbide will play a key role here. We also believe the combination of these volume, content and technology drivers translates into attractive long- term market opportunity for Axcelis. From a near-term perspective, as we think about this business over the next few quarters, we see continued pockets of demand, and we expect a modest improvement in revenue in the second half of 2025. Starting with the second quarter results, we will now refer to the remainder of the power market segment as other power compared to previously referring to this as silicon IGBT. While IGBTs have made up the lion's share of this category, we believe other power is more reflective of other potential power applications such as silicon BCDs, silicon power MOSFETs and GaN power devices. Turning to the results in the second quarter, ship system revenue from our other power applications grew sequentially, primarily due to growth in China across multiple customers. In our general mature segment, revenue declined slightly on a sequential basis as customers continue to manage their capacity investments given the current demand environment in auto, industrial and consumer electronics. We continue to see pockets of improved tool utilization, which is an encouraging sign. However, we would need to see this continued coupled with improved end demand in order for this to translate into resumption of capacity investments. Market dynamics aside, we are working closely with customers on their capacity and technology road maps. Case in point, we secured a meaningful order for high energy and high current tools from a customer in China that is investing in 28-nanometer applications. This is a nice reference win for us and can open up additional opportunities down the road. Turning to Slide 7. In advanced logic, we continue to engage closely with customers on their evaluation units, and we are pleased to say that in the second quarter, we received a follow-on order from one of these customers. This is consistent with our strategy of penetrating this opportunity by working collaboratively with customers through their evaluation units during their R&D process. Advanced logic remains an underpenetrated market for Axcelis, and we are actively targeting next-generation implant applications at the M+1, M+2 and M+3 nodes. This includes important applications for implant such as the backside power distribution network integration, where we believe we have potential solutions based on improved device performance and yield and the ability for customers to control the energy purity of implanted ions. Moving to memory, shipped system revenue declined on a sequential basis, consistent with commentary on our prior call that memory spending would remain muted for the balance of the year. Compared to 2024, which saw a sharp reduction in volume, we continue to expect modest growth in this end market on a year-over-year basis. Despite the pause on implant investments across DRAM and NAND, we are executing on our strategy of penetrating new and existing opportunities with customers on their next-generation robots and fab plans. To that end, we secured an order for a high current system for a DRAM application with the potential for additional follow-on orders based on this customer's investment plans. In NAND, customers remain focused on scaling to higher layer counts, which requires deposition and etch chamber-based upgrades and not incremental ion implantation capacity. As a result, we expect demand for NAND applications to remain muted over the balance of the year. On Slide 8, let me wrap up my thoughts prior to handing the call over to Jamie. Despite the macroeconomic uncertainty and widely known cyclical digestion we are seeing in 2025, we are executing very well with what we can control. This includes the following: first, a relentless focus on innovation and deep engagement with current and new customers across their technology road maps. In fact, during these quieter times, customers increased their focus on R&D to drive better cost performance and yields. And simply put, we see ourselves as an extension of the R&D teams. Second, our engagement with customers does not end at the system level, but also CS&I, our customer solutions and innovations business is foundational to the customer experience. This includes spares and consumables, service upgrades and used tools. Through the first half of 2025, our CS&I revenue made up approximately 30% of total revenue and is up slightly on a year-over-year basis despite lower systems volumes during this period. And this is a reflection of the strength of our installed base, which provides a resilient revenue stream through the cycles. Moreover, given that our CS&I gross margins are materially higher than the corporate average, this business makes up a meaningful percentage of our profitability, and I'm pleased with our execution in driving more service contracts and high-value upgrades for customers that are seeking our latest generation technology within their existing footprint. And third, we are prudently managing our cost structure while ensuring we have the resources necessary to invest in growth. This is reflected in our first half 2025 adjusted EBITDA margin of approximately 20%. Taken together, these actions are allowing us to deliver strong profitability despite a cyclically soft demand environment while positioning us to capture the long-term growth opportunities that we believe lie ahead. With that, let me turn the call over to Jamie for a closer look at our results and outlook. Jamie?

Thank you, Russell, and good morning, everyone. I'll start with some additional details on our second quarter before turning to our outlook for Q3. Starting on Slide 9. Second quarter revenue was $195 million with system revenue at $134 million and CS&I revenue at $61 million, both slightly above our expectations for the quarter. From a geographic perspective, consistent with our commentary on our prior earnings call, China increased sequentially to 65% of total shipped system sales, up from 37% in the prior quarter. We continue to anticipate our customers in China to digest the robust investments they've made into mature node capacity over the past few years. As a result, we anticipate second half revenue in China to be relatively similar to the first half. Turning to other regions. We saw shipped system sales to the U.S. at 19%, while Korea declined to 8%, consistent with our expectation of muted demand from memory for the balance of the year following the first quarter. In addition, we've added the geographic split on total revenue, reflecting both systems and CS&I. Using this measure, revenue from China totaled 55%, U.S. was 18% and Korea was 13%. Starting in the third quarter, we will transition to reporting geographic split of total revenue only, which is consistent with our peers and a better reflection of the overall company exposure we have. Please see the appendix of our earnings slide presentation for a quarterly breakdown of geographic revenue mix starting in the first quarter of 2024. As Russell mentioned, bookings declined slightly on a sequential basis to $96 million, and we exited the second quarter with backlog of $582 million. Turning to Slide 10. Now let me share some additional details on our GAAP and non-GAAP results. We delivered strong GAAP gross margins of 44.9% in the quarter, exceeding our outlook of 41.7%. Our non-GAAP gross margins were 45.2% compared to our outlook of 42%. Our better-than-expected margins were primarily due to higher CS&I revenue, another quarter of better-than- expected warranty and installation costs and favorable systems mix. In addition, our gross margins are benefiting from the cost savings and efficiencies actions we've taken over the past years, and we will continue to explore ways to optimize our cost structure. GAAP operating expenses totaled $58.4 million, and on a non-GAAP basis, operating expenses were $53.6 million, relatively in line with our outlook of $54 million. As a result, GAAP operating profit was $29 million, reflecting a 14.9% operating margin. Our non-GAAP operating margin was 17.7%, leading to an adjusted EBITDA in the second quarter of $38.9 million, reflecting a 20% margin. We generated approximately $6 million in other income with the sequential increase primarily due to foreign currency gains. Our tax rate was approximately 10% in the second quarter on a GAAP basis and approximately 11% on a non-GAAP basis. The lower-than-expected tax rate was primarily attributable to our foreign-derived intangible income deduction and federal research and development credits. For the balance of the year, we estimate our non-GAAP tax rate to be approximately 15%. Our weighted average diluted share count in the quarter was 31.9 million shares, and this all translates into GAAP diluted earnings per share of $0.98, which exceeded our outlook of $0.57. Non-GAAP diluted earnings per share was $1.13, exceeding our outlook of $0.73. The higher-than-expected EPS was primarily due to the better-than-expected revenue and gross margin. And in addition, our non-GAAP EPS benefited by about $0.05 due to a better- than-expected tax rate. Moving to our cash flow and balance sheet data shown on Slide 11. We generated $38 million of free cash flow in the second quarter as a result of better-than-expected profitability as well as improved days sales outstanding. Turning to share repurchases. In the second quarter, we repurchased approximately $45 million in shares. And at the end of the second quarter, we had $168 million remaining in share repurchase authorization. We exited the quarter with a strong balance sheet, consisting of $581 million of cash, cash equivalents and marketable securities on hand which includes $31 million of long-term securities that we've added in the second quarter. Before I turn to our outlook for the third quarter, I'll share some of our current thoughts on tariffs. We continue to monitor the fluid tariff environment, and we believe we are well positioned to respond to any changes through risk mitigation strategies and by leveraging our global supply chain and manufacturing footprint. The outlook I will provide today includes a modest estimated impact from tariffs. With that, let me discuss our third quarter outlook on Slide 12. All measures will be non-GAAP with the exception of revenue. We expect revenue in the third quarter of approximately $200 million. Additionally, our initial view of fourth quarter points to relatively similar levels compared to the third quarter. We expect non-GAAP gross margins of approximately 43%. The sequential decline is primarily due to our mix of systems revenue for the period as well as a slightly higher volume of systems revenue relative to CS&I. Our current view of the fourth quarter gross margins also points to similar levels with the third quarter. We expect non-GAAP operating expenses of approximately $53 million in the third quarter and expect this to increase slightly on a sequential basis in the fourth quarter. Adjusted EBITDA in the third quarter is expected to be approximately $39 million. And finally, we estimate non-GAAP diluted earnings per share in the third quarter of approximately $1. In summary, and to echo Russell's earlier commentary, despite the cyclical softness in our markets, we are pleased with our ability to generate robust profitability, return capital to shareholders and maintain a strong balance sheet, which positions us to deliver long-term value creation for our shareholders. With that, let me hand the call back to Russell for closing remarks. Russell?

Thank you, Jamie. We believe we are well positioned to navigate the current cyclical downturn. Our disciplined focus on cost controls is delivering tangible benefits even in a lower volume environment. At the same time, our strong balance sheet has enabled us to opportunistically repurchase shares and return cash to our shareholders. As we look ahead, we are confident we will emerge from this period even stronger, supported by a clear technology road map and differentiated market position. I want to thank our customers, employees, shareholders and partners for their continued support and trust in Axcelis. With that, operator, we are ready to take your questions.

[Operator Instructions] And our first question comes from Christian Schwab with Craig-Hallum Capital.

Congrats on the great quarter and the great results. As we look to the memory market in 2026, do you have any initial indications of wafer start growth there yet?

Christian, it's Russell. So we kind of really -- we're not forecasting 2026 yet. But I think what we've said is that let's just take DRAM initially. So obviously, HBM has been quite hot. That's been eating away at DRAM capacity. And a lot of the suppliers have been kind of 4-wall constrained. So as you know, node over node, the implant intensity doesn't change much. So we would need wafer starts to increase in order to start shipping more implanters. And I think while it may take a couple of years for new capacity to come on, I think in the end of '25, early '26, you're going to start to see some of this new capacity come online. So obviously, we're not going to be making any predictions yet, but we're excited by that.

Great. And then my second question has to do with the general mature marketplace. Kind of information by the chip manufacturers is kind of scattered as far as outlook and optimism in auto and industrial. But from your perspective, do you see that market improving in the second half of '25? Or do you think that's really a calendar 2026 event?

Yes. So I think -- so we're kind of saying we believe that our revenue for the second half of '25 is going to be slightly up on the revenue for the first half of '25, but it won't be due to general mature. I think we kind of -- we've said that we're actually seeing a slight uptick, and it's because of power. General Mature is -- I think it's in a digestion period at this stage.

Congrats on the great results.

And our next question comes from Craig Ellis with B. Riley Securities.

Congratulations on very strong execution through the income statement and the strong guide. I wanted to follow up to start, Russell, with further inquiry into one of the points you made around silicon carbide customers using the current period for R&D and technology transition. So the question is this, to me, that sounds like customers are acquiring tools for use in R&D lines versus in volume production, which would imply that when they're ready for volume production, there might be a further inflection in demand. Is that the right interpretation and implication from what you were saying there?

Craig, so actually, so just to kind of recap, we think the silicon carbide is going to be slightly stronger in the second half of '25 than the first half. What we begin to see is a bit more of a bifurcation. Within China, obviously, they're looking to get the processes laid down, get the yield up at the cost down, and they're focusing a lot on 6-inch planar. Some are looking at 200-millimeter planar. Outside of China, you're seeing customers drive very quickly to 200 and particularly to advanced devices as well. So they're looking to go from planar to trench and then we've also got customers working on super junction as well. So you've seen this bifurcation in technology and those buys have been specifically focused on these new technologies. So as we've mentioned before, to make trench and super junction devices, you need high-energy implanters. And as the market leader for high energy, this is playing beautifully to our sweet spot, and we're working very close with our customers to develop their processes utilizing these tools.

Great. Really helpful. And then, Jamie, a follow-up on your comments around gross margin and drivers to the robust levels in the quarter. So I think you mentioned CS&I mix, warranty performance, mix and trailing multiyear cost reduction. The question is this, can you talk a little bit more about where you see structural gains in some of those COGS drivers, whether it's warranty or just the ability to perpetuate ongoing cost gains because as systems eventually comes back, we'll lose at least one of the favorable drivers, and I want to better understand how some of the others could help perpetuate the strong performance.

Yes. Thanks, Craig. Good question on the margins. Yes, so mix is, as you noted, systems mix, so mix within our systems and then mix between systems and CS&I will continue to be the primary driver of gross margin for us over the reporting period -- over the sort of performance period. The structural changes that we're making are in sort of we'll call like -- we call them below standard cost type items that's in the warranty installation and sort of other expenses related to that as well as, to some extent, the maximization of our global operations footprint, which we've talked about, which will provide some incremental benefits over time. When we talk about our long-term margin trajectory and projections, the cost -- we're going to continue to drive cost out to the best of our ability. That is a multiyear path for us to see that sort of change in a much more meaningful and structural way. But what we've done here in 2024 and now you're seeing to some extent through 2025 is that on the lower volumes, we have been able to drive sort of higher margins here in a pretty nice and meaningful way. Looking to the back half of the year, we do see margins come down slightly relative to the expectations, and that really is driven by mix. So we still have those favorable benefits that we're seeing below the line, but the mix is really going to put a little bit of pressure on margins here in the back half of '25.

And our next question comes from Jed Dorsheimer with William Blair.

I'll echo the sentiments. Russell, I'm just -- I was wondering if I could go back to a previous question and just get a little bit more detail. I think it's helpful to understand sort of the Western shift to more advanced structures such as trench where the capital intensity for high energy is greater. I just -- the question is, as you discuss the difference between China and rest of the world, are you implying that -- because high energy is used in planar and trench is the mix that you're selling into China actually high current and medium current skewed? Or is it high energy, but just for planar versus high energy for the more capital-intensive trench and rest of the world? And then I have a follow-up.

Right. So to do standard planar, you don't actually need high energy. So that would be the high current and the medium current, and those will be the tool sets you'd need. As you start to go into higher energy, you're going to need -- I'm saying like you go into like trench and super junctions, that's when you need to start using high energy. And the intensity of high energy goes up, obviously, because you can't diffuse these implant profiles in the silicon carbide, you have to overlay them with channel -- sorry, with training. And also, we're seeing the energy is going higher and higher as well. So it's utilizing more and more of our high energy capability. So if you're going to do trench and super junction, you're going to be using medium, current and high energy and probably a little smattering of high -- sorry, high current, medium current and high energy. But if you're doing planar, you don't need the high energy.

I appreciate you -- Yes, that helps a lot. As my follow-up, and maybe somewhat related. Clearly, your position in high energy with a linear particle accelerator is a clear differentiation versus your competitor. I'm curious on the R&D front, away from just traditional power and silicon carbide, are you seeing any applications that are demanding high energy in a similar way that silicon carbide has? I'm just curious, as you look out on the horizon in terms of markets, what you're seeing?

So high energy is used in pretty much every application, right, other than advanced logic. So in NAND and DRAM, particularly in image sensors, they are particularly deep devices because of the IQE. So you have lots of implants into those. We're also seeing some kind of more advanced kind of avalanche devices being utilizing really high energy. But I'd say that silicon carbide is definitely a driver at the moment, but high energy -- and when I say high energy, we've got various flavors of high energy all the way up to like 15 mega electron volts. So we certainly cover the entire gamut. But yes, the density of high-energy implants in silicon carbide is certainly a driver.

Our next question comes from Jack Egan with Charter Equity Research.

So I was curious if tariff pull-ins or anything of the like might be contributing to some of the positive momentum in CS&I because last quarter, you mentioned that spare parts saw some upside. And logically, depending on the sector or the end market, I guess, if these customers had underutilized capacity, then I would imagine to get ahead of tariffs, they might purchase some spares rather than new systems. So I guess maybe just more broadly, what were some of the drivers behind the strong performance in CS&I?

Yes. No, it's a good question, Jack. And obviously, Q2 coming into Q2 is a wild time, right, with the announcement of the tariffs, the regimes and all the sort of uncertainty that created. I would say nothing material driven by what we saw from a pull-in perspective. Really, the driver for us in the second quarter for our CS&I had to do with upgrades and upgrade-related activity. We've talked about this on our road map to sort of new capacity additions is you're going to see increased utilization. You're going to see our customers, finding ways to squeak out incremental efficiencies out of their current tool sets, right? That leads to higher upgrade activity, higher spares, consumables and others. And then they'll go through and make those capacity additions over time. So the trend is following sort of the playbook that we've seen in the past. But as Russell noted in the commentary, we have not seen the inflection point yet that's going to translate that into necessarily increased bookings just yet. We still think we're sort of bouncing along the bottom. But the fact that upgrades came in a little bit stronger in Q2 helped both our CS&I margin and the overall margin for the period.

And Jack, it's kind of like piggyback on the back of that. So we have been investing in upgrades. It's a great opportunity because, one, we have a large installed base of legacy tools, but we also have a large installed base of our Purion platform as well. So it's a relatively captive market. And we've made a point of managing customers' product life cycles. So this has been a really good business for us.

Great. Okay. That's helpful. And then I guess it was good to see the elevated repurchases in the quarter. Should we expect kind of a higher baseline going forward? Or was this more just Axcelis being a bit more opportunistic?

Yes. We certainly talked about our sort of capital allocation strategy, right, being sort of organic growth based, right, higher R&D investments and others and then sort of pivoting over to the return side as well as looking at inorganic. So again, during the second quarter, we were opportunistic here allocating the $45 million plus to share repurchases in the period. As we go forward, our comment at the time we announced our incremental authorization in the second quarter was around having -- buying at a higher rate than we had historically. And so you may recall, if you go back into some of our filings, you'll see we typically bought around $15 million or so a quarter. So we do anticipate buying at an elevated rate relative to that $15 million. But I'm not going to forecast exactly how much we'll put towards share repurchases for the third quarter just yet.

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

Russell, first, I was hoping to get an update on just the state of the competition in China and maybe both on a systems and the spares business point of view.

Tom, yes, sure. So obviously, we monitor our competition incredibly carefully, particularly a lot of the new companies that are starting up in China. As I mentioned, there's been competition in China for many years. There's like 2 competitors out there have been there for about 20 years. And what I'd say is that they are -- we don't see them outside of China. We don't see them in accounts that are available to U.S. manufacturers, if you like. I think they're getting their foothold in these accounts that are essentially off limits to U.S. manufacturers. The feedback we get is that they're still very immature. I mean, remember, these things -- these tools have really big simultaneous compliance requirements. So you need really high throughput, you need really good beam uniformity, beam angles, beam purity, low particles. It really does take a huge amount of knowledge, experience and work in order to come down, get that maturity curve where you need it to be. So we're certainly watching them very carefully. I would say they're still very early on in their road map.

Okay. That's very helpful. And maybe as a follow-up, Jamie, maybe talk a little bit about the backlog. At this point, is it just systems? Or does it include systems plus CS&I? And what do you think the projected shipment or timing is of that backlog?

Yes. So that's a great question, Tom. Yes, our backlog numbers we report are just systems-related orders. So it does not include any of our CS&I revenue expectations in there. So it's just systems purchase orders that we've brought into the business. As it relates to the timing, that backlog carries into 2026 for sure. And as we think about it, it gives us a nice runway, right, as we go into 2026. But we are looking to see that inflection point where we get increased bookings. I think of note, it's important for us to remember that we are at despite the bookings not necessarily maybe being where we want them to be, they are at substantially higher levels than they were in the back half of 2024. And so we are starting to see some movement there. And ultimately, we just want to make sure that we position the business to be able to execute very well on the upturn, right? So investing in the R&D, maintaining slightly higher inventory levels to be opportunistic with when that upswing occurs that we've got the inventory related to our high-turn systems available for our customers. And so again, we're proud of the execution so far through the first 6 months here of 2025, and we look to finish the year out good.

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

I'm just trying to reconcile a couple of things here that China EV sales, as you noted, they've been strong year-over-year, yet you're projecting flat China sales in the second half. Similarly, DRAM sales have also been strong, but your memory sales were just 3% of total shipments and were sequentially down. I'm just trying to reconcile both of these things with what you're seeing.

Yes. So I think on the China side, what you're seeing is, again, they built out significant capacity over -- through '24. And it's coming into the year, we knew that they would use '25 in order to increase the productivity and efficiency of their tools and systems while continuing to add capacity, but at a slightly lower rate. So although we see power continue to be strong, we see China continuing to perform for us. Our customers are absolutely trying to find ways to increase the penetration of silicon carbide into the EVs. The penetration rate of silicon carbide into EV in China is still relatively low given the volume of automobiles they're selling. In addition to that, Mark, we're seeing some Chinese auto manufacturers push silicon carbide into hybrid vehicles as well. So I would say the market for silicon carbide in the electric vehicle, hybrid vehicle market is increasing. And as a result, our customers are trying to find ways to make sure that their devices are qualified to support that in future periods. So I think that's the dynamic we're seeing there. On the memory side, we knew memory was coming into the year. We had the deliveries there in the first quarter, which was a nice uptick. We still expect memory to be muted through 2025 as our customers are digesting the capacity. As Russell has noted a couple of times here, they're finding opportunities with the growth of HBM to sort of repurpose other parts of the fab to squeak tools in here or there to eke out incremental capacity, but they haven't necessarily pulled the trigger on significant capacity additions just yet. And so what we're really seeing is opportunistic buys by our customers to get that just 1 or 2, 3 more implanters in there. And memory will ebb and flow over the course of this year. It should be higher than what we saw in 2024, but it's still going to be at muted levels relative to our historical experience.

And this concludes the question-and-answer session. I would now like to turn it back to David Ryzhik for closing remarks.

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