Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue for Q2 2024 came in at EUR706 million, up 6% year-on-year and slightly above the top end of guidance.
- Equipment revenue increased 4% year-on-year, driven by robust ALD shipments.
- Spares and service revenue grew by 20% year-over-year.
- Gross margin improved to 49.8%, up from 49% in the same quarter last year.
- Order intake for Q2 was strong at EUR755 million, a 56% increase year-on-year.
Negative Points
- Operating margin decreased to 25.8%, down from 26.9% in the same quarter last year.
- SG&A expenses increased by 19% year-on-year and 20% quarter-on-quarter.
- Net R&D expenses rose by 11% year-on-year, with expectations for further increases in the second half.
- Cash reserves decreased to EUR637 million from EUR712 million at the end of Q1.
- Sales in the power/analog/wafer segment remain meaningfully lower than the average trend last year.
Q & A Highlights
Q: You're seeing strength in the memory market in terms of orders at this point. Is this strength likely to continue into future quarters, or will it be replaced by GAA as an important driver into 2025? Also, can you clarify the status of your holding in ASM Pacific?
A: The DRAM market, particularly high bandwidth memory, is expected to grow alongside the gate-all-around (GAA) technology node. We anticipate some lumpiness in DRAM orders but expect overall growth. Regarding ASM Pacific, it remains a financial holding for now, and no changes are planned at this time. β Hichem M'Saad, CEO
Q: Your quarterly revenue guidance has often proven conservative, and your 2024 targets are now close to the lower end of your 2025 range. Given the industry's trajectory and your market share gains, isn't it time to raise the 2025 target?
A: While we see positive trends in gate-all-around and memory demand, there are still many variables, including potential declines in China. For now, we believe our 2025 guidance of EUR3 billion to EUR3.6 billion remains appropriate. β Paul Verhagen, CFO
Q: Can you provide more details on the market opportunity for 3D DRAM and its timeline for adoption?
A: The transition to 3D DRAM is expected to start around 2030. This technology will significantly increase the use of ALD and epitaxy layers due to its high aspect ratio gap fill and silicon-germanium superlattice structures. β Hichem M'Saad, CEO
Q: How do you view the potential impact of new US restrictions on your business in China?
A: While new export controls could impact mature logic/foundry segments, our growth strategy focuses on leading-edge logic/foundry and high-performance memory, which should mitigate the impact. We are also focusing on silicon carbide and power/analog segments in China. β Paul Verhagen, CFO
Q: Can you elaborate on the adoption of high-k metal gate in DRAM and its correlation with DDR5?
A: High-k metal gate is being adopted in high-performance DRAM, including DDR5 and HBM. We are approximately halfway through this transition, and it is expected to continue with each new technology node. β Hichem M'Saad, CEO
Q: What is your outlook for silicon carbide epitaxy, given the current slowdown in EV adoption?
A: Despite a temporary slowdown in EV adoption, we remain confident in the long-term growth of silicon carbide technology. Our new 200-millimeter product has seen strong adoption, and we expect double-digit growth in this segment for 2024. β Hichem M'Saad, CEO
Q: How do you see the profitability of your business evolving with the decline in China sales and the rise in gate-all-around and high bandwidth memory?
A: While a decline in China sales may impact margins, we are focused on improving profitability through innovation and differentiated products. Over the long term, as our new technologies mature, we expect to maintain strong margins. β Paul Verhagen, CFO
Q: Are you adhering to the same US entity list restrictions as your American peers when it comes to shipping to China?
A: Yes, we adhere to the same US entity list restrictions as our American peers. There is no difference in how we comply with these regulations. β Hichem M'Saad, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
