Earnings call transcript: Axcelis Technologies Q3 2025 beats expectations, stock rises

Axcelis Technologies Inc. reported stronger-than-expected earnings for the third quarter of 2025, with earnings per share (EPS) of $1.21, surpassing the forecast of $1.00. The company’s revenue also exceeded expectations, reaching $213.6 million against a projected $200.06 million. Following the earnings announcement, Axcelis shares rose 7.58% in pre-market trading, reflecting investor optimism.

Key Takeaways

• Axcelis reported a significant EPS surprise of 21% above forecasts.
• Revenue for Q3 2025 came in at $213.6 million, beating expectations.
• The company announced a merger with Veeco, aiming to enhance its market position.
• Stock surged 7.58% in pre-market trading, showing strong investor confidence.
• The semiconductor market shows signs of recovery, benefiting Axcelis.

Company Performance

Axcelis Technologies demonstrated robust performance in Q3 2025, with revenue reaching $214 million, marking a notable increase from previous quarters. The company’s strategic initiatives, including new product launches and a planned merger with Veeco, are expected to strengthen its position in the semiconductor equipment industry. The geographic distribution of revenue showed a decline in sales from China, accounting for 46% of total sales, down from 55% in the previous quarter, while the U.S. and Korea contributed 14% and 10%, respectively.

Financial Highlights

• Revenue: $213.6 million (exceeding forecast)
• Earnings per share: $1.21 (21% above forecast)
• Gross Margin: 41.8% (non-GAAP)
• Free Cash Flow: $43 million
• Cash and Securities: $593 million

Earnings vs. Forecast

Axcelis reported an EPS of $1.21, surpassing the forecast of $1.00, resulting in a 21% earnings surprise. Revenue also exceeded expectations, coming in at $213.6 million compared to the anticipated $200.06 million. This performance marks a positive deviation from the company’s historical trend, indicating strong operational execution.

Market Reaction

Following the earnings announcement, Axcelis shares increased by 7.58% in pre-market trading, with the stock price reaching $89.01. This movement reflects investor confidence in the company’s ability to outperform market expectations. The stock’s performance is notable, given its 52-week range of $40.40 to $102.93, suggesting room for further growth.

Outlook & Guidance

Axcelis projects Q4 2025 revenue of approximately $215 million, aligning with its growth trajectory. The company anticipates a recovery in the memory market in 2026, driven by increased investments in DRAM and HBM. The merger with Veeco is expected to create expanded market opportunities, particularly in the semiconductor equipment sector.

Executive Commentary

"We are navigating the current cyclical digestion period across our markets exceptionally well," said Russell Lowe, President and CEO. He emphasized the anticipated growth in the memory market next year, led by increased DRAM and HBM investments. Lowe also noted signs of improvement in utilization rates, reinforcing the company’s positive outlook.

Risks and Challenges

• Supply chain disruptions could impact production timelines.
• Geopolitical tensions may affect sales in key regions like China.
• Market saturation in certain semiconductor segments could limit growth.
• Economic downturns could reduce demand for semiconductor equipment.
• Integration challenges related to the Veeco merger may arise.

Q&A

During the earnings call, analysts inquired about the potential impacts of tariffs and the company’s strategies for mitigating these effects. Discussions also focused on growth prospects in the Chinese semiconductor market and the adoption of silicon carbide technologies in electric vehicles. Analysts expressed interest in understanding the fluctuations in bookings and the company’s market expectations moving forward.

Full transcript - Axcelis Technologies Inc (ACLS) Q3 2025:

Britney Morgan, Conference Coordinator: Good day, ladies and gentlemen, and welcome to the Exelis Technologies call to discuss the company’s results for the third quarter twenty twenty five. My name is Britney Morgan, and I will be your coordinator for today. I would now like to turn the presentation over to your host for today’s call, David Rizik, Senior Vice President of Investor Relations and Corporate Strategy. Please proceed.

David Rizik, Senior Vice President of Investor Relations and Corporate Strategy, Exelis Technologies: Thank you, operator. This is David Ryzhik, Senior Vice President of Investor Relations and Corporate Strategy. And with me today is Russell Lowe, 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 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 annual report on Form 10 ks and other SEC filings, which we urge you to review. Our actual results may differ materially from our current expectations.

We do not assume any obligation to update these forward looking statements. Given the pending merger with Vico, we will not be addressing questions related to the transaction. Please note that today’s call is neither an offering of securities nor solicitation of a proxy vote in connection with our previously announced transaction with We urge you to read the joint proxy statement relating to the transaction with Vico once it becomes available. 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 Lowe.

Russell Lowe, President and CEO, Exelis Technologies: Good morning, and thank you for joining us for our third quarter twenty twenty five earnings call. Beginning on Slide four, we generated solid results in the third quarter with revenue of $214,000,000 and non GAAP earnings per diluted share of 1.21 both exceeding our outlook. We delivered record CS and I revenue as well as slightly better than expected system revenue, which drove the better than expected profitability. Bookings in the third quarter declined on a sequential basis, primarily led by a softer power and general mature bookings, which were partially offset by an improvement in memory. While bookings fluctuate from quarter to quarter, based on recent encouraging quoting activity and a conversation with customers on their build plans, we anticipate bookings to improve sequentially in the fourth quarter.

Before I provide more detail on the trends we’re seeing by market segment, I’d like to touch on our recent transaction announcement. On October 1, we announced that Exelis and Veeco had agreed to merge to create what we believe will be a leading semiconductor equipment company. We have long admired Veeco’s history of innovation and its track record of delivering breakthrough products. And this merger is expected to position the combined company as a key beneficiary and critical enabler of secular tailwinds, including AI and electrification. I want to take this opportunity to recap a few points that we made when we announced this deal and what is highly compelling opportunity for both companies.

Starting with cross sell synergy, we believe each company can open doors for the other. One such example is with Xelis’ implant and V Co’s laser annealing solutions, which are adjacent steps and reside in the same diffusion module in the fab. In addition, our combined technical debt is expected to enable us to optimize technology advancements. An example of this is our plan to leverage our deep ion source and component expertise to enhance Vika’s iron beam deposition capabilities and vice versa. Second, from a market perspective, we are strong in silicon carbide, while Vika has an exciting opportunity in MOCVD for GaN on Silicon.

We believe this combined presence will allow us to be a comprehensive solution provider to the compound semiconductor market, which is becoming increasingly relevant due to electrification, including the growing need for greater power efficiency, driven in part by the rise in AI. In addition, we believe VCO’s MOCV business has an opportunity in micro LED as well as an indium phosphide opportunity for optical communication products, which is an emerging data center application. Moreover, we see opportunities stemming from our strengths in memory and mature foundry logic, which we believe are complemented very well by VCO’s strength in advanced foundry logic and advanced packaging, stretching across annealing, ion beam deposition, wet processing, and lithography solutions. It’s also worth noting that the combined company is expected to be better equipped to better serve our customers through access to an expanded installed base supported by stronger aftermarket services. Finally, the all stock nature of this transaction is expected to position the combined company to have a resilient operating profile and balance sheet post closing, which we believe allows us to invest in our business to drive organic growth as well as return capital to shareholders.

In short, by bringing our two companies together, we believe we are building a leading semiconductor equipment company with the capabilities, resources and financial foundation to drive sustainable growth and value creation for shareholders and drive meaningful benefits for all our stakeholders. With that, let me now turn back to our Q3 results and the trends we’re seeing by market category. Turning to Slide six. 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 seven, let me review our trends by end market.

Within our power business, shipments to silicon carbide applications grew nicely on a sequential basis. Consistent with our commentary heading into 2025, customers continue to digest the capacity as we’ve been put in place over the past few years. However, in China, multiple customers continue to build out capacity as they strive to address growing demand in the local market, while customers outside of China are making select investments into next generation technology such as trench and superjunction. Moreover, in the quarter, we shipped several tools to multiple customers that have only just begun to develop their silicon carbide capability. We believe this is yet another validation of the long term secular growth opportunity in silicon carbide and customers recognize the world’s need for more efficient power delivery will continue to accelerate.

As the cost of silicon carbide continues to decline, we anticipate its adoption and an expanding array of applications will continue to grow, ultimately requiring more investments in technology and capacity. As we’ve noticed in the past, Exelis is the market and technology leader in high energy ion implantation, which is becoming increasingly critical for next generation silicon carbide devices. In August, we announced a joint development program with GE Aerospace to pursue production worthy high voltage silicon carbide devices utilizing our Purin XEmax system, which is our highest energy implanter, delivering up to 15,000,000 electron volts in an ion beam. We are proud to partner GE Aerospace on this exciting initiative. In September, we made multiple new product announcements, including our new Purion Power Plus series at the Annual Ice Cream Conference, which was held in Korea.

The platform is designed to enable improved device performance and increased productivity for next generation power devices. While the majority of the platform is targeted to the silicon carbide market, there are also applications with silicon and gallium nitride. It has a proven track record of collaborating with customers to develop innovative solutions, and this product announcement is no different. We also have received positive customer feedback about our new high energy channeling capability and music, our multi step implant chain capability, which reduces the overhead of wafer transfer time during the implant process, enabling our customers to have increased output with less downtime between recipes. This capability is on tools we’ve already placed in the field with our leading customers.

And as I said, we’re receiving positive feedback. Additionally, Exelis announced the launch of the GSD Ovation ES, a high current multi wafer iron implanter targeted specifically for engineered substrates. Turning back

Jamie Coogan, Executive Vice President and CFO, Exelis Technologies: to the near term demand environment in silicon carbide, we continue to see select areas of capacity and technology investment, and we expect revenue from silicon carbide to fluctuate from quarter to quarter with fourth quarter expected to be down slightly on a sequential basis. In our other power market segment, ship system revenue also grew on a sequential basis, primarily due to shipments to customers in Japan and Europe. In general mature, revenue declined on

Russell Lowe, President and CEO, Exelis Technologies: a sequential basis as customers continue to manage their capacity investments given the current demand environment in auto, industrial and consumer electronics. Broadly speaking, we are seeing an improvement in utilization rates. However, this varies by customer and can even vary by fab location within each customer. In fact, we’re seeing some signs of improvement in utilization rates with our image sensor customers as camera content on autos continues to rise and smartphones continue to be a strong long term demand driver. Image sensors require high energy ion implantation.

We are well positioned to address this market as our customers assume capacity build out investments. In the third quarter, we also shipped an XEmax evaluation unit for a 300 millimeter power management IC application. This is noteworthy because our XEmax was developed for the image sensor market, And yet we see interest in additional applications where this technology can be deployed, namely power. Turning to Slide eight. In advanced logic, we continue to actively target next generation ion implantation applications across multiple customers.

In the quarter, we generated revenue from a previously booked system with an existing customer. Moving to memory, revenue remained muted in the third quarter. However, we expect sequential increase in revenue in the fourth quarter as customers expand capacity to address growing demand for AI related applications. While it is too early for us to predict 2026, given our conversations with customers on the capacity plans, we anticipate our sales to memory market to grow next year led by increased DRAM and HBM investments. In NAND, customers remain focused on scaling to higher layer accounts, which requires deposition ex TEMA based upgrades, but not incremental iron implant capacity.

As a result, we continue to expect demand for NAND applications to remain muted in the near term. However, we are encouraged with some initial signs of improvement in the NAND bit demand and pricing, and we are ready to serve this market once customers resume capacity additions. On Slide nine, let me wrap up my thoughts prior to handing the call over to Jamie. We are navigating the current cyclical digestion period across our markets exceptionally well, remaining aggressive in our product development and customer engagement while staying disciplined on cost control. As referenced earlier, we are seeing interest in new applications for our high end solutions, but also executing on our strategy to drive greater adoption of our high current portfolio.

Meanwhile, our CS and I business continues to benefit from our focused aftermarket strategy and growing installed base. It remains a foundational part of our company’s profitability and cash flow profile and integral to the value proposition we offer our customers. Adding all this up, despite a moderation demand in our markets in 2025, we have a strong base of profitability and cash flow, which we believe provides a solid platform for Exelis to execute on our long term growth opportunities. With that, let me turn the call over to Jamie for a closer look at our results and outlook. Jamie?

Jamie Coogan, Executive Vice President and CFO, Exelis Technologies: Thank you, Russell, and good morning, everyone. I’ll first start with some additional detail on our third quarter before turning to our outlook for Q4. Starting on Slide ten, third quarter revenue was two fourteen million dollars with systems revenue at $144,000,000 and CS and I revenue at a record of $70,000,000 both above our expectations for the quarter. Our better than expected CS and I revenue was driven by strong demand for spares and consumables as well as an improvement in our service revenues. We are pleased with our execution in CS and I and our aftermarket offerings are resonating with the customers.

Case in point, through the first nine months of twenty twenty five, our CS and I revenue was up 9% on a year over year basis despite customers moderating their capital equipment investments. Moving to consolidated sales from a geographic perspective, China decreased sequentially to 46% of total sales, down from 55% in the prior quarter. Consistent with our expectations, our customers in China continue to digest the robust investments they’ve made in mature node capacity over the past few years. While quarterly revenue by region can fluctuate, we anticipate revenue from China will decline sequentially in the fourth quarter. Turning to other regions, we saw sales to The U.

S. At 14%, while Korea declined to 10%. As Russell mentioned, bookings declined on a sequential basis to $52,000,000 and we exited the third quarter with a backlog of $484,000,000 Turning to Slide 11, I’d like to share some additional detail on our GAAP and non GAAP results. GAAP gross margin was 41.6% in the quarter. And on a non GAAP basis, gross margin was 41.8%, below our outlook of 43%, primarily due to mix.

Within systems revenue, we recognized a number of low margin system installations in the third quarter forecasted to occur in the fourth. Within CS and I, as previously noted, we saw increased volumes of consumables and service contract revenue, which typically carry a lower margin. Nevertheless, we find this encouraging as this tends to reflect increased utilization rates with our customers. GAAP operating expenses totaled $63,800,000 and on a non GAAP basis, operating expenses were $50,400,000 lower than our outlook of $53,000,000 primarily due to lower compensation related expenses associated with the timing of annual merit increases as well as one time cost savings measures we executed in the quarter. Our non GAAP results excluded transaction related expenses associated with the pending VCO merger along with other typical adjustments such as share based compensation and restructuring charges.

On that note, in the third quarter, we implemented a one time voluntary retirement program and recorded a portion of the expense associated with that in the period. Given the nature of this program, expect to record additional program related expenses in the fourth quarter. As a result, our GAAP operating margin was 11.7%, while our non GAAP operating margin was 18.2%. Moreover, in the third quarter, we delivered adjusted EBITDA of $43,000,000 reflecting an adjusted EBITDA margin of 20.2%. We generated approximately $5,000,000 in other income with the sequential decrease primarily due to foreign currency.

And our tax rate was approximately 14% in the third quarter, both on a GAAP and non GAAP basis. For the fourth quarter, we estimate our non GAAP tax rate will be approximately 15%. Our weighted average diluted share count in the quarter was 31,500,000.0 shares and this all translates into GAAP diluted earnings per share of $0.83 which was lower than our outlook of $0.87 However, non GAAP diluted earnings per share was $1.21 exceeding our outlook of $1 The higher than expected non GAAP diluted EPS was primarily due to better than expected revenue along with lower operating expenses partially offset by product mix. Moving to our cash flow and balance sheet data shown on Slide 12, we generated $43,000,000 of free cash flow in the third quarter as a result of better than expected profitability and a slight improvement in both days sales and days payable outstanding. Turning to share repurchases.

In the third quarter, we repurchased approximately $32,000,000 in shares and have $135,000,000 remaining under the share repurchase program previously authorized by the Axcelis Board of Directors. We exited the third quarter with a strong balance sheet consisting of $593,000,000 of cash, cash equivalents and marketable securities on hand. This includes $143,000,000 of long term securities. With that, let me discuss our fourth quarter outlook on Slide 13. All measures will be non GAAP with the exception of revenue.

We expect revenue in the fourth quarter of approximately $215,000,000 And looking beyond the fourth quarter, our preliminary view on the 2026 suggests revenues to be relatively similar to our anticipated levels in the 2025. We expect non GAAP gross margins of approximately 43%. The sequential improvement is primarily due to a more favorable mix. And we expect non GAAP operating expenses of approximately $56,000,000 as a result of one time cost saving measures in the third quarter not reoccurring and in addition to a full quarter of annual merit increases kicking in for the period. Adjusted EBITDA in the fourth quarter is expected to be approximately $41,000,000 And finally, we estimate non GAAP diluted earnings per share in the fourth quarter of approximately $1.12 In summary, we are pleased with our financial execution through the first nine months of this year, delivering robust year to date adjusted EBITDA margins of 20% and strong free cash flow generation of $116,000,000 despite our revenue being down.

With a strong balance sheet, we are exiting 2025 in solid financial position and we are especially excited about our pending combination with V Go and the opportunities ahead for the combined company. With that, let me hand the call back to Russell for closing remarks. Russell?

Russell Lowe, President and CEO, Exelis Technologies: Thank you, Jamie. We are pleased with our third quarter performance as the team continues to execute with focus and discipline. Our results reflect the strength of our business model, the quality of our technology and the dedication of our global team. Looking ahead, the pending business combination with Zika represents exciting transformational step for both companies. We expect you to broaden our capabilities, expand our market reach and position us to unlock even greater value for customers and shareholders, while creating exciting new opportunities for

Craig Ellis, Analyst, B. Riley Securities: our

Russell Lowe, President and CEO, Exelis Technologies: employees. I want to thank our customers, employees, partners and shareholders for their continued support and trust in Exelis. With that, operator, we are ready to take your questions.

Britney Morgan, Conference Coordinator: Thank you. At this time, we will conduct the question and answer session. To ask a question, you will need to press 11 on your telephone and wait for your name to be announced. And A. Our first question comes from the line of Jed Dorsheimer with William Blair.

Your line is now open.

Jed Dorsheimer, Analyst, William Blair: Hi, thanks guys. Congrats on the quarter and thanks for taking my question.

: I was wondering

Jed Dorsheimer, Analyst, William Blair: if you might be able to describe the dynamics a bit more in the other power category. And in particular, what customers are seeing in terms of in silicon and what I’m trying to get at, in silicon carbide, your differentiation with high energy is very clear and distinct. And I’m curious what the dynamics are that you’re seeing in other power, and maybe also in general mature, that are driving that business? And then I have a follow-up.

Russell Lowe, President and CEO, Exelis Technologies: Hey, Jed, it’s Russell. So, yes, so I kind of broadened that slightly. So regarding Power overall, we are seeing the 2025 has been slightly better than the 2025. We’ve talked about different customers from different locations kind of being in different phases. We have kind of Chinese customers for silicon carbide specifically adding capacity versus the non Chinese customers basically doing no transitions.

When you look at, non silicon carbide power, so basically silicon power, so so that obviously is the largest TAM regarding power in total, right, for for us. And, you know, I’d say it’s kind of ebbing and flowing. We we do a nice job in out out, you know, for for a number of customers with that power. And and remember that some of those applications really are quite specific. So they might have a thin wafer application, which

Duxin Jain, Analyst, Bank of America Securities: is

Russell Lowe, President and CEO, Exelis Technologies: a silicon on glass or silicon on silicon or some other applications. So they’re very specific and quite advanced products. And in some of those, there might even be a proton implant on the backside, right? So I’d say that they are still what I would consider highly differentiated products on the silicon power. In addition to we’ve had a very differentiated portfolio and continue to push our portfolio with our latest power series in silicon carbide.

Jed Dorsheimer, Analyst, William Blair: Got it. That’s helpful. And then just update on tariff impacts overall on the business and what you’re seeing there would be helpful too. Thanks.

Jamie Coogan, Executive Vice President and CFO, Exelis Technologies: Yes. So as for 2025, we continue to manage through the tariff environment as we think about the optimization of our global manufacturing footprint to help support us in that effort. We are fortunate to have the operations overseas. But we’re not immune, right, at all to the tariff and tariff related costs as they do come in. As we look to 2026, could have a little bit more of an impact in 2026 as we move ahead as sort of some of those tariff costs start to move out of inventory and into the P and L.

But the team is working now on working to mitigate the potential impact of that. And as we pull our models together for that period, we’re going to we’ll work to try to quantify that a little bit more materially for you guys. I think overall, we’ve done a nice job in 2025. But again, these are dynamic times for sure, Jed, as the way things continue to sort of ebb and flow with the administration and the decisions that are made around tariffs.

Jed Dorsheimer, Analyst, William Blair: I’ll jump back in the queue, but nice job managing through the difficult markets. Thanks.

Jamie Coogan, Executive Vice President and CFO, Exelis Technologies: Thank you. Thanks.

Britney Morgan, Conference Coordinator: Thank you so much. Our next question comes from the line of Craig Ellis with B. Riley Securities. Your line is now open.

Craig Ellis, Analyst, B. Riley Securities: Yes. Thanks for taking the question and congratulations on the execution in the quarter, particularly the record CS and I revenues. That’s really quite notable that you’re now $71,000,000 I wanted to follow-up on something that’s been fairly topical with earnings quarter to date, and it’s the broader arc of China demand and acknowledging that Axcelis has uniquely broad and I think uniquely served customer base there. How should we think about the potential for China to be either a stable market in 2026, a growing market or one where there would be just more digestion at play? And any color on timing for which that might occur?

I know revenues as a percent of total are now 46%. So arguably, it’s happened year on year and quarter on quarter. But any color on that would be helpful.

Russell Lowe, President and CEO, Exelis Technologies: Craig, it’s Russell. Thanks for the question. So it’s a little too early to say too much about 2026. And clearly, 2025 has been a year of digestion. Believe that China demand in 2026 will depend upon the end demand environments as well as how much progress they make on chip self sufficiency targets.

And right now, we believe they’re still below those targets. Clearly, China for China and being able to supply domestic chips is a really big initiative for China. And I think they have to continue to invest to achieve this capacity. And I think, you know, the markets that we have the most visibility in would be general mature and power, and that’s kind of where we’re seeing this continued, kind of, you know, a desire to to to grow. One thing I’d also say, Craig, is, you know, so, you know, geopolitics aside, you know, our Chinese customers are acting like any of our other customers.

They really do want the best technology. They want the highest quality support. And they’re actively engaging with us on our roadmap. So we are very engaged with our Chinese customers. We are aligning our roadmap so that we can support their long term growth.

And we see opportunities in China.

Craig Ellis, Analyst, B. Riley Securities: That’s really helpful, Russell. Thank you. And then the follow-up question is related to the tantalizing comments that in 2026, we may be seeing indications for a better memory environment. I was hoping you could go into more detail in terms of what you’re seeing in DRAM versus NAND to the extent that it’s discernible. I know equipment can flex to either line, either type of line, but just more color on what you’re hearing from memory customers.

And in the past, you’ve had 50% share with Korean manufacturers. Is that a realistic expectation as memory starts to reaccelerate? Thanks, team.

Russell Lowe, President and CEO, Exelis Technologies: Okay. So when we talk with our customers, right now, it’s clear that the demand is coming from, say, DRAM and HBM. I think when you kind of read the news, some of the suppliers of those products are basically sold out for 2026. You do see the high utilization. You do see the upgrade flow.

I think, you know, the next stages are to bring on new new greenfield capacity. Right? So you’re going to see that happening. So that’s kind of one of the things we expect to see. NAND is really still NAND is very quiet.

I think NAND has been quiet for us for a long time. And, obviously, we care about wafer starts for NAND, not whether you build taller and taller skyscrapers, which certainly, as mentioned, helps to deponize people. So I do think it’s exciting that memory could actually be turning a cycle. It’s a bright spot for us. And I do think that we will continue to do well when that happens.

Craig Ellis, Analyst, B. Riley Securities: Thank you, Russell.

Russell Lowe, President and CEO, Exelis Technologies: Yes, Craig.

Britney Morgan, Conference Coordinator: Thank you so much. Our next question comes from the line of Christian Schwab with Craig Hallum Capital Group. Your line is now open.

Christian Schwab, Analyst, Craig Hallum Capital Group: Great. Thanks for taking my question. Good quarter end guide. Just a follow-up on the memory. Could you remind us in the typical capacity cycle adding wafer starts, kind of a range of revenue outcomes that historically you have seen, so we can get an idea should we enter an up cycle the range of revenue outcomes that could benefit you in memory?

Russell Lowe, President and CEO, Exelis Technologies: So just to double check, Christian, you’re talking about how many implanters, the capital intensity for a 100,000 wafer starts, that kind of number you’re looking for?

Christian Schwab, Analyst, Craig Hallum Capital Group: Yeah. So if we if there was greenfield facilities available for expansion, obviously, we all know how the pricing environment is. It would make sense for DRAM wafer starts to expand. Does that add 50,000,000 potential million of revenue to you on a yearly basis, 100,000,000. Could you just give us a wide range of potential outcomes?

Russell Lowe, President and CEO, Exelis Technologies: Yes. So let me so Jamie is looking to find the exact number. We’ll give you that well, the number we believe. So NAND and DRAM has about the same intensity. And see we’re we’re we’re thinking in terms of they they all need high energy, medium current, and high currents.

There’s a mix of those tools. For a 100,000 wafer starts, they thought it was north of you know, it’s 45 to 55 total implanters, that kind of number.

Christian Schwab, Analyst, Craig Hallum Capital Group: Perfect. And then as as you guys are seeing improved utilization, but spotty and general mature, are you guys optimistic that general mature will see a recovery in 2026 or is that yet to be determined?

Russell Lowe, President and CEO, Exelis Technologies: So I think general mature is going to be driven by the macro climate. So you’re looking at consumer spending, automotive and industrial. I think while we’re kind of encouraged by memory, we’ve kind of said in the past, we kind of bounced along the bottom. And it is too soon to say that the other markets, mainly consumer, industrial, and automotive have actually turned. But by customer, you do see pockets of high utilization.

You also see some customers still with lots of excess capacity.

Jamie Coogan, Executive Vice President and CFO, Exelis Technologies: We’re, my Jed, just like you guys, we’re monitoring customers’ sort of public commentary on inventory levels and their performance, right? And I think it still continues to be a bit of a mixed bag.

Christian Schwab, Analyst, Craig Hallum Capital Group: Great. No other questions. Thanks, guys.

Jamie Coogan, Executive Vice President and CFO, Exelis Technologies: Yes. Thanks, Christian.

Britney Morgan, Conference Coordinator: Thank you so much. Our next question comes from the line of Jack Egan with Charter Equity Research. Your line is now open.

Jack Egan, Analyst, Charter Equity Research: Great. Thanks for taking the question. So nice job on the record CSI revenue. For that, were there any kind of unique or onetime benefits in that number? Or I mean, you think the current level is pretty sustainable for the near future?

Jamie Coogan, Executive Vice President and CFO, Exelis Technologies: Yes. I mean, again, we saw a little bit uptick from some again, we talked about seeing some improved utilization rates. So we saw a little bit uptick there. We do always have some customers who do some buying as they sort of do some restock and other related activities. I think what we saw in the period, right, relative to expectations was slightly higher consumables in the period, which sort of contributed to some extent to the lower gross margin in the period.

That’s generally a positive sign. It’s one of those trends we talk about as recovery comes into play. Upgrades continue to remain strong primarily in the memory market for the period as well. So again, I think these are just we keep talking about these little bright spots that we see along the path. And again, I think you can tell from our tone here, we’re a little bit more comfortable on the memory side.

But we still remain a little bit cautious as we look at the remainder of the business in terms of calling a broad based recovery just yet. But we do feel a little bit more encouraging about where memory is going.

Jack Egan, Analyst, Charter Equity Research: Got it. Okay, that’s helpful. And then on the bookings side, you mentioned that they’re expected to grow next quarter. Obviously, there’s probably a bit of a normalization after just the lower level in the third quarter. But can you just kind of go over some of the assumptions for growth in the fourth quarter there, maybe like by end market or geography?

Russell Lowe, President and CEO, Exelis Technologies: I think it we’re expecting bookings across pretty much all of our customers, right? Not specifically a given market segment. I think there’s kind of been a little bit of a build up pressure and people will be looking to place POs. And obviously, you focus in on memory specifically, we’ve kind of said in the past that we typically build to forecast. So you may get the booking and the shipment in the same quarter.

So you’re not likely kind of to see those necessary in the backlog.

Jack Egan, Analyst, Charter Equity Research: Got it. Okay. Thanks, Russell.

David Rizik, Senior Vice President of Investor Relations and Corporate Strategy, Exelis Technologies: Cheers.

Britney Morgan, Conference Coordinator: Thank you so much. Our next question comes from the line of Mark Miller with The Benchmark Company. Your line is now open.

David Rizik, Senior Vice President of Investor Relations and Corporate Strategy, Exelis Technologies0: Thank you for the question and congratulations on the quarter.

David Rizik, Senior Vice President of Investor Relations and Corporate Strategy, Exelis Technologies1: Thank you.

David Rizik, Senior Vice President of Investor Relations and Corporate Strategy, Exelis Technologies0: You’re talking about lower silicon carbide in the fourth quarter. Do you see a trend where EVs are going to be utilizing less silicon carbide next year?

Russell Lowe, President and CEO, Exelis Technologies: So I think so while the ’25 was slightly higher than the 2025 silicon carbide, I think it’s been it’s remained healthy and it’s kind of the demand has remained. As you kind of talked about it, there’s kind of two camps. There’s the camp moving to kind of more advanced nodes and bigger wafer sizes more quickly. And there’s those that are adding capacity with the technology they have. I think one of the things is that as the price has come down significantly within EVs and even hybrids now, we’re seeing a lot more penetration of silicon carbide into those drive systems.

Then you’re seeing more so you’re seeing more and more hybrids and electric vehicles anyway. Then the penetration into those with silicon carbide is going up. And then we’re also actually hearing about applications going up. So for example, we’re hearing that, you know, the compressor for the AC unit on a car is gonna be using silicon carbide. So that’s certainly a a a positive.

And then there’s also the new applications, whether it be data center or grid technology. So I think there’s still a long way to go on this electrification. And I think as you see price coming down more and more and more, you’re gonna see the applications open up.

Jamie Coogan, Executive Vice President and CFO, Exelis Technologies: Yes. And we also think about design cycles for automobiles as well, right? I mean, are a little bit of a multiyear. So cars that are being designed over the last few years now actually have the ability given the price points of silicon carbide to introduce it more meaningfully into the BOM, right, as they’re building out those automobiles. Reading some reports out there that, again, we talked about penetration of silicon carbide into full EVs being in sort of that sort of mid single digit and that’s maybe today in the sort of low teens or something like that, Mark.

So there is still a lot of room to run-in the sort of the automobile market for silicon carbide on penetration into that space.

David Rizik, Senior Vice President of Investor Relations and Corporate Strategy, Exelis Technologies0: Okay. Just what’s your feeling for EVs next year in China and United States? Are they going to grow in both areas?

Jamie Coogan, Executive Vice President and CFO, Exelis Technologies: Yes. I think it’s hard for us to know. I mean, again, China continues to make some really meaningful progress, right, in the development of their electric vehicles. I think they’ve done a nice job in pushing the technology forward. I think the support the government provides to the consumer there to encourage them, right, to move to those vehicles has actually worked pretty well for them.

But it’s hard for us to know exactly where those numbers come in.

Russell Lowe, President and CEO, Exelis Technologies: Yes. And the other thing, Mark, so obviously, the Chinese auto market is the largest. I think it’s like 30,000,000 out of the entire 90,000,000 cars per year. I think the competition has been so aggressive in China amongst the electric car manufacturers that they’re now seeking overseas markets in order to kind of broaden their portfolio and improve their kind of ability to weather that. So I think you’re going to see more and more electric cars at better price points start to proliferate multiple different international markets.

David Rizik, Senior Vice President of Investor Relations and Corporate Strategy, Exelis Technologies0: Thank you.

Britney Morgan, Conference Coordinator: Thank you so much. Our next question comes from the line of Dennis Piakinen with Needham and Company LLC. Your line is now open.

David Rizik, Senior Vice President of Investor Relations and Corporate Strategy, Exelis Technologies1: Great. Thank you. For our first question, could you please discuss orders a little bit? Maybe which segments saw the dip in Q3? I see you guys were down to around $55,000,000 or so and what you’re seeing into Q4, perhaps also with regards to your full year bookings expectations for full year 2025 versus 2024?

Jamie Coogan, Executive Vice President and CFO, Exelis Technologies: Sorry, Dennis, I missed the first Can part of that you just maybe reiterate that real quick? I just want make sure we’re answering the right question here. I know it’s around bookings. I just want to make sure we answer it the right way for you.

David Rizik, Senior Vice President of Investor Relations and Corporate Strategy, Exelis Technologies1: Vicki, could you discuss which segments saw the dip in Q3 here and then what you’re seeing into Q4 and then maybe full year expectations for 2025 versus 2024?

Jamie Coogan, Executive Vice President and CFO, Exelis Technologies: Yes. So again, I think what we’re seeing here is really Power, General, Material continue to be a little bit softer relative to the bookings. I think for the full year, we do anticipate bookings to be lower than what we saw sort of during the high days of the high booking rate, although we do see encouraging signs as Russell noted in his prepared remarks that bookings will be higher in Q4 relative to what we see here in third quarter timeframe. And then beyond that, we don’t typically provide commentary on bookings beyond that just given the visibility and sort of nature of that process for us.

David Rizik, Senior Vice President of Investor Relations and Corporate Strategy, Exelis Technologies1: Got it. And then my follow-up, maybe we could discuss the CS and I a little bit. So with CS and I being up this much, maybe you can talk about what you’re seeing for utilizations or maybe service intensity by geography. Are there some reasons that are particularly strong or particularly weak?

Jamie Coogan, Executive Vice President and CFO, Exelis Technologies: Yes. So we talked about seeing some good upgrade consumable activity in the memory space. That’s primarily going to be tied to sort of our Korean memory customers. And we think about that performance. I think we continue to see good business in China relative to CS and I and other related activities.

And then as it relates to the other geographies and the other markets, it really is sort of spot customer by customer based on their specific fabs and utilization rates that we’re seeing there. What end markets they’re selling? Yes, what end markets and what end customers they have. And so we’ve talked about the sort of disparity even within a certain customer for one fab to have higher utilization than another. And we do see that today and that translates into CS and I volumes as well.

I think the important piece is that we continue to push more of our systems right into the field. And so a period by period basis, we’re having more available systems for CS and I revenue, which creates that nice stable sort of floor of revenue for us even in lower utilization and lower system shipment regions. And then the generally above average margins we get from that creates a nice little stable profit base for us as we continue to look to invest in the business going forward.

David Rizik, Senior Vice President of Investor Relations and Corporate Strategy, Exelis Technologies1: Got it. That was all from us. Thank you.

Jamie Coogan, Executive Vice President and CFO, Exelis Technologies: Thanks, Dennis. Thanks.

Britney Morgan, Conference Coordinator: Thank you so much. Our next question comes from the line of Dukesan Jain with Bank of America Securities. Your line is now open.

Duxin Jain, Analyst, Bank of America Securities: Hi, thank you for taking the question and congrats on the quarter. I wanted to go back to the bookings question and I know you’re not giving too much color beyond specific end markets. But in Q3, you said Power and General mature were down, which are two of your biggest end markets. And even if Q4 increases unless it increases materially, I think your backlog coverage is now only down to three quarters. So I’m curious what you’re seeing in terms of visibility, into 2026.

I know Q4 and Q1 were guided flattish, but what happens after that? Thank you so much.

Russell Lowe, President and CEO, Exelis Technologies: Okay. So regarding booking, I kind of said, bookings can fluctuate from quarter to quarter, and I think Q3 is no exception. Based on our conversations with our customers across all segments, we’re expecting to see increased activity regarding bookings. Regarding memory, which has always been a a a kind of almost like a turns business where we’re kinda seeing some kind of optimism. You know, we’re booking we’re we’re building to a a a schedule, if you like.

So we expect we’ll get the PO on the same time as we ship the tools. That’s kind of where we are right now. I think when you look at that, we’ve got, like, four to five quarters worth of of backlog. You know, it’s still up $485,000,000. That doesn’t include any of our CSI base.

So when you start putting improving CSNI on top of that, you’ve got a really solid, financial base to which to build the business off. So, you know, I think, we still believe we’re bouncing on the bottom, but we do see some exciting opportunities. And as every knows that this business can change quickly and often order intake can improve quickly as well. Yes.

Jamie Coogan, Executive Vice President and CFO, Exelis Technologies: And just to add, backlog is comprised of both short and long term orders, Duxin, right? So to some extent, current period deliveries don’t necessarily always all come out of backlog either because we are building to sort of our forecast, our customer expectations, as Russell noted. We predominantly see that in the memory space, but that can also happen in other parts of the businesses, customers’ needs and requirements shift and change. We want to make sure that we stand ready to be able to capture incremental opportunities for that. So operationally, we can operate pretty efficiently with sort of the type of production visibility that we have today.

We’ve been making some investments in inventory given the strength of our balance sheet to be able to pivot pretty quickly to meet customer requirements that might come in relatively short time frames. And in some instances, we can see customer needs book and ship in orders within a period, not just within memory, but in other parts of the business as a result of that.

Duxin Jain, Analyst, Bank of America Securities: Got it. Thank you for the color. And then for China specifically, you said China Q3 was down, you expect it to be down again next quarter. But then a lot of the strength, especially in power seems to be coming from China auto. So what would be the total revenue drivers into Q4 and Q1?

Is it mostly the memory customers? Or is it Western power device customers? Yes.

Jamie Coogan, Executive Vice President and CFO, Exelis Technologies: So I don’t we’re not going to give specifics, think, on markets just as of yet, Duxin, right, to some extent. As we look ahead and see where that comes, we do expect to see some incremental memory opportunities supporting the business as we go forward. I just wanted to remind you, as we entered the year, we anticipated China revenue being down both for General Mature and Power. So what’s occurring here is not outside of our general expectations to the overall performance of the business, given the digestion of capacity that we see there. I think Russell in his prepared remarks noted that we are still seeing new entrants into the power market.

I think there are customers today that see inflection points. As they look at sort of the long term trajectory of power, specifically in silicon carbide, they still see an opportunity for it to enter the market and to be successful in that space. So like I said, we’re ready to support all those customers as we move forward and we’ll have more commentary on that on the future expected performance in our next call.

Duxin Jain, Analyst, Bank of America Securities: Got it. Thank you so much.

Russell Lowe, President and CEO, Exelis Technologies: Thanks, Duxin.

Britney Morgan, Conference Coordinator: Thank you so much. Our final question comes from the line of David Dooley with Steelhead Securities. Your line is now open.

Russell Lowe, President and CEO, Exelis Technologies: You there, Dave?

Britney Morgan, Conference Coordinator: David?

Jamie Coogan, Executive Vice President and CFO, Exelis Technologies: Can you hear me? I

: finally figured out the technical difficulties. Congratulations on nice results in a difficult environment. Jenny, I think you were talking about gross margin or systems that were pulled into Q3 from Q4 that impacted gross margins. I was wondering if you could elaborate a little bit more on that. And do you expect that to continue in Q4?

And my second question is basically adoption of silicon carbide outside of electric vehicles. And if you could perhaps elaborate on which end markets you think will start to contribute in a more significant way?

Jamie Coogan, Executive Vice President and CFO, Exelis Technologies: Yes. So I’ll start with the gross margin and the second question off to Russell there. But on the gross margin front, so there’s a couple of things. So systems mix, so shipped systems mix within the period can impact margin. We did see a little bit of reshuffling of shipped systems relative to expectations.

So that’s the sort of product mix. The specific items we were talking about related to the installation. This is really around some deferred revenue that related to systems that had shipped in prior periods or some installations that were at lower margin. We have forecasted those getting signed off and completed in the fourth quarter timeframe. Team in the field work to bring those in and get those closed off here in the third quarter, which led to some of the higher slightly higher revenue than what we had forecasted in that space, but unfortunately also carried some lower margin, which put a little bit of pressure on gross margin for the period.

Those are, I think, a unique event. Each installation is its own unique event by the way. So this is not something we will see this from time to time occur. But as of right now, we’re this event will not repeat in that way going into the fourth quarter as we think about what the systems revenue will be overall. So between that product mix, the timing of those installation acceptances and then sort of the makeup of the CS and I are the real drivers of gross margin for the period.

Russell Lowe, President and CEO, Exelis Technologies: Well, I think your second question was about silicon carbide applications beyond electric vehicles, right? So I’ll just start off kind of like calibrate on electric vehicles. So I think David mentioned it, but I think it’s kind of low single low double digits, like the 10% to 12% of cars having silicon carbide in them outside of say Teslas. I think part of that is because the design cycle is so long for most car cycles that if you want to design silicon carbide in, it’s going take you three or four years before it comes into production. So I think we’re going to see a large increase there.

And like I mentioned, I also think you’re going to see more and more cars taking silicon carbide, including hybrids and then needing more and more silicon carbide. So that’s kind of what we’re seeing. And the huge competition and the lowering of cost,

David Rizik, Senior Vice President of Investor Relations and Corporate Strategy, Exelis Technologies1: I think, is going to

Russell Lowe, President and CEO, Exelis Technologies: grow EVs quite significantly. But that aside, we are hearing about the electric grid and having kind of you know, solid state devices in in in the electric grid. We’re also hearing about the data centers. But bear in mind, we don’t necessarily know what our customers are shipping. But if you listen to some of the kind of reports, some of our customers have products that are going after the data centers.

And there’s multiple applications to the data centers. It comes in at the kilovolts, jumps down all the way through until it hits a couple of volts or whatever actually on the board. And those data centers are using ridiculous amounts of power, right? And I think the electrification is really going to support the penetration of AI going forward.

David Rizik, Senior Vice President of Investor Relations and Corporate Strategy, Exelis Technologies1: Thank you.

Russell Lowe, President and CEO, Exelis Technologies: Stay safe.

Britney Morgan, Conference Coordinator: All right. Thank you so much for that. That does conclude our question and answer session. And thank you for your participation in today’s conference. Thank you and this does conclude the presentation.

I’m sorry. You may now disconnect. Good day.

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