ASML Holding N.V. (ASML) on Q1 2021 Results - Earnings Call Transcript
Operator: Thank you for standing by. Welcome to the ASML 2021 First Quarter Financial Results Conference Call on April 21, 2021. Throughout today’s introduction, all participants will be in a listen-only mode. And after ASML’s introduction, there will be an opportunity to ask questions. I would now like to turn the conference call over to Mr. Skip Miller. Please go ahead, sir. Skip Miller: Thank you, operator. Welcome, everyone. This is Skip Miller, Vice President of Investor Relations at ASML. Joining me today on the call is ASML’s CEO, Peter Wennink; and our CFO, Roger Dassen. The subject of today’s call is ASML’s 2021 first quarter results. The length of this call will be 60 minutes and questions will be taken in the order that they are received. This call is also being broadcast live over the internet at asml.com. A transcript of management’s opening remarks and a replay of the call will be available on our website shortly following the conclusion of this call. Before we begin, I’d like to caution listeners that comments made by management during this conference call will include forward-looking statements within the meaning of the Federal Securities Laws. These forward-looking statements involve material risks and uncertainties. For a discussion of risk factors, I encourage you to review the Safe Harbor statement contained in today’s press release and presentation found on our website at asml.com and in annual -- ASML’s annual report on Form 20-F and other documents as filed with the Securities and Exchange Commission. With that, I’d like to turn the call over to Peter Wennink for a brief introduction. Peter Wennink: Thank you, Skip. Welcome everyone. Thank you for joining us for our Q1 2021 results conference call. And I hope all of you and your families are healthy and safe. Before we begin the question-and-answer session, Roger and I would like to provide an overview on some commentary on the first quarter, as well as provide our view of the coming quarters. Roger will start with a review of our Q1 2021 financial performance with added comments on our short-term outlook. And I will complete the introduction with some additional comments on the current business environment and our future business outlook. Roger? Roger Dassen: Thank you, Peter. Welcome everyone. I will first review the first quarter financial accomplishments and then provide guidance on the second quarter of 2021. Net sales came in above guidance at €4.4 billion, primarily due to higher installed base business from upgrades. We shipped nine EUV systems and recognized €1.1 billion revenue from seven systems this quarter. Due to the delay in one of our customer's roadmaps, we jointly decided to buy back two of their new systems and ship these to another customer this year. This was accounted for as a revenue reverted in Q1 of 2021. For the system shipped in Q4 2020 with a new configuration, we were able to complete site acceptance and recognized revenue this quarter. We also shipped one system this quarter without factory acceptance testing so revenue will be recognized in the subsequent quarter after customer site acceptance. Again, the net result is seven EUV revenue systems in Q1. Peter Wennink: Thank you, Roger. As Roger highlighted, we had a very strong quarter in both sales and profitability, driven by continued strength in both Logic and Memory as well as a significant demand for upgrades as customers look to bring additional capacity online as quickly as possible. The additional upgrades consisted primarily of software based productivity packages. We are seeing a significant increase in demand from our customers across all market segments and all nodes, mature and advanced, compared to 3 months ago and we expect another very strong year with demand across our entire product portfolio. The steeper than expected recovery in demand for semiconductors, amplified by the COVID induced lower investments of the industry in 2020, has created significant upside to demand over the past quarter. This more cyclical demand sits on top of the secular growth from the accelerated build up of the worldwide digital infrastructure and is fueling demand not only for advanced and mature Logic nodes but also for Memory. In Logic, customers continue to see strong demand across a broad application space for both advanced nodes as well as mature nodes. And last quarter we expected revenue from Logic in 2021 to be up 10% year-on-year. However, we now expect Logic to be up around 30% this year. In Memory, the applications that are driving the strong Logic demand are also fueling demand for Memory. As we mentioned in earlier calls, the Memory recovery started last year and continues to strengthen as customers’ plans to increase capacity is driving significant demand for our systems in the second half of the year. Compared to last quarter where we expected revenue from Memory in 2021 to be up 20% year-on-year, we now expect Memory revenue to be up around 50% this year. Skip Miller: All right. Thank you, Peter and Roger. The operator will instruct you momentarily on the protocol for the Q&A session. Beforehand, I would like to ask that you kindly limit yourself to one question with one short follow-up if necessary. This will allow us to get to as many callers as possible. Now, operator, could we have your final instructions and then the first question please. Operator: Thank you. And our first question comes from the line of Mehdi Hosseini of SIG. Please go ahead. Your line is open. Mehdi Hosseini: Yes. Thanks for taking my question. I want to follow-up on EUV revenue target for this year. I understand that you’ve -- you're keeping it unchanged at 30%. But in case you're able to improve the supply chain and availability of subcomponent, could there be upside to the shipment, even though you may not be able to recognize revenue? And I have a follow-up. Peter Wennink: Yes. Mehdi, you just use two very important words in case, which is the problem because we said in the last quarter these are very long lead time items. I mean, there's a lens it has a manufacturing cycle time I was telling over 12 months, so we have a audit, but that is not going to be there. So I think when we look at capacity and because really need to look at next year, I think it's virtually impossible to get more out of 2021 as we have planned today. So really it's going to be -- that's why we also mentioned that working with our supply chain and looking at the map next year, we are now planning and we haven't received full confirmation yet of the supply chain on it. But our focus is on the 55 systems next year. Bearing in mind also that I think we said it before, customers are buying systems with effectively they're buying wafer capacity. And with next year only there's going to , which already provides you with a 15% to 20% productivity increase. Well, if you'd have no supply, let's take the average of 15% to 20%, 17.5%, or let's say 18%. So productivity increase for our system and a 55 systems actually translated into 65 systems with 3400 C productivity. So it's -- this is the way that you need to look at it. Mehdi Hosseini: Great. Thanks for the detail and a quick follow-up. As I think about beyond 2021 and your operating margin, could there be a scenario where your key customers would share some of the development costs associated with High-NA similar to what happened to EUV almost a decade ago, so that that could also help drive overall operating margin to above 33%? Thank you. Peter Wennink: I think -- I don't think it's likely because it's not necessary. I mean, where we go back almost a decade ago, our R&D expense at that time was €600 million per year. And then when you looked at the size of the EUV program at that time, and still you need to consider that the entire Low-NA EUV program will have cost more, if we all end it, than with the High-NA program. So if you look at it, then the relative effort to bring EUV to life was so large, that it would have put a significant financial strain on the P&L of ASML, which of course we could not afford, which is not the case today. And I think if you think about operating margins, it is more a matter of maturity of EUV, which will of course lead to better performance tools with higher productivity with higher value EUV service revenue that will grow going forward. And I think those are the most important drivers for operating margin. Roger? Roger Dassen: Yes, I agree. I mean, the gross margin components, I think, Peter, you just referenced them like it's the EUV ASP and as a result of that the EUV system gross margin and the EUV surplus gross margin, those are the major drivers on the margin side. And I think, also in the introduction we've been pretty clear on what the ambition is for OpEx, right, so 14% to 15% for R&D, and 4% for SG&A. And our longer term ambition at least on the R&D side is to try and model that back to around 30% over time. I think that's what we stated R&D. And those are the major drivers I would say to get the operating margin further up. Peter Wennink: Yes. Mehdi Hosseini: Thanks much. Operator: Thank you. And our next question comes from the line of Pierre Ferragu of New Street Research. Please go ahead. Your line is open. Pierre Ferragu: Hey, thank you. Can you hear me right? Peter Wennink: Very well. Good afternoon, Pierre. Pierre Ferragu: Great. Good afternoon, Peter. So, thanks for the color on how we increased capacity for this year and next year, that’s very clear. My question would be more of 2, 3 years, if I recall correctly, like about my visit in Veldhoven, you guys are set up to be able to do 60 EUV tools a year than 20 High-NA EUV tools. And when I took a shot at looking at how much would be needed over the next 3, 4 years, I felt like this was actually a bit limited and that you might actually need more capacity. And so I would love to hear your take on that on -- in the longer term, do you think it would make sense to think about increasing your overall capacity? And you got security, what kind of flip sides are we talking about for that kind of endeavor? And I have a quick one. Peter Wennink: Yes, it's a very good question, Pierre, and I think it's a long-term strategic question. Let me try to answer it this way. When I talked about the three trends that the company will have to face in terms of demand cycles, that's of course the shorter term, which you could say, it's a catch up on the lower level of investments we saw last year because of the pandemic, which is -- which are catching up this year, and I think throughout next year, or in any case as a part of next year, then that the sector growth trend, which we have underestimated. I think you can go back to the Capital Markets Day '16 and '18, I don't think we at that point in time anticipated the strength of the DUV market that we see today. And that's the third trend, which is basically the drive of technological sovereignty by different countries, different governments. Those are all at this moment in time, those will be the drivers. But it's also difficult to really get a very clear view on this. So your question is, taking that into consideration, should you guys be looking at increasing your capacity beyond the 60, the magical 60 that we've always mentioned? Good question. And I think this is actually the work that we're doing today. We're looking at what we need to do this. So now the lead time, now if you have to build a complete new factory. Let's take you need to build a new optics factory, then the lead time is 2 to 3 years because you need to build the factory, you need to procure the machines. And by the way when it comes to optics manufacturing, you have to build those machines yourself because they're not available. So that will be longer, but lot of ways to increase capacity and as to cycle time reduction that's through a process optimization. And so it's this complexity of measures that we can take to see how we can drive the total capacity up, which by the way, all have lead times that are beyond the 55 units that we're planning for next year, which doesn't mean that it couldn't be higher in '23 and '24. But that's the work that we need to do today, which by the way we are doing, yes. Pierre Ferragu: That makes sense. And a quick follow-up very much related to that. You mentioned like the geopolitical situation, when I look at the overall event chain, and how much it depends on what's happening in Veldhoven on the single side where you’ve assembled your tools, it's almost scary. It's a weak point for the global value chain and probably a place where your clients and governments are getting maybe a bit nervous about that. So do you have conversations with people around you about diversifying your thoughts and creating supplies, that not only the -- like that would be less dependent on the Netherlands? Peter Wennink: Yes, I think the -- that's the situation of today is not very different than the situation 5 years ago. You could also -- you can only argue that the realization of people is now different, but that has never changed, it is what it is. But the same can be said for our customers that are relatively concentrated in one particular area, or some of our peers that with some of their production facilities only make a couple of 100 tools per year in one or two single sites. It is the concentration of the semiconductor industry in different geographical areas that actually now starts to make governments think. That’s never been an issue. Its only becoming an issue when this -- have almost seamless ecosystem that has been built across many, many borders are now being -- that ecosystem is now being threatened, I would say, almost by blockages of that and then you get an issue. So I think it's nothing different. There's always been this way, and especially over the last 5 years, I would say, there's high concentration of leading edge technologies across the value chain. But given the geopolitical situation, people are more aware and they start now thinking of sales -- of levels of sale sufficiency that a couple of years ago nobody thought of. Pierre Ferragu: Thanks, Peter. Operator: Thank you. And our next question comes from the line of Joe Quatrochi of Wells Fargo. Please go ahead. Your line is open. Joe Quatrochi: Yes, thanks for taking the question. I was wondering if you could help us on the updated 2021 guidance. I think last quarter, you had talked about there being potential upside from domestic China. We hadn't seen any change in the geopolitical situation or export controls. So I was curious can you help us understand is that now included -- that upside included? And if so, how much is that? Roger Dassen: Yes, I think it's fair to say that upside is now included in the numbers that we've given. So it's clear. And Peter went through that also in the presentation at the beginning of this call that we've revised upwards, if you like the outlook for the full year. And further down into the year, we've now said, this is how we look at the full year. Of course, still expecting that the regulatory situation remains a little bit the way it is today. And therefore what previously was upside, and the way we talked about it, upside has now really been included in that number. Remember, last time, the expectation that we gave was that could be about €600 million upside coming from China. And that number is now included in the, let's say, close to €18 billion that we now talked about. Peter Wennink: And if you really want to think about risk profile, you could say, well, when the regulatory situation changes and you could not ship to China, when you look at the market situation today, then -- which is quite different than 3 months ago, then we would ship those systems somewhere else. Joe Quatrochi: Great. And then just as a follow-up, I just want to make sure I understand the two systems that you repurchase from a customer, those are on the EUV side, and then you plan to ship those this year. And I guess is that -- if that's correct, is that embedded in the 30% EUV revenue growth? Roger Dassen: Yes, it is. Yes. Peter Wennink: So when you … Roger Dassen: You have a reversal in this quarter, and you will see it come back in the subsequent quarters. For the full year, it's a - it's neutral, right. It's minus two and plus 2 . Joe Quatrochi: Perfect. Thank you. Roger Dassen: You’re welcome. Operator: Thank you. And our next question comes from the line of Aleksander Peterc of Societe Generale. Please go ahead. Your line is open. Aleksander Peterc: Yes. Hi, good afternoon, and thanks for taking the question. So you gave us a pretty clear outlook on EUV for '22. I just wondered about the longevity of this stronger cycle that you see emerging and try it because that's where all of the upgrade today is coming through for '21. So I'm just wondering is all of that then carrying into '22 as well. And then just very quickly, if you could also provide a quick comment on ASPs, they were again very strong this quarter specifically the puts and takes there. Thanks a lot. Peter Wennink: I will do the ASP -- well, Roger, will do the ASPs. And your question on the sustainability, and especially DUV and apps. I think I said it on the -- as an answer on the earlier question, when we look at how we see the DUV market that -- you have market today as compared to 3 years ago, 2018, I think we have a different view. And that's driven by the fact that, of course, our entire DUV portfolio which is immersion and dry, we have -- we cannot fulfill the demands of our customers all the time. And that has to do with the fact that our analysis shows that with the combination of, let's say, advanced sensing technology 5G, the ability to process all the data through high performance compute and that in a distributed fashion basically, leading edge compute also goes to the edge. I call that distributed systems. And a distribute system is, for instance a car. But it's also one of our machines in the field. And that increasingly requires collection of data, transport of data, processing of data, not only through the most advanced high performance compute, but as part of a distributed system. And that system inevitably includes mature technology, which could be image sensors, power ICs, MEMS, analog solutions. It's the whole thing. And that means if we would have an eye line system available today, it will be sold yesterday. So it's everywhere. And that has to do with the proliferation of chip technology and a distributed computing and distributed systems that we are seeing. That is something that will not go away in our minds. This is why there is also a market data box that we are also planning and looking into what is the level of our DUV capacity increase that we need, both in mature and in emerging. That’s going to be double-digit increase as from where we are today. Now, how much can we stretch that or how it is needed? That's exactly what we're doing with EUV, we need to line up with the supply chain. We need to go deeper into what it takes in terms of capacity lead time, do they need to build square meters, do they need to hire people, is it going to be possible through cycle time reduction through process optimization, this is the work that we're doing today because remember 5 months ago, we were looking at a completely different world. So this is a ramp up. But we do believe that this has a long runway. Roger Dassen: Yes, on the ASP for EUV, it's well noticed. You're absolutely right. So this quarter, in Q1, we're looking at an ASP for EUV of about 160. Part of that is configuration, we've talked about that in the past. If you look at the last three quarters we've consistently been looking at an ASP of around 145. And this time, it's a little bit up for another reason, I'll come to in a moment. So in fact, what you see is that -- in fact, in the last year, we've been positive, really surprised by the options on the tool, the options that were ordered on the tool and as a result of that the configuration was that was richer than anticipated and as a result of that fairly consistently see now that the ASP range is above the 130 that we've talked about in the past and fairly consistently seen 145 or up. The reason that it's extra of this year, there's a few accounting things. We've talked about accounting for VPAs in the past. That is a few accounting reasons why it's higher, so why its 160 rather than 145. But in reality just looking at the configuration that we seen on the tools in the past couple of quarters, the 145 anchor point for the ASP for EUV is probably the right way to go. And I’d say that recognizing that is about the last quarter that we're really looking at the large number of fees in the revenue. Aleksander Peterc: Thank you. Operator: Thank you. And our next question comes from the line of David Mulholland of UBS. Please go ahead. Your line is open. David Mulholland: Thanks for taking the questions. Just coming back on the EUV capacity increase and shifting to 55 tool capacity for next year. Obviously, there were some changes made last year that ended up limiting what potentially should have been higher shipments this year, and some of that probably kicks in next year. But in your discussions with customers, Peter, just obviously there's a very, very strong cyclical tailwind to the industry today that’s driving appetite for capacity increase, but EUVs on a very, very long time horizon for customers that 18 months rather than 6 months planning. How do you feel like their assumptions have changed that's driving that upside? Is it primarily because of their confidence and penetration of EUV in higher layers? Or is there an element of actually just big -- building bigger nodes now that's driving the need for more capacity at this point? Peter Wennink: I think, David, it's both. I think we're seeing -- I only want to refer to as a comment that was made by the CEO of one of our large customers that actually mentioned we're going to double the number of EUV layers on our next node. I think that's a trend that we are seeing, simply because the advantages of EUV are not only, you could say, the pure economic cost per layer because you can eliminate multiple patterning, but it's also the electrical characteristics and the simplicity of the process, lower width is one of them. So there's many other side effects that actually lead people to go for EUV. So yes, it's higher layer counts, that's what we're seeing which is true for Memory and for Logic. But also when we talk to customers, they all talk about bigger nodes, and has to do with this secular trend, trend number two that I talked about and trend number three, the technological sovereignty will just be a layer on top which will not go away, which will take time, when -- it takes 2 to 3 years to build a semiconductor factory, and put it into action. So -- but I think this is -- so it is bigger nodes. It is strategic investments. It's higher layer accounts. And this is what I -- I’ve answered to a previous question, we all need to take it into consideration. Some of it we already saw coming, but what does it mean for our capacity needs beyond 2022, which by the way, sold that capacity, if that would be needed, would be the result of, like I said, process optimization, cycle time improvement, different work schedules and potentially square meters, that could be. So but it's all of the above. David Mulholland: And just one quick follow-up, obviously, from a financial perspective, at some point in the near future, you need to start building those tools through the supply chain, given the lead times. Are you requiring customers to place deposits and make the financial commitments that you've been starting to make before any of those tools get built? Or is there an element still this year, where you're going ahead and starting production before you've had firm deposit associated orders from the customer? Roger Dassen: Yes, David, the policy hasn't changed there. So that means that when a customer has put in a PO, a down payment is required. And I think we mentioned in the past that the amount of the PO is a little bit dependent on the moment where the order is being placed, or the order is being placed nicely in line with the lead time, then the down payment is lower than when it's placed a little bit later than that. But you also know that the PO by itself is a bit of a non-event for us because we work so closely with the customer that we sort of understand what they're doing what they want and when they need it. So the PO is a bit of a non-event for us. But yes, the short answer is absolutely there will be down payments placed at the moment of the PO. David Mulholland: Great. Thanks. Operator: Thank you. And our next question comes from the line of C.J. Muse at Evercore ISI. Please go ahead. Your line is open. C.J. Muse: Yes, good afternoon, good morning. Thank you for taking the question. I guess first question, Peter, can you speak to the sustainability of Memory? I think the headline above 50% might be a bit concerning. However, if I think about EUV in there as well as a strong pick up in EUV in both e-beam voltage and contrast imaging. It certainly looks like Memory ex those two things is tracking more like 20%, 25%. So we'd love to hear your thoughts on the moving parts there, and how to think about sustainability into '22? Peter Wennink: Yes, I think for this year it's not a surprise. I mean, you just need to go back to our conference calls for the last two quarters, where we actually saw recovery of especially DRAM starting and I think I gave some color 3 months ago where I basically said, we had a decent shipping -- shipment in Q4 of last year, which basically go into -- goes into production in Q1. But if you look at a bit growth of 20% this year, then our calculations show that we're very quickly at the max output capacity of our DRAM customers in this year, where we would reach pretty quick, so we would need more capacity addition that's exactly what we have seen. So I think it's just the beginning. These things -- so yes, I think yes, it will move into next year. Now it's been around also long, so that in the Memory business, yes, there is more tendency to have from time to time some overcapacity and some under capacity. How long does it last? I don't know. But still there's somethings about telling me, hey, the secular trends when it's such a high demand in Logic, all this stuff doesn't only work with only Logic, it also needs Memory, yes. So it's going to be quite interesting to see how quickly the Memory capacity will be added throughout this year, early next year, and what the underlying bit block percentages will be. Now, having said that, you’ve noticed also Memory is more cyclical than Logic, but nothing that indicated to me at this moment in time that we are looking at building an overcapacity. There's nothing I can see at this moment in fact. We're just starting. C.J. Muse: Very helpful. And then just a follow-up question on the DUV side of things. I think you guys have talked about growing your non-EUV tool business by about 40%. So that's roughly $7.7 billion this year. Is there a way to frame how much capacity you're planning to add on the non-EUV side relative to that $7.7 billion for us to kind of gauge what you're capable of into '22 and beyond? Peter Wennink: Yes, I think we would calculate it the way that we would calculate would just be over 8, about 8.2. And that's really stretching it in terms of our production capacity this year. We would have more capacity, we would probably do more, likely we would be able to do more. So your question really is answered in a sense that I always said in my prepared remarks, we're looking at increasing our DUV capacity, both dry, mature and emerging. And it's not going to be 5%, I mean it's going to be double-digit. But that will take some further analysis, or what needs to be done. Is it through optimization, through things like process optimization, and added workforce or lack of time or has it to do with square meter capacity like factories, that is something that was under consideration today. And we're looking into that, it's getting with our supply chain. It's not so much for us. And it's really in the supply chain. So the reason why I say this is because we believe that we need extra capacity. And it has to do with the underlying trends, the trends that I talked about earlier. So yes, the 40% brings us to just over 8, you have 7.7, or you're a bit more conservative, but this is -- directionally it is correct with -- this is the answer. C.J. Muse: Great. Thanks so much. Operator: Thank you. And our next question comes from the line of Andrew Gardiner at Barclays. Please go ahead. Your line is open. Andrew Gardiner: Good afternoon. Thanks for taking the question. Another one, Peter, on the sort of capacity planning issues that you guys have just been talking about. I'm wondering, given the changes that we've seen from a number of your lead customers, or at least the public announcements from your lead customers over the last 3 or 4 months. And the fact that you are now having to rethink the need for additional capacity expansion whether at your site or within the supply chain. Are they now giving -- and I presume, yes, they're wanting it sooner rather than later is always seems to be the way and yet you've got fairly extensive lead times, particularly so for EUV, perhaps slightly less so for DUV in terms of building out this capacity. Are you getting better visibility today in terms of what those customers are going to need looking at over the next 3, 4 or 5 years in order to give you that confidence in making such a decision? Peter Wennink: Yes, it's a good question. I mean, also you've been around people I've been around a long time. So you know that, yes, when we under invest, there's also going to be a knee jerk reaction, like it always happens. So this is more the shorter term correction of a miss planning that's happening today, that's what I call. It's the trend number one. But clearly, customers understanding that our capacity lead times, and our manufacturing lead times are long. So they do share with us a longer term vision. Now not 5 years out, this would be too much to ask, but certainly 2, 3 years out. So I mean, I would say, for 2022, 2023, we definitely have deep discussions about what they need in terms of expansion plans, in terms of what they see, when we talk about Logic, the anticipated capacity ramp in terms of the tape outs that they have on the shelves that they see coming on N5, and N3. So that -- it is not just some pie in the sky thinking. This is real underlying discussion that they have with their customers, and the design requirements that they get for increasing customer base, which has to do with high powered computer with AI and with all the applications that we talked about, because of the whole digital transition. So, yes, there is more visibility to the point that the planning system -- the planning visibility, is I would say deeper. And this is also where we've made our request to the supply chain on. It's of that discussion, which is going to be a costly discussion because you do not have capacity for nothing. So this is -- and it's also true for our customers. It's going to be costly, but they've been very explicit to the outside world and to the media about what their plans are. And that's well thought through based on what they see. So their customers, and the customers of their customers tell them. So this is why I talk about these three trends. And this is -- this basically is the base for the visibility, but how much in the end will be or we will need, there's always a risk of underestimation, but also risk of over estimation. And that's what we need to take into consideration when we say what's wise. And like I said, this is just something of the last 3, 4 months, where it starts to accelerate. It gives us a bit of time and our supplies, particularly to figure out what this wisdom. Andrew Gardiner: Thank you. Thank you, Peter, for that insight. Even if I think you did call me old at the outset there, I still appreciate the color. Peter Wennink: It's all relative. From my perspective, you're very young. Andrew Gardiner: Thank you. Operator: Thank you. Our next question comes from the line of Krish Sankar of Cowen and Co. Please go ahead. Your line is open. Krish Sankar: Yes. Hi. Thanks for taking my question, Peter, and also been around quite a bit. So let me ask you two quick questions. Clearly a nice jump in EUV bookings in the March quarter. Can you give some color on how that EUV bookings are trending for the current quarter? And what is your yearly backlog in terms of units? And then I had a follow-up. Peter Wennink: Roger, do you want to take that? Roger Dassen: Yes, I will take it. So in terms of order book, the current backlog is €7.4 billion for EUV. So that's pretty strong, and obviously also driven by significant intake in the last quarter. I'm not going to comment specifically on this quarter. But, in general, just listening to the commentary that we made on our expectations for next year, it's pretty clear that also for the next quarter, we do expect a healthy order intake for EUV, because at this stage €7.4 billion, and if you do the math, what you think system business is going to be next year, if you translate that at the 55 capacity that we've been talking about. It's pretty clear that we're still looking at the significant order intake expected for the next -- for this quarter and for the next quarter. Krish Sankar: Got it. Well, that’s very helpful, Roger. And just as a follow-up, Peter, I know you gave some color on like the Memory outlook for this year. Can you just give little more insight in terms of how to think between DRAM and NAND in the context of your Memory growth of 50% for this year? Peter Wennink: Yes. I think the -- I think we are also -- it's an extension of what we said in the previous two quarters, it is primarily driven by DRAM. But we also see that 3D-NAND will follow. I mean, what we see is, is basically following the utilization of our tools in the field, that will follow. But it is primarily driven this quarter, next quarter and I think the majority of this year by DRAM. Krish Sankar: Thanks, Peter. Operator: Thank you. And our next question comes from the line of Alex Duval at Goldman Sachs. Please go ahead. Your line is open. Alex Duval: Yes. Hi. Good afternoon. Congratulations on the results. Just had a quick question on EUV gross margin. So you expected to get through that gross margins at the end this year to be a good gross margin levels. I wondered if you could just talk through the improvement as we go through the year. And you referenced related to this, that you will see higher ASP related to how people are on the C model. Just wondering the extent that we see better than expected ASPs of the D model could gross margin for EUV. Thanks. Roger Dassen: Yes, Alex, at the beginning you were a little bit tough to understand. But I think your question really was how do you expect the gross margin to further develop on EUV. And as we mentioned before, we do expect in the second half with the introduction of the D model, we expect EUV system gross margin to be at the level of the corporate gross margin. So -- and I can confirm that that's exactly what's going on. You're right, that the -- that we did see a little bit of a reset on the ASP for the C model, right? So we've been talking about 130. But as I mentioned, the configuration quarter-after-quarter turned out to be richer than we previously anticipated. And I think it's fair to say that the 10% to 15% uptick that we've been talking about on the -- for the D model in comparison to C model. So if you take the 145-ish basis for the C model, then I think low 10 increase over that in terms of ASP, I think is probably what you should be looking at for the ASP calculation. And of course, to the extent that is better, that of course is also helpful, a little bit on the gross margin side as well. Peter Wennink: Yes, although the D has also somewhat higher costs. Roger Dassen: Sure, yes. Peter Wennink: So it's a 100% to the bottom line, we have some higher cost on the optics and also other parts, correct. But it will help. Alex Duval: Great. Thanks. Operator: Thank you. And our next question comes from the line of Amit Harchandani of Citi. Please go ahead. Your line is open. Amit Harchandani: Thank you. Hello, everyone. Amit Harchandani from Citi. My first question is on the topic of DUV, if I try to collate all the data points you've shared with us, is it fair for me to say you would expect DUV sales to be up year-on-year in 2022, given that you're just getting started in Memory and cyclicalities can could persist into 2022? And as a follow-up to that, if I may, you talked about building capacity for DUV. Your that a billion and you talked about double digitizing earlier in the call. Is it fair to say that you would expect this €8 billion to be exceeded? Or basically even a higher contribution from DUV? If not in 2022, then certainly beyond 2022. Thank you. Peter Wennink: Yes. Listen carefully, Amit, and that's true. Everything you just said, do we expect DUV sales to be up year-on-year? I don't know about the year that you are matching, but the fact that we are looking into increasing our DUV capacity means that we believe DUV sales will be up and in what year and -- year-on-year, but I think medium to long-term, we have indeed reassessed the need for DUV capacity going forward. And when I talk about capacity increase, you don't do this for 1 year. You do this because you feel medium to long-term that is needed. So, yes, and it also means that if we do that, then and we say we'll be around €8 billion this year on DUV, yes, we would expect that will increase because otherwise you don't need to build capacity, because we could do with what we have today. Amit Harchandani: Okay. Thank you. And just wanted to clarify that. And secondly, very quickly on geopolitics, we've heard a lot of noise. Based on what you've said today, it seems like you expect the whole geopolitical dynamic to be a net positive, with maybe some downside risk to China potentially being offered by potential upside in Europe and the U.S. Is that a fair assessment? Or more broadly, what are the latest -- what's the latest in your view versus what you shared with us end of January? Thank you. Peter Wennink: Yes, I think Roger said it is that I think we are now where we are because we're through Q1. We are in Q2 now. We have included that €600 million upside into the number that we gave you. However, we don't control the geopolitical situation and the lawmaking. But given the market situation where we are today, if some of that €600 million would not be there, because of geopolitical roadblocks, then the demand is such that we will ship those systems somewhere else. And if you then look at how that affects shippers to China versus the longer term geopolitical impact, it's just a matter of timing. That’s the other -- the first one could be short-term this year. The orders are definitely long-term, because when you know that this is all about where do we build a new fab, while it takes 2 to 3 years. So -- and you really look at adding capacity in the timeframe 24, 25 is when that capacity starts coming through the market. So that’s all a matter of different timing. It's a different time perspective. Amit Harchandani: Thank you, Peter. Skip Miller: All right. We have time for one last quick question. So if you are -- and if you are unable to get through on this call and still have questions, please feel free to contact ASML Investor Relations Department with your question. Operator, may we have the last caller, please. Operator: Thank you. That is the from the line of Didier Scemama of Bank of America. Please go ahead. Your line is open. Didier Scemama: Oh, thank you. Thanks for squeezing me in and good afternoon, gentlemen. I think the most important question was just asked and answered. So thank you. I wanted to ask you a question about Installed Base Management for EUV. Peter, if you would like to really share with us what you think the sort of revenues could be for EUV Installed Base this year? And how you're thinking about the slope of growth over the coming 5 years, the sort of things that we have a feel for the change in the mix towards the sort of more recurring revenues in Installed Base, that would be great. Thank you. Roger Dassen: Yes. So on the more recurring side, I think what we've said in the past is that, the way to model that for EUV is to take the ASP as a tool and take about 6% for that. And that's when the tool is up and running at its envisaged capacity, then you would have 6% of the ASP as the recurring revenue for service and maintenance for that tool. So that excludes upgrades, but just for the regular service and maintenance 6% of the ASP is what you would see there. So again, the assumption do needs to be up and running as the envisaged capacity, and it should be out of warranty. As long as the tool is in warranty, the number is a bit lower. So that's really the way to model it. As it comes to upgrade, that's a little bit more difficult because upgrades is lumpy, upgrades is dependent on what the customer wants in terms of productivity gains, what they want to make available to us in terms of the machine time. So that's a little bit harder to predict. But at least on the regular service and maintenance side, this is the way to model the 6% of the ASP, once the tool is up and running and out of warranty. Didier Scemama: All right, Thank you. Peter Wennink: All right. Thank you. Roger Dassen: Thank you, . Skip Miller: Before we sign off, I'd like to remind you that our Investor Day will be September 29, 2021. The event is currently planned to be held in London. We move the date from June in hopes we can have a face to face meeting at the time. But of course this will depend on the progress against the virus. More details will follow in due time, and we do hope you'll be able to join us. Now on behalf of ASML, I'd like to thank you all for joining us today. Operator, if you could formally conclude the call and I'd appreciate it. Thank you. Operator: Thank you. This concludes the ASML 2021 first quarter financial results conference call. Thank you for participating. You may now disconnect.ASML Ratings Summary
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ASML Plunges 7% on Q1 Revenue Miss
ASML Holdings (NASDAQ:ASML) experienced a 7% intra-day drop in its shares following the announcement of first-quarter sales for fiscal 2024 that did not meet expectations. The company reported net sales of 5.29 billion euros, which fell short of the expected 5.39 billion euros. However, its net profit reached 1.22 billion euros, surpassing the forecasted 1.07 billion euros.
Year-over-year comparisons show a 21.6% decrease in net sales and a significant 37.4% reduction in net income. A notable concern was the net bookings for ASML’s equipment, a critical indicator of future revenues, which totaled 3.61 billion euros. This figure represents a 4% decrease from the previous year and a significant decline from the prior quarter, falling well below the expected 4.63 billion euros.
Despite these challenges, ASML maintained its annual sales forecast at 27.6 billion euros, the same as the previous year, and anticipates stronger performance in the second half of 2024, aligning with the broader industry recovery from the downturn. CEO Peter Wennink described 2024 as a transitional year, emphasizing ongoing investments in capacity ramp-up and technology to prepare for an anticipated market upturn.
ASML also highlighted the necessity to secure around 4 billion euros in orders each subsequent quarter to achieve its 35 billion euros revenue goal for the year, indicating the company’s strategic focus on meeting these targets amidst current challenges.
ASML Stock Falls After Q3 Miss
Following weaker guidance, ASML Holding (NASDAQ:ASML) saw a more than 2% drop in its stock price in pre-market after reporting lower-than-expected orders, leading to a cautious sales forecast for the next year.
This caution arises from clients conserving cash due to economic uncertainties. While the company acknowledges that the semiconductor industry may have reached a trough, the uncertainty surrounding the shape of the demand recovery is causing customers to be cautious. Chief Financial Officer Roger Dassen noted that customers are exercising prudence with cash and capital expenditures, which is reflected in their order placements.
The company's net profit for the three months ending on September 30 was 1.9 billion euros, in line with analysts' expectations. However, net bookings were significantly lower at 2.6 billion euros compared to the third-quarter sales of 6.7 billion euros. Revenues came in at 6.67 billion euros, missing the Street estimate of 7.31 billion euros.
Despite the cautious outlook for 2024, ASML maintains a robust order backlog of 35 billion euros, and the company expects a more favorable 2025, given its customers' expansion plans across Asia, the United States, and Europe.
Analysts Warn of Shipment Cuts at ASML Holdings
ASML Holdings (NASDAQ:ASML) shares fell more than 1% pre-market today due to concerns raised by TF International Securities' analysts, who believe that the company will likely make significant reductions in its EUV equipment shipment forecasts for 2024, possibly by 20-30%.
The analysts’ warning is based on several factors, including lower expected demand for Apple's 3nm chips in 2024, reduced demand for Qualcomm's 3nm chips due to Huawei's chip sourcing halt, lower-than-expected demand for Samsung's and Intel's chips, and delays in memory expansion plans by Samsung, Micron, and SK Hynix, now expected to happen between 2025 and 2027.
Analysts Warn of Shipment Cuts at ASML Holdings
ASML Holdings (NASDAQ:ASML) shares fell more than 1% pre-market today due to concerns raised by TF International Securities' analysts, who believe that the company will likely make significant reductions in its EUV equipment shipment forecasts for 2024, possibly by 20-30%.
The analysts’ warning is based on several factors, including lower expected demand for Apple's 3nm chips in 2024, reduced demand for Qualcomm's 3nm chips due to Huawei's chip sourcing halt, lower-than-expected demand for Samsung's and Intel's chips, and delays in memory expansion plans by Samsung, Micron, and SK Hynix, now expected to happen between 2025 and 2027.
