Axcelis Technologies Inc (ACLS) 2016 Q4 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Axcelis Technologies call to discuss the Company's results for the fourth quarter and full-year 2016. My name is Liz and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions) I would now like to turn the presentation over to your host for today's call, Mary Puma, President and CEO of Axcelis Technologies. Please proceed, ma'am.

Thank you, Liz. With me today is Kevin Brewer, Executive Vice President and CFO; and Doug Lawson, Executive Vice President of Corporate Marketing and Strategy. If you've not seen a copy of our press release issued earlier today, it is available on our website. Playback service will also be available on our website as described in our press release.

Please note that comments made today about our expectations for future revenues, profits, and other results are forward-looking statements under the SEC's safe harbor provision. These forward-looking statements are based on management's current expectations and are subject to the risks inherent in our business. These risks are described in detail in our Form 10-K annual report and other SEC filings, which we urge you to review. Our actual results may differ materially from our current expectations. We do not assume any obligation to update these forward-looking statements.

Today, Axcelis reported fourth quarter and 2016 year-end financial results. Revenues for the quarter were $69.4 million with gross margins at 38.9% and earnings per share of $0.13. Results for the quarter were in line with our updated guidance of January 10 and above current consensus estimates. 2016 revenues were $267 million with gross margins at 37.3% and earnings per share of $0.36.

Our systems mix in the quarter was 50% mature foundry and logic highlighting the continued strength of the Internet of Things. In addition, the increased strength of memory over Q3 comprising the other 50% of system sales demonstrates that the anticipated 2017 memory build is now underway.

For the full-year 2016, our systems mix was 56% mature foundry and logic and 44% memory. The bulk of our systems shipped to Korea 34%, China 26%, and the US and Europe 25%. Purion accounted for 81% of our 2016 systems revenue.

Turning to guidance for the first quarter, we are forecasting revenues of approximately $80 million, up 15% from Q4. We expect gross margins around 39%, operating income of $7.5 million to $9 million and EPS of $0.20 to $0.24, a more than 50% increase over Q4 highlighting the leverage in our business model. Let me take a moment to review the results of our key 2016 objectives. Last year, we focused our efforts on increasing the Purion customer base, maturing the core Purion product family, developing new application specific product extensions for Purion, and improving our gross margins.

Our Purion customer base grew significantly during 2016 as we placed Purion products in 14 new customer fabs. Seven of these sites are new Purion customers with the other half comprised of new fab locations for existing Purion customers. Customer penetration activity has continued into 2017 with our first new Purion customer of the year. In January, we shipped a Purion H system to a new Asian fab for evaluation and qualification on their newest memory process. Although our success in penetrating new customers is mainly due to the technology advantages Purion offers versus the competition, it is also as a result of Axcelis' focus on our customer-specific application requirements especially in the mature process technology markets.

During 2016, Axcelis introduced multiple product extensions to our base Purion product family. These extensions were designed to address the exact needs of customers producing not only memory devices, but also image sensors and power devices. These Purion product extensions include the new Purion EXE and VXE providing the highest energy levels available in a production implanter, the high temperature Purion M with 150 millimeter silicon carbide capability for the power device market, and significant productivity and source life enhancements for the Purion H. These extensions accounted for more than a third of the new customer Purion placements during 2016.

Last year, we also made significant progress towards our goal of delivering our long-term business model target of margins greater than 40%. We finished Q4 with gross margins at 38.9%, above our 2016 goal of 36% to 38%. Kevin will discuss this in more detail shortly. We believe that 2017 is shaping up to be a very good year for the industry and is the beginning of a solid up cycle. [SEMI] has identified 62 fabs and fab extensions planned between now and 2020. All market segments are currently exhibiting strength. The IoT is driving a significant amount of activity in the mature foundry logic market segment and in fact is picking up additional momentum as China's fab plans become a reality and as European customers increase their investment levels. This market continues to be strong for Axcelis and is likely to account for more than 50% of our systems business in 2017. As I just discussed, many of our Purion product extensions are targeted to support this market.

In memory, we expect a solid first half from DRAM customers as they respond to a supply constrained market that has resulted from the low level of capacity additions in 2016. NAND appears to have entered a long-term up cycle driven by solid state drive demand especially in the data center segment. We believe that the advanced logic market segment continues its march down Moore's Law with investment in 10, 7 and 5 nanometer process equipment. We continue to work closely with these customers to identify potential Purion opportunities, but as in 2016, we will continue to be primarily focused on the memory and mature foundry logic markets given the higher implant CapEx opportunity these segments offer.

Our objectives for 2017 will be very similar to 2016. We have four key objectives. First, we will focus on new customer penetrations with Purion. The expanding number of customers investing in IoT 3D NAND in China has broadened the CapEx opportunity providing new prospects for Axcelis. Second, we will also drive to grow our share of business at existing customers as they increase their capacity in 2017. Third, we will focus our marketing and engineering resources on maturing Purion and on developing additional product extensions to drive both revenue gains and gross margin improvement. And fourth, we will execute against detailed gross margin improvement programs with a goal of exiting 2017 at 40%. In line with these objectives, we are currently working on multiple additional evaluation opportunities for both the Purion H and Purion VXE. Interest in both products continues to be very high due to their technical differentiation. The Purion H has significant advantages due to its unique spot beam architecture and the Purion VXE is the only system that can deliver the very high energy levels desired by image sensor customers. Now I'd like to turn it over to Kevin to discuss our financials and provide additional color on our gross margin objectives.

Thank you, Mary. Before I review the financials, I'd like to take a few minutes to review the progress we've made on gross margins and talk about some planned investments we will make to drive additional Purion market penetration in 2017. For the full-year 2016, gross margins finished at 37.3%, up 360 basis points from 33.7% in 2015. In Q4, our gross margins were 38.9% and higher than our [year-end] goal of 36% to 38%. Gross margin improvement continues to come from a strong focus on Purion cost out engineering, supply chain optimization, and factory lean programs. Since volume ramp of our full Purion product line began in the first quarter of 2015, system standard margins have increased 970 basis points on a rolling four quarter average. Improving Purion maturity, significant platform commonality, and product line extensions are also contributing to higher gross margins. In 2017, we expect continued gross margin improvement from these activities.

With a strong diversified market anticipated in 2017, we see an opportunity to firmly establish Purion across a broader customer base. To ensure we capture these opportunities, we plan to increase the number of evaluation tools for Purion H and Purion VXE. Both products are targeted towards markets that provide significant opportunity for us with [high current] now representing approximately 60% of the implant TAM and the image sensor market continuing to grow.

We will also invest in additional headcount and infrastructure to support the growing Chinese market. This region is vast in size and we expect it to represent a significant opportunity especially in our core markets of mature process technology and memory and we will develop additional product line extensions across all the Purion tools that we expect will capture new opportunities and help drive higher gross margins.

As a result of these planned investments, we expect our combined SG&A and R&D to be around $23 million per quarter with Q1 being slightly higher due to one-time expenses. I feel this modest increase in spending is appropriate at this time and should fuel additional Purion revenue growth and gross margin expansion. That said, I will continue to closely monitor our expenses and ensure that they remain at the right level given our revenue and market conditions.

Now, I'll review the fourth quarter results and year-end 2016 financials. In Q4, we finished in line with our updated revenue guidance and above consensus estimates. Q4 revenue finished at $69.4 million compared to $65.7 million in Q3. Q4 system sales were $37.7 million compared to $30.9 million in Q3. Q4 CS&I revenue finished at $31.7 million compared to $34.8 million in Q3. Full-year 2016 revenue finished at $267 million compared to $301.5 million in 2015, down as a result of the slower than expected DRAM market in 2016. Q4 sales to our Top 10 customers accounted for about 80% of our total sales compared to 70% in Q3 with one of these customers at 10% or above.

Q4 system bookings were $34.8 million compared to $23.1 million in Q3 with a Q4 book-to-bill ratio of 0.88 versus 0.86 in Q3. Backlog in the fourth quarter finished at $17.5 million compared to $20.6 million in Q3. Q4 combined SG&A and R&D spending was $21.1 million compared to $20.5 million in Q3. SG&A in the quarter was $12.3 million with R&D at $8.8 million. In Q1, we expect SG&A and R&D spending to be around $23.5 million, which includes approximately $400,000 of annual [Mass.] unemployment tax that occurs in the first quarter and the increased investment previously discussed. Gross margin in Q4 finished at 38.9% compared to 36.7% in Q3. Full-year gross margin was 37.3% compared to 33.7% in 2015. In Q1, we expect gross margins to be around 39%. Operating profit in Q4 was $5.9 million compared to $3.6 million in Q3.

Full-year 2016 operating profit was $16.6 million compared to $20.7 million in 2015. Q4 net income was $4 million or $0.13 per share compared to $2.2 million or $0.07 per share in Q3. Full-year 2016 net income finished at $11 million compared to $14.7 million in 2015. Q4 inventory ended at $113.9 million compared to $117 million in Q3. Inventory turns finished at 1.5 compared to 1.4 in Q3. Q4 accounts payable were $25 million compared to $20.2 million in Q3 driven by the timing of receipts. Q4 receivables were $50.6 million compared to $45 million in Q3 driven by the timing of shipments.

Q4 total cash finished at $77.7 million compared to $72.5 million in Q3. Full-year cash finished lower than 2015 driven by significantly higher receivables, investment in engineering assets and inventory to support Purion shipments. We expect Q1 cash to finish around $70 million. Overall, I'm pleased with our financial performance in 2016. Our balance sheet remains strong and we added 14 new Purion customer penetrations while driving solid gross margin improvement. We are now focused on 2017 and beyond. Gross margin improvement will remain a top priority along with expanding our Purion footprint. I will now turn the call back to Mary for closing comments.

Thank you, Kevin. Our customers now have a choice in implant and as they have come to know Purion, they are choosing Axcelis. They choose Axcelis for several reasons. Advanced technology is first on the list. The Purion product family provides them significant advantages in angle, dose, and energy control as a result of our scanned spot beam technology. The common Purion end station and ELS4 source provide them cost of ownership advantages.

Second, our focus on customer-specific applications provides them with an implant solution tailored for their needs and finally, there is the innovation benefit, which by promoting competition allows customers to gain significant technology advances in engineering expertise to support their process development efforts. Customers measure the innovation benefit through improvements in productivity, yield, and cost of ownership. They maximize this benefit by splitting their business evenly between two strong implant suppliers.

As the industry enters this upturn, we expect our Purion penetration success to drive growth in both this year and next. Revenue growth in these years will continue to be driven by a broader customer base and increased spending in both the memory and mature process technology segments. Our gross margin improvement initiatives remain on track and we believe that we are poised to deliver our long-term model, which will yield attractive earnings for our shareholders. With that, I'd like to open it up for questions.

(Operator Instructions). Edwin Mok, Needham & Company.

Hi everyone, this is Arthur actually on for Edwin. Congrats on the great quarter results and thanks for taking our questions. So, Mary, first question for you, with the strong results and guidance, it seems that you guys are regaining Purion momentum [in that] actually the pause that you saw in 3Q and I understand this is driven by your memory customers (inaudible). So I know your visibility is a little bit limited, but I wanted to get your thoughts on the sustainability of this investment cycle as we go through 2017 and specifically the effect it has on your shipment profile, do you see a stronger first half or are there other drivers that you could share that could sustain shipments into the second half?

Well, as we have been saying, we expected memory to pick up. In terms of DRAM, we expect the first half to remain relatively strong given the fact that there was little investment in DRAM in 2016. NAND appears to be in a long-term up cycle, so we expect that to maintain its strength throughout 2017 and into next year. We see investment in leading-edge foundry logic business as well throughout the year, but I think most importantly for Axcelis what we call mature foundry logic or mature process technologies is the segment that is really going to significantly propel our growth in 2017.

As I mentioned earlier, we see a number of customers in this segment buying. We see China fabs, for example, new capacity coming online, some of the new fabs beginning to start up and it's really growth that's being spurred on not only by what's going on in China, but really by customers around the world. And we believe in this segment that there will be strength at least for the next couple of years driven by the Internet of Things and a number of other factors that we've talked about.

So we don't really have visibility from a first half to a second half, but we do believe that given the fact that there are multiple segments in play right now and two in particular, memory and the mature process segment, that have strength during 2017 that it's going to be a very positive year for growth for Axcelis.

Thanks for that color, really appreciate it. Maybe a question for you Kevin, gross margin guidance is up in 1Q16. Just wanted -- in the past you've highlighted several cost reduction initiatives to drive stronger gross margin. Is this strong gross margin a reflection of these benefits or is it more of a factor of volume or mix?

So we're continuing to make really good progress on our cost out initiatives. In particular, we have a lot of work going on still in engineering -- value engineering driving cost out. We're also still working with the supply chain, we're moving more material into our lower-cost supply chain and we're also getting a fairly good pick-up on warranty and install. As these tools mature, we're seeing those costs coming down.

So the key drivers are still going to be cost out, but within a quarter, the things you highlight, yes, systems mix within a quarter, if there is a [evalu] tool, recognizing mix of service versus systems, those will always come into play. As we continue to drive the systems margins higher, these things will have less impact from quarter to quarter. So we're still very confident that we're going to exit this year at that 40% mark or better and that's going to be from continuing to drive costs out of products throughout the year.

Okay and if I could just squeeze in one more, just to run off of that. We know you're guiding for gross margins about 39% at a revenue run rate of just $80 million in 1Q 2017. Are you more confident that you can achieve your 40% gross margin target of revenue run rate plus then your target model of $115 million per quarter?.

We're still very confident we're going to get to that 40% or greater this year.

Patrick Ho, Stifel.

Just a quick question in terms of your revenue mix for the March quarter. How do you expect that to break down between memory and the mature technology node in logic and foundry.

Well, typically we don't guide on that, but I guess if we look at bookings, which aren't necessarily an indicator, it looks like memory perhaps could be slightly more heavy than the mature process technology, but again, I think it's going to continue to be a relatively even mix although over the course of the year, it could go back and forth between memory and mature process, but perhaps in Q2, a little bit heavier on the memory side.

Great. Actually, that's very helpful in terms of the qualitative color. Kevin, maybe just going back to the gross margin question how it relates to the supply chain overall and your ability to manage it particularly right now when the entire food chain is pretty tight, it's pretty demanding right now. How are you managing the cost to ensure that these gross margin levels stay at these elevated levels versus perhaps incurring expedited costs and things of that nature in order to meet pretty high customer demand over the next couple of quarters?

Yes, so one of the most important things we've done, Patrick, is really worked on our cycle time. So our lead times we reduced quite a bit over the past year. So that certainly helps with -- in terms of what we're putting into the supply chain. We're not overloading them with unnecessary demands, but also on things where we have pinch points, we have long lead and material [bombs] that are always driving to stay ahead of it. So I'm looking at the capacity all the time with suppliers. I think that the suppliers we have right now have plenty of capacity to keep up with what we need to do. So again, it's a good question and we continue to keep an eye on that, but at this point I don't see any issues.

Maybe finally a big picture question for either Mary or Doug in terms of capital intensity of [ion implants] particularly at the leading edge DRAM nodes. These processes are becoming a lot more complicated as you go to 18 and then eventually down to 15. How do you see capital intensity trends for ion implants as a whole trending particularly as DRAM moves to these more stringent line widths.

Hi Patrick, it's Doug. In general, with a planar transistor, which is what's used in DRAM, when you do a shrink, there's usually additional implants that are added to make electrical tweaks to the device. So going from 20 to 18, we'll see some additions. Going beyond 18, we'll continue to see some, so the capital intensity would increase there.

Craig Ellis, B. Riley.

I apologize, but I'm just hopping on the call, so I missed the prepared remarks. Mary or Doug can you just help me with your thoughts on this year's broader industry backdrop? Is there any change to your, either TAM view or the view of Axcelis' market share within that TAM which I believe has been 22% to 28%.

So I'll just cover it one more time and from a market perspective. So we really expect this to be a very strong year not only for the market but also for Axcelis. We think memory is going to be strong throughout the year. The DRAM market will likely perhaps be a bit stronger in the first half than the second half because there -- again there wasn't a lot of capacity that was laid in, in 2016. NAND appears to continue to be strong and is in an up cycle that should continue on for at least the next couple of years.

Advanced logic is going to continue to make investments as they move down Moore's Law. And then the most -- potentially the most important market for us this year is going to be the mature process technology or mature foundry and logic market. As I mentioned earlier, there are a lot of fabs, not only new fabs coming online in China, but there's a lot of capacity being laid in there. The European market is quite strong and in fact, I think the thing that's most interesting about this market is that it's really -- there is growth globally from a number of different customers, and not only is it strong, but we actually see it increasing.

So when you take a look at implant, we know that the two markets that account for 85% of implant CapEx are memory and mature process technologies. I mean those markets seem to be hitting on most cylinders and even if there's perhaps a lull in one in the second half of the year like DRAM, there's enough strength in all of those other markets to really carry us through the year. So we're not making a prediction about first half or second half being better, one versus the other, we just basically think there's going to be strength in Axcelis' markets throughout the whole year and again, it's going to be a great year for us.

I think you also asked about the TAM. We've talked a lot about how the TAM is very hard to really understand the size of it -- to identify and determine the size of it, but again, if you use $850 million for 2016 and you now do the math on the numbers we've reported, the market share was about 18%, which I think is what we've been saying recently. If you take a look at 2017, you're not going to hear us talk as much about market share because again it's hard to define the TAM. Yes, it's potentially likely to be around $950 million, that's a number we've used. It's a number you can use also as an estimate. So the 22% to 28% market share still remains in place, but again, what we're going to be more focused on is really reporting growth throughout the year. I think that's really going to be a key indicator. The growth along with the gross margin improvements are really what's going to drive our bottom line. So you'll hear us talking more about that, but there haven't been any other fundamental changes to some of the metrics we've talked about.

That's very helpful and then just following up on the growth comment, at the Analyst Day, the Company identified that it had done a very good job in 2016 penetrating new customers and doing so with products that had feature enhancements. Can you talk about this year from a new customer and a follow-on shipment standpoint from those that you penetrated last year and give us some qualitative color on what you're seeing?

Yes, I'm not going to give you qualitative, but we do have a number of new penetrations planned for the year. Some of them are clearly new customers we talked about how in particular, we're planning for new evaluation placements for both the Purion H and the Purion VXE in particular. So we're excited about the traction that those products have and yes, with the 14 new customers where we planted those seeds last year, we absolutely expect to see follow-on orders throughout the year. So as Doug has always talked about, look for those press releases, it's a very active market right now. So hopefully, you'll see a lot of press releases coming out in the coming weeks and months.

Thank you and then the last question for Kevin. Kevin, I heard you comment on the prior question with regards to the costs and some of the Kaizen related factors on gross margin, but if we look at gross margin from the first quarter to the fourth quarter and the 200 basis point increase, you do have multiple levers, you've got that product mix levers with customized or feature enhanced products that have high ASPs and high gross margins, you've also got that the cost reduction that you're executing and you've got volume. If we looked at closing the 200 basis point gap, how much of that is from the Kaizen type stuff versus other levers that are at your disposal?

Most of the improvement is going to continue to come from cost out. So the supply chain is still a big area where we're making good gains and the value engineering is the other piece where we still have quite a few projects teed up to move the costs down. As I also mentioned too and I know you're very aware of it, within a quarter and I think you kind of alluded to it, there's different things that move us from quarter-to-quarter, depending on systems mix, depending on evaluation tools recognizing and things like that. But the point I continue to make is that as we continue to improve our system gross margins that this will start to smooth this more and more on some of these other levers that may pull in more of a negative way. So we're still laser focused on cost out. The product extensions are driving higher ASPs for us on tools like silicon carbide and the EXE and VXE tools. So those will continue to help and it's really right now about the volume and getting supply chain and engineering -- value engineering projects to continue to drive costs out.

David Duley, Steelhead.

I guess when I started this year, I would have thought that memory business would have accounted for a greater than a 50% percentage of 2017's revenue. So I guess versus my thinking, it seems like the IoT segment is showing more rapid potential or growth in 2017 versus initial expectations. Is that a good way to think about it because it looks like both your segments are going to go roughly the same amount if the mix is going to be 50-50 and I'm just -- it seems like you've up ticked your IoT expectations I guess for growth in 2017. Is that the way to look at it?

Yes, Dave, that is definitely the way to look at it. The IoT and mature process technologies are growing very well. It's very active around the world. So it's a very diverse customer base. Although most of the Chinese investment in 2017 is in this space, their memory investment really starts in 2018 in terms of size. And the European market is very, very strong which -- this space has been a space they've been in for a long time especially automotive and applications like that. So, yes, so the best way to look at it is it is, it probably has gotten a little bit hotter than you would have guessed a year ago and definitely than two years ago.

And that's not cause the growth rate in your mind in the memory business has ticked down.

No.

Okay and then a couple other questions. You mentioned I guess increasing the number of evaluation systems during 2017 with Purion H and with VXE I believe is what you said. Could you give us a target, how many evals you'd like to place in 2017 and maybe just a reminder, how many are out there now as far as evaluations [as things go].

Yes, I mean, we're not going to give a target in terms of the number of evaluations that we have.

We have five outstanding right now and we'll be putting several more out there.

Okay and then maybe just you guys issued a press release the other day talking about new customer wins with Purion H. I was curious, is this a win with the Purion H in NAND or could you help us understand, give us more details about what the significance of that press release was?

Well, the significance is that it's a customer who's never used the Purion H before who is now evaluating the Purion H. So that's always very good, again another new customer planting another seed for potential follow-on even in 2017. From giving you more color on it, we are really from a competitive standpoint and also a customer confidentiality standpoint, we're going to probably give a little bit less color on evaluations than we have in the past. So that's really all I can share with you at this point.

Okay, maybe a different way to ask it is how do you feel overall your Company is positioned on the NAND side. I realize the last time you saw a big memory uptick, I think it was mainly driven by DRAM conversions and so I'm curious going forward now that we have a, what you describe as a multi-year build in NAND. Is this mainly just on the EXE side or would you expect the Purion H and M to be contributors in 2017 and 2018 from NAND customers.

Yes, we actually have exposure across all three Purion products in NAND. So we expect to get our fair share both in DRAM and in NAND.

Mark Miller, Benchmark.

I was just wondering how you're placed or positioned, lot of talk about the expansion of 200 millimeter fabs especially in China. Do you feel you have a better position there than overall in terms of your share in this expanding market.

Yes, Mark, we're very well positioned on the 200 millimeter side. In fact, in most cases in 200 millimeter, Axcelis is tool of record back when those 200 millimeter fabs were built. And so in a lot of these cases, the customer is calling us looking for productivity improvements either in the form of upgrades to what they have, additional tools that are similar to what they have or new Purions and as you could tell from the statistic, 81% of our revenue came from Purion last year. So a good portion of that is going to the 200 millimeter market.

Can you give us any ballpark figure in terms of the growth you expect, what percent of that will be driven by 200 millimeter?

No, we don't break it down necessarily that -- that finite. A lot of the customers in the mature technologies have a mix of both 200 and 300 and in fact one of the reasons the Purion is very desirable to them is they can qualify a 200 millimeter or 300 millimeter part or they can qualify a part on either 200 or a 300 and then be able to transfer it between lines since it's using the same beam line.

You talked about China, we are also hearing that signs that Europe is coming back, are you seeing some signs that Europe might be a better market this year?

Europe is very, very strong.

An improvement from last year.

Yes, they continue to increase their investment.

And finally in terms of your revenue guidance for the current quarter, even though your bookings, your book-to-bill was under one. Is most of that coming from the order you just announced or you're expecting another order to also be contributing to that improvement sequentially in terms of revenues?

Hi, Mark, it's Kevin. I mean the book-to-bill, we talk about this a lot, we often get orders in the same quarter that we ship in. So, the book-to-bill although it's a metric, it really is not a good indicator of how our current quarter is going to be. Like I said many -- actually many orders come in, in a quarter and ship in a quarter. It's just the way a lot of customers are now.

So you're expecting besides that order you got from the Asian memory customer, you're expecting orders to also contribute that we haven't heard about this quarter, is that correct?

Absolutely.

Yes.

I mean our revenue guide is for around $80 million, so that's certainly more than one order.

Yes, I mean if what you are trying to get at is, do we have a lot of -- several customers that account for a high percentage of our business, the answer is no. I mean you take a look over the last several quarters and we've never had more than -- we haven't had more than one or two customers over 10%. So we have very broad mix of customers typically in a quarter.

(Operator Instructions) Edwin Mok, Needham & Company.

Hi, this is Arthur back on Edwin. Thanks for the follow-up question. So on previous earnings calls you -- Japan has been discussed as a potential area of opportunity for Axcelis. Can you share if any progress has been made on penetrating this region, and if so, when can we see some topline contribution?

So, I think we've mentioned in the past that we've added some infrastructure there. We've reopened our KK, so now we have an office. We've added some people. We have marketing and applications folks working with several customers there. We actually expect to have some demo wafers with some Japanese customers. So I mean these are all the things that are part of the process leading up to potentially either placing an evaluation or directly selling a system.

So we're working through all the steps we've mentioned before that it's particularly difficult selling into Japan if you're not a Japanese supplier, but we are excited about the progress we're making, albeit it's slow. We are not counting on significant revenue from Japan in the near-term. Again, it's something that we're just going to keep working away at -- chipping away at and we expect to be successful at some point.

That concludes the Q&A portion of today's call. I will now turn the call back over to Mary Puma who will make some closing remarks.

Okay, thanks Liz. We're looking forward to a very exciting year for Axcelis and for the industry and as always, I want to thank you for your continued support and hope to see you in the coming months at one of the several investor trips that we've planned. Thank you very much.

This concludes the presentation. Thank you for your participation in today's conference. You may now disconnect. Good day.