Good day, ladies and gentlemen, and welcome to the Axcelis Technologies First Quarter 2012 Conference Call. My name is Louisa, and I'll be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Amy Rasimas, Director of Investor Relations of Axcelis Technologies. Please proceed.

Thank you, Louisa. This is Amy Rasimas, Director of Investor Relations. Welcome to our conference call to discuss our first quarter results. With me today is Mary Puma, Chairman and CEO; Jay Zager, Executive Vice President and CFO; and Doug Lawson, Senior Vice President of Strategic Initiatives. If you have 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. I'd now like to turn the call over to Mary Puma.

Thank you, Amy. The first quarter of 2012 was a transitional one for Axcelis. Challenging industry conditions, including weak DRAM spending, resulted in a quarter that we believe defined the bottom of the cycle for Axcelis. During the quarter, we took steps to proactively refocus our strategic efforts on our competitive advantages and strengthen our business through restructuring. We believe that the industry outlook is positive for 2012. The remainder of the year continues to be defined by large planned customer projects. During the first quarter, I spent considerable time with key customers in Asia and gained confidence that many of these programs remain on track, and in some cases, could be accelerated should global conditions warrant. We are also encouraged by signs that participation in the recovery will broaden beyond these large customers and extend into the second tier. Typically, this would ensure that we have a robust upturn. Indications of this are reflected in improving fab utilization rates, which are creating a positive trend in our average daily spares and consumable orders. The increase for quotations for upgrades is also a precursor to a ramp. As a result, we believe that we are on track to achieve historical $40 million-plus quarterly after-market revenues in the second half of this year. In addition, request for quotes for systems have increased, and we are experiencing inquiries about accelerating system shipment dates, another good sign. If the long-awaited increase in DRAM spending occurs later in the year, it should provide incremental revenue. As a result, we expect our financial performance to improve throughout the year. We believe that our implant share will increase in 2012, despite the fact that it was relatively flat in 2011. The market downturn, customer buying patterns skewed towards logic and the delay in the launch of…

Thank you, Mary, and good afternoon, everyone. As expected, Q1 was a challenging quarter. Although we believe this to be the bottom of Axcelis' cycle, we took several actions to lower our ongoing quarterly expenses and position the business to take advantage of improving market conditions in 2012. Q1 consolidated sales were $55 million, below our guidance and 8.9% less than our Q4 results. There were 2 low-margin tools worth about $6 million, which we expected to recognize in the quarter, but did not. Both of these tools are currently under installation at customer sites. The purchase order for the first tool was delayed to the second quarter due to our customer's budgetary constraints. The second tool requires some additional product enhancements that will be completed over the next few months. While these delays were the primary reason for our lower-than-expected revenue performance, they were also the primary reason why our gross margins in the quarter were significantly higher than we had projected. Excluding restructuring charges, our operating loss for the quarter was $5.5 million, which was better than guidance. On an overall basis, we lost $10 million or $0.09 per share, which was within our earnings guidance. System sales in the quarter were $22.9 million, while sales for our after-market business, which we call GSS, were $32.1 million, and system shipments were $18.7 million. Within these shipment totals, ion implant shipments were $11.9 million or about 64% of the total. And shipments for our cleaning and curing systems, which reflect primarily our dry strip business, were $6.8 million or about 36% of the total. In the first quarter, about 2/3 of our shipments were for memory customers, primarily flash, and about 1/3 of our shipments were to logic and foundry customers. Sales to our top 10 customers accounted for…

Thank you, Jay. After a difficult start to the year, we believe that the industry has turned the corner, and that we are well positioned to capitalize on an upturn. We are working very closely with our customers to prove out the competitive advantages of our products that will drive market share gains. And as our revenues increase, our leveraged financial model will enhance shareholder value through a significant draw-through in profitability and cash. With that, I'd like to open it up for questions.

[Operator Instructions] And your first question comes from the line of Patrick Ho with Stifel, Nicolaus.

Mary, just looking at the results, as well as the guidance. If you take away, I guess, some of the revenues that are going to be recognized in the second quarter, it still kind of shows, I guess, flattish revenue on a quarterly basis. Is that due to customer mix or are you still facing some of the issues you mentioned last quarter of about getting systems to the customers?

No, I think it's more of a function still of where we are in the industry cycle. As I mentioned, we're seeing signs of an upturn. But in terms of the slope and the speed with which that upturn is coming, it has not materialized yet in Q2. I also think that mix continues to have an effect on us. As you know, that we have a stronger presence in memory, and so that, at this point in time continues to work against us. Although we are shipping tools into some flash fabs at this point in time. So I think, as I said, as we move into the second half of the year, we will see the recovery accelerate. Our penetration will continue, and that's really what's going to fuel what we believe will be an upturn for Axcelis in the second half of the year.

Patrick, this is Jay. So if you just look at it analytically, we did $55 million in the first quarter. Our current guidance has us only recognizing 1 of those 2 tools. So that would bring us to about $57 million, $58 million. And we're guiding $60 million to $70 million. So even with that 1 tool, we see some sequential improvement, somewhere in the 10% to 20% range, even adjusting for that 1 tool.

Okay, okay, great. I apologize because I was trying to...

No problem.

[indiscernible] $6 million, yes. Jay, maybe a question for you specifically on gross margin. And I know there's a lot of moving pieces with that line, as well as OpEx as well. But now that you're going in with several of these new products to customers, how can we look at both gross margin and OpEx, particularly with new customer engagements? Typically, they'd go up because they are new tools. You're trying to get the customers on-board with them. And how do I look at, I guess, both on the gross margin line and OpEx over the next few quarters, as you try to penetrate new customers?

It's a good question. I think basically in our case, particularly with a product like the MDxt, where we've not placed any -- we have some evaluations that Mary indicated we will be hopefully putting in place during the summer. The margins on the newer products, in our case, tends to be relatively low. They will increase over time and it'll get much stronger. But one of the reasons why we don't see a significant increase in margins beyond the mid-30% range is that the flagship products tend to have slightly lower margins, particularly the newer products than the older products, as they tend to get more experience, as we tend to place more products, we'll see continued improvement on a product-by-product basis, in the margins.

Your next question comes from the line of Christian Schwab with Craig-Hallum Capital Group.

Regarding operating expenses. Given the trajectory of revenue here off the bottom of the cycle, are you looking at any other meaningful reductions in operating expenses?

Not at this time. Although, obviously, we're committed to drive to profitability and generate cash. So if the cycle plays out the way we expect, Christian, and the second half is a much stronger half, we've taken our operating expenses down probably about $4 million to $5 million a quarter in the last year from about $28 million, $29 million a quarter, down to about $24 million or so, $24 million, $25 million. Having said that, I'm very cognizant about the fact that we -- our cash position, while it's adequate, is not exorbitant. And therefore, we will, when appropriate, be looking at what we need to do to make sure that we are generating cash, and we're keeping the business positive.

Okay. And I guess that, when you talk about a meaningful recovery or some type of recovery in the back half from, call it, $55 million to $60 million, what type of revenue range are you expecting? Are you expecting revenues to get back to $75 million, $80 million? Or do you think they can recover to near the highs of 2011?

Yes. I think what we're looking at, and we've talked about this, Christian, is that we believe that 2011 will be sort of, what I'll call, maybe an opposite mirror of 2012. So the first half has been maybe a little bit lower than we had originally anticipated, but we expect that the second half would pick up and that -- again, it's going to be a function of timing, but that we certainly could get back to the levels of where we were at the beginning of 2011.

Sir, ma'am, at this time, there's no questions. [Operator Instructions] And this concludes the Q&A portion of the call. I would now like to turn the call back over to Mary Puma, who will make a few closing remarks.

I'd like to thank you for joining us today, and please note that we'll -- we will be attending the Craig-Hallum Conference on May 30 in Minneapolis. And we will also be participating in the Needham Bus Tour on June 5 in the Boston area. And we look forward to seeing many of you at these events. Thank you.

This concludes the presentation. Thank you for your participation in today's conference. You may now disconnect, and have a great day.