Good day, ladies and gentlemen, and welcome to the Axcelis Technologies Second Quarter 2013 Conference Call. My name is Shelane, and I will be your coordinator for today. [Operator Instructions] I would now like to turn the presentation over to your host for today's call, Ms. Amy Rasimas, Director of Investor Relations of Axcelis Technologies. Please proceed.

Thank you, Shelane. This is Amy Rasimas, Director of Investor Relations. Welcome to our conference call to discuss our second quarter results. With me today is Mary Puma, Chairman and CEO; Kevin Brewer, Executive Vice President of Global Operations and Interim CFO; and Doug Lawson, Senior Vice President of Strategic Initiatives. Jay Zager, Executive Vice President of Finance, was planning to be with us today but could not due to a death in his immediate family. 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. Axcelis had many positive events take place in Q2 relative to financial results, product penetrations and customer satisfaction. First, our second quarter financial results came in at the mid-point of our guidance. Revenues were $47.5 million; gross margin, 35.2%; net loss was $4 million, or $0.04 per share; and cash came in at $34.7 million. Second, we negotiated a transaction to strengthen our cash position. As we announced on July 9, we closed on a 3-year $15 million term loan from Northern Bank & Trust. This loan is secured by a mortgage on Axcelis' headquarters facility in Beverly. The total of the net proceeds plus our Q2 cash is over $48 million. This loan provides funds to accelerate growth in our leading-edge Purion platform. Third, it was a watershed quarter for our new medium current system, the Purion M. We now have 3 evaluation units in the field at leading chip makers. During the quarter, we shipped 2 Purion M evaluations to 2 different customers, one for advanced memory development and the other 2 are foundry for leading-edge logic. These 2 systems are installed and under qualification. The third evaluation system, which has been in production in Asia for one year, is proceeding very well. This system is being evaluated on flash, DRAM and logic process flows, as well as advanced R&D development wafers and is expected to close in the third quarter. Fourth, we made significant progress with Optima HDx high current penetrations at top foundry logic customers as we successfully closed our 2 outstanding evaluations. Customers acknowledge the significant cost of ownership advantages provided by the extended lifetime of our Eterna ELS3 source for carbon and germanium and our cost-effective damage engineering solution. And finally, Axcelis was selected to receive the Texas Instruments 2012 Supplier…

Thank you, Mary, and good afternoon, everyone. Before I share the details of the quarter, I'd like to take a minute and thank everyone who took the time to meet with Doug, Jay and myself at SEMICON West. It was a great opportunity to meet many of you in person over a busy 4-day schedule and discuss some of the positive changes that are occurring in our business. Your feedback is important to ensure that Axcelis' strategic and financial goals are well aligned with those of investors. As we discussed in our meetings, we have made solid progress lowering our quarterly breakeven and strengthening our balance sheet. Tight cash management and the recent closing of a $15 million mortgage leaves us well positioned to ramp the business and make strategic investments in our Purion product. Purion is our newest platform and incorporates a high degree of hardware and software commonality throughout the design. This commonality will fuel future gross margin improvements through increased supply chain leverage and earlier adoption of our lean manufacturing principles. Inventory turns will also increase as a result of shorter manufacturing and supplier lead times. Our improving financial performance and liquidity, along with a much stronger product portfolio, puts us in a solid position to capitalize on improving market conditions. On a personal note, I can tell you that I am very excited about the Interim CFO role. I believe my deep understanding of the business industry combined with my close working relationship with Jay enables me to build upon our positive momentum. Now I'll discuss our Q2 operating results. Across the board, we finished within our guidance. Q2 revenues were $47.5 million, up 17% from Q1 and at the midpoint of our guidance, reflecting a recovering market. System sales were $16.6 million, up 31% from…

Thank you, Kevin. The Axcelis management team and I are energized by our prospects for the future. This is a new Axcelis, a better Axcelis. We look forward to capitalizing on the improvements we've made that will facilitate growing our market share and profitability during the industry upturn. We are moving out of a restructuring-and-positioning-for-the-future phase and into a growing-the-business phase. Our implant portfolio led by our Purion platform products and our Optima HDx is very competitive and provides our customers with unique benefits that meet their emerging device challenges. Consistent with this, we expect to see continuing improvement in market conditions in Q3 and are currently projecting Q3 revenues to be up another 10-plus percent, resulting in revenues in the $50 million to $55 million range. We expect that the sequential increase will come primarily from system sales. Q3 gross margins are projected to be flat in the mid-30% range. Q3 combined R&D and SG&A expenses should also be flat to Q2, staying in the $20 million to $21 million range, reflecting continued strong management of our expenses. As a result of these factors, we expect to continue to reduce our losses and report a modest Q3 operating loss of approximately $1 million to $4 million and an earning loss of approximately $0.02 to $0.04 per share. We are projecting that our cash balance will be in the high $40 million range in Q3. Without the mortgage proceeds, our cash balance would remain essentially flat to Q2. We will be continuing our tight controls on expenses and cash usage. As I discussed earlier, Axcelis has made numerous strategic and operational changes that through the next cycle will drive improved performance in revenue growth, in market share and in profitability. And in fact, we expect to see these initiatives result in profitability in Q4. We are excited about the future and the significant value that we believe we can create for our shareholders. With that, I'd like to open it up for questions.

[Operator Instructions] Your first question comes from Christian Schwab.

Mary, thank you for all of that detail. A few quick questions for you. When you look at peak-to-peak revenue cycles, are you willing to kind of give a range, or another way of saying it, what your aggregate market share will be in the TAM in the next peak cycle, say, '14, '15 time frame versus a couple of years ago?

Well, Christian, I think you've seen our business model, which you can find in our investor presentation on our website, and we've tried to model where we think we will go through the cycle. We expect that in this upcoming cycle, we can have revenues higher than where we were at the peak of the last cycle, which I think as you recall in Q1 and Q2 of 2011 were about $93 million. And that's really a function of the strength that we see in the product portfolio. It will be a combination of increasing market shares for the Optima HDx. It will be having -- or gaining very healthy market shares with the Purion M, which is a product that we did not have in the last cycle, and then, also, maintaining our leadership with the Purion XE, our high-energy system. We also expect that our GSS revenues will get back to more historical healthy kinds of levels and perhaps with some of the initiatives that we are driving right now, or John Aldeborgh and his team are driving, we can even surpass the peaks that we saw in the last cycle. So I'm not going to give you an actual number. Obviously, we need to see what the timing is on some of these investments and understand really the intensity of the next upturn, but again, I think, we can definitely have a much more significant market share and at least meet, if not beat, the revenues that we had in the last cycle -- the peak of the last cycle.

Great. And then as you kind of talked about improvements in the GSS business as well as a greater commonality on the products, does that give you greater conviction that maybe in the next peak cycle, gross margins can get as high as 40%? Or should we think that it stays in the high '30s?

I'll let Kevin answer that.

Hi, Christian. We've talked about this. At least, this year we're saying we're going to stay in the mid-30s. And, certainly, as the commonality from the Purion product gets out there and we gain traction with that platform, the system's gross margins will start to improve a little bit. In terms of can we hit the 40%? We certainly know gross margins will improve from commonality. And I think our timing on that is going to have a lot to do with the volumes and when this actually occurs. So, I guess, the answer to your question is yes. The commonality will help gross margins. When we get to 40% is going to be more determined by the timing of the recovery.

Great. And you guys talked -- my last question -- you talked about increased quota activity in the high-energy side. Do you expect to start shipping or would you expect to be shipping any high-energy boxes -- implanters in Q4 of this year? Or do you think that's more of a 2014 event?

Absolutely. We've been shipping, actually, high-energy throughout 2013. And I think it's safe to say that we expect to see a pickup in Q4.

Perfect. And that still runs at kind of $4.5 million to $5 million, on average?

That's correct. Yes, the Purion XT. Yes.

The next question comes from Edwin Mok from Needham & Company. Edwin Mok - Needham & Company, LLC, Research Division: I have, actually, I have some follow-up questions to Christian. Mary, in terms of high energy, I think if I go back kind of the last few nodes, we've seen some of the high energy step got moved into medium current-type process. But it sounds like you're a little more confident about high energy. Do you expect high energy as a percentage of your total implant market grow, as we see customer shrink to nodes [ph]?

Edwin, this is Doug. The high-energy market is primarily memory, as you know, and image sensor. And the needs of high energy have not changed. There is, as you mentioned, overlap between some medium current and high energy. And in fact, that's the place where our Purion M medium current has a significant advantage over the competing system. We can go at high throughputs to a much higher energy. And so it allows our customers to buy a combination of Purion XE and Purion M and have much greater flexibility on their FAB floor. Edwin Mok - Needham & Company, LLC, Research Division: Okay, great. That's actually very helpful. And then I guess talk a little bit about the Purion M. You mentioned you have one large customer, which is closer to end of that, I guess, development program that you have, right? And are you expecting a number of Purion M orders and shipment to come after that program is completed, and that's what gives you the confidence of the kind of -- imply strong growth by the time we get to the fourth quarter of this year?

Yes, so the answer is absolutely. I think as I mentioned in my script, the timing at this point is not clear. It's not clear if it will happen at the end of this year or into 2014. But we fully expect to get multiple tool orders from that customer. In addition to that, we have the 2 other evals out there at 2 different customers. And based on the closure or the timing of closure of those evaluations, we expect to get repeat orders for those in 2014 as well. Edwin Mok - Needham & Company, LLC, Research Division: Is it possible for you to tell me what type of technology and what node are you targeting? Are those product being evaluate for -- the 2 Purion M that you mentioned?

Yes, Edwin, this is Doug again. There is actually 3 Purion Ms that are being in evaluation. The 3 are being evaluated at different sites for DRAM, for NAND and for advanced logic in foundry. And in all cases, they're being evaluated on the most advanced nodes that are in production, as well as R&D for upcoming nodes. To date, the performance in the furthest along eval has been extremely well. We are seeing the tool perform at production levels that the customers are very, very happy with. Edwin Mok - Needham & Company, LLC, Research Division: Yes, maybe [indiscernible] developments most of it are a lot of foundries, right? So we have heard a lot of companies, as well as some of your customer talk about transition into FinFET area, right? How do you think that will impact or benefit your business?

Well, I think there's still quite a number of implants that are used in the FinFET structures. And in fact, the angle control that we have on the Purion M product line becomes very critical as you move into some of these advanced nodes for FinFET, as well as other 3D structures and, in general, the shallower depths and the tighter geometries. So the Purion M has many benefits in -- for those technologies, including a very broad energy range that allows us to do very low energy implants, which is critical, even in planar devices with very shallow junctions. Edwin Mok - Needham & Company, LLC, Research Division: Great. That's very helpful. And then last question, just a financial question. I think you had talked about kind of $60 million or low $60 million as the break-even target for you guys, right? I guess 2 part question. One is what kind of gross margin do you need to get to, to get to that breakeven? And second question is do you guys have any temporary costs reduction effort, like furloughs or maybe shutdowns that might come back if your business continue to improve?

Edwin, this is Kevin. So we're basically at that breakeven now at $60 million of quarterly revenue. If you take our expenses at $20 million to $21 million a quarter, you take mid-30% gross margins, at $60 million of quarterly revenue, you're at that breakeven. So we're where we want to be with that model. In terms of the furloughs, we have in this quarter another 1 week furlough that will be included. But we plan in Q4 to not have to do any additional furloughs at this point.

And Edwin, we've always said that, based on market conditions and, obviously, we're constantly monitoring, if, for some reason, this upturn were to not materialize, and we have no evidence that, that's the case, we'll continue to take whatever actions are required to ensure that our costs are in line with where the industry conditions are.

Mrs. Puma, you have no further questions at this time. [Operator Instructions]

Okay. Well, I guess there are no further questions. So I'd like to take this opportunity to thank Jay Zager for his many contributions to Axcelis and to wish him well. I'd also like to thank you for joining us today. Hopefully, we will see some of you at the Craig-Hallum Alpha Select Conference and the Rodman & Renshaw Annual Investment Conference, both in September and both in New York. Thank you very much.

Thank you. This concludes the Q&A portion of this call. And I'd now like to turn the call back over to Mary Puma who will make the following remarks. This concludes the presentation, ladies and gentlemen. Thank you for your patience, and you may now disconnect your lines. Thank you for joining.