Good day, ladies and gentlemen, and welcome to the Axcelis Technologies Third Quarter 2014 Conference Call. My name is Philip and I will 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, Mary Puma, Chairman and CEO of Axcelis Technologies. Please proceed, ma’am.

Thank you, Philip. This is Mary Puma, Chairman and CEO of Axcelis Technologies. With me today is Kevin Brewer, Executive Vice President and CFO; and Doug Lawson, Executive Vice President of Corporate Marketing and Strategy. 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. Axcelis reported third quarter results essentially in line with our guidance. As expected, a slowdown in memory spending continue to impact our system sales, but it appears that the pause is beginning to draw. Recent announcement of the sale of both new Purion H High Current Implanter and our High Energy Purion XE to large DRAM customer provide a strong signal that the anticipated DRAM delt is imminent. While the past has created several difficult quarters for us financially, we believe that history will show that this slowdown has been very positive for Axcelis. On the product front, it gave time to offer customers the full family of Purion products for selection upcoming memory build. With the Purion H is the most critical edition as it reopens the important high current market segment to Axcelis. On the financial front, having completed key development…

Thank, Mary. In the third, we spend considerable time evaluating financing a sale leaseback opportunities for our Beverly facility. On October 6, we announced a signing of a $50 million sale leaseback agreement by Middleton Partners, which is expected a close in Q4. We also took action to lower our cash and operating breakeven levels that approximately $10 million for quarter through a headcount reduction and other discretionary spending cuts. Due to the high degree of Purion platform commonality, we’re able to proactively reduce R&D expenses or keeping key strategic initiatives and funding in place. In addition, we streamline our customer facing operations to improve customer satisfaction and reduce SG&A cost. In Q3, our results were consistently guidance, but with a challenging quarter due to the continuing industry pause. During the quarter, all of our tools shipped foundry logic customer, the same as in Q2 reflecting the magnitude of the pause and memory spending. Going to the details our third quarter results, revenue finished at $38.5 million into a low end of guidance. System sales were $8.4 million down from $10.9 million in Q2. GSS revenue finished mostly flat at $30.1 million compared to $30.3 million in Q2. Q3 sales to our top ten customers accounted for about 65% of our total sales compared to 67% in Q2. While two of customers have 10% or above. Q3 system walking to a $15.9 million compared to $9.2 million in Q2. And our book-to-bill ratio almost double to 1.83 compared to 0.95 in Q2. Combined Q3 SG&A and R&D spending was $18.2 million, it’s already above our guidance of $17 million-$18 million. SG&A for the quarter was $10.3 million when R&D at $8 million. Moving forward, we expect our SG&A and R&D run rate to be below $18 million for quarter as…

Thank you Kevin. We expect 2015 to be a solid year for capital spending relative to the implant market. There are two Greenfield DRAM factories under construction that Axcelis will participate in. Both are expected to wrap and initial phase of between 30,000 and 50,000 wafer starts. The first project will ramp in Q1 into Q2 and the second is expected to ramp more slowly beginning in Q2 and accelerate in the second half of 2015. Axcelis has already received initial orders for the first project for both the Purion XE and the Purion H. NAND is expected to ramp beginning in the middle of the year and continued through the second half. Axcelis is well positioned to support this ramp especially due to the more intensive high energy requirements of NAND devices. Leading edge foundry is forecasted to ramp 14 and 16 nanometer n-type processes during 2015. We expect this to be second half weighted to the yield issues and the challenges associated with this difficult technology. Axcelis is targeting placement of Purion H evaluation units in leading edge foundry customers in 2015. The Purion H magnetically scanned spot beam architecture offer significant technical advantages for this note. Mature foundry and logic customer producing 28 nanometer and older logic (indiscernible) devices will also adding capacity throughout 2015. The mobile, automotive and internet market will drive demand in this segment. This market is less predictable to forecast that these customers face challenges of continues product and process mix changes often within a full well constrained factory. The productivity advantages of the Purion product family are highly valued in this environment. This view supports more gradual but sustained up cycle compared to the short but deep 2011 upturn. We believe the shape of this recovery offer more opportunity for Axcelis as…

Thank you, Doug. The bottom line is that we believe that we are executing against the right strategy and with the pause time, we are positioned to begin to grow our market share. Our innovative Purion products provide a very competitive portfolio that will grow our top line. We expect that we will increase our share to greater than 30% of the implant market over the next three to five years based on the strength of the Purion H, the Purion M and the Purion XE. Our SG&A and R&D run rate is now below $18 million for quarter, which allows us to continue to invest in our future while protecting profitability and cash. Our sale leaseback will strengthen our balance sheet and provide stability for our customer, employees and investors. We have accounted organization driven by measurements and a culture focused on execution and success. The management team committed and incentivized to meet both short and long term objectives. We’ve had a broad refreshment process underway over the last several years. We have added three very qualified board members to replace three senior directors who will not stand for reelection in May 2015. We are currently recruiting for one to two new board members and have reached out to our shareholders for their input into the recruiting process. We continue to work with Blackstone Advisory Partners to identify strategic opportunities to strengthen our long term position in the semiconductor industry. And perhaps most importantly, our customers recognize our advantages and are supportive of our success. Customers are realizing that new emerging implant applications are best served by using our innovative Purion products. Our customer satisfaction as measured by the LSI Research is rated highest in the industry above all our competitors. We are well positioned to meet our goals for 2015, which are very simply to gain share with all three of our Purion products. The recent multisystem revenue sale is an exciting indicator of this opportunity in 2015. By increasing top line sales, holding the SG&A and R&D run rate below $18 million and strengthening our gross margins through commonality of the Purion platform, we expect to have a business that delivers improving profitability and cash for our shareholder. With that I’d like to open it up for questions.

(Operator Instructions) And our first question comes from the line of Patrick Ho from Stifel. Patrick Ho – Stifel Nicolaus: Thank you very much. Mary, can you give a little I guess color in terms of your exposure overall to NAND and how some of the recent trainer conversion is potentially the push outs on 3D NANA impact both I guess your XE as well as some of the evaluations that you’ve been doing M and H. How does some of the shipping on the NAND side impact you?

Okay. Patrick, let Doug take that.

So Patrick, the NAND, we’ve been expecting to be later in Q2 and into the second half kind of all along. So it’s really not changing anything relative to our plans. The DRAM build in the first half has kind of been in the way we’ve seen it. When we discuss the shape or slope of the turn, we see the DRAM stuff happening and initially NAND coming in second and the foundry filling in toward the end of the year, obviously with some overlap, so. Patrick Ho – Stifel Nicolaus: Great, that’s helpful. Maybe just go into comments regarding 28 nanometers are some of the more mature technology note, not that some of the second Tier players are starting to ramp up or get their plans for 28 nanometer capacity for 2015. How does there I guess projected spending plans and their build outs impact you, did their delays or their timing give you guys more opportunities potentially to break in at those second Tier counts?

Patrick, we said all along that having more time to get our Purion products qualified has been a good thing. So we continue to work with all of those customers to get really the four portfolio of our products qualified. So I would say yes that having a delay at those customers at the 28 nanometer in particular will give us an opportunity to potentially have a larger opportunity than we were had.

So Patrick, let me add to that, that market is a little less predictable and so it’s more difficult to plan, it’s not like one of the large memory companies build in a Greenfield. We have an idea of exactly when they are going to build and how big. Having said that, the second Tier market really looks at adding sellers from three perspectives. First, if they are looking for productivity improvements, the Purion really can bring that to them. If they are looking to get a tool quickly that they don’t have to re-qualify they may buys an Axcelis legacy tool, this was same as what they have in their fab to ramp quickly. Or if they are more concerned with cost, then they would look on the used tool market. And so in all three areas, Axcelis offers opportunity – there is opportunity for Axcelis to participate with all of that second Tier. Patrick Ho – Stifel Nicolaus: Right and finally question maybe for Kevin in terms the variables on the gross margin. I understand how it impacts Q4. Given that you are still kind of in the evaluation phase particularly with Purion H, what kind of timeframe are you looking at for the H to eventually equal, I guess the XE margins are getting – meet the corporate average that you’ve targeted. How much of the time roll that you are looking at?

Patrick Ho – Stifel Nicolaus: I guess the two variables that drive the gross margin, overall the system mix the GSS. As you know we’ve talked about GSS been a very accretive then obviously the mix with our systems which is I think where your pocking out right now. Our gross margins roadmaps are aggressive in terms of driving the cost of these tools and quickly improving things. But if you are looking a sense of timing, we’ve been talking about a model in mid-30s and obviously I think if the survey got a little bit of pressure going in this quarter, I would think probably the first half of next year, we’ll continue to see pressure as we roll out more Ms and Hs. And then I think looking at your overall model 35, you probably just want to kind of slop it, use an average of 35, a little bit tighter on front and a little bit more on back end of the year. Patrick Ho – Stifel Nicolaus: So volumes?

Patrick Ho – Stifel Nicolaus: The volume will drive a big component there. Patrick Ho – Stifel Nicolaus: Great, that’s helpful. Thank you very much.

(Operator Instructions) And our next question comes from the line Christian Schwab from Craig Hallum. Christian Schwab – Craig Hallum: Hey, guys, congratulations on some business improvement. Where would you believe your market share is today and you can get roughly in 2014?

I think our market share is probably around 10%. We said that we’ve been around now on average. And I think in 2014 given the unfortunate pause that we’ve experienced, the momentum that we came into the year was obviously slow down. So I would say we are probably around 10%. And as I mentioned in the scrip, we expect over the next three to five years to be able to get 30% plus market share. Christian Schwab – Craig Hallum: Great and then looking that all three to five years, what do you think that the – DRAM is going to be relatively stable at what where at. Now what would you expect would be in appropriate term expectation for ion implant three to five years out?

I think probably three to five years out, it’s probably slightly less than a billion dollars. If you look Data Quest what they are forecasting right now. I think as you know we go into our strategic planning period what we’re probably looking at is something may be around $800 million. Now again we’ve said many times that we believe that Data Quest is really only capturing traditional implant and perhaps not talking into account the increase in implant stuffs that we’re in material modification. So I’m just sharing with you basically I guess the common reason at this point in time based on data from an outside source but we feel that, that potentially could be larger than the 800. Christian Schwab – Craig Hallum: Right, and Kevin, when you guys started ramping revenues little bit more materially than what you are seeing currently, let’s just assume at some point in the future we have a $300 million business plus or minus right and gross margins at 35% plus or minus. What type – who should we be thinking about that type of run rate. In other words and other way of asking that is how much quarterly revenue can 18 million plus or minus support?

I think the only differential see Christian that those higher levels would be and maybe some of the variable components, commissions for salespeople and potentially bonus maybe get funded but in terms of core headcount that we have right now, I don’t think we need to increase that. So the commonality in apparent platform is really starting to show the leverage. I think the fact that these two ages to ship this quickly as I did also shows the benefit of that commonality process, the whole family projects. 300 million, it’s going to variable component of that, so I won’t see significant changes, but the days of the heavy spending are gone, so we’ve modeled up a little bit, but again core headcount will stay essentially flat early on. Christian Schwab – Craig Hallum: And could you remind us Kevin what headcount is and if you have it in front of your, or is I – okay, but and where was that say a year or two ago?

So headcount a year or two ago was probably close to 900-950 employees and our recent headcount after the restructuring that we just did is around 750 people, that’s world-wide. Christian Schwab – Craig Hallum: Absolutely. Great, thank you, no other questions.

Alright, thanks.

Thanks.

Our next question comes from the line of David Duley for Steelhead Securities. David Duley – Steelhead Securities: Yeah, thanks for talking my questions. Just a clarification, what is your breakeven now in dollar, those I guess in a GAAP basis, how you would you like to present it?

So we – what we talk about David is we would brought breakeven level at mid-30 gross margins down to 50 level on an operating level and on a cash breakeven level, it’s around 43 million again last year and mid-30 gross margins and operating expenses R&D and SG&A slightly below 80.25. Actually you could model 80.25 and 35 gross margin you can be right at the 50 million breakeven. And we were at 60 prior to doing this most recently structuring in Q3. David Duley – Steelhead Securities: Okay, and I think you mentioned in you prepared remarks that your impact to gross margins in the December quarter from the debt revenue deferral and shipping, first time systems to customers was 450 basis point.

Yeah, it’s approximately 450 basis point. There is a fairly large revenue deferral just because of the timing of the shipments and then two Purion H is might bring in a little bit lower gross margins right now. David Duley – Steelhead Securities: So I guess I was wondering if you could help us all understand because one is kind of a onetime thing, what is the impact of the revenue deferral because that’s you are going to capture that sometime in the future, so if you just kind of understand was is a couple, was is most of this 450 points or?

That was a good portion, yeah. David Duley – Steelhead Securities: Okay. And I think you mentioned to the foundry ramp for you guys would be in the second half of 2015, could you just talk about exactly I guess I would have through that, that maybe would have been earlier in the year for you and may be just talk about some of the dynamics that are going on around, why you think that’s timing for Axcelis.

Okay, well I wasn’t specifically talking about Axcelis when we said that. We feel that the memory market is ramping pretty aggressively in the first half led by DRAM, followed by NAND. If you look at what all the foundry companies have talked about during their earnings call, they talked about ramping since that. In 2015, our view based on what we hear in terms of where yields are and where they are in terms of qualifying process and so forth, just suggest to us that it’s probably a little weighted towards the second half of the year. For Axcelis, our goal in 2015 is to grow Purion market share in the memory segment with all thee the Purion products. And to penetrate those the foundries with Purion H evaluation, so we would expect to continue to sell Purion XEs in foundries for image sensor applications, power device applications and so forth. But our real goal is to penetrate evaluation units into the leading edge. And so that could happen anytime, it’s not really depended on their ramp. But the comments that we make in terms of the timing is just based on where we feel the industry is that at this point. David Duley – Steelhead Securities: Okay, maybe just another clarification there is you do have an evaluation with a Purion M or H at a major foundry going on now, correct?

No, all of the evaluations regarding Purion and foundries are closed. So Purian M is in a foundry and production, there are multiple Purion XEs in foundries that are running in production and so there – our goal – our next goal evaluation lies is to penetrate with the Purion H high current tool into a leading edge foundry. David Duley – Steelhead Securities: Okay, and would you expect when that you start to spend more significantly, would you expect your Purion M that’s in production, so ramp more than it is now or?

Yeah, we would expect Purion M will ramp across the different market segment. It currently is in three customers running in production for both memory and foundry processes and so as they ramp and need additional medium current capacity, we would expect to participate in that. David Duley – Steelhead Securities: Okay, thank you.

Okay, thank Dave.

Our next question comes from the line Christian Schwab with Craig Hallum. Christian Schwab – Craig Hallum: Hey, guys just a quick follow-up. And 300 million in product revenues plus or minus similar to 2011, is there any changes on a go forward basis that would materially change services revenue versus last time you were there and in other words is that going to kind of like a $32 million-$33 million business plus or minus at that point, at that type of revenue or there is some positive or negative puts and takes to that number.

I think that share. Right now if you take a look back on the 12 to 18 months, we’ve been running around $30 million and obviously as we move forward, we have a number of initiatives in place to grow revenue. We think we’ve made a significant progress in some areas like spares (indiscernible) upgrades, we’ve sold many more used tools than we even have in the past. So we’re going to continue to focus on a number of those initiatives and we’d expect to grow it. But I think if you want to model it in a like a little $30 million range that’s probably fat.

The other think Christian is longer term, as we continue to sell more Purion, refreshing the install base also contributes to the service business overtime. So if you look out depending on what you target 300 number is and you look out a little further than that then we start to see benefits from that install base growth. Christian Schwab – Craig Hallum: Great, and redoing, is there any further adjustments either you have geared time and all of your tool and show it order for very obvious reasons. As we look at that inventory number, just remind me, just as we think about working capital, how much is that inventory is positioned around the world for guaranteed up time.

Part of third of it. Part of third of that number. Remember level still setting that numbers well. Christian Schwab – Craig Hallum: Right, right. Perfect, thank you.

Okay, thanks for those questions.

Alright, our next question comes from line of Edwin Mok from Needham & Company. Edwin Mok – Needham & Company: Hello, thanks for talking my question. Sorry I jump on little late, I apologize you guys really touched on this. But on the sequentially increase in guidance, how of that is increased demand from your customer and how is that is coming from this new Purion H?

Well beyond slip our revenue by product, but the – we’ve referenced in our prepare remarks that it’s being driven by this time in memory spend in particular the first stage of a DRAM ramp at a major customer in Asia-Pacific. So I think it’s safe to say that there is a fair amount of our systems revenue coming from that customer. And they are actually – it’s not just that customer, there is at least, there are at least two other customers that were also getting some significant business from.

So Edwin to – a little bit of follow-on to that is so as we’ve been saying as a memory business recover as we given the pause, we expected all three products will participate and so I think the other way to answer your question is the memory market is coming back to like at a time when all three of our products are available. So the combination of the two is what will impact our business projections going forward. Edwin Mok – Needham & Company: I see. And then on the booking, you guys had press released on I guess two day ago, right. All those products shipping in the fourth, do you actually or is that a booking from all throughout quarter so excepted to more shipment in first half of ‘15?

No, the Q4 shipment. Edwin Mok – Needham & Company: I see, okay, that’s helpful. And then on – actually a question on your Purion XE right, so for this year we have seen more actually incremental order you guys got from for example foundry customer which is traditionally only buy it for image sensor application, little bit in application, are you guys seeing increase demand or increase number of application on the XE platform or is it just build on application that you guys typically see is just because of customer investing in those area. I’m just trying to understand is, is it a broadening application or is it more just customer building capacity?

It’s a combination, there is a broadening of application the more advanced sensor are requiring lower metals contamination and more high energy implants and the power device – power device market is also beginning to require more high energy especially in the automotive side of power device. So there is a bit of growth in terms of where our energy has been used and most of that is coming from custom logic and specialty logic and now they are foundry partners. Edwin Mok – Needham & Company: I see, okay, that’s fair. And then just quick follow-up question on the margin side, actually last quarter you guys have actually have high product gross margin right are probably high system gross margin as well. And I understand this quarter Purion H initial ramp you always have some track on gross margin. How do you guys – how do we kind of think about gross margin longer term, assuming ex-ramp and you have modular customer buying that product to get on healthier spending environment, do you expect your margin to actually march back up to this, last quarter you did 39% overall profit of gross margin, but do you expect that too and what – how fast you can actually get it back up to that range I guess?

So Edwin the Q3 39 was really driven by a fairly significant mix of the service side which is really where all the spare parts and consumables there. And the GSS is very accretive, so that was a big piece of that. But in terms of how we think about it, as we roll out more systems because the GSS is more accretive that obviously pressure the margins a little bit, but we’ve always kind of said that we would ramp up this Purion product line and hold our margins in that mid-30s. And then roadmaps take us back to 40 plus percent gross margin business. But – if I was looking out obviously when I guide next year, but I was looking at next year, I would say no, it’s a mid-30 is a still a right place because any growth we have is going to come from the systems. And just a fact that we would hold in a mid-30s that are serious erosion with systems coming in and that the systems are continuing to improve as year goes on. Edwin Mok – Needham & Company: Okay, great, actually that’s good color. Thanks.

Alright, thanks Edwin.

Thank you.

And we have a follow-up question coming from the line of Christian Schwab with Craig Hallum. Please proceed. Christian Schwab – Craig Hallum: Just a follow-up on Edwin’s comment, maybe asking a little bit more directly, if we get to 300 million in revenue in some point down the road and we have 30 million-35 million in service revenue, is the gross margin objective to have 35% gross margin plus or minus or is it somewhere between 35 and 40?

When we get that 38, the answer is somewhere between 35 and 40.

Okay, and between there, 40 would be rolling and 37.5 would be kind of what you love to do and 35 at that point would be a disappointment. Christian Schwab – Craig Hallum: And 300 million.

Right, no other questions I promise. Thanks.

This concludes our Q&A portion of the call, I’ll hand the call back over to Mary Puma, will make a few closing remarks.

Thanks, Philip. We spend a great time with investors on the phone and meetings probably (ph) on the road and we have scheduled the number of non-deal road shows as well as conferences. We will be attending Small Cap in New York city in December, the Needham Conference in New York city in January and the Stifel Conference in San Francisco in February. We are looking forward to catching up with all of you. Thank you.