ASML Holding NV

AEX:ASML

Earnings Call Transcript

[Jim Kavanagh, executive]

Hello, and welcome to ASML's Q4 and Full Year 2024 Results video. Let me start by welcoming Christophe and Roger.

[Jim Kavanagh, executive]

If I can start with you, Roger, can you give us an overview of Q4 and full year 2024 results?

[R.J.M. Dassen, executive]

Absolutely, Jim. So Q4 net sales came in at EUR 9.3 billion, which is a bit higher than we guided, primarily driven by installed base business, which came in at EUR 2.1 billion. So that was quite a bit higher than we guided. For the full year, we're looking at EUR 28.3 billion of revenue, again, higher than last year and primarily driven, I would say, by the installed base business, which in total came at EUR 6.5 billion, which is about 16% growth in comparison to 2023.

Gross margin for the quarter came in at 51.7%, again ahead of guidance, primarily because of additional upgrade business that we were able to record in the fourth quarter. And also because, as you know, we have the revenue recognition for the first High-NA tools. So we have 2 High-NA tools where we were able to recognize revenue for in the quarter because the customer accepted the 2 tools. And that is recognizing a High-NA revenue, as you know, is detrimental to the gross margin. But in fact, the cost that we needed to incur in order to make the systems work were actually lower than planned. So that was also the reasons why the gross margin for the quarter came in a bit better than we anticipated. Gross margin for the year, 51.3%, which is similar to the gross margin that we had in 2023.

If you look at net income for the quarter, EUR 2.7 billion for the full year, EUR 7.6 billion in terms of total net income. Net system bookings for the quarter, EUR 7.1 billion, of which EUR 3 billion EUV and that got us to a backlog for -- at the end of the year of approximately EUR 36 billion.

Talking about net bookings. The net bookings, and we said this before, net bookings can be lumpy, particularly if you look at it from one quarter to the other. And in fact, the way we do it, the way we work with our customers and the way we come up with our expectations for the business, really is based on an ongoing review cycle that we have with customers. So it's much less influenced, I would say, by bookings, it's much more based on regular reviews that we have with customers. So recognizing that, recognizing that PO bookings can be lumpy and are not necessarily, we would say, a good reflection or accurate reflection of the business momentum. We said we'll continue to provide a number throughout this year. But after this year, we will stop providing this number. What we will do is provide a backlog. So on an annual basis, we will provide you with the total backlog.

[Jim Kavanagh, executive]

So all that said, how would you summarize Q4 and the full year in '24.

[R.J.M. Dassen, executive]

Well, Q4 was a record quarter for ASML. 2024 is yet again a growth year and therefore, yet again from a revenue perspective, a record year for ASML. I would say recognizing -- that recognizing in the current very dynamic market circumstances, recognizing that we once again had a record quarter and a record year. I think kudos and a big thank you to the entire ASML family, both the employees and all the partners we have within ASML to make that possible within this very dynamic environment.

[Jim Kavanagh, executive]

If I can turn to you, Christophe, can you give us an outlook on 2025, how you see things?

[Christophe Fouquet, executive]

Well, I think our outlook remains consistent with the view we gave last quarter. We see total revenue for 2025 between EUR 30 billion and EUR 35 billion and the gross margin between 51% and 53%. AI is the clear driver. I think we started to see that last year. In fact, at this point, we really believe that AI is creating a shift in the market. And we have seen customers benefiting for it very strongly. Other may be a bit less. So for AI, if the demand remains strong and our customers are capable to build some capacity, we see the opportunity to all the highest part of the range. On the other hand, there's still quite some uncertainty on the other customer, and this also justified the lowest part of the range.

[Jim Kavanagh, executive]

If we look then at the different market segments, Logic, Memory, installed base, how do you see that progressing through '25.

[Christophe Fouquet, executive]

So 2024 was strong for Memory, and we remain -- we expect Memory to remain strong. We expect Logic to grow to basically fulfill the demand of AI.

[Jim Kavanagh, executive]

And what about installed base?

[Christophe Fouquet, executive]

Well, our number of systems in the installed base continues to grow, we see an increased share of EUV as well, and we expect some more upgrades next year. So overall, we will see also an increase in our installed base business.

[Jim Kavanagh, executive]

If we look then maybe at a topic that's on everybody's mind a lot of the time is China, how do you see China revenue progressing in '25 versus '23, '24, for example.

[Christophe Fouquet, executive]

Well, we had a lot of discussion about China in 2023, 2024 because our revenue in China was extremely high. I think we have explained that this was caused by the fact that we are still working on some backlog created in 2022 when our capacity was not big enough to fulfill the whole market. 2025 will be a year where we see China going back to a more normal ratio in our business. So I think we're going to see again numbers people used to see before '23.

[Jim Kavanagh, executive]

If we turn back to you, Roger, if we look at '25 in terms of the numbers point of view, how do you see Q1 in terms of guidance?

[R.J.M. Dassen, executive]

For Q1 when it comes to net sales, we're looking at guidance between EUR 7.5 billion and EUR 8 billion. Included in there would be EUR 2.1 billion that we expect for installed base business, which would be similar to the last quarter. And we'll be looking at a gross margin somewhere between 52% and 53%.

[Jim Kavanagh, executive]

So if I look at that gross margin in Q1, how should we expect things throughout the full year as a whole? Should we expect the high end of the guidance there?

[R.J.M. Dassen, executive]

So gross margin, 52% to 53% if you compare it a little bit to what we had in the last quarter so where is the uptick from the last quarter. A number of moving parts, most significant moving parts. We do not expect to have revenue recognition for High-NA in this quarter. So that's a positive. On the other hand, also for Q1, there is a little bit less immersion sales in there, which is detrimental to gross margin. So net-net, we still believe that we're going to have a little bit better gross margin in Q1 than we would have had in Q4.

If you look at the full year, again, particularly in light of the -- of High-NA and High-NA revenue recognition, we believe that is primarily skewed towards the second half of the year. As a result of that, I would expect that the gross margin in the first half is a little bit better than the gross margin in the second half. Nonetheless, what we said before, the gross margin expectation for the year is between 51% and 53%.

[Jim Kavanagh, executive]

Okay. And do you expect any additional impacts from the latest export control regulations that have been recently published?

[R.J.M. Dassen, executive]

Quite a few moving parts when it comes to export controls from the U.S., as you know, the U.S. articulated a number of new regulations in December. Actually 2 big parts there. One was they included in a number of new technologies on the list of restricted technologies. And they also added a number of fabs to the list of restricted fabs. So where restrictions apply. You also know that the Dutch government very recently came out with new regulation there as well. But I would say that the combination and the impact of those both U.S. and Dutch measures has been appropriately reflected in the guidance that we've given before. So the EUR 30 billion to EUR 35 billion properly reflects the limitations that we see from an export controls perspective.

[Jim Kavanagh, executive]

Christophe, if I can switch to our technology. Can you give us updates on the latest progress when it comes to Low-NA, High-NA or DUV products as well as applications.

[Christophe Fouquet, executive]

Well, if you look back at 2024, I think this has been a very rich year for technology at ASML. We have started to ship some products that will be very, very critical for customer volume ramp on AI but also for their longer-term road map. So let me start with EUV Low-NA. This is our NXE:3800. We started to ship this system last year, as you know, we have achieved a very important milestone last quarter, which is to demonstrate basically the full capability of the tool, final specification here at ASML. And we are continuing to mature basically the platform with our customers so that the tool can be ready this year to really support high-volume manufacturing.

As you know as well, on this tool, this will become the majority of our shipments when it comes to Low-NA this year. Roger was referring to the margin, this is going to be a good contribution to that. High-NA, we are very, very happy with our achievement on High-NA last year. We got the first 2 customer acceptance, which after so many years of development has been a major milestone. Feedback on the imaging performance from our DRAM customer, Logic customer continue to be very, very positive. They like what they see. And the key discussion now is really when, how and in which volume, I will say, to insert this tool into volume manufacturing. That's a discussion we're going to have with our customers.

Deep UV, still a lot happening on deep UV. We have shipped our latest generation on immersion, the NXT:2150. We have shipped the latest generation on KrF, the NXT:870B, which can provide up to 400 wafer per hour speed, which is a major, major step compared to the previous platform. So a lot of good also progress on the deep UV.

And finally, I think also a bigger highlight when it comes to application. You know that we have been working on e-beam product for quite a few years after the HMI acquisition. Multi-beam was a major reason to do this acquisition. And at the end of last year, we got also our first 4 customer acceptance on multi-beam, which is, of course, a major milestone for all of us a ASML.

[Jim Kavanagh, executive]

We ended the year with a significant amount of cash on our balance sheet. Can you give us some more details on what you plan to do in terms of capital allocation going forward?

[R.J.M. Dassen, executive]

So you're right, a lot of cash generation in Q4, particularly in the past -- in the last weeks of the quarter, a lot of cash came in. As you know, we, first and foremost, use the cash in our business, right, to make sure that the business goes on. And then as you also know, our policy is to have increasing dividends. So the dividend -- the interim payment that we're going to make in this quarter will be EUR 1.52 per ordinary share, which is in line with what we had last quarter. the final dividend that we proposed to the AGM is EUR 1.84 per ordinary share. So that gets total dividends for the year to EUR 6.40 per ordinary share which is about a 5% increase from the year before. So I think you see the continuous improvement and increase in dividends right there. Whatever is left can be used for share buybacks, and we should continue to see that throughout the planned period.

[Jim Kavanagh, executive]

We've just finished our Investor Day back in November of last year. Can you give us a more long-term outlook of how you see both the market and ASML between now and well beyond '25.

[Christophe Fouquet, executive]

Well, I think our view on the long term is still, I would say, very positive. And we used to talk about semiconductor everywhere. I think since November, we start to talk about AI everywhere. And we truly believe that AI is going to bring even more opportunity to the semiconductor industry. That's the first thing. The second thing is that AI is going to drive more advanced technology to address some of the challenges on cost on power consumption. We believe that this will drive more advanced DRAM logic technology. So more appetite for an aggressive road map. This is, of course, good for lithography.

We also believe that the solution we can provide our customer will secure that lithography remains at the core of the solution they want to use basically to execute on this very aggressive road map. And this is why as we have said in November, we expect the number of lithography layers to continue to increase on all applications. And to translate that into numbers, I think, again, very consistent to the view we presented in November. Total revenue for 2030 will be between EUR 44 billion and EUR 60 billion. Our gross margin will be somewhere between 56% and 60%.

[Jim Kavanagh, executive]

Very clear. Thank you, Christophe, and thank you, Roger.

[R.J.M. Dassen, executive]

Pleasure.

[Christophe Fouquet, executive]

Thank you, Jim.