ASML Holding's CEO Discusses Q2 2012 Results - Earnings Call Transcript

ASML Holding N.V. (ASML)

Q2 2012 Earnings Call

July 18, 2012 09:00 am ET

Executives

Craig DeYoung - VP Investor Relations

Eric Meurice - President & CEO

Peter Wennink - EVP & CFO

Analysts

Sumant Wahi - Redburn Partners

Janardan Menon - Liberum Capital

Stephane Houri - Natixis

Simon Schafer - Goldman Sachs

Mahesh Sanganeria - RBC Capital Markets

Sandeep Deshpande - JP Morgan

Didier Scemama - Merrill Lynch

Gareth Jenkins - UBS

Francois Meunier - Morgan Stanley

Mehdi Hosseini - Susquehanna International

Jagadish Iyer - Piper Jaffray

Presentation

Operator

Ladies and gentlemen thank you for holding and welcome to the ASML 2012 second quarter results conference call on July 18, 2012. For our today's introduction all participants will be in a listen-only mode. After ASML’s introduction there will be an opportunity to ask questions. (Operator Instructions)

I would now like to turn the conference over to Mr. Craig DeYoung. Please go ahead sir.

Craig DeYoung

Thank you, Peter. Good afternoon and good morning ladies and gentlemen. This is Craig DeYoung, Vice President of Investor Relations here at ASML. I would like to welcome to our investor call and webcast. Joining me from our headquarters here in Veldhoven, the Netherlands is Mr. Eric Meurice, ASML’s CEO and Mr. Peter Wennink, ASML’s CFO.

As the operator mentioned, the subject of today’s call is ASML’s second quarter 2012 results. However, on July 9th, ASML announced a co-investment program in which customers will potentially contribute up to €1.4 billion over the next five years to accelerate development of 450 millimeter wafer platform and the next-generation of EUV systems; both expected to enter volume production in the second half of this decade. So we would welcome any remaining questions you might have about this program in addition to those questions you might have about our Q2 results.

At this time, I would like to draw your attention to the Safe Harbor statement contained in today's press release and in our second quarter results presentation both of which you can find on our website at www.asml.com. This Safe Harbor statement will apply to this call and all associated presentation materials. The length of the call will be 60 minutes as normal.

Now I would like to turn the call over to Eric Meurice for a brief introduction.

Eric Meurice

Thank you, Craig. Good afternoon. Good morning. Thank you for attending our conference call. As usual, before we begin the Q&A session Peter and I would like to provide an overview and commentary on the second quarter result and provide an outlook for the year. I will myself complete the introduction with some further comments on market view longer-term and about our strategy.

So Peter please if you will.

Peter Wennink

Thank you Eric and welcome to everyone. Summarizing our second quarter; sales came in just about €1.2 billion which is essentially the same as in the previous quarter. This quarter sales remained largely skewed towards the foundry IDM sector which was about 73% including non critical Kaloyeros systems which are supporting the capacity additions. As in the first quarter only 9% of second quarter sales went to the DRAM sector with just under 20% going to NAND customers.

The average selling price of all systems recognized in the second quarter was €22.4 million reflecting a bit higher Immersion shipments than the first quarter. Service and field option sales came in at a record of €243 million which is again driven by a significant adoption of system performance enhancing field options.

Updating our previously announced share buyback program, as of July 10, 2012 last week, ASML has repurchased 33.2 million shares of which 7.5 million shares in 2012 for a total amount of €970 million of which €270 million in 2012 giving an average buyback price of €29. For regulatory reasons in connection with the customer co-investment program which we announced last week ASML has suspended its share buyback program from July 10, 2012 until further notice and we are then to resume share buybacks when permitted under applicable regulations.

The second quarter net bookings came in at 43 systems valued at €949 million, excluding EUV. Our booked average selling price came in at €22 million with the quarter’s booking profile seeing a significant moderation and Foundry orders at 36% of total orders, half of that, slightly half of what they were in the previous quarter. The balance of orders was almost evenly split between IDM’s NAND and DRAM. Our order backlog at the end of the second quarter was €1.5 billion excluding EUV by the way totaling 55 systems with a strong average selling price of €27.3 million.

The backlog profile at the end of the quarter changed as combined memory moved upwards to 36% of total versus 23% at the end of the prior quarter. Most of that change coming from DRAM as it moved from 2% to 14% off the backlog; reminding you by the way that this change is already four high end units divided over three customers.

As to the outlook, we estimate second half sales coming in between €2.2 billion and €2.4 billion with the third quarter estimate at €1.2 billion and gross margin of 43%. R&D and SG&A expenses will be about €145 million for R&D and €60 million for SG&A which is slightly above the previous quarters as we decided to upgrade and invest in our IT infrastructure throughout the remainder of the year.

The second half looks to be sustained by an increase of system shipments supporting NAND shrink plans and by a low, but relatively stable level of DRAM system shipments. We see a lower 28 and 32 nanometer Logic shipments in the second half compared with the first half and we see IDM’s coming in slightly higher when compared to the first half of this year.

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