Good day, ladies and gentlemen, and welcome to the Axcelis Technologies Second Quarter 2014 Conference Call. My name is Sarah, and I will be your operator for today. (Operator Instructions) 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, Sarah. 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 second quarter results in line with our July 7 pre-announcement. As we explained several weeks ago at the time we pre-announced, Axcelis has been challenged by an industry slowdown. In particularly, a substantial pause in memory spending combined with several system push-outs late in the quarter by customers in the MEMS, image sensor and power semiconductor markets had an adverse impact on our financial results. During the second quarter, we continued to execute on our Purion strategy. As forecasted, we shipped our first Purion H to a leading customer in Asia and closed the third Purion M evaluation at a foundry customer. We continued to experience a high level of customer activity on the Purion H, our high current system, at our advanced technology center in Beverly. Before I discuss additional details regarding third quarter guidance and Purion products, I’d like to ask Doug to provide thoughts on the current industry environment, future market trends and the likely impact this will have on Axcelis’ business going forward. Doug?

Thank you, Mary. We see a strong memory build for both DRAM and Flash on the horizon. Customers have fab space available now or fabs under construction, with planned availability in the near future. Our customers’ technical and purchase teams are actively engaged with us in preparation for this capacity build. They are discussing technical requirements, capacity requirements and expected timing. Based on these discussions, we expect the full Purion family to participate in this upcoming build, including high current implanter, the Purion H. Commodity economics related to memory pricing and demand will likely drive the exact timing of this next capacity build. Based on our discussions to date, we expect capacity additions to begin in late Q4 and continue through the first half of 2015. Customers in the MEMS, image sensor and power device markets continue to be active with Axcelis, looking at Purion implanters, legacy products and use tools. These customers are benefiting from growth in the mobile, wearables, automotive and Internet of things markets. As they add capacity, they are typically looking for improved productivity solutions, since they are not usually additional fab space. This is a very dynamic market segment and one in which Axcelis actively participates. Unfortunately the nature of this business makes it more difficult to forecast the exact timing of equipment shipments. The leading edge foundry customers continue to wrestle with the difficulties related to FinFET development. Foundries are planning on ramping capacity for 14 nanometer and 16 nanometer process flows sometime during 2015. However due to the difficulty involved in FinFET development, the exact timing of this foundry ramp is less predictable. As FinFET process flows mature we expect the precision capabilities provided by Purion platform will become an invaluable tool for improving FinFET device yields. FinFET manufacturing represents a significant growth opportunity for Axcelis and for the Purion platform. Now I’ll turn it back to Mary.

Thank you, Doug. Turning to our third quarter guidance, we are expecting revenues to be relatively flat with Q2 between $38 million and $43 million. This will translate into operating results ranging from an operating loss of $6 million to $3 million and a loss per share ranging from $0.06 to $0.03 per share, inclusive of restructuring of approximately $2 million. Gross margins will be in the mid 30% range. The orders that pushed out late in Q2, resulting in lower-than-expected revenue and earnings, are anticipated to close during the second half of 2014. As we highlighted in the pre-announcement release, we have taken our quarterly expenses down from $20 million to $21 million to a range of $17 million to $18 million. We accomplished this in Q3 by implementing a mix for furloughs, forced vacation and a reduction in our workforce. This reduction in force will allow us to maintain this low level of expense in Q4 and into 2015, even as we anticipate that business in these quarters will improve. We restructured by completing a comprehensive review of the business to ensure that we can continue to support Purion product growth. These lower expense levels will also allow us to protect profitability and cash as we increase sales of Purion Hs and Purion M and broaden our and customer base beyond memory. Our expectation is that cash in Q3 will be in the low $30 million range. While we have taken swift actions to cut our costs and protect our cash, our success is dependent on driving systems growth. As painful as this industry pause has been, it has provided additional time for the Purion H and the Purion M to gain a stronger foothold at customers. As customer spending returns later in the year, Axcelis will be…

Thank you, Mary. Q2 revenue finished within our revised guidance announced on July 7. While the Q2 revenue level is extremely disappointing, we remain encouraged by the continuing penetration of the Purion platform. In the quarter, we shipped our first Purion H high current tool and recognized revenue on our third Purion M evaluation tool. Shipment of the new Purion H is significant as high current now represents 55% of the total available implant market. We’ve also taken steps to lower both our operating and cash breakeven levels after a careful review of strategic investments required to meet Purion penetration requirements. With these changes, our new operating breakeven moves from $60 million per quarter to $150 million and our cash breakeven lowers to under $42 million per quarter. Looking at the details of our second quarter results. Revenue finished at $41.2 million and within our revised guidance. Systems sales made up $10.9 million compared to $32.5 million in Q1. GSS revenue finished at $30.3 million compared to $28.4 million in Q1. Q2 sales to our top 10 customers accounted for about 67% of our total sales compared to 81% in Q1 with two of these customers at 10% or above. In the quarter, all of our tools shipped to foundry logic customers compared to 13% in Q1. The significant shift in Q2 orders highlights the magnitude of the memory pause which accounted for 87% of our shipments in Q1. Q2 system bookings were $9.2 million compared to $27.6 million in Q1, and our book-to-bill ratio increased to 0.95 compared to 0.87 in the prior quarter. Q2 gross margin was 35.2% and within our guidance of mid 30s. Q2 inventory ended at $106.7 million compared to $95.5 million in Q1. System order pushouts that occurred late in the quarter drove the…

Thank you, Kevin. I would like to conclude by addressing the comments in our preannouncement press release relative to hiring Blackstone Advisory Partners to assist Axcelis with optimizing and accelerating the market penetration of the full Purion platform. We've worked with Blackstone in the past to assess approaches to various strategic issues, including our 450-millimeter strategy. Blackstone will be assisting us now as we evaluate financing and strategic initiatives that will strengthen our long-term position in the semiconductor equipment industry. This is a critical time for the industry as the industry matures, cycle to less predictable and customers and equipment suppliers consolidate. And this is a critical time for Axcelis as the role and performance requirements of ion implant change dramatically, particularly affecting the performance of other tool sets like Etch and enabling new applications like materials modification. Customers are realizing that these new implant applications require the most innovative technology that Axcelis offers through our Purion platform. When the upturn resumes led by memory spending, we will have all three Purion products positioned to ramp. We expect that Purion top line growth combined with the streamlined expense structure will result in a highly leveraged business model that should deliver handsome returns for our shareholders. With that, I would like to open it up for questions.

(Operator Instructions) Our first question comes from Edwin Mok from Needham & Company. Edwin Mok – Needham & Company: Hi thanks for taking my questions. So first question is, I noticed that your GSS revenue increased sequentially. Any kind of color you can provide that on why it increased sequentially and any help you have for us on the third quarter in terms of how we think about GSS revenue?

Edwin, this is Kevin. On GSS, we have kind of a core base business, which is the used parts consumable business, and thing that flexes a little bit is the used tools. Edwin Mok – Needham & Company: And then is that – should we expect similar level in the coming quarter or is it returning back to the March quarter level?

Yeah, I mean I don’t want to break that out right now, but I will tell you used tool business is something we’re going to continue to focus on, and it’s an area we want to grow in our GSS business. Edwin Mok – Needham & Company: And then Doug, you mentioned about acceleration for memory spending to resume starting on the fourth quarter. Anyway you kind of give us a little breakdown where it comes from, is it DRAM, or is it 3D NAND or incremental NAND spending, any kind of color on that?

Sure. At this point it seems like the DRAM spending seems to be in front of the NAND at this point. And so we’re expecting DRAM to begin towards the end of Q4 and it seems like the Flash is going to be something that's in the first half of 2015. Edwin Mok – Needham & Company: And then I think you guys had talked about Purion M being qualified at three customers right now and obviously some of them are memory customers. I was wondering – should we expect revenue to start coming for Purion M in the fourth quarter as the spending picks up on memory, or is it more like 2015 – I think some of those products have been qualified although that we haven’t seen product revenue. I was wondering if you can give some color on how -- what are you expecting for the Purion M product.

So depending on the exact timing of when that memory capacity spend starts, we expect all three Purion products to participation in this upcoming spend. So that would include the high-energy tool, medium current tool as well as the new Purion H high current tool. Edwin Mok – Needham & Company: So that leads to my question – so you just shipped the first evaluable Purion H, right, and I guess you expect – you mentioned that you expect at least one more to a second customer, maybe more. But how does it take for the customer to actually turn around and get that to qualify to the point where when they place these orders, the orders will come to you on Purion H? I am just wondering, any kind of color about turnaround time for the qualification for the tool and what gives you confidence that you can turn it around fast enough – do you have enough time to do that?

Yes, so a couple of comments on that. So first, as we expect there will probably be couple more evaluation customers on the Purion H in 2014. And we expect that some of those customers could take multiple Purion Hs during this fiscal year as well. I mean in terms of your turnaround question, remember the Purion is all built on a common platform. And so the Purion platform which is the wafer handling and all the software, this is qualified in high volume production on both the Purion XE and Purion M. So the qualification time for a customer and the learning curve for the customer is much lower for the Purion H since it’s the third member of the family.

Let me add to that. The other thing to remember and we’ve talked about this before is that we work in very close conjunction with several customers to develop the Purion H. And so some of these first customers who are taking the evaluation tools are very familiar with the tool and have actually run a significant number of wafers at our Advanced Technology Center here in Beverly. So in some cases there’s actually qualification that's being done by shipping wafers here and then sending them back to their fabs. And that’s in preparation for the installation of the tool and then a quick turnaround from a qualification standpoint. Edwin Mok – Needham & Company: So Purion XE that you shipped is actually installed and up and running at customer site –

Well, we shipped it at the end of June. So it’s under installation right now and we will be beginning the process qualification very shortly.

Our next question comes from Patrick Ho from Stifel. Patrick Ho – Stifel, Nicolaus: Thanks, I apologize, I jumped on a little bit late. So maybe you may have said this on your prepared remarks. With regards to Purion M, what are the potential impacts to gross margin as these initial systems flow through the P&L? Basically I am just trying to get from a modeling perspective, how many basis points on the gross margin line as the systems flow through the initial systems that you guys shipped and qualified, how does that impact the income statement?

So on the first shipments, always the first being the first tools and fab, typically around lower gross margins, it’s a little bit more work you have to put into, a little more customization. So in terms of modelling, I would model – Purion M slightly down from where you’re going to take them and run into volume production. And the other thing too, Patrick, because we have commonality on the M and H and the XE platform, really the leverage comes through supply-chain, when all these tools really start getting out there in higher volume. I think that's where you will see the biggest pickup at that point in time. Patrick Ho – Stifel, Nicolaus: Kevin, I know you talked about in the press release the most recent cost cutting initiatives that lowered the breakeven levels following the June quarter, are these sustainable or once you start getting back to that $60 million to 70 million quarterly run rate, especially as you mentioned memory CapEx spending going up, things turning around, does the breakeven then also rise, are those costs coming back at some future point?

I think at those levels you just mentioned that these new levels are where we can stay. The only wildcard, Patrick, would be if we got – if it was significantly more evals than we planned in there, there would be some incremental but in terms of the development projects and -- the money was being spent through headcount, those cuts are what I would – nothing is ever permanent but I consider those mostly permanent in terms of what we’ve done. I guess to answer your question is we should have a total in these lower levels. Patrick Ho – Stifel, Nicolaus: A final question from me, given that traditionally or at least in some years you’ve had the stronger exposure to the memory side of things, given your product portfolio. As you start I guess penetrating and working closer to the foundries, what are some of the key applications that the foundries are looking for from your end in terms of both M as well as the H products?

So the key application area in foundries is probably going to be in two areas. The first is all around the FinFET and Fin definition, the angle control and uniformity control of all of the process steps around that are critical. I’ve actually heard several engineers at our customers basically refer to FinFET as the integration engineers’ nightmare. And the uniformity of all of the processes and how they add up is critical. So the implant uniformity is going to be key and that's a place where the Purion excels with the spot beam architecture and the tight angle control and precision. The second area that the foundries will be keen in on is materials modification and this will be again tying back to critical angle control, critical dose control and the ability to vary both energy and dose across the wafer to increase the process windows for processes like Etch.

(Operator Instructions) All right. It looks like there are no further questions in queue. So I will turn the call back over Mary Puma who will make a few closing remarks.

Well, we appreciate your taking the time to listen to our Q2 earnings call and we look forward to speaking to and seeing many of you soon. So again thank you very much.

This concludes today’s presentation. Thanks for your participation. You can disconnect and have a wonderful day.