Axcelis Technologies Inc
NASDAQ:ACLS
US |
Fubotv Inc
NYSE:FUBO
|
Media
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
|
CN |
NIO Inc
NYSE:NIO
|
Automobiles
|
|
US |
Fluor Corp
NYSE:FLR
|
Construction
|
|
US |
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
|
US |
TopBuild Corp
NYSE:BLD
|
Consumer products
|
|
US |
Abbott Laboratories
NYSE:ABT
|
Health Care
|
|
US |
Chevron Corp
NYSE:CVX
|
Energy
|
|
US |
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
|
US |
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
|
US |
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
|
US |
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
|
US |
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
|
US |
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
85.31
155.02
|
Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
Fubotv Inc
NYSE:FUBO
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
Uber Technologies Inc
NYSE:UBER
|
US | |
NIO Inc
NYSE:NIO
|
CN | |
Fluor Corp
NYSE:FLR
|
US | |
Jacobs Engineering Group Inc
NYSE:J
|
US | |
TopBuild Corp
NYSE:BLD
|
US | |
Abbott Laboratories
NYSE:ABT
|
US | |
Chevron Corp
NYSE:CVX
|
US | |
Occidental Petroleum Corp
NYSE:OXY
|
US | |
Matrix Service Co
NASDAQ:MTRX
|
US | |
Automatic Data Processing Inc
NASDAQ:ADP
|
US | |
Qualcomm Inc
NASDAQ:QCOM
|
US | |
PayPal Holdings Inc
NASDAQ:PYPL
|
US | |
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Good day, ladies and gentlemen. And welcome to the Axcelis Technologies call to discuss the Company’s Results for the Fourth Quarter of 2017. My name is Amanda, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of the conference [Operator Instructions].
I would now like to turn the presentation over to your host for today’s call, Mary Puma, President and CEO of Axcelis Technologies. Please proceed, ma’am.
Thank you, Amanda. 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 Web site. Playback service will also be available on our Web site 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.
In this call, we will provide some non-GAAP financial information to allow for period-to-period comparisons given accounting events that occurred in the quarter. Reconciliation to GAAP can be found in the press release and investor presentation posted to our Web site today.
The strong semiconductor market in 2017 provided a great backdrop for additional Purion market share growth. Systems revenue grew by 89% year-over-year with Purion representing 87% of this systems revenue. During the year, Axcelis shipped Purion systems to 18 new customer fabs. Seven of these sites represent new Purion customers, the other 11 locations are first in fab Purion placements by existing Purion customers. The increase of existing customers populating additional fabs with Purion is a strong indicator of its share growth potential. The year started with strong Purion XE and Purion VXE sales for 3D NAND image center and mature foundry logic applications.
Purion H ramped throughout the year and by Q4 represented the highest percentage of shipped systems. Strong Purion H bookings have continued into 2018 and during the year, five new customers adopted Purion H and two existing customers added Purion H to a new fab. The Purion product family now have two of record status at seven of the top 10 CapEx spenders in the industry. Two of our 2018 objective penetrating advanced logic and re-entering Japan will provide access to the remaining three in the top 10.
Purion H already has two of record status at five of the top 10, and we believe we have the opportunity to significantly increase this number in 2018. Regaining market share leadership in ion implantation remains our primary objective.
With Purion technology now firmly rooted in the customer base, we have confidence we can achieve this. Our customers’ primary buying criteria is based on technology. Competitive pricing pressure should be seen as further proof of Purion's technology advantages and Axcelis' ability to take additional market share.
2018 is shaping up to be another strong year, driven once again by IoT, data storage and data analytics. We expect to continue to gain market share with a revenue target in 2018 of approximately $450 million. To achieve this revenue growth in 2018, we will focus on four objectives; grow our footprint within our existing customer base with a focus on large memory customers; establish Purion in the nascent domestic Chinese memory market; penetrate the advanced foundry logic market segment with Purion; and reenter the Japanese market, which represents approximately 15% of the ion implant TAM.
Three out of four of these objectives are greenfield opportunities for Axcelis that can translate directly to market share gains. I'd like to take a moment to summarize a few of our fourth quarter 2017 financial results and provide Q1 guidance. Revenues for the quarter were $116.4 million with non-GAAP earnings per share of $0.47. Results for the quarter were above guidance and current consensus estimates. 2017 revenues were $410.6 million with non-GAAP earnings per share of $1.48.
Our systems mix in the quarter was 57% mature foundry logic, highlighting the continued strength of the Internet of Things. Memory comprised the remaining 43% of systems shipment. For the full year, our systems mix was 56% mature foundry logic and 44% memory. The geographic mix of our systems shipments were Korea 52%, China 20% and the U.S. and Europe 17%.
Turning to guidance for the first quarter. We are forecasting revenues of between $115 million and $120 million. We expect gross margins of approximately 38%, operating income of $16 million to $17 million and EPS of $0.34 to $0.37, including a non-cash tax expense of $0.10. The industry is in a very strong sustained cycle and it appears that 2018 will be another good year. The cycle continues to be driven by IoT and the mature foundry logic market, data storage and the 3D NAND market and data analytics in the DRAM and advanced logic segment. New customers and new technologies are ramping in the memory market, opening prospects for Axcelis. With all of this activity, we are already seeing strong bookings into the second quarter.
Now, I would like to turn it over to Kevin, to discuss our financials.
Thank you, Mary. Axcelis delivered solid fourth quarter and full year 2017 financial results, driven by our highest revenue level in 10 years. In the year, we generated $56.3 million of cash from operations and ended the year with a cash balance of $140.9 million, up $63.2 million for the year.
Strength in the overall semiconductor market continues to provide Axcelis with an opportunity to firmly establish Purion across a broader customer base. In the quarter, we recognized two evaluation units and shift one new Purion H evaluation system to multinational 3D NAND customer in China.
In Q4, we executed a reversal of our deferred tax asset valuation allowance based on 13 consecutive quarters of profitability, and a positive outlook for 2018 and beyond. This along with other related impacts resulted in a Q4 tax benefit of $81.6 million, or $2.39 per share. Our deferred tax assets will be used to offset future state and federal tax expense on U.S. profits until they are fully depleted.
In Q4, we also recorded $6.2 million excess inventory reserve on legacy products, resulting from the success of our Purion. Our market share growth is our primary objective in 2018. Gross margin improvement remains a top priority within the business. We continue to make solid progress on supply chain, engineering and manufacturing cost of initiatives and increased our rolling fourth quarter average on systems standard margins by 1500 basis point since full launch of the Purion product line.
As is typical, quarterly gross margin will continue to be influenced by the number of evaluation tools converted to revenue, the mix of system revenue versus CS&I revenue, the mix of products and customers and competitive pricing pressures will continue to gain momentum of the Purion H.
Now, I'll review the fourth quarter and full year 2017 financial results. Q4 revenue finished at $116.4 million compared to $104.5 million in Q3. Q4 systems sales was $75.8 million compared to $69.2 million in Q3. Q4 CS&I revenue finished at $40.6 million compared to $35.3 million in Q3, driven by higher spare parts and upgrades. Full year 2017 revenues finished at $410.6 million, up 54% compared to $267 million in 2016. System revenue for the year was $262.7 million, up 89% compared to $139.3 million in 2016. Q4 sales to our top 10 customers accounted for approximately 64% of our total sales compared to 80% in Q3, but one of these customer is 10% or above. Q4 system bookings were $103.8 million compared to $83.2 million in Q3, for the Q4 book-to-bill ratio of 1.35 versus 1.18 in Q3.
Backlog in the fourth quarter, including deferred revenue finished at $87.3 million compared to $58.5 million in Q3. Q4 combined SG&A and R&D spending was $26 million compared to $25.9 million in Q3. SG&A in the quarter was $15.1 million with R&D at $10.9 million. In Q1, we expect SG&A and R&D spending to be approximately 25% of revenues and in line with our target business model.
Q4 gross margin was 31.5%, which included an excess inventory reserve of $6.2 million. Excluding this reserve, gross margin would have been 36.8% compared to 38% in Q3. As we discussed in our Q3 earnings call, Q4 gross margin would be impacted by a significantly higher Purion H shipment that currently have lower standard margin than other Purion products.
We are continuing to make good progress with our cost out initiatives and are aggressively working to close the gap between Purion H and other in Purion products. You can find additional details on our standard margins in our investor presentation.
Full year 2017 gross margin was 36.6% compared to 37.3% in 2016. Excluding the impact of the excess inventory reserve, full year gross margin would have been 38.1%, our highest annual level in 11 years. In Q1, we expect gross margin to be approximately 38%.
Operating profit in Q4 was $10.8 million compared to $13.8 million in Q3. Excluding the $6.2 million excess inventory reserve, operating profit would have been $16.9 million. Full year 2017 operating profit was $47.8 million compared to $16.6 million in 2016. Excluding the excess inventory reserve, full year operating profit would have been $54 million, up 225% over 2016.
Q4 net income was $91.7 million or $2.68 per share compared to $0.35 per share in Q3. In the quarter, we realized a tax benefit of $81.6 million to principally for the release of the tax valuation allowance and related impacts, and recorded an excess inventory reserve of $6.2 million. Excluding these items, net income would have been $16.2 million or $0.47 per share.
Full year net income was $127 million compared to net income of $11 million in 2016. Excluding the impact of the previously discussed items, full year net income would have been $49.5 million or $1.48 per share compared to $0.36 in 2016, an increase of 311%.
We are guiding Q1 earnings of $0.34 to $0.37 per share, including a non-cash tax expense of $0.10. Q4 inventory ended at $120.5 million compared to $123.4 million in Q3. Q4 inventory turns, excluding the evaluation tools, finished at 2.7 compared to 2.2 in Q3. Q4 accounts payable were $32.6 million compared to $33.6 million in Q3. Q4 receivables was $75.3 million compared to $69.8 million in Q3, driven by the timing of shipments. 2017 year end cash finished at $140.9 million compared to $120.1 million in Q3, and 2016 year-end cash finished at $77.7 million.
We expect Q1 cash to finish at approximately $145 million. Axcelis delivered significant improvement in full year and quarter operating results, thanks to the hard work of all our employees and strong demand for our products. In 2016, we penetrated 18 new customer sales with Purion and drove the highest revenue and operating profit in 10 years.
Our cash generation in the year further strengthened our balance sheet, which allows us to continue to make critical investments to grow the business. We are now focused on 2018 and beyond share gain and improving gross margins are our top priorities, thank you.
I will now turn the call back to Mary for closing comments.
Thank you, Kevin. Our customers have a choice in implant and as the number show, they are choosing Axcelis. They choose Axcelis for Purion platform technology, for solutions tailored to their needs in the form of Purion product extensions and to the innovation benefit they gain from a more competitive ion implant market.
I'd also like to thank our employees and their families for our success last year. Without their dedication and support, none of our achievements would be possible. Next month marks the company's 40th anniversary. The journey began in 1978 in a shed in Middleton Massachusetts. Our founders knew two things; they wanted to build a high current implanter; and they wanted to be disruptive. They didn't realize it then but they were already starting to tackle problems that would lay the foundation for the connected world we live in today.
Since that day, the company has led the implant industry through the introduction of innovative technology and its breadth of product lines. The world around us is changing fast and our technology helps drive that change. Many thanks to all of our stakeholders, employees, customers, suppliers and shareholders for your support and commitment. We have accomplished a lot here in our first 40 years and we look forward to continuing this success moving forward.
With that, I'd like to open it up for questions.
Thank you [Operator Instructions]. Our first question comes from the line of Edwin Mok of Needham and Company. Your line is open.
So my first question I think more recently at a conference you guys talked about $450 million revenue number for this year. So you guys are finding you're pretty strong and imply that pretty cool, perhaps your run rate is actually gone above that right. Is that where the -- walk us through how you think about the year progress and if that 450 is still a starting point or anyway you can describe that?
Edwin, the addition for us right now as I mentioned in the script is that we have pretty good visibility into Q2, but beyond that -- so that would be the second half of the year, we really don’t have visibility and that’s something that’s actually quite normal for us at this point in the year. So the issue at this point is that we can't really make a call on the second half of the year, but we have enough confidence in the projects that are out there and the strength of the Purion platform that the $450 million revenue is the right revenue to target in the year. And again, it's around $450 million, so we’ll just have to play it out and as we get further into the year, we can likely provide more color on that.
Second question I have, I guess question for you to have in -- in first quarter, you guys guided for gross margin to basically recover to 38%. But from your commentary, it sounds like you have a lot more into Purion H, which is still the lowest gross margin product. What allow you to push to margin back to 38%? And should we expect more improvement beyond that?
In our targeted model, we did say that we were targeting 39%. So 38% Edwin is right in line with where we want to be at this point in time. As you point out, we do have a lot of momentum with Purion H, and in the quarter Purion H still represents a fairly large number of the shipments. We’re making progress on cost-out that’s the one lever that we can control entirely right now, and we’re pushing the teams aggressively too, so we can do the grind work cost out of these. So based on the cost improvement we’ve made and then the mix we got coming out 38% is where I think we’ll be. And again, we’re still targeting that 39% on the $450 million model, which is what we’re running at this year.
Last question I have, always you guys have fund these well, '17 was a really strong growth year clearly in share there. Have you started to see increased competition from, not just from the large competitor out there of the largest company out there, but also from the Japanese competitor? Have you seen like competition from either front and what are you guys doing to address potentially more aggressive boost by those competitors?
So I don’t think we’ve seen any significant change in the competitive landscape. Our primary competitors Applied Materials, which shouldn’t be a surprise to anybody. And I would say infrequently run into some of the more niche players. But again, the market share that we’ve been taking away to get to -- I think we ended up at 27.4% based on the $1 billion TAM, really has come from Applied.
Again, you don’t think that -- or you haven’t seen at least Applied starting get more aggressive on commercial term pricing and potentially new product offering?
At the end of the day, we all know that customers ultimately select products based on technology. And the Purion products are very competitive for a multitude of applications. So we have talked about how we’ve seen some pricing pressure. And we expect that that’s a near term phenomenon as we gain market share, particularly as we gain market share with the Purion H. But we believe that when we reached market share leadership, we think that pricing pressure will ease up. And again, it's all about the technology, and Purion is winning. So we feel like we've got superior technology.
Our next question is from the line of Craig Ellis of B. Riley.
This is Peter Peng calling in for Craig Ellis, and thanks for taking my questions. Under $1 billion implant target, just wondering you were talking about a double-digit WFE growth and 85% of that is memory driven. So why wouldn’t we argue for something similar to that given that DRAM incentives and NAND intentionally is highest for prior implanters?
Implanters are primarily -- competitive platform for implanters is primarily on productivity. And so that's -- unfortunately that takes away from a pure one-for-one TAM growth as you look at WFE growth. So that's the primary factor.
And if I do the revenues and back out into the share gain, it seems like its 400 basis point of share gains from 2017 to 2018. Given that you laid out four initiatives, should I kind of be assuming 100 basis points for each initiative or should I be placing more on existing memory customer versus penetration of logic, how should I think about that?
Well, I don’t know if you can necessarily deviate up evenly. I think the best way to look at it is existing customer base is obviously, they have their two of record, we’re working with them on additional recipes. And as they add wafer starts, we’re two of record. So that's the most likely place where you gain share most quickly. When we look at China, we have a very strong base in China as they build, which are expected to build especially in the second part of the year pretty aggressively then we would expect we would get our fair share business there.
The advanced logic and Japanese markets are longer term within the model. And so we are hoping that we’ll ship tools and have evaluation units go out in 2018, and that would give us the opportunity for substantial revenue as we go into '19 and '20. So they're really more critical to the $550 million model than to the $450 million. So I mean that's the best way to look at it. I'm not naturally you can deviate up, because there’s a lot of projects for each of those segments.
And just on the first half of revenue expectations, given that it's memory loaded first half. Should we be thinking that the similar for Axcelis that it's going to be memory heavy on the first half and versus…
No, I mean we have, typically for the last three to four years now, been split pretty evenly annually between the mature process foundry and logic type customers and memory. And we continue to see that split pretty strong and pretty evenly. So it varies quarter-to-quarter to some degree, but you shouldn't assume -- make the assumption that we’ll be very heavily weighted towards one of the other in any of the given quarters.
Okay, so it’s more equally balanced.
Well, the thing that you have to look at is that the implant technology, again based on the fact that it’s really productivity driven and it’s very device driven, has a lot more opportunity in the mature market and in the older foundries than many of the other process tools. So that's one of the key reasons why we see that difference in weighting.
One more question before I hop back into the queue. The pricing pressure. Is that a statement to the Purion H product or is that also applicable to the Purion XE?
It's mostly a function of the Purion H. We're gaining pretty rapid market share with the Purion H. I mean if you look back, we only introduced the product at the end of 2014 and here we are by the end of 2017 with having the Purion as a process tool of record in seven out of the 10 largest CapEx spenders. So we've talked before how it’s the most rapidly adopted product in Axcelis' history. So it’s something that's happened very quickly and has attracted some, noticed by our competitors. But again, it’s all about the technology, the Purion H is very strong competitive technology with multiple advantages for our customers. And so again, there's some pressure here in the near term but we think longer term that's going to subside and we're going to just continue to win with Purion.
Thank you. Our next question comes from the line of Christian Schwab of Craig Hallum. Your line is open.
This is Tyler on behalf of Christian, thanks for letting me ask a couple of questions. So first, the valuation tool that you're shipping to China. Can you help me with the timing of that? Gross margin guidance that you pointed 38%, am I right to assume that that’s not been recognized in Q2 and that would probably be recognized in early Q1 -- it would be recognized in Q2 then?
Well, typically evaluation tools are anywhere from six to 12 months before they’re recognized. So you're correct in assuming that would not be in the Q1 numbers. It’d be a future quarter, six to 12 months is a typical ease out.
And then on the same lines of previous question, just for seasonality through the year. Earlier today another peer in the semiconductor space discussed what they thought semi-equipment CapEx to be strong 2018, but it'd be front end loaded. Do you agree with that, could CapEx improve through the back half of the year?
I think it's really a function of visibility Tyler. And as Mary said, earlier we have good visibility in the first couple of quarters, actually a little bit longer than -- a little bit deeper than we normally do. And so at this point, it's really hard for us to judge exactly which projects are going to move faster or slower as we get into the second half. There's a lot of opportunity out there, a lot of people building shelves and there has not been a change in the demand on the memory side. That was highlighted in some recent memory company announcements. And as we talked about the IoT and the mature technology continues to be very strong for implant. As a function of the fact that they need faster and more productive implanters to be able to support the growing number of products and devices in their fabs.
Thank you. And the next question comes from the line of Patrick Ho of Stifel. Your line is open.
First in regards to the opportunity with the indigenous Chinese manufacturers that you talked about -- talked about the shipping of an evaluation system. I guess two twofold, one, how many more do you see potential evaluations in 2018 with other Chinese memory vendors? And maybe for Kevin in terms of the cost, the multinationals are well-established in China, you probably support and service them pretty strongly with the infrastructure you have in place. But how much do you have to expand the Chinese infrastructure to serve the local vendors, which tend to be a little more spread out?
Just the evaluation we would actually went to multinational so we have shift tools in the quarter to the domestic memory customers. But those aren’t the eval, the eval went through multinational, just to clarify that. As far as the staffing requirements and so forth to supported it, it is something that we’ve talked about we have been investing pretty heavily over the last year as these new projects have come up. And I'll let Kevin comment additionally on that.
Patrick, there are additional units that will go out to some of these new memory manufacturers in China, likely in 2018 and some of them they still into 2019, again based on the timing that Doug talked about, it’s just simply a matter of when the projects are going to start up.
So Patrick, we did have infrastructure in China. We did also last year continue to talk about adding that infrastructure. I think we made some really good in roads in 2017 building things up. There is still more plan for this year. But that all fits within the 25% of revenue and OpEx model that we have out there for our $450 million target. So we are still investing, but again its covered. It's not outside of what we have in our model.
And maybe and my follow up question and maybe again for you Kevin in terms of the GSS business, which continues to show growth year-over-year. And given the adoption of Purion and the rapid pace that you’re seeing. What kind of qualitative commentary can you give on the GSS opportunity, particularly in 2018 given the rapid growth assistance in 2017?
So if I look at the whole aftermarket business, which has huge tools and spare parts and service and upgrades, there is no doubt that more tools we shift that adds to that base business. But we rebase line that if we include our implanters and strip products it’s probably 3000 tools out there. So although we’re shipping new tools though and then that we will add to this year, which it’s not going to spike it. So where we’re really looking to grow Patrick is on the upgrade business, because we have such a large install base. And a lot of these tools are very old because an implanter last for real on time. We’ve added quite a bit of resources, engineering team and developed what we consider high margin upgrades to really push the revenue higher there. So yes, Purion will add to the base, but the faster growth is going to be coming through upgrades and a little bit through winning back some business that the third parties have captured. We’ve got some innovative ideas having go about to and that with designs and things.
And particularly, the expanse and consumer was there…
Our next question is from the line of David Duley of Steelhead.
I just had a couple of clarifications just as far as 2017, the market share that you achieved in '17 was approximately is less than on your presentation for 2018, the $450 million of revenues that you planned. What market share will that be as well?
So the market share in '17 was approximately 27%. The market share that we associate with the $450 million revenue model is about 32%.
And then can you give us an idea now, I think you've mentioned in the past, what percentage of systems shipments are Purion H?
Well, we haven't given a percent, but we did say that the Q4 shipments were the highest month or highest quarter ever of the shipments. As a matter effect in Q4 we shipped almost as many tools in Q4 as a rest of the whole first half of the year for Purion H. But we don’t give an exact percent and then in Q1, there is still a high number of Purion H and the mix that's planned for Q1.
And then could you give us an idea of where your current lead times are and have they expanded? And then the final question from me Kevin is could you just walk us through the P&L impact of brining that I think $80 million of deferred tax assets just back on to the balance sheet. How is that going to impact the P&L statement, going forward?
So in terms of lead times, our supply chain is still doing a great job keeping up with it. So our lead times typically on a shipment sell tool where we have long lead material already driving and we keep a certain amount of long lead driving, we can turn a tool within a quarter, because the factory cycle time is only about four weeks on the shipment sale. And the rest is really about getting the long lead here we have to just take the short lead and most of the materials 50 days or less.
In terms of the impact from the valuation allowance that get reversed. So we now have an asset and in the press release you can see on the balance sheet the asset that’s there. We will use that asset going forward to offset any cash expense we have from taxes. So the new tax laws is biggest and back to our company was pretty much a fact that we are tax payer now, we're in a 21% tax bracket. There is a lot of other things in there with toll taxes and stuff, but they really had minimal impact on our business. So the biggest impact of that data going forward is that we have a fairly large deferred tax assets sitting on the balance sheet now for $81 million and some change and for every dollar tax as we have to pay going forward, we will offset that. So we will be a non-cash tax payer for a good amount of time. Obviously, the better the business does the faster we burn enough, but we will apply those going forward. So the P&L will be impacted. We're going to have a tax expense on the P&L, but then we're going to turn around and it will be a non-cash expense, because we'll offset it with that asset that we have the deferred tax asset.
So will you be breaking out this impact going forward on a pro forma basis, so we can kind of -- on apples-to-apples?
So we try to do this today. We said we had $0.10 of tax impact, so pretty much what we're saying is we guided 34 to 37 prior to the reversal, we've been guiding 44 to 47 but we got this $0.10 of tax impact now, at the P&L low, but again not the cash level.
And just a final clarification, you mentioned you talked about your cycle times in your factory and lead times for a bunch of different things. But right now, someone gives you an order -- how many weeks is it before you deliver it?
So we keep -- we have planning material bunch along lead materials, so that's assuming long leads here and we have a good amount of long lead here. Short lead material is all less than 60 days and our build time is four weeks on shipments. So in the worst case, it’s three months but it can be less than that. So it's very possible for us to turn tools within a quarter if we get the order early in the quarter.
Thank you. Our next question is from the line of Mark Miller of Benchmark. Your line is open.
I had a question, you were talking about growing the upgrade business. Will that have a positive impact on GSS margins and where are the margins relative for GSS and relative to overall company margins?
The only thing we ever say is that the GSS margins are very accretive. And the answer is yes. The upgrades will grow those margins higher. If I look at know the business, the upgrades are some of the higher margins when you look at all the buckets within that side of the business between used tools, spare parts, consumables, service. So the upgrades are some of the higher gross margin pieces of that business.
On the local Chinese where manufacturers coming out this year, what percent of those will be just be in power protection and going into production ramp in 2019. What's your estimate? How many will actually be in full production this year versus full production 2019?
I think most of them actually are starting up pilot lines. The tools that are getting shipped now aren't going into pilot line. So it’s going to take them a while to work out the kinks, especially given that some of them have actually developed the technology themselves. So there's a lot of work they have to do before they go into full production.
And then related to that, what do you think geographically will be your sales mix in 2018, will it be similar to 2017 with Korea being 57% or 60% of it?
No, we expect that China will actually have the largest percentage of our business or be the largest percentage of our business in 2018. Korea would still be strong, but China should surpass it this year.
Thank you. And at this time, I am showing no further questions [Operator Instructions]. And this does conclude today's Q&A portion of the call. I will now turn the call over to Miss. Mary Puma who will make further closing remarks.
Thanks Amanda. So we’re looking forward to an exciting year for Axcelis and for the industry. As always, I want to thank you for your continued support and hope to see you in the coming months at one of several investor trips we have planned. Thank you very much.
This concludes the presentation. Thank you for your participation in today's conference. You may now disconnect. Good day.