Axcelis Technologies Inc

NASDAQ:ACLS

Earnings Call Transcript 2022-Q4

[Operator]

Good day, and thank you for standing by. Welcome to Axcelis Fourth Quarter and Full Year 2022 Conference Call. [Operator Instructions].

I would now like to hand the conference over to Mary Puma, President and CEO of Axcelis Technologies. Please go ahead.

[Mary Puma, CEO, President & Director]

Thank you, . With me today is Kevin Brewer, Executive Vice President and CFO; and Doug Lawson, Executive Vice President of Corporate Marketing and Strategy. We are all participating in this call remotely, so I would like to apologize in advance for any technical difficulties. If you have not seen a copy of our press release issued yesterday, 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 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.

Good morning, and thank you for joining us for our fourth quarter and year-end 2022 earnings call. As a result of strong execution by the Axcelis team and robust demand for the Purion product family, we are pleased to announce record quarterly and annual revenues. Revenue for the fourth quarter was $266.1 million, with earnings per share of $1.71. Revenue for the full year 2022 was $920 million with record annual earnings per share of $5.46. As a result of a record backlog of over $1.1 billion, continued solid bookings and strong customer demand in the power device market, we expect both revenue and earnings to grow in 2023.

For the first quarter of 2023, we expect revenue of approximately $240 million, gross margin of roughly 41.5% and operating profit of around $48 million and earnings per share of approximately $1.25. For the full year 2023, Axcelis revenues are expected to exceed $1 billion. This represents revenue growth of over 8% in a year in which overall wafer fab equipment is expected to decrease by over 20%.

Additionally, we are introducing a new long-term implant-only model with revenue of $1.3 billion that we believe is achievable within the next 2 to 3 years. The mature process technology market continues to be an area of strength for Axcelis, with 76% of fourth quarter system shipments going to mature foundry logic customers, 4% to advanced logic customers and the customers comprised of 15% DRAM and 5% NAND. For the full year 2022, 82% of system shipments went to mature foundry logic customers, 1% to advanced logic customers and 17% to memory customers comprised of 8% DRAM and 9% NAND. The geographic mix of our system shipments is becoming more globally distributed. In the fourth quarter, China represented 35%; Korea, 29%; the U.S. 19%; Europe, 8%; Taiwan, 6%; and the rest of the world, 3%. For the full year 2022, China was 41%, Korea, 20%; the U.S., 15%; Europe, 9%; Taiwan, 6%; Japan, 2% and the rest of the world, 7%.

The power device market is anticipated to be Axcelis' demand driver through this industry downturn due to the rapid growth rate of the market and the high implant intensity of power devices. We expect over 55% of our system revenue in 2023 to come from this segment with greater than 50% of the overall power device system revenue coming from silicon carbide applications. Silicon carbide provides many performance advantages over silicon for electric vehicle applications and is expected to grow significantly over the next several years. Currently, we estimate that silicon carbide wafer starts will double every 3 years, driven by a 30% annual growth rate in this device market, which is dominated by automotive.

Purion power series products for silicon carbide have been designed to support the technical challenges facing our customers as they ramp to high volume in support of their automotive customers. Axcelis is the only ion implant company that can deliver complete recipe coverage for all power device applications. The full Purion power series family of products allows customers to optimize their fabs for high-volume manufacturing and to continuously improve their power device performance.

The Purion H200 and Purion EXE family, in particular, provide high levels of productivity and lower cost of ownership to our customers as their recipe mixes shift to high dose and high energy implants. Since 2021, we have seen increasing adoption of Purion H200 silicon carbide and Purion XE silicon carbide systems in addition to our Purion M silicon carbide tool. In 2023, we expect revenue from silicon carbide customers to be spread relatively evenly across these 3 types of Purion power series implanters.

This complete product offering provides a significant competitive advantage for Axcelis in this market. The power device customer base is large and growing, and we are actively engaged with all customers in this high-growth market segment. Axcelis is considered by power device customers to be the technology leader and the supplier of choice, providing the best product family and manufacturing capabilities. This means that using Axcelis tools provides the lowest risk path to high-volume manufacturing required to support aggressive fab ramp plans. Axcelis placed a significant value on enabling our customers to succeed in this exciting market by providing differentiated product performance and a high level of customer satisfaction.

Now I'd like to turn it over to Kevin to discuss our financials and operational capabilities and to introduce our new $1.3 billion model.

[Kevin Brewer, EVP & CFO]

Thank you, Mary, and good morning. We are extremely pleased with our fourth quarter and full year 2022 financial results and are very excited about our projected growth to greater than $1 billion of revenue in 2023. We are also happy to have the opportunity to share with you today our new implant only $1.3 billion revenue model that we believe is achievable over the next 2 to 3 years. Financial details around our expectations for 2023 and the $1.3 billion model can be found on Page 8 of our investor presentation.

Looking at our fourth quarter, revenue finished well above guidance due to strong execution in the pull-in of additional systems and CS&I business from Q1 2023. This drove Q4 systems revenue to $203.8 million and CSI to $62.3 million combined for record quarterly annual revenues of $266.1 million and $920 million, respectively. In 2023, we expect total revenue to be greater than $1 billion, driven by continued strength in the power device market. CS&I revenue will vary quarter-to-quarter, but should be modeled at approximately 25% of total revenue for both 2023 in our $1.3 billion revenue model.

Looking at gross margin, we finished 2022 at 43.7% or 50 basis points higher than in 2021. Despite a very challenging year, with higher supply chain costs. Q4 gross margin finished at 41.2% as expected, pressured by higher material costs and a less favorable product mix. We expect margins will begin to recover in Q1 to approximately 41.5%. We still remain under pressure by higher material costs related to prior inventory purchases in a continuing less favorable product mix.

In the second half of the year, we expect meaningful improvements in supply chain costs and a return to a more favorable product mix. This should allow us to achieve full year gross margins of 44% as shown in a $1 billion revenue model. We remain laser-focused on gross margin improvement through supply chain initiatives that include a number of value engineering and strategic sourcing projects. This, combined with sales of higher-value Purion product extensions allows us to target gross margin at greater than 45% in a $1.3 billion model.

Turning to operating expenses. They were well controlled in 2022 at 20.6% of revenue and 3.4% lower than in 2021, highlighting the leverage of our business model. Operating expenses should be slightly down as a percent of revenue in 2023 at approximately 20.5% and further reduced around 19% of revenue in a $1.3 billion model. R&D is expected to account for approximately half of our spending to further solidify our technology advantage in the specialty markets and support penetration into markets like advanced logic.

Additionally, we will continue to invest in infrastructure and our workforce to support growth and financial models. One example of infrastructure investment is our new state-of-the-art logistics center in Beverley, Mass located just a short walk from Axcelis' headquarters. This facility is scheduled to open this summer and provide centralized logistics and flex manufacturing capacity. We also plan to further ramp our manufacturing operation is our needs to grow.

We ended 2022 with $433 million of cash, cash equivalents and short-term investments and generated $215.6 million of cash from operations during the year. During 2022, we repurchased $57.5 million of stock and have returned over $132 million of cash to shareholders since 2019 through our share repurchase program. As a result of the success of Purion, higher gross margins and tight cost control, Axcelis' profitability has improved significantly. In 2022, we finished with operating profit of 23.1% of revenue and delivered $5.46 of earnings per share with 22.3% free cash flow.

Before I close, I'd like to summarize our new $1.3 billion implant-only business model targeted for achievement in the next 2 to 3 years. We are modeling our revenue at approximately $1.3 billion, gross margin at greater than 45%. OpEx at approximately 19%, operating profit around 26% and free cash flow at approximately 25%. We are excited about the significant growth opportunity in the ion implant market over the next several years. Axcelis also has a rare opportunity to grow revenue and profitability during significant industry downturns. This is a result of strong product positioning in a power device market and continued execution in a challenging environment. Once again, I want to thank the entire Axcelis team for their continuing outstanding performance. I also want to thank our supply chain partners for their hard work supporting Axcelis and our customers for their confidence in our ability to deliver.

I'll now turn the call back to Mary for closing comments.

[Mary Puma, CEO, President & Director]

Thank you, Kevin. The Axcelis business thesis, which supports over $1 billion in revenues in 2023 and $1.3 billion over the next few years is based on the following 5 key points: First, the implant TAM has more than doubled in the last few years with the mature market segments representing greater than 60% of the total TAM. Second, power devices and image sensors are highly implant intensive and the general mature nodes have increasing implant intensity peaking at 28-nanometer. Third, high-value Purion product extensions were designed to optimize power and image sensor device manufacturing, uniquely positioning Axcelis to benefit from high growth in the mature process technology market.

Fourth, Purion product differentiation has propelled Axcelis to implant leadership in these high-growth specialty device market segments; and fifth, we have strong long-term customer relationships and a fundamental cultural desire to win by making our customers successful. As a result, we are well positioned to grow through the current down cycle, and we'll continue to evolve our business to leverage the trend and capture the opportunities that lie ahead.

With that, I'd like to open it up for questions.

[Operator]

[Operator Instructions]. And I show our first question comes from the line of Quinn Bolton from Needham.

[Nathaniel Bolton, Needham & Company]

Congratulations on the nice results and pulling the $1 billion model into this year. I guess maybe for Mary or Kevin, just as we think about reaching the $1 billion TAM, can you give us any sense on your expectations just sort of linearity through the 4 quarters of '23. It sounds like you pulled in due to strong execution, some revenue from the first quarter into the very strong fourth quarter and so you're guiding for a sequential step down in Q1 versus Q4, but would you expect sort of sequential growth through the rest of the year?

[Kevin Brewer, EVP & CFO]

Yes. Quinn, this is Kevin, as you point out, Q4 is down a little bit as a result of the pull-ins. What I would expect is we've obviously got to come above the Q1 run rate to hit greater than $1 billion this year. The way I'm looking at the year now, I think it steps back up in Q2, and it's probably mostly flat throughout the year. So I feel it comes back up in Q2 and kind of stays flattish throughout the year based on what I'm looking at right now.

[Nathaniel Bolton, Needham & Company]

Okay. And then, Kevin, on the margins, obviously, starting the year 41.5% getting to 44% for the year sort of implies that margins must be at 45% or higher in the back half, just to get the numbers to work. What are the key drivers of that margin improvement? Is it really just product mix to more high energy and capturing some of the lower material costs as the premium costs flow through the income statement?

[Kevin Brewer, EVP & CFO]

Yes, it's exactly that. We have -- as I mentioned, I mean, we do have a lot of pre-bought material at some higher prices. The supply chain team, along with our supply partners have done a really good job working some of the costs back out, which really starts to hit in the second half of the year. So as those lower costs start to come through our efforts with our suppliers and some strategic sourcing projects. We actually have qualified a lot of new parts at lower cost, which is going to help as well as the value engineering, I think 1 of the issues, Quinn, that a lot of us had throughout the pandemic is there's a lot of chip shortages and most of those chips are older type of chips.

So our value engineering team has worked with our suppliers that come up with designs they're using newer chips, so we don't get back into that same situation. So that helps. There's going to be some factory efficiency too. I'm not going to say that the supply chain delivery issues are all going to be behind us in the second half, but there's definitely pockets of improvement and as that starts to flow through, that will help the factory efficiency a bit as well. And then as you pointed out, the biggest -- the other biggest lever is that shift back towards a higher mix of high energy it's no secret.

I think it's Page 23, an investor presentation. We have the relative standard margins of the 3 products, the high current, medium current and high energy and you can see what happens if that mix moves around a little bit. So I feel good about the full year at this point at 44% based on the assumptions that we're making for mix and things I know from a supply chain point of view, that will start to impact us more in the second half with cost out.

[Douglas Lawson, EVP, Corporate Marketing & Strategy]

Quinn, one other thing just to add on the product side. The other thing that goes on is we're starting, as Mary mentioned in the script, to see a much bigger swing to high current and high energy in the silicon carbide market, and that will continue to ramp through the year. as customers are starting to ramp their fabs to high volume. And that's a positive on the margin side as well.

[Kevin Brewer, EVP & CFO]

Yes. I think anywhere where we have the product extension Quinn that we talk about are related to silicon carbide and other things. The product extensions definitely carry better margins than the base tools. So moving as Doug says, has been more high current silicon carbide is better than the base -- systems are we after right now.

[Nathaniel Bolton, Needham & Company]

Great. And then just finally for Mary. The $1.3 billion model looks like it gets you to almost $9 of earnings per share, which obviously is very strong earnings, but in the presentation, it seems like you're talking about the opportunity to pursue M&A outside of implant to continue the company's growth prospects longer term. Can you just give us your sense, your M&A strategy, would you consider dilutive transactions? How strategic are you looking at? Just any sort of comments around your M&A philosophy and particularly, thoughts around would you pursue a dilutive deal, I think, would be helpful.

[Mary Puma, CEO, President & Director]

Yes. Quinn, we're really at the beginning of this journey. As you know, we hired a VP of Corporate Development to focus on strategy and M&A to grow beyond the $1.3 billion model. And we just did that mid last year. So there's a lot of analysis going on right now to understand what potential opportunities lie ahead of us. There's really nothing at this point in time that we can share. I will say that anything potentially we would do in the near term would probably be something along the lines of helping us grow our implant business. But in terms of moving beyond implant, it's going to take us some time to really develop that strategy and go any further with it in terms of having anything else to share with you and other investors.

[Operator]

And I show our next question comes from the line of Craig Ellis from B. Riley.

[Craig Ellis, B. Riley Securities]

Congratulations on the quarterly execution, very strong in real tough environment. Mary, I wanted to start just by understanding what's changing as the company looks at the new model at $1.3 billion, a really nice increase from the $1 billion. So can you just help us understand how much of that is due to a larger TAM, how much might be share gain geographically in Japan, et cetera, and how much might be due to things like progress with advanced logic, et cetera?

[Mary Puma, CEO, President & Director]

Okay. I think, Craig, as we continue to execute over the next 2 to 3 years, you're really not going to see any significant changes in our strategy. I mean, we've made major investments in Purion products, particularly in the specialty markets, and we've made great progress because now obviously, we're the leader in those specialty markets, particularly in silicon carbide right now and which is driving -- power devices and silicon carbide, which is driving our growth. So we're going to continue to focus on all the things that we've been focused on. If you look at our investor presentation over the next 2- to 3-year time frame, the TAM really isn't going to make any significant jumps. It will fluctuate based on things that are going on in the industry and in the economy. So there aren't going to be any significant changes in the TAM. However, we've talked a lot about how because of the electrification of the automotive industry, there will be continuing growth in the power device market, for example, and in silicon carbide. So that, as we said in the script, is really going to be the major driver for our growth.

That said, we're going to continue to invest in our product line extensions. We're going to continue to focus on things like China and Japan. We're going to continue to work to improve or increase our penetration into the advanced logic markets. There's a lot of work we can continue to do with existing customers to actually expand our share within those accounts. We're doing a lot of work with our customers in terms of JDPs. We've got partners that we were trying to explore sort of novel ways to use ion implant. So all those things will continue. We've said all along, and I think it's going to be true in the $1.3 billion model, there will be increasing contributions from Japan and from advanced logic, but that's not really going to be where the significant growth is going to come from. It's going to continue to be the mature process technology markets, the power devices, the image sensors, memory will come back and we're very well positioned to capture that business when that segment does recover. So a number of things, but all things that we've talked about, we will continue to execute against.

[Douglas Lawson, EVP, Corporate Marketing & Strategy]

And Craig, if I can add to that a little bit. Again, I want to emphasize, Purion H200 and Purion XE for silicon carbide over the course of that next 2 to 3 years, many of the silicon carbide customers will be ramping to much higher volumes and optimizing their devices. And those 2 tools will become very, very important to their strategy. And then the second thing relative to the product extensions is the image sensor market as the economy improves and phones pick up speed again, we'll start to see more XEmax and more VXE type sales into image sensors that will contribute more in the $1.3 billion than our plan for this year. So.

[Craig Ellis, B. Riley Securities]

Got it. Those points both make sense, Mary. So I wanted to follow-up just on the $1.3 billion target and understand how the company is looking at really the linearity of getting there. So one, if demand were there for that to be achieved in 2024 are there anything -- is there anything in the supply chain materials, company capacity, et cetera, that would preclude being able to ramp that aggressively? And then if the target model would be attained in a 3-year time frame, that would imply about 9% average annual growth. And how do we think about the different puts and takes if the model were to be achieved over a longer period than 2024 achievement with different end market areas contributing or different geographic areas contributing?

[Kevin Brewer, EVP & CFO]

So let me start with that, and then Mary and Doug can add. And so as we said, Craig, we do expect it's a 2- to 3-year time frame that we get to the $1.3 billion in terms of the business, where we're making investment, both in the R&D side of the business or in the SG&A side of the business. I don't -- I have no concerns that we are going to have problems getting to this $1.3 billion model due to a lack of resources or infrastructure also on the supply chain side and factory capacity side. We have done a lot of work with the supply chain over the last couple of years, both out of the necessity and then really just to improve things and add additional capacity. So there's still supply chain constraints that are -- I don't think there is related to ramping as they are just all the other stuff that's been going on. So as the supply chain recovers and taking a look at everything we've done to add capacity with our supply chain partners as well as that capacity of the factory. I think we're going to be -- and we're well positioned. I'm not worried about capacity.

The one thing I would say is that, for some reason, things dragged out longer. That would probably be even better for gross margins. So when you're working on value engineering projects, when you're bringing on new low-cost partners and things, time is always your friend. So my only input to what would happen if things delayed is you probably get a positive impact to margins, which would flow through to all models right to the bottom line.

[Craig Ellis, B. Riley Securities]

That makes sense. And then -- go ahead, Doug.

[Douglas Lawson, EVP, Corporate Marketing & Strategy]

No, just to say the second part of your question, Craig, relative to the contribution of the segments and the timing and so forth. I think we're going to see a pretty steady growth in the power market. It's going to be shifting more to silicon carbide, going to be shifting, as I said, more to the full family of products and that's going to be a big driver. I think the timing is probably a little more -- of getting to $1.3 billion is probably a little more dependent on how quickly consumer recovers and what the impact that has on general mature and image sensors that will have some bearing on how much advanced logic is included in our objectives there. And then more -- probably most importantly, will be the memory recovery as this inventory is digested and people start spending, the timing of that, obviously, will have significant impact on the achievement of the $1.3 billion model.

[Craig Ellis, B. Riley Securities]

Yes, that makes sense. It would be nice to get some more Purion Dragon in the mix. Mary, if I could just follow up on the earlier question on M&A. So your comments sounded very consistent with what we've been hearing over the last couple of quarters in terms of intent and timings. I get that but I'm wondering as you do further work with business development and with the Board explore opportunities, are there particular areas outside of ion implantation that are starting to rise to the top of the interest level for the company? And if so, can you give us some color on what the attributes of those areas might be?

[Mary Puma, CEO, President & Director]

Yes. So again, we're sort of at the begin -- what I'll call the beginning of this journey. As I said before, there's a lot of research going on. we share an update with the Board quarterly. So everyone is in the loop in terms of what's going on. But again, it's just too soon to share anything. Internally, there are some things that seem to be of interest to us. But very early stages. So there's more work that we need to do before we'll share it with -- externally.

[Craig Ellis, B. Riley Securities]

Okay. Look forward to hearing you about that.

[Operator]

And I show our next question comes from the line of Mark Miller from the Benchmark.

[Mark Miller, The Benchmark Company]

Congratulations on a fantastic year and outlook is also very positive. In terms of -- you had a number -- I think 5 evals, I was just wondering if you can give us an update on these evals and what's the potential from the evals?

[Mary Puma, CEO, President & Director]

Yes. So Mark, we actually have 6 in the field now. There's always -- there are always the ones that end up closing successfully and then new ones going out. But Recently, we just closed 2 evaluations. One was a Purion XEmax at a leading image sensor company where they're using it to develop their next generation of image sensors. And then the second one was a Purion H evaluation of the DRAM manufacturer. So those were in Q4. In terms of where we are today, we actually have, as I mentioned, 6, one is a Purion M at a DRAM customer, and this customer has other Purion products. One is the Purion XEmax, which is an image sensor customer, and this would be a new high energy penetration for us.

And then there are 3 in the general mature process technology segment. There's 1 Purion XE that would be a new high energy penetration. And 2 Purion Hs. One is a new customer and then the second 1 is a new high current customer for Axcelis and then the sixth 1 is a Purion Dragon at advanced logic, and that's being used at an R&D lab to develop some next-generation devices. So that's where we are now. And as I said, things will go in and out in terms of closure and putting new systems in the field.

[Mark Miller, The Benchmark Company]

You've been adding new customers. And I'm just wondering if you could estimate the percent of sales on customers you've added within the last year or 18 months from these new customers?

[Mary Puma, CEO, President & Director]

I don't have an exact number for you. I will tell you that, yes, you're right. There are a lot of customers. We have a very broad and diverse base of customers. I think it's safe to say that the majority of these new customers are in the mature process technology segment and many of them are actually manufacturing power devices so that's the area where we've had significant growth.

[Mark Miller, The Benchmark Company]

And again, congratulations on a wonderful year and a great outlook.

[Operator]

And I show our next question comes from the line of David Duley from Steelhead Securities.

[David Duley, Steelhead Securities]

Mary, I think in your prepared remarks, I think you were mentioning that power would be 55% of revenue, and then you said something about silicon carbide could you just repeat that commentary? I didn't hear it.

[Mary Puma, CEO, President & Director]

Yes. I said our ship systems revenue in 2023 is expected to be about 50% of our total revenue. And that half of that 55% would actually be for silicon carbide or shipping silicon carbide tools.

[David Duley, Steelhead Securities]

Okay. And then you've mentioned several times that capital intensity, I think, of silicon carbide and power devices and CMOS image sensors. I know it's typical, but could you help us understand how much more implant intensive do you think these devices are versus standard silicon devices?

[Douglas Lawson, EVP, Corporate Marketing & Strategy]

Yes. Dave, the power devices, image sensor devices. They have a lot of implants they are -- when you look at Moore's Law, the number of implants increase in a large standard logic process when peak at around the 28-nanometer node. Power and image sensors have at least the same number, probably more, but they have a lot more high energy and high-dose implants, which are longer implants. And so hence, add to the overall intensity of the implant needs for those devices. And we see that increasing. The general trend is for higher doses and higher energies as customers optimize the overall device performances for the higher voltages and for the better efficiencies, especially on the silicon carbide side. So that's where that comes on power. On image sensors, it's very high energy intensive, and that's what brought us to introduce the Purion XEmax, which allows for very, very high energy levels as well as very low metals contamination. So again, these are a lot of implants and long implants, and that's what contributes to the implant intensity.

[David Duley, Steelhead Securities]

Okay. And then somewhere in the prepared remarks, I think you said that silicon carbide wafer starts were going to double every 2 or 3 years. Could you just give us a base number on that? Or do you think the wafer starts per month are, year or whatever that whatever number you're referring to, if you could just kind of understand what the size of that wafer start number is now.

[Douglas Lawson, EVP, Corporate Marketing & Strategy]

So Slide 13 in the investor presentation has a chart. But again, it's based on some outside research as well as some internal estimates. And basically, we're looking at last year, probably around 500,000 wafer starts of silicon carbide per year and that doubling essentially every 3 years. And so we're watching this and monitoring it. There's a lot of different estimates out there, and there's a lot of new entrants and players that are adding capacity. And so this is a number that it's probably best to look at 2 or 3 external estimates to get it. But our best guess right now is it's doubling about every 3 years.

[David Duley, Steelhead Securities]

Okay. Final question from me. is, Mary, I think you mentioned that over the next 2 or 3 years, the implant TAM would be relatively flat at the current level, I guess, $2.5 billion. So that kind of suggests that your growth from $1 billion to $1.3 billion is going to be all share gains. Is that the way we should look at it?

[Mary Puma, CEO, President & Director]

I think it's 2 things. One is that we are growing in the markets that are growing I just explained the whole power device, silicon carbide area, which is an area that is growing as part of that TAM. And so we're growing with it. And secondly, yes, we are continuing to gain share really across all segments of the market. So both things are true, Dave.

[Douglas Lawson, EVP, Corporate Marketing & Strategy]

I think just adding to that, Dave. The -- it's really important, memory plays a big role here in the overall TAM or [indiscernible] a lot of spend there. And if we look at our estimates for the TAM, it shows 2023 being down, yet Axcelis is growing, and that's because the power market is up within that. And as memory starts to recover in 2024, the implant TAM will grow with that. And so it's almost -- it's very important to look at the segment growth beyond just the overall TAM number right now.

[Operator]

[Operator Instructions]. I show our next question comes from the line of Christian Schwab from Craig-Hallum.

[Christian Schwab, Craig-Hallum]

Great quarter, guys. So Doug, I just want to make sure, and Mary, the last comment about memory recovery in '24. Is that kind of the current expectation on your '23 guidance is that memory recovers in '24, not the back half of '23 currently?

[Douglas Lawson, EVP, Corporate Marketing & Strategy]

Well, our -- everybody's guess is as good as anybody else's guess as exactly when it happens. But the -- we're anticipating 10% to 15% of our revenue is coming from memory, more related to DRAM than NAND at this point for 2023. And so that would definitely indicate that at this point, we think 24% is probably when things start to come back more robustly, I guess.

[Christian Schwab, Craig-Hallum]

Yes, I think that's fair. And then just on the $1.3 billion opportunity, I think it was kind of answered a couple of different ways. But from like a labor tools and facility standpoint, we could do $1.3 billion earlier, Kevin, if the sales came or the orders came did I hear that correctly?

[Kevin Brewer, EVP & CFO]

Yes. Yes. We're -- we -- from a capacity point of view, we always try to keep our plans ahead of our -- what we think is the real need . So yes, if it came earlier, I wouldn't anticipate any issues from that, Christian.

[Christian Schwab, Craig-Hallum]

Okay. Perfect. And then are we ready to maybe at least give some directional number of how many distinct silicon carbide customers we have currently and how many we think we could potentially be selling to 2 to 3 years from now, or at least like a broad range of -- in a number?

[Kevin Brewer, EVP & CFO]

I think no, we're not ready to give an exact number. It's a large moving target, I guess, would probably be something to say. There's a lot of new entrants. We are absolutely engaged with pretty much everybody in the industry either selling them tools in the process of evaluation discussions or demoing tools with them. And so it's -- but it is a very broad customer base at this point and growing.

[Christian Schwab, Craig-Hallum]

Right, right. I mean greater than 10%, greater than 15%, greater than 20?

[Kevin Brewer, EVP & CFO]

Yes.

[Christian Schwab, Craig-Hallum]

Yes. All right. That's great. I don't have...

[Kevin Brewer, EVP & CFO]

You've never seen me that's the same [indiscernible].

[Christian Schwab, Craig-Hallum]

No, no, that was fabulous. All right.

[Operator]

I'm showing no further questions in the queue. At this time, I'd like to turn the conference back over to Mary Puma, President and CEO, for closing remarks.

[Mary Puma, CEO, President & Director]

Thank you, . I'd like to thank everyone for joining us today. In March, we will be participating in the SIG 12th Annual Tech Conference and the Loop Capital Markets 2023 Investor Conference, both in New York City. We hope to see you at 1 of these events, and thank you for your continued support.

[Operator]

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.