Today ASML Holding NV (ASML) has published its 2023 fourth quarter and full-year results:
Roger Dassen CFO
Thank you, Peter and welcome, everyone. I will first review the fourth quarter and full year 2023 financial accomplishments and then provide guidance on the first quarter of 2024.
Let me start with our fourth quarter accomplishments. Net sales came in at €7.2 billion which is just above our guidance, primarily due to more installed base business. We shipped 10 EUV systems and recognized €2.3 billion revenue from 13 systems this quarter. Net system sales of €5.7 billion which was mainly driven by Logic at 63% and with the remaining 37% coming from Memory. Installed Base Management sales for the quarter came in at €1.6 billion which was higher than guided due to additional service and upgrade sales.
Gross margin for the quarter came in at 51.4% which is above our guidance, primarily driven by installed base business. On operating expenses, R&D expenses came in at €1.041 billion and SG&A expenses given at €284 million, both basically as guided. Net income in Q4 was €2 billion, representing 28.3% of net sales and resulting in an EPS of €5.21.
Turning to the balance sheet; we ended the fourth quarter with cash, cash equivalents and short-term investments at a level of €7 billion.
Moving to the order book; Q4 net system bookings came in at €9.2 billion which is made up of €5.6 billion for EUV bookings and €3.6 billion for non-EUV bookings. These values also include inflation corrections. Net system bookings in the quarter are more balanced between Logic and Memory relative to past few quarters, with logic at 53% of the bookings, while memory accounted for the remaining 47%.
Looking at the full year, net sales grew 30% to €27.6 billion, with a gross margin of 51.3%. EUV system sales grew 30% to €9.1 billion, realized from 53 systems while a total, we shipped 42 EUV systems in 2023. DPV system sales grew 60% to €12.3 billion. Our metrology and inspection system sales decreased 19% to €536 million.
Looking at the market segments for 2023; logic system revenue was €16 billion which is a 60% increase from last year. Memory system revenue was €6 billion which is a 9% increase from last year. Installed base management sales was €5.6 billion which is a 2% decrease compared to previous year. At the end of 2023, we finished with a backlog of €39 billion. Our R&D spending increased to €4 billion in 2023 as we continue to invest in innovation across our full product portfolio. Overall, R&D investments as a percentage of 2023 sales were about 14%. SG&A increased to €1.1 billion in 2023 which was about 4% of sales.
Net income for the full year was €7.8 billion, 28.4% of net sales, resulting in an EPS of €19.91. We finished 2023 with a free cash flow generation of €3.2 billion. We returned €3.3 billion to shareholders through a combination of dividends and share buybacks in 2023.
With that, I would like to turn to our expectations for the first quarter of 2024. We expect Q1 net sales to be between €5 billion and €5.5 billion. We expect our Q1 installed base management sales to be around €1.3 billion.
Gross margin for Q1 is expected to be between 48% and 49%. Lower revenue and margin relative to Q4 is primarily driven by lower emerging volume, along with an unfavorable change in product mix. In addition, we also expect EUV volume and lower installed base business in Q1 relative to Q4. The relatively slow start to the year is a reflection of the current state of the industry coming out of a downturn. As it relates to gross margin, I would like to make a few more comments on the 2024 margin drivers as well as our longer-term ambitions of 54% to 56% by 2025. We finished 2023 with a full year gross margin of 51.3% and there are a number of developments that could impact the gross margin in 2024.
For EUV, positive drivers include a higher ASP of the 3800E as well as improving EUV service margins. For DPV, we expect product mix to have a negative impact on margin in 2024. On our installed base business, we currently expect a similar gross margin as 2023 but the final impact will ultimately depend on the level of upgrades in 2024. And finally, as we have said before, we expect significant costs in 2024 related to the introduction of High-NA and to the ramp of our capacity to 90 EUV, 600 DPV levels that we have talked about before which will create pressure on the gross margin.
When we assess the combined effects of these different developments, we expect a slightly lower gross margin in 2024 compared to 2023. We are still targeting our earlier communicated gross margin ambition of 54% to 56% by 2025. This increase in gross margin will be driven by a number of items.
First, higher sales volume, both in EUV and DPV which improved fixed cost coverage. Second, a move to a higher-margin EUV 0.33 NA system as the vast majority of systems in 2025 are planned to be 3,800 E-Systems. Third, we expect reduced headwinds from capacity investments as we ramp volume, including high NA. Fourth, we will also be transitioning to a higher-margin EUV high NA system, the 5200 in 2025. Lastly, we expect our installed base business to have a positive impact on 2025 margins due to both improved EUV service margins as well as increased upgrade business volume.
The expected R&D expenses for Q1 are around €1.07 billion and SG&A is expected to be around €300 million. Our estimated 2024 annualized effective tax rate is expected to be between 16% and 17%. In Q4, ASML paid the second quarterly interim dividend of €1.45 per ordinary share. ASML intends to declare a total dividend for the year 2023 of €6.10 per ordinary share. The third interim dividend of €1.45 per ordinary share will be made payable on February 14, 2024.
Recognizing this third interim dividend and the 2 interim dividends of €1.45 per ordinary share paid in 2023, this leads to a final dividend proposal to the general meeting of €1.75 per ordinary share. In Q4 2023, no shares were purchased.
- Q4 net sales of €7.2 billion, gross margin of 51.4%, net income of €2.0 billion
- Quarterly net bookings in Q4 of €9.2 billion2 of which €5.6 billion is EUV
- 2023 net sales of €27.6 billion, gross margin of 51.3%, net income of €7.8 billion
- ASML expects 2024 net sales to be similar to 2023
- ASML expects Q1 2024 net sales between €5.0 billion and €5.5 billion and a gross margin between 48% and 49%
Roger Dassen CFO
Thank you, Peter and welcome, everyone. I will first review the fourth quarter and full year 2023 financial accomplishments and then provide guidance on the first quarter of 2024.
Let me start with our fourth quarter accomplishments. Net sales came in at €7.2 billion which is just above our guidance, primarily due to more installed base business. We shipped 10 EUV systems and recognized €2.3 billion revenue from 13 systems this quarter. Net system sales of €5.7 billion which was mainly driven by Logic at 63% and with the remaining 37% coming from Memory. Installed Base Management sales for the quarter came in at €1.6 billion which was higher than guided due to additional service and upgrade sales.
Gross margin for the quarter came in at 51.4% which is above our guidance, primarily driven by installed base business. On operating expenses, R&D expenses came in at €1.041 billion and SG&A expenses given at €284 million, both basically as guided. Net income in Q4 was €2 billion, representing 28.3% of net sales and resulting in an EPS of €5.21.
Turning to the balance sheet; we ended the fourth quarter with cash, cash equivalents and short-term investments at a level of €7 billion.
Moving to the order book; Q4 net system bookings came in at €9.2 billion which is made up of €5.6 billion for EUV bookings and €3.6 billion for non-EUV bookings. These values also include inflation corrections. Net system bookings in the quarter are more balanced between Logic and Memory relative to past few quarters, with logic at 53% of the bookings, while memory accounted for the remaining 47%.
Looking at the full year, net sales grew 30% to €27.6 billion, with a gross margin of 51.3%. EUV system sales grew 30% to €9.1 billion, realized from 53 systems while a total, we shipped 42 EUV systems in 2023. DPV system sales grew 60% to €12.3 billion. Our metrology and inspection system sales decreased 19% to €536 million.
Looking at the market segments for 2023; logic system revenue was €16 billion which is a 60% increase from last year. Memory system revenue was €6 billion which is a 9% increase from last year. Installed base management sales was €5.6 billion which is a 2% decrease compared to previous year. At the end of 2023, we finished with a backlog of €39 billion. Our R&D spending increased to €4 billion in 2023 as we continue to invest in innovation across our full product portfolio. Overall, R&D investments as a percentage of 2023 sales were about 14%. SG&A increased to €1.1 billion in 2023 which was about 4% of sales.
Net income for the full year was €7.8 billion, 28.4% of net sales, resulting in an EPS of €19.91. We finished 2023 with a free cash flow generation of €3.2 billion. We returned €3.3 billion to shareholders through a combination of dividends and share buybacks in 2023.
With that, I would like to turn to our expectations for the first quarter of 2024. We expect Q1 net sales to be between €5 billion and €5.5 billion. We expect our Q1 installed base management sales to be around €1.3 billion.
Gross margin for Q1 is expected to be between 48% and 49%. Lower revenue and margin relative to Q4 is primarily driven by lower emerging volume, along with an unfavorable change in product mix. In addition, we also expect EUV volume and lower installed base business in Q1 relative to Q4. The relatively slow start to the year is a reflection of the current state of the industry coming out of a downturn. As it relates to gross margin, I would like to make a few more comments on the 2024 margin drivers as well as our longer-term ambitions of 54% to 56% by 2025. We finished 2023 with a full year gross margin of 51.3% and there are a number of developments that could impact the gross margin in 2024.
For EUV, positive drivers include a higher ASP of the 3800E as well as improving EUV service margins. For DPV, we expect product mix to have a negative impact on margin in 2024. On our installed base business, we currently expect a similar gross margin as 2023 but the final impact will ultimately depend on the level of upgrades in 2024. And finally, as we have said before, we expect significant costs in 2024 related to the introduction of High-NA and to the ramp of our capacity to 90 EUV, 600 DPV levels that we have talked about before which will create pressure on the gross margin.
When we assess the combined effects of these different developments, we expect a slightly lower gross margin in 2024 compared to 2023. We are still targeting our earlier communicated gross margin ambition of 54% to 56% by 2025. This increase in gross margin will be driven by a number of items.
First, higher sales volume, both in EUV and DPV which improved fixed cost coverage. Second, a move to a higher-margin EUV 0.33 NA system as the vast majority of systems in 2025 are planned to be 3,800 E-Systems. Third, we expect reduced headwinds from capacity investments as we ramp volume, including high NA. Fourth, we will also be transitioning to a higher-margin EUV high NA system, the 5200 in 2025. Lastly, we expect our installed base business to have a positive impact on 2025 margins due to both improved EUV service margins as well as increased upgrade business volume.
The expected R&D expenses for Q1 are around €1.07 billion and SG&A is expected to be around €300 million. Our estimated 2024 annualized effective tax rate is expected to be between 16% and 17%. In Q4, ASML paid the second quarterly interim dividend of €1.45 per ordinary share. ASML intends to declare a total dividend for the year 2023 of €6.10 per ordinary share. The third interim dividend of €1.45 per ordinary share will be made payable on February 14, 2024.
Recognizing this third interim dividend and the 2 interim dividends of €1.45 per ordinary share paid in 2023, this leads to a final dividend proposal to the general meeting of €1.75 per ordinary share. In Q4 2023, no shares were purchased.
