Good day, and welcome to the ASM International Q2 2018 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Victor Bareno. Please go ahead, sir.
Thank you, operator. ASMI issued its 2018 Q2 results last evening. For those of you who have not seen the press release, it alone was our latest investor presentation is accessible on our website, azem.com. As always, we remind you that this conference call may contain information relating to ASM's future business or results in addition to historical information. For more information on risk factors related to such forward looking statements, please refer to the company's press releases, reports and financial statements, which are available on our website.
And with that, I will turn the call over to Caktla Prado, President and CEO of ASMI. Cakt?
Yes. Thank you, Victor. So thank you all for attending today's ASMI Q2 2018 conference call. And of course, we'll start with some introductory remarks and then subsequently, of course, together with Peter van Baumel, our CFO, we're able to answer any questions you may have. So let's now first review our Q2 2018 financial results.
Net sales in the Q2 increased to €209,000,000 an increase of 31% compared to the Q1. Sales in the quarter were in line with our guidance, which was a range of between €200,000,000 230,000,000 And on a constant currency basis, sales increased year on year by 3% in Q2 and by 6% in the first half of this year. Equipment sales increased 34% sequentially. Service and spare parts accounted for 23% of total sales in the 2nd quarter and were up 16%, 1 6% year on year in the first half at constant currencies. In terms of product lines, our ALD business was again the key driver, but we also had a decent contribution from the other product lines.
To highlight one example, in furnaces, we have seen solid sales levels in Q2 and also in Q1 driven by advanced logic as well as so called more than more applications such as sensors and IoT products. Compared to Q1, sales in all industry segments were higher, led by strong increases in logic and foundry. Within memory, sales were at healthy levels in both DRAM and 3 d NAND. The gross margin was 42% in the 2nd quarter. In line with our expectation, gross margin improved substantially compared to 38% in the Q1 and returned to the target range of low to mid-40s.
The sequential improvement in gross margin was a result of a few factors. First of all, moderation of the impact from new products from 2% in Q1 to 1 percentage point in Q2. And secondly, the sales mix of existing products compared to Q1 returning to the normal levels as seen in the past years. And third factor, it was the reduction of the costs associated with our preparations for expansion. We had a strong pipeline of new products and applications that we are going to introduce in the forthcoming periods and that will add to ASM's growth potential.
It is possible that some of the next quarters will show the impact of higher associated installation expenses of these new introductions. That can lead to a somewhat higher volatility in gross margin than what we have seen in previous years. Having said that, we expect the gross margin to remain in the lowtomid-40s range. SG and A expenses increased by 9% compared to the Q1. And while R and D spending increased quarter on quarter with 5%, the reported R and D expenses
decreased with 5%.
This is due to the higher R and D capitalization as more of the new products and applications that we have been working on are getting closer to the point of commercialization. We generated operating income of €38,000,000 in the quarter with an operating margin of 18%, up from 7% in the Q1. Financing results in the 2nd quarter included a currency translation gain of €8,000,000 compared to a loss of €8,000,000 in the 1st quarter. As a reminder, we hold substantial part of our cash balances in U. S.
Dollars. Net earnings on a normalized basis amounted to €62,000,000 up from €90,000,000 in Q1. In Q2 of last year, our normalized net earnings amounted €61,000,000 excluding a book profit of about €100,000,000 related to the sale of a 5% stake in ASMPT in that respective quarter. Let's take a look briefly at the ASMPT. ASMPT delivered again solid results in the 2nd quarter Normalized results from investments, which reflect our share of approximately 25% in the net earnings from ASMPT, increased to €22,000,000 for the quarter, up from €16,000,000 in Q1.
And we're talking about euros here. In the 2nd quarter, HMPT sales rose to US672 $1,000,000 up 21% from the Q1 and up 19% year on year and in line with the company's earlier guidance of somewhere between US650 $1,000,000 US710 $1,000,000 Following the strong level in Q1, bookings in the second quarter increased 10% year on year, slightly above PT's guidance of single digit growth. So let's now turn back to ASMI's consolidated operations. Our order intake in the 2nd quarter amounted to €176,000,000 down from the record high of 207,000,000 euros in the Q1 and as such well within our earlier guidance of a range between €200,000,000 Looking at the breakdown in bookings by industry segment. Foundry was the largest segment, followed by memory.
Foundry orders increased versus Q1 and were driven by the continued ramp of 7 nanometer as well as some early demand related to the next 5 nanometer node. Within memory, DRAM accounted for the largest part of the order intake and NAND bookings after having been at solid levels for multiple quarters slowed compared to Q1. Taking a look at our balance sheet and cash flow. At the end of June, the cash position stood at €651,000,000 down from €741,000,000 at the end of March. This decrease was largely the result of a total of nearly €80,000,000 spent on dividends and share buybacks as well as a negative free cash flow during the quarter and partly offset by €15,000,000 in dividends received from ASMPT.
The free cash flow turned to €37,000,000 negative in the 2nd quarter compared to €15,000,000 positive in the Q1. This is primarily the result of working capital, which increased from 150 €6,000,000 at the end of the Q1 to €213,000,000 at the end of June. The largest part of this increase was in turn caused by accounts receivables, which rose by €42,000,000 due to the strong sequential increase in sales and by the fact that Q2 sales were heavily back end low. In the 2nd quarter, we paid €37,000,000 in dividends or 0 point 80 €0 per share. We also spent €39,000,000 during the quarter to buy back more than 700,000 of our shares at an average price of approximately €52 These share repurchases were primarily related to the €250,000,000 share buyback program that we announced on June 5 this year.
As of last week, we have completed 31% of this program. As communicated earlier, this share buyback program is funded with part of the proceeds of the 9% stake sale in ASMPT that we tax efficient capital repayment of €4 per share, which was approved by the AGM in May. And the indicative X date for the capital repayment is August 7. And the AGM also approved the cancellation of 6,000,000 treasury shares, which is expected to become effective as of August 1. So let's now more closely look at the dynamics in our key markets.
Despite a number of macro related risks such as potential impact from trade tariffs, overall conditions in the semiconductor end market still look healthy, supported by broad based demand drivers such as cloud computing, data centers, automotive and industrial applications. The total IC market is expected to grow low double digits this year. Looking at the WFE market, the wafer fab equipment market, while 2018 is still expected to be a growth year, the increase this year is likely to be somewhat lower than expected earlier in the year. That's due to the lower than previously expected spending in the second half of the year in primarily the memory sector. General expectations are now for the WFE market to increase by a mid to high single digit percentage in 2018 in U.
S. Dollar terms. Drivers behind the growth this year are still expected to be the Logic and DRAM segments. For ASM, we continue to expect sales in the second half to be higher than in the first half of this year.
As we
indicated in April, expected higher sales in the second half will be driven by logic, foundry and DRAM, while NAND sales are still foreseen to be lower sequentially. For the full year, we still aim to outperform the expectations for the logicfoundry market have remained largely unchanged. While the mix of spending on the different nodes this year now looks somewhat different than earlier assumed, overall spending within Advanced Logic is still expected to be up this year. In Foundry, the spending in 2018 is related to the ramp of 7 nanometer node as well as the first investments in the next 5 nanometer node. Investments for the 5 nanometer node are likely to further increase in the course of 2019.
As we highlighted earlier, we believe the 5 nanometer foundry node is going to be an important transition for our company. Looking at the intense D engagement, we see very good opportunity to expand our position to multiple new applications across our ALD portfolio and to increase our overall share of wallet in the foundry sector with the transition to this more advanced node. Now turning to 3 d NAND. Growth in the end market demand continues to be healthy, but following strong levels of spending in the three d NAND space in the last couple of years, WV spending in this segment is expected to decrease in 2018, mostly impacting the second half of the year. Customers are preparing for the ramp of the next generation devices, which are likely to see volume build outs in the course of next year.
Looking at these next generation devices, we will we feel we are well positioned. As customers move to higher stack devices of 90 layers and above, the increasing complexity and aspect ratios will gradually fuel the need for a growing number of advanced single wafer ALD solutions. Over the last few years, we have invested in new solutions and hardware improvements that will increase the part of the 3 d NAND ALD market that we can address, both in terms of existing and new applications. In DRAM segment, overall growth in WFE this year is still expected to increase. Even though some investments have been pushed out to 2019.
While technology transitions continue, customers are making relatively higher investments in new capacity this year, which is driving for us a healthy increase in new ALD tool demand for double and quadruple pathing. In R and D, we remain focused on broadening our portfolio of ALD in this DRAM segment. We continue to expect the first contribution of new non patterning solutions in next year. Looking at the longer term, we remain confident about the double digit growth potential of the ALD market. As the industry continues to transition to smaller geometries, new materials and more complex device architectures, more and more deposition steps are expected to require the superior film precision and control offered by advanced single wafer ALD with lower temperature processing and high levels of productivity.
An important element of our growth strategy is to expand our SAM, our served available market, within the total ALD market, as we shared with you before, including parts of the markets that we have so far not yet addressed. An important step in this context is the introduction of our new Synagis tool that we recently announced at Semicon West in San Francisco in earlier this month. The synergies combines the core ALD capabilities of the Pulsar and Emerald Reactors with the proven high productivity of our XP8 our proven XP8 platform and includes innovations such as optimal thermal control in a low volume reactor with improved purge efficiency, contributing to excellent film uniformity and chamber repeatability in a lower cost of ownership configuration. Furthermore, Synagis supports a wide range of films, film properties and material compositions and as such will enable a meaningful expansion of our served available market. We have R and D engagement for our Synagis tools ongoing with several customers.
Looking at the longer term next to ALD, we also expect a structural higher contribution from our combined other product lines. In epitaxy, our Intepid systems are currently supporting the Atrium ramp, as you know, of the leading foundry customer in the world. And for the next device generations, we continue to be engaged in R and D with multiple customers. So as now closes introduction, I was looking at our Q3 guidance as we included in our press release. For Q3, on currency comparable level, we expect sales of between €180,000,000 200,000,000 and an order intake between €200,000,000 2 30,000,000 And Q3 reflects still some uncertainty around the exact timing of individual tools.
At this time, we are more than happy to meet together with Peter von Beaumont to answer any questions you may have.
We'd like to ask you to please limit your questions to not more than 2 at a time, so that everybody has a chance to ask a question. Okay, operator, we are ready for the first question.
Thank
We will now take our first question from Kwon Lee from Credit Suisse.
Chuck, if I could move to your comment, you said that you remain confident about double digit growth in single wafer ALD market this year. Am I correct? Could you clarify that?
No. Yes. Thank you for asking this clarifying question. It's more the, let's say, the double digit CAGR calculated CAGR over, let's say, a 4, 5 year period of time because that's reconfirming our statement that with 2017 as a baseline, we are of the view that the single wafer LOD market has the clear potential to grow to around US1.5 billion dollars by 20, 21. So that's what we meant with that main statement.
Thank you for asking this clarifying question.
Thank you. Thank you. So in that case, how what is your projection for this year and next year growth? And do you have anything in mind?
Yes. Well, if you look at the ALD market, it's, of course, a little bit too early to do a complete forecast for the year to estimate forecast the complete outcome of the year. But if you look at it by industry segment, then we expect that the logic contribution the advanced logic contribution to go up this year. We expect the DRAM contribution to the single wafer ALD market to go up. And our, yes, opinion now is that we expect the NAND contribution to go down and likely the foundry contribution also temporarily to go down also.
That's, I think, from an ALD point of view. I think, yes, our current view.
I see. And if I could clarify, you also said that
yes, at the same time, if you then look at next year, next year, it's if we see if advanced logic is able to reaccelerate the ramp of 10 nanometer, and Foundry really steps up again in investments N7 plus but especially N5, then there is a big opportunity for those segments to develop very well going into 2017. And that's also a very interesting area for us to be focused on and to work on increasing our share of wallet.
I see. And if I could also move back to your comment that all your segments have been increasing year to year in this quarter. Do you see any market share gains, especially in single wafer ALD, epi or PCVD, those segments where you are focused on?
You mean the market share in this year?
Yes, this year. I mean year to date that is.
Yes. I think that's too that's way too early to because we cannot compare it with publicly available data because we always build also our intelligence on combining our own assessment with publicly available data. But and as you know but you can also do an assessment yourself because our market share is mostly a function of overall mix of spending. And you know that, for example, in 2017, our market share decreased somewhat because memory was the main driver of the industry. And you understand that we are better able to, let's say, maintain and develop solid market share when logicfoundry compared to memory is doing well because our relative market share in those segments is the strongest.
So that's the color we can provide at this moment in time. And for the rest, for now, you have to make your we invite you to make your own assessment. But as soon as we think we can provide more color on that, we will.
Thank you.
Okay. You're welcome. You're
welcome. We will take our next question from Tammy Key from Berenberg. Your line is open. Please go ahead.
Thank you for taking my question. So, firstly, can you talk about your comment regarding memory spending is lower than expected in H2 this year? Is that more of a push out or a cancellation of spending? So if it's actually a push out, are we going to see 2019 higher than expected? And also my second question is, can you talk about your positioning in the new 96 layer generation 3 gs NAND, which was released literally
a week or 2 ago?
Thank you.
Okay. So first of all, memory in general, yes, I think we have been pretty our visibility our visibility was that NAND was market was clearly weakening in the course of the year. Compared to April, it maybe has weakened a little bit more for the remainder of the year. But on DRAM, we foresaw clearly and we still see that year on year, DRAM is clearly stronger. But also there in the second half, certain players have slowed down their spending.
So and since most of those players only place their orders relatively late, for us, those are push outs and no cancellations. In general, we are of the opinion that looking at 2019, because that's maybe what you're also looking for, Yes, it's of course very early, but the common opinion is that DRAM after 2 strong years may slow down year on year in 2019. NAND, initially, a lot of people were pretty negative on 2019, very aggressively negative on 2019. We've said earlier that we in talking to our customers, we don't see that same pattern coming back from our customers, especially since some of the slowdown in NAND already kicked in basically in this year. So it could result in a soft landing early next year and maybe even a pickup sometime next year.
Again, I'm not we're not predicting that, but we don't exclude that from happening. And then for the rest, as I alluded to in the earlier question for 2019, we see a big opportunity for foundry to pick up driven by N7 plus and N5, N3 spending. And advanced logic could also be up if 10 nanometer really would accelerate. That's so then coming back to your second question on 96 stack, I don't know exactly what you mean, but we have seen the industry preparing for 96 stack already since early in the year. We have not seen a strong ramp there yet, and we don't foresee a strong ramp of volume there until early next year based on, again, positioning ourselves with certain applications in 96 stacks at multiple customers.
And let's say the programs that we have been working on with customers, those programs are going very well. And as a result, as we said before, we aim to gradually increase our presence in 3 d NAND as we go from stack to stack. And we are also aiming to, as we said, to expand our presence in basically build a presence in the leader in this industry gradually as of 96 Tech.
Okay. I see. So what I meant by 96 layer was that previously, you were involved in some of the side wins with 64 layer three d NAND, but one of the biggest memory maker wasn't actually using single wafer ALD at 64 layer. You were commenting that you were working with them on the next generation i96 layer. So I'm just wondering, have they started adopting single wave ALD at 96 layer design?
We are, let's say, on that specific application. Again, they have not ramped volume significantly. What we can say is that the engage that engagement is very much on track. And for us, that is a very strategic path to get in, for the customer to familiarize with our tool, with our process capabilities and then gradually build further build our presence within that customer. Okay?
Okay. Thank you.
Yes. You're welcome, Tannen.
We will take our next question from Mr. Robert Sanders from Deutsche Bank. Please go ahead.
Yes, hi. I have two questions. Firstly, on EUV at foundries. Clearly, TSMC is a large customer. They are adopting EUV or trying to in a big way at 5 nanometer.
How is that impacting your single wafer ALD patterning business with them? Have you seen an impact already? Are they reusing tools more? I'd love to get an idea of your have you seen any impact and how you see that going forward? And then just a kind of naughty question, probably this is a stupid question, but I'd love to know a bit more about the mechanism behind this capital return?
What does it mean for our model, etcetera? Did the share count go down? I'd love to learn a bit more. Frankly, not seen a lot of these in my career. Thanks.
Okay. First of all, yes, EUV, and I don't want to speak too much about specific customers. But I think in general, we see introduction of EUV in general. We really embrace it. First of all, we expect our ALD patterning business to remain really a steady business for the foreseeable future.
As we said before, percentage wise, in the growth to SEK 1,500,000,000 likely we did not foresee the threatening basis to percentage wise to significantly grow in all our projections. So that has not changed. But the absolute contribution will stay steady one regardless of the introduction that introductions of perceived introductions or planned introductions that have been announced recently. And yes, and in general, within the foundry space, we see tremendous opportunity to increase our served our share of wallet from going from N7 to N5 in that industry segment in general, Rob. Okay.
So that's one, Robert.
Could you clarify sorry, could clarify a little bit more about that? I mean, it does seem like they're not going to be adopting gate all around. So if you're not saying the non patterning driver at TSMC is not the transistor gate type stuff. It's something else. It's a replacement of CBD or something else?
Yes. We have multiple areas, multiple areas, multiple product engagements with Foundry to increase our share of wallet going from 7 to 5.
Okay.
Across the board, we are working with them. Across the board, multiple products to increase our presence in the foundry space. Going to the next technology node and those cooperations are very, very intense from both sides. And then one last thing because basically your question mixed two things. And EUV in general, I think EUV will be successful in general.
I cannot repeat that enough, it will enable the industry to further continue Moore's Law. And that is we view that since we are an innovative company that tries to be the leading edge of the deposition landscape with many of our technologies, many of our equipments, many of our materials, chemistries, it opens up more opportunities for us to grow our business down the road, okay? So that's the answer to that question. And Peter, can you take Yes.
Let me try to answer your question with regard to the capital return. It's a rather technical issue.
First of all,
what we are doing on this one, we have, of course, nominal capital and we have paid up capital in excess of that nominal capital. And we're following basically a 2 step approach, which has also been approved by the AGM in May. The first step is in principle that we add the paid up capital in excess of nominal capital towards the nominal capital. So you increase in principle the nominal value per share. And then in the second step, you reduce that nominal capital again for the same amount as what you have done that you have increased it out of the paid up capital in excess of the nominal capital.
And by doing so, you are in principle returning capital towards your shareholders. And you can do that tax free. So the only thing what you have is a waiting period of slightly above the 2 months because creditors of the company could disagree with that. Now that waiting period ends early August. And directly after that period, we will pay out that €4 to the outstanding shares in the company.
And got it. From a modeling point of view, is that basically equivalent to the share count going down accordingly by that amount and the cash out of that amount? I mean just to
ask you the question.
The share count will remain the same.
Okay. So it's like a special day, it's modeled like a special day basically.
It's a principle that the combination of the nominal capital the nominal value of the capital and the paid up capital in excess of the nominal capital, that's when you add those numbers together on this moment in the books, that will reduce towards simply the nominal capital per share again.
Got it. Okay. I'll follow-up maybe offline. Thanks.
Thank you. We will now take our next question from Edouard de Jong from NIBC. Please go ahead.
Good afternoon, gentlemen. A couple of questions left. You could take your guidance of above market growth for the full year and then look at the Q3 guidance as well. Q4 should be very strong, well above €200,000,000 quarter again. Could you maybe explain a little bit what is driving that?
And can we maybe also have some comments on what order intake is looking like looks like at the moment?
So your first question was what the drivers are for this ALD market to keep growing?
No, no. Just the general sales guidance, you say you're going to grow above market for the year, so let's say 8%, 9% or so. You have a Q3 guidance of around 190,000,000 If we combine that, Q4 should be very strong in terms of revenues.
Talking to the remainder of this year. Okay. So first of all, you are maybe combining a few facts, which I understand from your point of view. But we have not given specific sales guidance for the full year of 2018. I would like to make that clear.
But your question basically is whether we anticipate a strong Q4 based on our guidance for Q3 and for the full year. And well, we can confirm that we do expect a strong 4th quarter as, of course, implied by our guidance. And yes, if you look at the backlog of June, it was lower sequentially but still very healthy. And if you look if you combine that with our guidance on the Q3 bookings, we would end up with, of course, a very healthy backlog at the end of Q3. And so then you can understand what that could mean for, let's say, Q4 revenue.
And if you look at the drivers for our Q3 order intake, then logic is expected to be it's foreseen to be a strong contributor. Analog is for SHEEN also to be a healthy contributor. And also Foundry, to a certain extent, Q on Q, we think will step up. So just to provide you some color on what we took into account in getting to our current guidance for Q3. It's just not a number, it's based on certain trends that we experience in specific industry segments of the environment that we work in.
Yes.
Okay. Sorry.
That was my answer. Any follow-up?
And the follow-up will be on the synergies. We already have some first shipments for the new tool? Can you maybe give some idea of the specific markets you're targeting with the new tool and how it's being received by the market? Maybe some general comments.
Yes. General comments, well, we really of course, we always have had with our both our and Emerald reactors, we really focus on this market. And so far, we have had 4 reactor platform that we used for that market. And we really worked very, very hard over the last 2, 3 years to do 2 things: to repackage all the know how we have in on the ALD aspects that are incorporated in these reactors in an 8 reactor configuration to really improve to make the cost of ownership more attractive. And secondly, take all the learnings from all the process and tool learnings that we build in during those ALD engagement with customers that we've had over the last few years to also incorporate those in this tool.
And yes, and we think that for specific application, not for every application, for certain applications, the current configurations are still very well valid, are maybe more suitable, depends also on the application itself, the speed of the process, wafers per hour and then all the process itself without going into too much detail. But we basically by bringing this configuration to the market, we really have a tremendous opportunity to increase our served available market within the ALD space. And that's what we said all along in the last few quarters that we are aiming to increase our served available market within that position. So with Epi, which to a certain extent with PCVD, to also a certain extent with vertical furnace. PCVD and vertical furnace in a more modest way than in epi, but also in ALD regardless of the fact that we are the leader.
Still we don't we said many times, we don't address all the areas of the business. We don't address all the applications in logic, don't address all the applications in foundry. And we have significant areas of opportunity in memory. And this will it's an important step, not the only step, but an important step to increase that served available market, to protect our leadership in ALD. And we see a tremendous interest among multiple customers.
And yes, we expect to go in we aim to go into high volume with this tool next year. We aim to go into high volume with this tool next year, yes? And that's our aim, again. And so that's our ambition.
Okay. And that's mostly targeting memory market, I think, or an iron there?
Well, it will be gradually. It will gradually be likely the initial space will be the initial traction will be in the logicfoundry space And then subsequently, in memory, it may take a little bit more time, but we have engagements ongoing there. But
we our
belief is that likely we will build 1st track sheet the most in logicfoundry space.
Okay. Thank you.
Yes.
You're welcome. Thank you. Our next question is from Charles Elias from inflection point Investments. Please go ahead.
Hi. A quick one. We're hearing a story that your Japanese competitors producing CBD are not getting enough aluminum capacitors and that in turn may be responsible for the pushback in DRAM investment, in planned DRAM CapEx spend into next year by 1 of the major Asian clients. Could you give any comment? Hello, did they get through?
Yes.
I have difficulty giving comments to this question. Maybe offline, we can sort out if we can respond to this question better. Maybe let's have additional dialogue outside the meeting with Victor because I do not recognize his comment immediately. So I'm not able to comment on it. I can speculate, but I don't think that will help the audience today.
Sorry about that.
That's fine, Chuck. Thanks.
Okay. Okay. Thank you for bringing it up. And please let's please follow-up line with Stu Victor. Yes.
Our next question is from David O'Connor from Exane BNP.
Great. Good afternoon. Thanks for taking my question. Maybe just a clarification, Chuck, on one of your comments in your prepared remarks to one of the questions. You mentioned the advanced logic step up in 2019 after the issues and that ramp up this year.
Is that your current expectation? Or is that just more of a general comment? Thanks. And then a follow-up.
There is no there is absolutely no confirmation in that respect from the customer base. But we do know that this technology in Advanced Logic was announced in 2016. And there should come a time when it will go into HVM. So I think together with us more peers are at least commenting that I think there is a reasonable possibility. But there is no confirmation from the customer in that respect in any way, if that's what you would like to know.
Okay?
Okay. Thanks. Thanks for that. And maybe just then, I'm not sure if you responded to already. The comment on the some uncertainty around the timing of tools in Q3.
Can you give us a little bit more detail on what exactly you're talking about there? Thanks.
It's just lead times. It's just related to lead times. And the lead times and the exact capabilities to align customer request stage with the capabilities of our supply chain. Peter, anything you want to add to that?
Yes. I think that's the reason why we already have given now for
a few quarters a broader
gains. So there is a lot of there are a lot of requirements of customers. Those requirements due to the pressure that everyone has in increasing its capacity might lead to for certain periods, for certain days or certain weeks sometimes, to an uneven distribution of the products that you need to have. And that leads to last minute changes, and that leads to sometimes slightly delays in delivering the products. We have seen that in the second quarter.
So that was the reason why we said, okay, we have a range of €200,000,000 to €230,000,000 Well, the analyst community, of course, came to a mid point, which is 250 in a way you see that 1 or 2 tools are not going out at the last minute. And this is a principle, so some uncertainty that we see on this moment in the value chain also for the Q3.
Got it. Thank you.
You're welcome, David.
Thank you. We will take our final question from Peter Olofsen from Kepler Cheuvreux.
I had a question on spares and services sales, which came in pretty strong in the Q2. Is there any link with equipment sales in the quarter? Or is this spares and services sales mainly driven by your installed base business? And what kind of growth rates should be modeled for spares and services for the coming years?
Yes. Let me try to answer that, Peter.
I think there is no direct link between the spares and the services business within the quarter in delivering of tools. Sometimes you deliver towards customers a few spare tools, but that is not always the case. Or the moment that you deliver the equipment, it's you have to make a distinction or so between the spares, which are for normal usage, yes? So the things that are used up during a certain period, And that will increase as a function of the installed base over the longer term. And the other thing are spares, where you simply have to replace a part of the tool, which is on a certain moment not functioning any longer.
So and that has a more ad hoc consequence and ad hoc sales levels that have increased. So we expect that our installed base is growing, that our service business will grow with the equipment installations that we are doing, be it at the delayed time level.
And then what kind of growth rates you're going to think of? Is it maybe mid- high single digit or potentially double digit?
That depends a little bit, right? So we expect that to grow with the installed base that we have. So when we have a sales level of increase of 10%, then you might highly expect it 1 or 2 years later, that also will lead to additional spares and service business.
Okay. Thank you. Yes.
Thank you. That concludes today's question and answer session. I'd like to turn the call back to Mr. Chuck Del Prado for any additional or closing remarks.
Okay. I would like to thank you all for your questions, especially on such a warm day with regard to all the people in Europe that you still had the energy to stamina to attend this Q2 conference call. Very much appreciated. And let's really stay in touch in the coming months and looking forward to meet some of you in one of the upcoming roadshows after this mid summer period. Thank you again and have a very nice rest of your day.
Thank you. Bye bye.