Ladies and gentlemen, thank you for standing by. Welcome to the ASML 2018 Fourth Quarter and Annual Financial Results Conference Call on January 23, 2019. Throughout today's call introduction, all participants will be in a listen-only mode. After ASML's introduction, there will be an opportunity to ask questions. I would now like to open the question-and-answer queue. [Operator Instructions]. I would now like to turn the conference call over to Mr. Skip Miller. Go ahead please, sir.

Thank you, operator. Good afternoon, good morning, ladies and gentlemen. This is Skip Miller, Vice President of Investor Relations at ASML. Joining me today from ASML headquarters in Veldhoven, The Netherlands is ASML's CEO, Peter Wennink; and our CFO, Roger Dassen. The subject of today's call is ASML's 2019 fourth quarter and annual results. The length of this call will be 60 minutes and questions will be taken in the order they are received. This call is also being broadcast live over the Internet at ASML.com. A transcript of management's opening remarks and a replay of the call will be available on our website shortly following the conclusion of this call. Before we begin, I'd like to caution listeners that comments made by management during this conference call will include forward-looking statements within the meaning of the Federal Securities Laws. These forward-looking statements involve material risks and uncertainties. For a discussion of risk factors, I encourage you to review the Safe Harbor statement contained in today's press release and presentation found on our website at ASML.com and in the ASML's annual report on Form 20-F and other documents as filed with the Securities and Exchange Commission. With that, I'd like to turn the call over to Peter Wennink for a brief introduction.

Thank you, Skip. Good morning and good afternoon ladies and gentlemen and thank you for joining us for our Q4 and 2018 annual results conference call. Before we begin the question-and-answer session Roger and I would like to provide an overview and some commentary on the fourth quarter and the full year 2018, as well as provide our view of the coming quarters. Roger will start with a review of our Q4 and full year financial performance with added comments on our short-term outlook. And I will complete the introduction with some additional comments on the current business environment and our future business outlook. Roger if you will.

Thank you Peter and welcome everyone. I will first highlight some of the fourth quarter and full year financial accomplishments and then provide our guidance for the first quarter of 2019. Q4 net sales came in at €3.14 billion, slightly higher than our guidance. Net system sales of €2.42 billion was more weighted towards Logic at 60%, with the remaining 40% from Memory. We shipped six EUV systems and recognized EUV revenue of €579 million from five shipments. One system was shipped to a collaborative research center IMEC and was not recorded as revenue, which we mentioned last quarter. Installed Base Management sales for the quarter came in at €719 million. Gross margin for the quarter was 44.3%, which was negatively impacted by the Nikon settlement, without this charge the gross margin was 48.5%. We signed a memorandum of understanding with Nikon to settle all legal dispute over alleged patent infringements that was initiated by Nikon. Therefore, we recorded a provision in our 2018 accounts, which has a negative impact of €131 million on gross margin in 2018. Overall R&D and SG&A expenses came in a little higher than guided, with R&D expenses at €442 million and SG&A expenses at €135 million. Turning to the balance sheet, €345 million worth of shares were repurchased in Q4. This leaves around €1.35 billion of the 2018-2019 share buyback remaining. We ended last quarter with cash, cash equivalents and short-term investments at a level of €4.03 billion, which was higher than expected due to early payments by multiple customers at the end of the year. Moving to the order book, Q4 system bookings came in at €1.59 billion. Logic order intake was 80% of total value with the remaining 20% from Memory. We took five new EUV orders in the quarter. For the full year, our net sales grew 22% to a record of €10.9 billion. Net installed base management sales was similar to last year at €2.68 billion. We shipped 18 EUV systems with a total EUV system sales of €1.9 billion, representing a significant growth over 2017. Our gross margin for 2018 was 46%, which would have been 47.2% without the Nikon settlement charges. We made considerable improvements on our gross margin in 2018 and remain on track to achieving overall gross margins exceeding 50% in 2020, as confirmed during our Investor Day in November of last year. We continue to invest in the long-term future of ASML and increased R&D from €1.26 billion in 2017 to €1.58 billion in 2018. The increase was primarily driven by the acceleration of our EUV roadmap. Overall R&D investments as a percentage of 2018 revenue was about 14% and SG&A was about 4.5% of revenue, both similar to 2017 as a percentage of revenue. Net income for the full year grew 25% to a record of €2.6 billion, resulting in 23.7% of net sales and an EPS of €6.10. With that I would like to turn to our expectations for the first quarter of 2019. We expect Q1 total net sales of about €2.1 billion. The lower revenue guidance is due to a combination of revenue pull into Q4 2018 as well as a reduction in shipments due to a fire at one of our suppliers, Prodrive, and some system demand change. As announced in a press release on December 3rd last year, there was a fire at one of our suppliers of electronics components and modules. This resulted in a loss of work in progress as well as some inventory. Due to the integral cycle time of about one quarter for these modules, our first quarter sales will be negatively impacted by around €300 million, which we expect to largely recover in Q2. We expect the remainder to be recovered in second half. Our total net sales forecast for Q1 includes around €300 million of EUV system revenues. We currently expect to ship three EUV systems in Q1. We expect our Q1 Installed Base Management revenue to be around €600 million, which is primarily due to lower field upgrades as a result of the Prodrive fire. Gross margin for Q1 is expected to be around 40%. The lower gross margin is due to a combination of mix, lower field upgrades, factory loading, and EUV service burden. The mix relates to a reduction in higher margin immersion systems and field upgrades as a result of the Prodrive fire and some system demand change. With lower system sales there is also a reduction in factory loading which has a negative impact on gross margins. As our EUV installed base continues to grow, we must expand our service infrastructure to support these systems in the field, which is an increased burden on gross margins until we start collecting service revenue later this year. We see the impact from these items continuing in Q2, with an expected recovery in second half. The positive margin recovery in the second half will be driven by higher revenue, thus improved factory loading, as well as increased field upgrades and we will start shipping the higher margin NXE:3400C in addition to realizing EUV service revenue. We expect to move towards our 2020 target of over 50% gross margin as we exit the year. The higher R&D expenses for Q1 of around €480 million are due to an acceleration of the NXE:3400 roadmap and growing investment in the High NA EUV program. SG&A is expected to come in at around €130 million, which is similar to prior quarter. Although we are currently going through a period of uncertainty in the industry we look forward to our growth opportunity in 2019. As we remain confident in our long-term growth, we will propose a 50% increase in our dividend to €2.10 per share at our annual shareholder meeting which takes place on April 24th in Veldhoven. The dividend payments is valued at around €880 million. With that I’d like to turn the call back over to Peter.

Thank you, Roger. As Roger has highlighted, we had another good quarter closing a great year for us, with record demand from our memory and logic customers combined across our entire product portfolio. While the current geopolitical landscape and economic environment are creating volatility in the markets and uncertainty on the near term, as mentioned before, we still expect overall growth in 2019. At the very end of last year, we saw the continued slowdown of memory end market demand as well as some demand reduction in the logic end markets, primarily driven by the mobile and the server markets. And this translated into push outs of our planned systems to both memory and logic customers from the first half of 2019 in their attempt to regain balance of supply against demand. The NAND market, as mentioned in prior quarters, remains in an oversupply situation and is going through a digestion phase after a period of significant 2D to 3D conversions, yield improvements, and wafer capacity additions. DRAM is experiencing softening of bit demand, largely driven by decreased demand in mobile market as well as some inventory correction in the server market. All of this has resulted in some push outs of planned shipments by memory customers in the first half of 2019. Customers have indicated that they believe there will be a recovery in the second half of the year as they expect that inventory levels will be managed down swiftly. In logic, while we see some softening in DUV demand which is primarily driven by the mobile market, we still expect strong demand in support of the ramp of 10 and 7 nanometer nodes. We also expect to see strong growth in EUV demand supporting customers' ramp of 7 and 7 plus nanometer nodes as well as a transition to the 5 nanometer node. Although future developments in the macro environment can impact our current view, we currently expect logic demand to increase around 50% year-over-year and memory to be down around 20% year-over-year. We still expect single digit percentage growth of Installed Base revenue. In summary, 2019 will be a growth year, largely driven by logic. On the ASML product side let me start with an update of our EUV business. In EUV, we continue to make solid progress as evident in the positive public comments from our logic and memory customers on the use of EUV in their most advanced nodes. Logic customers are installing systems in support of volume manufacturing for their 7 and 5 nanometer nodes. DRAM customers are also working on qualifying EUV for their future nodes. And this year we expect the first commercial EUV enabled chip to reach the consumer market. In 2018, we demonstrated over 145 wafers per hour and we are accelerating our EUV roadmap to deliver 170 wafers per hour on our NXE:3400C with first shipments planned in the second half of 2019. The NXE:3400C will also include a number of innovations that will further improve availability. As Roger mentioned, we shipped six systems in Q4, which translates to a total of 18 EUV shipments in 2018. With the five orders booked this quarter, our shipment plan of 30 systems for 2019 is covered. In DUV, we shipped 189 new systems in 2018, an increase of 17% over 2017 and we were able to further increase our output in support of the demand from both logic and memory customers. And we continued ramping our latest immersion system, NXT:2000 with a record time to achieve mature customer yields. Our applications portfolio has continued to see strong adoption in all market segments. Our latest YieldStar system continues to gain adoption at memory customers, following the strong adoption we saw in logic. Integrated products using the combined technology of HMI and ASML are being evaluated at multiple customer sites to help improve customers' yield and time to market. So to summarize 2018, our fourth quarter came in slightly above our guidance and we nearly achieved 11 billion sales for the year, which was a milestone originally set for 2020. Although 2018 was a very good year from a financial perspective, I think it was also a milestone year in terms of technology innovations across all our products. This not only provides our customers with higher value solutions, but it also fuels our future growth. Turning to 2019, we currently see some uncertainty in the market but after a long period of strong capacity investments, driven by healthy demand over the past years, it is normal to see a period of digestion, which we expect in first half of 2019. With regards to the markets we serve, our customers responded quite late in Q4 to slowing demand in their end markets by delaying deliveries of litho systems from the first half of 2019 to balance supply and demand. We now see our first half of 2019 lower than the second half of 2018, with the reduction being roughly an equal split between memory and logic. The fundamental drivers of high performance compute, with associated high performance memory and data storage, are still in place and our customers clearly indicated the need for a strong shipment pattern in the second half of 2019 in support of their 2020 business potential. The demand in the second half of 2019 could therefore be 50% higher than the first half of the year. For 2019, the logic segment is expected to be the growth driver, investing strongly in technology transitions as well as production capacity for their advanced nodes. As we have consistently done in prior slow downs, we sustain or even accelerate our investments in R&D to deliver on the leading edge technology when the market turns up which has been and will be the key driver to secure our long-term growth. We expect to increase our investments in R&D to €1.9 billion for 2019. We reiterate that we see market demand that supports yet another year of growth for ASML in 2019 with significantly stronger demand in the second half of the year. As Roger explained, we see similar development in our profitability, with lower margins expected in the first half of 2019 improving towards our 2020 target of over 50% as we exit the year. Despite some uncertainty in the current environment, we remain confident about our sales and profit targets for 2020 and beyond as we communicated during our Investor Day in November last year. We are happy to underline this confidence by our proposal of a 50% increase in our dividend. And with that we would be happy to take your questions.

[Operator Instructions]. The first question comes from Mr. Mitch Steve. Please state your company name followed by your question.

Hi, thanks, Mitch Steves from RBC. I just had to really focus on the Q1 in kind of a quarterly numbers going forward so I understand $300 million hit from the fire but how do I think about kind of June and then going forward to September to sequential and secondly also for the gross margin line I think it's pretty difficult to get from 40 to kind of 50 at the exit so, any help there would also be very useful?

Okay, thank you. So let me start by talking about the gross margin and the gross margin drivers if you like in the first quarter and then reconciling that to how we see the rest of the year. So, as I mentioned in my introduction the main drivers of gross margin in the quarter so bringing back the gross margin from 48.5% which is the gross margin that we had in Q4 if you adjust for Nikon and then bring it down to the 40% that we essentially guide for Q1. The main drivers there are the loading in the factory as we said that is the result of obviously lower sales levels. That would account for about 1% in that bridge. The second element is the mix in the EUV and that is essentially as a result of some of the push outs from the first quarter into essentially the second half. And that generates approximately 2.5% impact in that bridge of the gross margin. The biggest impact on gross margin actually is from what we call the field upgrades and service and that has two components to it and I mentioned both components in my introduction. One component is the lower field upgrades and the lower field upgrades that we expect to have in Q1 to a very large extent related to the Prodrive situation because it means that there is no availability for field upgrades for certain components that has one element. And if we talk about the EUV service burden which I mentioned in my introduction again, just to recap what we mean by that, as you know the installed base in EUV is growing. A number of our customers are looking into high volume manufacturing for EUV not too long from now. That means that that we have to support them obviously in the field to get everything up and running. Whilst the revenue associated with the service from the EUV will only kick in once wafers are being produced which we expect to happen at the end of this year. So that means that we have a significant cost burden right now while the revenues only kick in at the end of the year. If you take those two together so the lower field upgrades and the EUV service burden that accounts for approximately 4% in that gross margin bridge that I gave you. And then there is about 1% left which is miscellaneous that has a number of elements in there. So that kind of gives you the bridge from the 48.5% to the 40% that we have in Q1. Now back to your question how is all of that going to -- how are we going to recover to the normal margin levels if you like in H2 and as I mentioned how are we going to get from this situation into the -- towards 50% gross margin that we expect as we exit 2019 into 2020. So as it relates to the mix effect and also the loading effect as a result of the uptick of the business that we expect for the second half, that is what is the main driver, that's the main driver behind that. We also expect some of the field upgrades that we lost as a result of Prodrive in the first quarter we expect some of that to be recouped in the second half of this year. Third important point in getting the margin up to that level is the shipment in the course of the second half of the 3400C model which is a model as you know has a significantly better margin profile. And then finally again related to what I have just mentioned, at the end of this year when high volume manufacturing starts to kick in on EUV that's what we also expect service revenue to come up. So that's essentially how we came back from 48.5% to 40% but also it gives you the bridge how we believe we're going to exit the year at the level of towards 50% gross margin.

And let me answer the [indiscernible] Q on Q sequence, that means half on half sequence. First of all I would like to reiterate what I said earlier that for the year we expect the logic sales to be 50% up from last year, memory about 20% down, and the single-digit growth in installed base management. Now you can add it all up and if you haven’t gone through that number that sales number will be divided half and half as such that we believe that the second half of 2019 necessarily will be about 50% higher than the first range. So if you take those numbers then you can calculate the Q on Q I would say the half on half trends.

Okay, thank you.

The next question comes from Mr. Krish Sankar. Please state your company name followed by your question.

Sankar from Cowen. Thanks for taking my question. I had two of them, first one Peter, given the DRAM outlook has incrementally worsened over the last couple of months and now you view that these tools that are being pushed out from first half into second half of the year what kind of tangible data points that you or your customers have on a conviction in the second half shipment recovery and is there a risk it can get pushed out further and I'll try to follow up?

Yes, I think Krish that is a good question. I think what our customers are actually seeing is what their customers are telling them what they need. So there is nobody there with a crystal ball that can tell us that the second half is going to be absolutely certain at a certain level. It is simply not there. I think that's where the economic uncertainties aren’t simply there. And they need to basically stabilize, to give us a bit more confidence. However, having said that the thing that we get especially from DRAM customers is -- from our largest customers is that they said we should not underestimate their ability to react swiftly and that's what they have done. So, they have said to what we are looking, where we're looking now it is a 20% bit growth or even a slightly less this year. And then looking what they have installed in terms of capacity and their ability to react swiftly which you have already done, they believe that with that bit demand they should be back into a more positive territory in the second half of this year. That's what they've told us. But again you know if you're asking for absolute certainty which somebody did during our press conference this morning, there is an absolute certainty but it also is very much related to economic environment. But based on these data points our customers believe that we need to be ready to start shipping again in H2.

Got it, got it. Peter that's very helpful and then just as a follow up, you know, when I look at your memory order in Q4 it's like down almost 80% from the peak and it's also back to like early 2016 levels. So should we expect memory bookings to rebound in calendar Q1 in the current quarter or do you think it's going to take a quarter or two before you see that happening?

It is what I said earlier. I think it is a swift reaction so it is a quite a significant reduction and I think the low memory order rate is a reflection of what the customers decided they wanted to do in Q4 with respect to their 2019 shipments. Now if they are right on the second half of the year we should see a rebound of those orders in the course of the year.

Thank you Peter, thank you very much.

The next question comes from Mr. David Mulholland. Please state your company name followed by your question.

Hi, it is David Mulholland from UBS. Just one question firstly on the EUV roadmap, obviously you have talked a lot about this at your Capital Markets Day and at some point thus needing to move towards multi patterning. I think some of the comments that we have seen in some industry events are suggesting that might even be the case of the kind of the 5 nanometer node or the industry 5 nanometer node so I wondered if you can maybe comment on how you see that progressing? And then I have got a follow-up.

Yeah, I think if you talk about the industry 5 nanometer node which some of our customers then called the N3 node. There is some discussion on this. Now I don't think we can say with absolute certainty that it's going to happen but it's definitely something that's being considered, that's correct.

And then just in terms of the follow-up on the comment you made on China, I am still seeing looking quite strong even after what happened on one of the customers that are being banned from buying from the U.S. Have you started seeing more confirmations on orders from likes of YMPC or [indiscernible] at this stage?

Well, I think the estimate is split between the domestic and the non-domestic customers. I think some of the slowdowns that we have seen they do relate to the non-domestic Chinese customers and a fraction of the Chinese staff but the domestic demand is still as strong as it was one or two or three quarters ago. I mean and it's understandable if you look at what they're doing, I mean many of those are new. They are strategic investments, some of the products are being qualified and that means they can start ramping which I think from a strategic point of view is something that they will do anyhow which is also I think a confirmation of the fact that now what they say they're going to do, I mean that's what we see today. So from a domestic point of view those are pretty strong.

Just one quick follow up on the comment and your response to the multi-patenting [ph] question, what assumption had you made in the model that your presented for 2025 on the industry 5 node, were you assuming single patenting in that?

I don't think so, it was not there and I think it's still uncertain whether it will happen but we assume single-patenting solutions.

Okay, thank you very much.

The next question comes from Mr. John Pitzer. Please state your company name followed by your question.

Yeah it is Credit Suisse, thanks for letting me ask the question. Peter you did a really good job kind of helping us understand for the overall business how the half on half recoup will look like in 2019. I am wondering if you could just do that the same thing for sort of the EUV expectations, clearly given the slower start to the year it feels like the half on half growth in EUV needs to be even stronger than the 50% you referenced for the overall business and I'd be curious as you think about 30 tools for this year how that breaks down logic versus memory?

Yeah, well to answer your last question we of course have a customer that does both. But you could say it was about 80% to 90% is going to be logic. And then 15% DRAM related but we have 80% to 90% logic. And it's true I think you will see the same pattern for EUV shipments in the second of the year being immediately higher than the first half. That's the pattern that was actually planned also because I don't think it's got anything to do with the push back, it's more just the logistic planning of our customers shape this pattern. So yes, it's going to be more than 50% but it's just a matter of letting logistics which we already had, nothing changed there.

And then as my follow-up for Roger, can you just talk a little bit about the R&D costs going forward, it was a little bit higher than we were modeling both in the December and the March quarters, how should we think about R&D here and you mentioned kind of the cost you're incurring now for EUV service without service revenue, is that now fully baked into the model so that it's now a leveragable event as EUV revenue ramps or how do we think about that?

Yes, so let me start with answering that latter question, the answer is yes, so that is modeled, that is included now in the in the model for sure. On the R&D side, the guidance we give for Q1 480 million in essence that's kind of the run rate that we would expect for the quarters in this year. So, our expectations for the full year would be about four times this number. And so this is the number that we expect for 2019 with the roadmaps in there that you're very familiar with particularly the high NA, the pulling in of the 3400C, multi-beam and a number of other things. Going into 2020 I think the guidance that we gave there at that stage of around 14% over revenue that's probably where we see that for 2020.

And perhaps on the R&D number for 2019 I think when we said we took a decision to accelerate the introduction of the 3400C and high NA as the logical next node in EUV multi-beam development we accelerated in the second half of 2018 the hiring of the people to make sure that at the beginning of 2019 we had all the people or more. So if you take our Q1 guidance this is and you basically take that on average or sorry on an annual basis. You could argue that we actually created the R&D infrastructure to do this and we wanted to finalize that by the end of 2018 and it is what we did. So this is basically the full year effect that you're seeing now in 2019 of the decisions that we've taken in 2018.

That's helpful, thanks guys.

The next question comes from Mr. Pierre Ferragu. Please state your company name followed by your question.

Hi, It's Pierre, New Street Research. Thanks for taking my question. I was wondering about like the inclusion of the 3400C later this year how this is going to look like in terms of deliveries, is there a point in time from which all of the vast majority of your deliveries are going to be 3400C or is it going to be more God, you are always like half of shipments being B and half of your shipments being C? And then do you have any update or like color on how is the economics going to work between the two tools so the difference in ASB? And then last but not least I was wondering if you are the B tools that you are shipping today are going to be upgraded all to C and wondering what the economics would be there?

Okay, so about the C, little shipment in the second half of the year and you could assume that any shipment in Q4 will be ceased. And some of it will be in Q3 but the majority of the shipment this year will still be B and everything that we're booking now are Cs. So it's going to be a handover you could say from the B to the C starting in the end of Q3. Roger you want to take the second one.

So on the other two questions on the economics, as you know in terms of the specs, the current machine that we ship has a spec of 125 wafers per hour. We have guided that for 3400C it's going to be 107 more over 170 wafers per hour which means approximately 35% increase in the throughput. And I think as we've guided in the past you can typically assume that the ASB kind of correlates with that percentage. So currently the ASB for the machine that we ship today is about 100 million so you can kind of calculate what the ASB expectation is that we have for this machine. In terms of upgrades indeed we do have a -- we do have options to have a part of the performance uptick that the C has over the B. We will also make that available to the B machines in form of upgrades. Not entirely but the vast majority of the performance upgrades can be obtained through C upgrade.

And by having said that I mean it's going to be in question of the economics on this because it's a different lens. So actually you basically you need to be able to take the hit off quite an expensive upgrade and that of course needs to be balanced with the real performance of the being the real performance with C. So we will just have to see whether that's going to happen but when it happens it is going to be an expensive upgrade. But having a new lens into that system is not trivial.

Okay, thanks for that, that is very useful.

The next question comes from Mr. Mehdi Hosseini. Please state your company name followed by your question.

Hey, thanks for taking my question. Peter just as a follow-up to the prior question, of the 30 EUV system in your backlog how should we think about the mix of 3400C, I'm sorry?

Yeah it’s the, sort of like I said, the fourth quarter shipments will probably be going to be also 3400C. So, if you think about this, it is probably going to be around 5 to 10 but the total is 13, but I am not going to confuse you that some of the Cs will have a fully upgraded new vessel which is 5 to 10. So there is going to be an in-between version of 3400C which has all the type of EUV source vessel. So it's 13 in total but really the ones with all the new vessels is going to be 5 to 10. We have tried to do 10, it could be 5 if the supply chain is a bit slower than we think. But almost it will be 13 and that also means that from a price point of view we will start off of course it will be higher but the 35% that Roger mentioned that applies to the full fledged 3400C with a new modular vessel.

Done, okay. And I have a follow-up regarding just the big picture and how do you see the overall demand environment. If I were to strip away the EUV revenue it seems like the core business could have a couple of quarters of sequential decline which is typical of a downturn if I were to look at the late 2015 early 2016, you had three quarters of sequential decline in revenues and a prior downturns were also a multi-quarter revenue decline. In that context how do you see the current downturn compared to prior cycles, what is different now and what are the things that are similar to the prior downturns? Thank you.

Well, deltas are always similar in the sense that the supply is higher than the demand and now the question is how big is that demand. To be very frank we can only repeat or tell you what we get from the discussions from our customers because they have a better view of their marketing in the discussions with their customers. So this is I can only repeat what I said earlier, they talk about a two quarter correction in inventory. That is driven I think very much by the macroeconomic situation and the macroeconomic uncertainty. So this is a big crystal ball that I don't have and nobody has so well, we'll have to see. And I'd like to really comment on what you started your question off with and that's if you strip away EUV and look at the core business may I remind you that EUV is our core business and that we can only ship those leading edge EUV [ph] tools because there is an EUV solution for 7 or 5 nanometer. Without EUV there would not be a 5 and 7 nanometer transition. So that means that everything that we are shipping is inclusive of EUV has to do with the technology transitions that our customers are planning to actually capture the value on everything that we still talk about and that will happen which has to do with cloud bit data, I can't repeat all of them again. That is unabated, that will happen and you cannot strip EUV outdoors, it drives this technology transition, its part of the core business.

Got it. Thank you.

The next question comes from Mr. C.J. Muse. Please state your company name followed by your question. C.J. Muse: Yeah, hi, Evercore ISI. Thank you for taking the question. I guess Peter another follow-up excluding EUV which you may not like but if you look at 2019 and if I pull out immersion which is obviously being weighed down by push outs on the memory side and exclude EUV, what's interesting I guess it looks like KrF and ArF drive and [indiscernible] actually growing year-on-year so can you kind of walk through what you're seeing that's driving that whether it's Legacy 200 millimeter China, advance logic would love to hear what is driving that including as well whether there is a rising lift to intensity that we should be thinking about?

Yeah, I think you know it's C.J. -- lets answer it as far as you are right, if you read those numbers I think there are two areas where we see from a profit point of view an increase which we talk about and like I said earlier you cannot stick this out because it's just part of the entire development in the industry. And indeed we have KrF, we have dry DUV is also higher currently than what we think that we saw in 2018. And that has to do [indiscernible] it has to with China. It is not that much high but indeed it doesn't show a reduction in the system sales. and this is also what Roger referred to that this mix, this DUV mix which is a mix of immersion and KrF is of course in the first half leading to this 2.5% reduction in the gross margin. But with the immersion system picking up in the second half that will resolve itself. But it is indeed the right direction, the right conclusion that you drew on the KrF systems being higher than in previous quarters and of course EUV in the entirety of 2019. C.J. Muse: Very helpful and as a follow-up I guess specific to EUV gross margins it looks like you came in around 20% in Q4 of 2018 if I pro forma that one time charge. I think you've talked about exiting calendar 2019 at 30%, can you walk through how we should think about the ramp there and as well when you talk about where you're seeing bottlenecks, is it still primarily Carl Zeiss are we still at roughly nine month cycle time, can we get it down to six, would love to hear the working parts to gross margin and cycle times as we go through the year?

And the main driver of that improvement is as we already mentioned in the introduction of the 3400C model, so that is the main driver through its higher ASB. Of course there is an element in there of further reducing cycle time and as a result of that you know being more efficient in the manufacturing of the machines. But the main driver in getting to this uptake of 10% in the gross margin of systems really is the higher ASB on the 3400C model.

And on your question on the 20% I think you're about right when you say the blended EUV margin is about 20%, the system margin by the way is over 30%. So that goes into the right direction, the issue is and I said it earlier that we decided in 2018 to at least make sure that we step up the infrastructure of EUV service. That we are at that point we're not going to grow that any further in 2019 but we do get the full brunt in terms of cost start in January 1st 2019 because that EUV infrastructure given the ramp profile of our customers need to be ready and the learning curve for our people in the field is more than a year. So that effectively brings the blended EUV gross margin down and we said it earlier we don't have yet coverage of the EUV service infrastructure. It would only start by the end of year when we start seeing the first HVM, high volume manufacturing wafer output for which we will get paid. And of course that will accelerate throughout 2020 and beyond. So, the service -- and Roger talked about it is I think the main reason why there is a gap between the 30% and the 20% that you are calculating. C.J. Muse: Fair enough, well thank you.

The next question comes from Mr. Amit Harchandani. Please state your company name followed by your question.

Thank you. Good morning and good afternoon all. Amit Harchandani from Citi. Just a quick question if I may to begin with on the installed base management side of things. Given your comments you have talked about the mid single-digit or single-digit growth in installed base over the course of 2019, just wondering if you could elaborate on the puts and takes of that and what could push it lower or higher? The reason I ask this is because as I look at the number for 2019 and then I look at some of the scenarios you had laid out for 2020 I think the installed base number was seen at about €3.6 billion to €3.7 billion in 2020, just wondering if you still think you could get to that number what would drive that ramp and again what would be the implications for gross margin because I do understand this is relatively higher gross margin?

Yeah, I think on the gross margins you do understand it so it will have an impact, a positive impact on the gross margin. But the single-digit number for this year is also driven by what Roger said earlier. I mean we did have a supply chain issue because of the supplier of some of the electronics and the motion control Prodrive. That fire had an impact on the upgrades that we were planning to do in the first half of this year. Now we're using those bonus to shipments that actually means that the upgrades are coming back in the second half of the year but those are complex upgrades for which we simply don't have the service capacity to do all the upgrades to basically catch up six months or 12 months of business in six months time. So for the year you would see that that actually gives you a lot -- you just lose upgrade business and that brings the growth percentage down to single-digits. Now hopefully I do assume, we do not have a similar situation in 2020 and that should really correct itself. So this single digit growth has to do with the fact that we cannot to recuperate 12 months in six months that's the main reason.

Okay, but you still are quite confident in getting to that 3.6 to 3.7, it is just a temporary issue?

It is our target.

Okay, thank you. Thank you Peter.

The next question comes from Mr. Stéphane Houri. Please state your company name followed by your question. Stéphane Houri: Hi, this is Stéphane Houri from ODDO. I have a question about the second half outlook, just to understand a little bit more what you are saying basically, are you banking on any recovery in the memory DRAM or non-space to talk about this two increase or it is just based on the logic business? And if ever it was happening do you have enough -- would you have enough capacity to meet the demand? Thank you.

Well, to answer your last question, yes, we will have enough capacity. Analog generating is really driven by the logic strength in the second half. We do expect when we talk to our memory customer that they do expect some recovery in H2. But when you look at H2 it will be strong logic driven half. Stéphane Houri: Okay, and I have a short follow-up, you said in your remarks that EUV deliveries to 13 machines that you are talking about were covered by your order book. How do you see 2020 for EUV shipments? Thank you.

2020 shipments well I can only refer to what we have shown at the Capital Markets Day where we showed you the model, I think you should take that number. Now that can change and like a very wise person told me lately I'm an optimist that worries a lot. But I am optimistic on 2020 because I'm optimistic on the performance of the 3400C. And that means that if we can prove and I think we will that by the end of this year you have a EUV tool that has an availability of over 90% with 170 wafers per hour and the economics for EUV are so convincing that I believe that our customers are definitely going to relook at their plans and see which layers in the logic but particularly at DRAM are now eligible for EUV introduction. So I would refer to right now, I would refer to the Capital Markets Day and the model market scenario we have put in there. It gives you the EUV number. But I then also tell you that I have been very much looking forward to the performance of the 3400C for which we have a lot of confidence. And that might trigger additional demand in 2020. Stéphane Houri: Okay, thank you. Many thanks.

The next question comes from Mr. Adithya Metuku. Please state your company name followed by your question.

Yeah, good morning guys. It is Bank of America. Two questions if I could, firstly just looking through DRAM that you need to deliver on EUV and DUV, I just wanted to better understand what EUV tool capacity you will have in the second half of this year, my understanding was it will be 10 per quarter in 2020, so any color there would be very helpful? And then secondly just trying to practically think about why R&D would come down in 2020 versus 2019 levels, practically what exactly will drive this if you could give some color on that, that will be helpful, thank you?

Yeah, I think the shipment capability, I think you are right. The second half is obviously a year. And in Q4 we should have a 10 per quarter run rate. Which actually means one of the earlier questions that the cycle time is coming down, factory cycle time. Integral cycle time of EUV which includes also the supply chain is still well over 12 months. But our integral cycle time in the factory should go down to anywhere between 15 and 18 weeks so that is the big task. That will actually mean that we will be able to do 10 shipments per quarter.

As it relates to R&D an important portion of the acceleration of the R&D effort that we talked about is related to the introduction of the 3400C model which as I have already explained is going to happen this year. So with that essentially done that means that there is some leeway there and that we would be able to manage down the total R&D expenses because that research is done. And we're very well able to do that because in addition to our own headcount that we already talked about there is a lot of format out that we have there. So in that way we think we can manage that down to the number that we've guided for 2020.

Okay, understood. And just quick clarification on Q2 gross margin, you clearly said gross margin will improve in the second half. Would it be reasonable to assume that Q2 gross margin will be similar to the Q1 gross margin or would that be too pessimistic?

You know we'll get there in a couple of months. As we said we think the conditions that exist for Q1 to a very large extent also exist for Q2 and the major recovery items that we discussed are going to kick-in in the second half.

Understood, thank you.

The next question comes from Mr. Andrew Gardiner. Please state your company name followed by your question.

Good afternoon, it's Andrew from Barclays. Thanks for taking the question. I'd another one on the EUV, or sort of one follow-up and another question. Peter in response to an earlier question you suggested that indeed there had not really been any change to delivery plans or shipment plans through the quarters of 2019, clearly you are still saying 30 units in total but I just wanted to first of all make sure that indeed your customers haven't really changed any plans on that front?

That's correct because we haven't seen any customer push backs on the EUV shipments.

Okay, and so in relation to that there's some discussion in parts of the industry and parts of the financial markets about perhaps not so much concerns on your customer side, the foundry side but perhaps that the customer-customer, some of the fabulous guys with a little bit of trepidation as to how the ramp of the EUV is going to go and what that means for high volume manufacturing and their ability to get the chips out the other side. Are you having -- are you hearing those fears, are you having those discussions with some of the fabulous chip vendors, what are you doing to help sort of satisfy those concerns?

Well, the customers of our customers they are bit more distanced as you can imagine. We do have interactions with customers of customers but that's largely on the roadmap and not so much on the operational situation at our customers. I mean we don't discuss our customer's production capability or the capacity of our customers. We don't have that insight but like I said we do talk about the roadmap and I think in the discussions that we have had with customers of our customers is also in our mind pretty clear that they all understand that EUV is here and it actually works. Now having said that what is particularly important is, not so much a little graphic performance. I think the little graphic performance of the machine itself is actually better. Every time it is better than what was anticipated and that's what actually drives a lot of the design. So it's good. Now we are of course not yet had an availability and had a let's say maturity level that we would like to see for high volume manufacturing. The 3400C with all the improvements that are in there was also a lot of availability improvements in there and that is going to be the proof of the pudding. And I think this will -- this is why I also said in an answer to an earlier question that the 3400C and its performance is going to be a big driver also in 2020. And we are confident that we are going to get there and I can imagine that customers of our customers that are further away from us that they want to see this first. Well they will get an opportunity to see this in the second half of the year.

Ladies and gentlemen we have time for one last question. If you are unable to get through on this call and still have questions please feel free to contact ASML Investor Relations Department with your question. Operator may we have the last caller please.

Yes sir, the last question will come from Mr. Sandeep Deshpande. Please state your company name followed by your question. Sir your line is open.

Hello, hi, Sandeep Deshpande here at J.P. Morgan. My question is regarding Peter about you mentioned in one of your press release that your DRAM vendors are looking at EUV at this point. My question is, is this throughput going to 170 wafers per hour, I mean in 2019 you've got majority of your tools going to probably the TSMC, will the DRAM guys be able to contribute enough to do that 33 to 35 tools next year or you think there are going to be other contributors beyond DRAM in terms of EUV tools in training?

I think DRAM is definitely an additional contributor. It will be small this year as I said earlier but they are going to be more -- it's just more than one DRAM manufacturer we are going to ship the retool to. So it is a very much a function of our ability to bring 3400C up to maturity levels that customers need for DRAM. I think we can do that, I think everything that is -- that we have in front of us which is the availability improvements in the EUV source, the higher productivity with 170 wafers per hour was all ingredients that make it attractive for DRAM customers to start using EUV in DRAM. So I think there is little doubt there. So it is up to us, it is up to us and to the customer to make sure that what 3400C can actually be used in high volume manufacturing. And then that will drive 2020 demand also and it is really the success of the introduction that will drive this additional demand.

And then one quick follow-up on your gross margin. I mean given the weaker first half gross margin with your expectations that there will be a big step back in the second half, do you still think that your gross margin on an overall basis will grow in 2019 versus 2018?

You can do the math. I mean you have six months of pushback and a lower gross margin you have to be pretty -- it has to be pretty high to make that all up. Now what we actually said is I think the recovery driven by all the reasons that Roger talked about I think we will see a gross margin exiting the year in Q4 that are trending nicely towards the 50% plus that we said we would see in 2020.

Understood. Thanks a lot.

And on behalf of ASML's Board of Management I would like to thank you all for joining us today. Operator if you could tell them to conclude call I would appreciate it, thank you.

Of course sir. Ladies and gentlemen this concludes the ASML 2018 fourth quarter and annual financial results conference call. Thank you for participating. You may now disconnect your lines.