ACM Research Inc (ACMR) 2022 Q2 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the ACM Research Second Quarter 2022 Earnings Conference Call. (Operator Instructions) As a reminder, we are recording today's call. (Operator Instructions) Now, I will turn the call over to Gary Dvorchak, Managing Director of the Blueshirt Group. Mr. Dvorchak, you may begin.

Thanks, Carmen, and Good morning, everyone. Thank you for joining us on today's call to discuss second quarter 2022 results. We released results before the US market opened today. The release is available on our website as well as our Newswire services. There's also a supplemental slide deck posted to the investor portion of our website that we'll reference during our prepared remarks. On the call with me today are our CEO, Dr. David Wang, our CFO, Mark McKechnie, and Lisa Feng, the CFO of our operating subsidiary, ACM Shanghai.

Before we continue, please turn to Slide 2. Let me remind you that remarks made during this call may include predictions, estimates or other information that might be considered forward-looking. These forward-looking statements represent ACM's current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results to differ materially. Those risks are described under "Risk Factors" and elsewhere in ACM's filings with the Securities and Exchange Commission.

Please do not place undue reliance on these forward-looking statements, which reflect ACM's opinions only as of the date of this call. ACM is not obliged to update you on any revisions to these forward-looking statements. Certain of the financial results that we provide in this call will be on a non-GAAP basis, which excludes stock-based compensation and an unrealized gain or loss in trading securities. For our GAAP results and reconciliations between GAAP and non-GAAP amounts, you should refer to our earnings release, which is posted on the IR section of our website. With that, let me now turn the call over to David Wang, who will begin with Slide 3. David?

Thanks, Gary. Good afternoon, everyone, and welcome to ACM Research, Second Quarter 2022 Earnings Conference Call. Please turn to Slide 3. Our second quarter results represent a solid recovery following the Shanghai COVID restrictions this spring. We delivered strong revenue and profitability as our facility returned to normal operations. As we had expected on the Q1 call, the restrictions turned out to be temporary. The Chuansha facility was reopened on the closed loop production process in later April. As of July 1, operations in Shanghai were largely back to normal. I want to sincerely thank our employees, business partners, and customers for their dedication as we navigated COVID pandemic.

Let me share some financial highlights for the quarter. Revenue of $104 million was up 94%. Revenue included shipments of tools in the second quarter that could not be delivered in the first quarter due to the late March restrictions in Shanghai. A strong product cycle from ECP and incremental business from new customers also contributed to growth. Shipments were $112 million compared to $82 million last year. Gross margin was 42.4% within our normal range of 40% to 45%. Operating margin was 21.1%. We ended the quarter with $469 million of cash & equivalents and time deposits. For the first half of the year, revenue grew by 50%. Cleaning tools grew 27%, while ECP tools grew 490% and contributed 20% of the sales.

Demand from our top China customers remains strong. We believe many of our customers are in the early-to-mid-stages of multi-year expansion plans, and we see good growth of opportunity for the next several years. We have grown share of the China market with our cleaning tools based on our technology, good execution, and new products. We had incremental revenue contribution for ECP product cycle for both front end and back end, and with multiple customers. We are gaining marketing share in China with both ECP and advanced packaging products. Over time, we target 50% market share in plating in China and 25% share globally. We target a similar trajectory for our furnace product cycle in the coming years, and we are building a longer-term opportunity with the instruction of 2 new product categories, which are on track for later this year.

I will now highlight a few recent announcements.

On April 21, we announced that our 18 chamber, 300-mm Ultra C VI single-wafer tool was qualified for mass production by a mainstream memory chip manufacturer in China. This tool provides 50% more throughput than our 12-chamber tool, but with a similar footprint and is an important tool to support higher volume production lines at one of our key memory customers. We expect the 18-Chamber cleaning platform to play an important role with this customer and others for 3D NAND and DRAM. On July 12, we introduced a new post-CMP cleaning tool for silicon and SiC wafer substrate manufacturing. This tool expands our cleaning product portfolio by serving as a cleaning step following chemical mechanical polishing. CMP is used manufacturing high-quality substrates.

I will now provide some highlights of our major customer initiatives. I will start with the US. We recently delivered 2 Ultra C SAPS V 12-chamber cleaning tools to the fab of a major US semiconductor manufacturer. This is a great achievement for ACM, a testament of our technology and our North American sales and marketing operations. We delivered the first tool in June, which our customer is evaluating based on its unique technology features. We also delivered a second SAPS V tool in mid-July. Our target is to qualify both tools and put them into production by the end of the year. We have staffed a full on-site services team in the US, and we now have a visiting team of engineering from Shanghai to support installation and evaluation. We believe our success here could lead to follow-on orders with this customer at several sites, and perhaps lead to interest from other major customers in US and Europe.

Next, we remain engaged at the China-based facilities of 3 large international semiconductor manufacturers. The first is the global IDM with a China-based packaging facility. We delivered the first Ultra C pr wet stripping system in Q4 2021, followed by a second tool in Q1, and we received additional orders for delivery later this year. We are hopeful that success with our first products can lead to a broader adoption of other WLP products at this important customer.

The second is a regional Asia-based semiconductor player with a China-based fab. We deliver an Ultra ECP map development tool in Q1, and the customer has begun its evaluation with our service and process team.

And the third is a major global semiconductor manufacturer with a China fab. We deliver an Ultra C SAP V 12 Chamber cleaning tool in Q2, and we are moving forward with the evaluation.

Looking into second half of the year, demand for our tools is strong, and we have good visibility through year end, and we are starting to receive orders for the first half of next year. We expect solid growth in 2022 and beyond from our core cleaning products, the ramp of our ECP tools and increased shipments of our furnace products. We are committed to gaining additional share in the $8 billion market addressed by our current products. We have 2 important new product extensions. In cleaning, we have supercritical CO2 dry tool and in furnace we have ALD. Both are on track to be delivered in the second half of this year.

Furthermore, we are on track to double our addressable market opportunity with upcoming introduction of 2 new product categories also in the second half of this year.

Now, let's discuss our capacity expansion plans. We continue to add capacity to our Chuansha facility. We moved our past inventory to a new third building, which freed up additional 5,000 square meters as our second building for final assembly. We remain committed to grow our production capacity to $625 million this year, and our Lingang construction project is on track. We plan to complete the first production building in the beginning of 2023, with initial production to start by mid-year. We are also planning R&D center in Wuxi and Beijing to support several key customers, and we are considering a more meaningful investment with a potential production facility in South Korea. We currently have about 100 R&D engineers and support staff together with the production facility. A larger presence in South Korea with meaningful production capacity, will establish a local footprint near the two major players and provide our global customers with a secondary production center to ensure continuity.

Before I provide outlook, I'm pleased with the progress with our new auditor. On May 19, we appointed PCAOB-compliant auditor Armanino, as our independent public accounting firm for our first year 2022 audit. On June 30, this was ratified by our shareholders. Following our 2022 annual audit and filing of the 10-K, we expect to be removed from list published by the SEC pursuant to the US Holding Foreign Company Accountable Actor.

I will now provide our outlook. We have strong orders through year end. Due to a tight supply chain environment, we are keeping our outlook unchanged at the range of $365 million to $405 million. The range of outlook considers among other factors, continued expansion of production and shipping operations in Shanghai, the absence of unexpected interruptions of our supply chain and continued demand by our customers.

Now let me turn the call over to Mark, who will review details on second quarter results. Mark, please?

Thank you, David, and good day, everyone. Please turn to Slide 5. Unless I note otherwise, I will refer to non-GAAP financial measures, which exclude stock-based compensation and unrealized loss on trading securities. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release.

Before I provide the normal review, I want to address the impact of the COVID restrictions in Shanghai on our business. As a result of the restrictions for the first half of the year, we experienced a negative impact on revenue and shipments, and overall results were below the original plan established prior to the restrictions. In addition, 13 tools that could not be shipped to customers in the first quarter were subsequently shipped in the second quarter. To quantify these 13 tools amounted to $24 million in shipments and $12.9 million in revenue.

Qualitatively, we had higher operational costs and some inefficiencies across different groups during the restrictions. The restrictions did also impact our operating cash flow. Primarily with the relatively high percentage of shipments in the latter half of the quarter, our accounts receivables grew. With the easing of restrictions, we are now focused on delivering tools to meet the demands of our customers.

I'll now provide financial highlights for the second quarter. Revenue for the second quarter of 2022 was $104.4 million, up 93.8% from the second quarter of 2021. Total shipments were $112 million versus $82 million in the year-ago period. Revenue for single-wafer cleaning tools, which include SAPS, TEBO, Tahoe and semi-critical cleaning was $72.6 million, up 59.7%. Cleaning mix as a percentage of total revenue was 69.5% versus 84.4% last year. Revenue for ECP, furnace and other technologies was $20.5 million or 19.6% of sales compared to no contribution in the year-ago quarter.

Revenue for advanced packaging(excluding ECP), services and spares was $11.3 million, up 34.6% or 10.8% of sales versus the mix of 15.6% last year.

Gross margin was 42.4%, up from 40.5% in the prior year, which is in line with our normal expected range of 40-45%. We expect gross margin to continue to vary on a quarterly basis due to a variety of factors, including product mix and manufacturing utilization. Operating expenses were $22.3 million versus $16.1 million in the second quarter of 2021. The majority of the increase was from R&D personnel for new product development and other factors and increased SG&A costs to scale the business in China and new global markets.

Operating income was $22.0 million versus operating income of $5.7 million in the year-ago period. The large increase in operating income was due primarily to leverage in our topline. Our operating margin was 21.1% compared to 10.5%.

Unrealized loss on trading securities was $0.4 million in the second quarter of 2022, versus an unrealized gain of $3.8 million in the year-ago quarter. This noncash item is excluded from our non-GAAP results.

Income tax expense was $7.7 million. As described in our earnings release, a change in the US, Internal Revenue Code Section 174 that went into effect on January 1, 2022, has caused a meaningful potential increase in ACM's effective tax rate for the full year. We're still evaluating the impact of the new tax provision for 2022, and we note that Congress is considering legislation to defer the capitalization requirement to later years.

Net income attributable to ACM Research was $14.6 million versus net income of $4.1 million in the year-ago period.

Net income per diluted share was $0.22 compared to net income per diluted share of $0.06 in Q2 of 2021.

I will now review selected balance sheet items. Cash and cash equivalents, restricted cash, and time deposits was $468.9 million at the end of the second quarter versus $533.1 million at the end of the first quarter. Total inventory was $288.1 million at quarter end, up from $271.5 million at the end of the last quarter. This included finished goods inventory of $103.4 million, work in process of $45.7 million and raw materials of $139 million.

Net cash used in operations was $33.6 million with net income offset by an increase in accounts receivable and inventory. As mentioned previously, our receivables were higher due to the relatively higher percentage of shipments made in the latter half of the quarter as a result of the Shanghai COVID restrictions.

In closing, demand for our tools remain solid, and our operations have returned to a more normal level. We will continue our investments in new products, new customers and capacity as we continue forward on our mission to become a major player in the global semiconductor industry.

Now, let's open the call for any questions that you may have. Operator, Please go ahead.

(Operator Instructions) Our first question comes from Quinn Bolton with Needham & Company.

Congratulations on the nice results and the strong recovery in the June quarter. David or Mark, just wanted to ask my first question around the 2022 guidance. I know you're keeping it unchanged at $365 to $405 million. But it sounded like you said part of the reason you're keeping it unchanged was due to supply chain constraints. I guess my question is, do you have the demand that could actually lead to upside and you're not changing it because of the supply chain or did I mishear your comment?

As we said that, everybody where that is a supply chain still continue, I should say, still very tight. That's the reason even we have very strong demand and PO from customer, because uncertainty of this supply chain, that's why we're still keeping $365 to $405 million of our projection for this year.

But it sounds like, David, you might have actual demand that would allow you to exceed that level, but you're keeping the annual target mostly because of concerns around the supply chain?

Well, as I said, if the supply chain really gets better or if we have a landing item can be delivered as we expected and probably can reach a high sight of our projection. And so it's really this moment, we still have some surprising, sometimes they say they can deliver next month, but when the time come in, there is a delay. So there's certain parts holding us, put this way, that's why we're still keeping this number, no change.

David, second question from me. You've got a number of new platforms coming out in the second half. You've announced 2 of those, which are the supercritical dry and the ALD Furnace tool and then the complete new platforms. Can you talk to us as you introduce those tools, when do you think you'd actually be able to start to rev rec those tools? Could the supercritical dry and ALD Furnace rev rec in 2023? Or do you think the valuations for those tools as well as the new platforms that you haven't announced yet? Do you think that rev rec on those platforms really are going to start to kick in for you more in 2024? Just trying to think about the timing of these additional growth drivers.

Actually, those tools, as I mentioned, will come in the second half of this year. Normally, like Furnace ALD, also, we have the Supercritical CO2 Dry including also, 2 new category products. And when we put in the customer side, normally take about 1 year or 1.5 years for the full qualification. I should say, we're probably expecting real revenue come out in 2024.

Our next question comes from Suji Desilva with ROTH Capital.

Congratulations on the execution challenging environment. So just to maybe elaborate on Quinn's question a little differently. I want to ask about the visibility in the sense that you had backlog you were catching up from in the first quarter that drop in the second quarter. Does any of that still remain for the third quarter? Or have you worked through the tools you couldn't ship during the COVID lockdowns?

So, there were 2 factors for the first half of the year. I mean, we did deliver, all the tools we couldn't deliver in Q1, we delivered in Q2. But certainly, in the first half of the year, our overall production output was impacted. No, we have not caught up with all the demand for the tools that we have from our customers, the lead times for our deliveries are longer than normal. And so really, if you look at the back half of the year, it's going to be about our execution on the supply chain side and our suppliers.

That helps me in a picture there. And then, David, perhaps, the foundries in China making some others are starting to be able to deliver leading-edge nodes, maybe with or without EV. And they have obviously a mix of trailing and leading edge or trying to grow into. Is there an uplift potential for your addressable market as the foundries in China try to target the leading edges more? Or is that nascent and maybe less of an opportunity versus what you're shipping today?

Yes. And actually, you're right, (inaudible) leading-edge product. And at this moment, I think we're really focused on the 28 Nano and above. A lot of products we're selling right now is 45 and 28 Nano and put this way as a large market exists in China here, you can still use 45 Nano and 28 Nano technology to make the product. So we see that the potential is still tremendous. It's including cover all cleaning products, for example, where we announced our AutoBench. That's mostly using for the 45 Nano above, and obviously, 28 Nano is used for a lot of single-wafer cleaning. I still see the potential going in there, and the all products can be keep going as this fab build up for those 28 Nano on and above.

Maybe if I could sneak in one last quick question. On your US-based semi cap equipment partner, any update there on the, I guess, the development effort you were working with?

Yes. As we said, we have 2 tools have been delivered to one of the major US customers, and we are expecting these 2 tools will be qualified probably by end of this year, and which will lead additional PO and additional interest. Meanwhile, we're also working closely with other customer in the US and Europe. I think our goal is really at global market with our differential product in the cleaning, in the copper plating, and also, in the future furnace, but especially ALD, we're developing right now. We see still a lot of potential market, get our differential product and to penetrate the global market.

Our next question comes from Donnie Teng with Nomura.

Congrats on the strong results. I think the first question is still regarding the second quarter results. I think previously, our impression is like the second quarter sales may be less than $100 million or not as high as today. Could you elaborate more on it was mainly due to just the tool shipment being postponed from first quarter to second quarter, and we probably miscalculated a couple of tools in the second quarter? Or it's because of some customers we want to pull in first in the second quarter. Just want to have an idea what's the mismatch in the second quarter sales result in the previous impression?

So really, the upside in Q2, I'd characterize that as just good execution by our factory. As we discussed earlier, the customers' demand for our tools was pretty high. So we quantified how much move that we couldn't shift from Q1 into Q2, but we had pretty good output and also on the customer acceptance side. The combination of that drove the upside for Q2.

Understood. So it sounds like it's mainly due to demand driven rather than just pull in the second quarter.

Yes. Donnie, the demand was there, and it's there for the back half of the year. So to be clear, it was really the execution of our factory and watching.

Yes, let me add on that, Donnie, your comment. Actually, we're not pull-in, we're pull-off. We're still not there. We'll meet our demand in Q2 from our customer. Some of those products had really delayed into Q3. That's the status. Because we're still in lockdown for April and even back to the "two points, one line" production in May, there is a lot of restrictions for the logistics delivery and the clearance of the customer of the import parts. So anyway, that's still the real impact on our Q2 revenue and shipments.

And can I have a follow-up on the full year guidance again? So it looks like we are facing some supply constraint or supply chain uncertainties. Does it mainly refer to our component supply or the customers' capacity expansion and uncertainties. Just want to have a more clear view on what exactly mean the supply chain uncertainties to have some constraints to our full year guidance.

Yes. Well, actually, our customer demand is still very strong. And we can see that our PO has freed up this year and some PO even go to the Q1, Q2 next year. Really, this moment is, I think the factorial inhibitors is secure some short or long-leading parts. Of course, we're ramping our production, and we still need to training our staffing and manufacturing people and increase our efficiency, and then deliver too. So, that's the major constraint of our revenue, I call the realization.

Could you let us know what kind of components we are facing, maybe have a much longer lead time? Could you give us some examples?

Well, I don't really touch on details. I will say I have a vendor, supplier, if I mention what's the product, they may be not happy. Anyway, not a lot, a few of them. We're still lacking, I call it secure or their fully production capacity either. I think they also supply other customers too, so it's really a shortage. We're still working very close with them, and we are also working on a second source. Even at some time, we have changed our design and changed the components. That's the strategy we're taking right now.

And my second question is regarding to our progress with the customers. It looks like we have quite good progress in different type of equipment. But if we want to focus on the priority of these projects or these customers, could you maybe give us a more clear view on which new equipment or which customers that we are more confident in winning the orders, or to see a more meaningful sales contribution in the near term, based on the prepared remarks you mentioned about all these projects.

Well, obviously, you can see we have our first-tier customer. Obviously, at this moment, YMTC and HLMC, SMIC and CXMT. And we also have another second-tier jumping big one is Silan, RGPT customer in China. Also, have a bunch of second-tier customers in there. I can see they're growing and they're building the pilot line and also their pilot production too. It's a lot of I call the demand there. But as I mentioned at the top of the five customers taking roughly probably 65% of our total revenue.

I just want to maybe see if you could prioritize all the new projects you've just mentioned in your prepared remarks. There are lots of names there like IDM companies, Asia-based customers, etc. Just a little bit of distraction, I just want to see if you could kindly prioritize the importance of those projects or when exactly maybe by the sales contribution timeframe ranked by the timeframe, if you could.

Well, as I mentioned, the top customer, I just mentioned already. But at this moment, it's too early for us to tell you who is number 1, number 2, because this is the only Q2 timeline. I will say, by end of the year, we're going to publish what will be the number 1, number 2, but probably what change can be ranking by the 5 probably, I already mentioned to you. As I said, SMIC, YMTC, HLMC, and also CXMT and Silan. That's our maybe top 5, top 6, but may change end of the year, so we have to give you the real number by probably end of this year, which is on Q4 earnings connection.

Our next question is from Edison Lee with Jefferies.

I have 2 questions. Number one is more about demand, particularly in light of the recent talk by the US government to step up their export restrictions of SPE to China. What do you think is the impact if that step-up is going to materialize, particularly on, for example, DUV, which could impact not just 40-nanometer or below, but potentially 28, 40, 55? That's my first question.

Well, I should say, we're not just by public information, we heard that is 40 Nano and below. And I didn't hear anybody talk about 28 Nano at the moment. You're looking to the 20 Nano and for those, I call, they did not use any UV, they're not using any advance to there. I think 20 Nano is still a viable technology for a lot of applications, and also, if you pair it together with advanced packaging together as a lot of the product can make. That's why I see a lot of fabs still built in China, and most of them is 28 Nano and also 45 Nano above. Also, that's our major revenue come from at this moment. Of course, we have also penetrated the market outside of China, and with that in mind, so we want our product, either cleaning, copper plating, and also their furnace product we're getting to more advanced application in the market outside China.

But as far as you know, what do you think the Chinese customers or your Chinese customers have started doing in response to this risk of more difficulty in buying SPE from the US? Have you seen any change in your customer strategy? Are they accelerating procurement or expanding faster? What have you seen from your customers?

Well, I mean, this is daily changing information, I really cannot comment on customers right now. Maybe too early to see anything right now. I have real limited information to comment on the customer right now.

No problem. My second question is about rising cost of materials and components. Because obviously, given logistics issues, inflation, we think that a lot of components and materials prices have been going up, and your gross margin in the second quarter actually is higher than the first quarter. We wonder if you have been able to pass on some of these materials cost increases to your customers? Or how does that work if the material and component costs suddenly shot up?

Sorry, my sound here is not clear. Can you repeat the question?

Yes. It's about material cost increases and component cost increases. Just we think that because of inflationary pressure and also because of logistical challenges, I think component costs are going up. We wonder whether you can pass on some of those cost increases to your customers? And how does the pricing work?

So we do see some parts increased price, because our supply side components, also their raw materials start changing. We do not, I should say, increase our pricing for the sale yet. But for a certain portion of the product, if it's really increased a lot, we're talking to the customer right now, because the component increased pricing. At this moment, I should say, our major component pricing is still not changing. We imported some parts from Japan, differentiation of Japanese Yen, I see not increase too much pricing of their parts. But we do see some parts from Europe and from US get increased because of their strong and dollar. Anyway, it's still a minor impact to us, it's not a real much significant to our cost.

Yes. David, if you don't mind, I'd add something here. Edison, David made a good point. The renminbi weakened about 5% during Q2. And so a lot of our tools are priced in dollars, so you don't see a big impact on revenue. And on COGS, the supply is as David noted, some of it's in the end, some of it comes from renminbi, and then we get the western currency, Europe and US. There is an impact, but overall, the weaker renminbi does help out on our operating expense, and so that certainly contributed a bit. And the big picture, our Shanghai operation looks cheaper in US dollars than it would if the expense wasn't dollars.

In that case, and a follow-up by asking what percentage of your revenue, for Q2 as an example, is dollar-based?

Yes, it's the substantial majority. I don't think we'd break out the exact amount. But, David, yes, it's I'd say the substantial majority, but we're not going to give a percentage.

So basically, all your Chinese customers or the majority of your Chinese customers are basically buying things denominated in US dollars from you guys?

Yes, that's correct.

One moment for our next question, please. It comes from Chaolien Tseng with Credit Suisse.

This is Chaolien from Credit Suisse. First is a quick follow-up question to the question that Donnie asked. I'm curious, David, that in the case that if ACM has to change some equipment design, partially on the design or the components, do they take more time for the customers to qualify than the usual case?

Go ahead, Chaolien. Can you repeat your question?

Yes. Because earlier, I think when you answered Donnie or someone's question, you mentioned that in some cases, the company may change a little bit of the equipment design or some components inside because of the component shortage. My question is, in this case, would the customer need to take more time to requalify your tools with the new design or component inside?

Actually, it depends on the components, what you're changing. If it's very sensitive components, you have to requalify, but for say example, some flow meter, you got a different vendor, a different manufacturer, if the boss is a real well-known manufacturer, you can change the flow meter to another kind of flow meter. It's not necessarily you're changing everyone. However, before you change it, you have to really talk to a customer. And also customer has also their experience about the components or the parts we're going to change. When we reach the agreement, then we're going to change it. That's the normal process we do it.

So actually, before we change we need to get their kind of agreement?

Yes. We have to look out the customer, we tell them, "Hey, if this component you wanted it will take more long time. And then if we give these components that we give you a spec or detail, I call it functionality or the description. When we got the permission from customer, then you can change it. Of course, we'll do some internal tests first, too.

My next question is, I'm quite curious as for the second quarter finished goods, about how much for that is clean furnace versus ECP?

You mean the components in the cleaning or ECP, you talking about or revenue?

For the inventory finished goods, so for those 2 customers already, but we have a program. I'm just curious about how much is for clean furnace or ECP advanced packaging.

I think most of our inventory of finished goods is still most convenient work. Almost closer percentage of revenue-wise, probably close to 70% is a cleaning product and also still 20% ECP, of course, they have 10% of our packaging roughly exists. Of course, we have some other new product, which is furnace. We're not calculating the revenue yet, so some portion will also into the finished goods inventory.

And David, my next question is on the furnace side because that's something we've been quite looking forward to since last year, early this year. So first, would you mind sharing with us how many furnace carbon plating tools were shipped in the second quarter? And first, second half of this year about how many furnace tools would you expect to book in our revenue?

I probably cannot give that detailed number right now. But I think last year, 20 plating to shipped. This year, I think, we'll project total anywhere between 30, around the 30 number range total this year.

Chaolien Tseng: And by now, I know that COVID interrupted the intaking channel. I'm just curious that by now because it's kind of early August already, do you feel the furnace progress with multiple customers are on schedule within expectation or do you feel there's a little bit of the delay?

Yes. Chaolien, if I understood your question, we answered that on a couple of the other previous questions. There's some catch-up for us. So really, we need to catch up on relative to the customer demand. We certainly didn't fully catch up in Q2, and so we've got more work to do.

Mark, I understand that but I'm just curious on the furnace side.

On the furnace side. Please go ahead and ask your question again, Chaolien. Just to make sure we understand.

I'm just asking about furnace or the furnace qualification testing assessments or whatever with our memory or logic or foundry customers. I'm just curious about furnace. Do you think so far everything is on schedule, or do you feel there is a little bit of the delay with one or more customers?

I see. David, did you get the question? She's just asking if (inaudible).

I think the voice here is very weak. I don't know, can you repeat the question?

She asked if the restriction caused any delays on the qualification of our furnace tool.

You mean the restriction for the components?

No. The COVID-related Shanghai restrictions.

Actually, not really much because at this moment, our furnace and most portion was made in Korea and some portion made in China, and also, volume not as big as the cleaning tool. It's some impact, but not really much.

Maybe, David, I think really, she was more asking about like just the evaluation, our ability to have our services team and our customers at our customers to help them with the evaluation of the furnace.

How we evaluate the tool?

Yes. As I understand, she wanted to know if the restrictions during Shanghai interrupted our ability or our customers' ability to evaluate.

Yes (inaudible).

David, we lost your voice a little bit there. Sorry about that. Maybe David, could you answer again? I think that's it. But David, maybe just to answer her question one more time because your earlier answer didn't come through clearly.

Okay. I said during the COVID-19 restriction period, and our processes and the second engineer, and other 3 traveled from Shanghai, and also some components we're going to ship from Shanghai. That's why it will impact some of the tool of furnace valuation in customer side.

Operator, it looks like there's no more questions. If you want to pull one more time.

We have people in the queue, one moment for our next question. We have a question from the line of Charlie Chan with Morgan Stanley. Your line is open.

Congrats for the strong recovery, not just revenue, but also the stock price. My question is about your view about the future China CapEx sustainability. I know you have a very high backlog to digest, but some memory fab or foundry fabs that you cut their CapEx recently. Do you expect your new booking to slow down in the coming quarters? And what would that mean for your maybe coming year growth? That's the first question.

Actually, we didn't see any impact this year. As I said, even some deal, leaving for the Q1, Q2 next year. Even with that, we're still talking to the key customers in China and even the next year's CEO. As I said, the key customer or customer in China are still in a multi-year expansion, probably there another, I should say that they're in the middle, they cannot stop this way. Of course, they have the timing of the technology, make sure their yield and their technologies advance to the certain point and expanding faster. But that expansion trend as you see is still not changing. But we will say there are obvious cycle in the coming. There are a couple of cycles probably next year or start to decline, and what I should say, the profit cycle in China will be delayed than the word cycle. If I have to say, in year 2, I feel still pretty comfortable, even 3 years from now.

Seems, David, I kind of agree because it's local sufficiency-driven, but once that capacity expansion plan gets completed, I think, the cycle impact will still be there. But I agree with you, it would be one or 2 years later. My next question is maybe to Mark, it should be simpler. How soon can you be removed from the provision list from US prices? I know you have changed the accountants, but I just want to make sure has to be the next of 10-K, 20-K, or from the quarterly reporting you can be removed from the provision list.

Yes. As you know, we were put on the conclusive list actually following the filing of our 2021 10-K. So, we showed up on a list for the first time as a result of that. Now that we've appointed a US-based auditor, PCAOB compliant, after we've completed our 10-K filing for 2022, and they're signed as the principal auditor. I guess the way it would work is, we would not show up on the list again in 2022. We can't get removed from the list that we were put on in 2021, but we wouldn't show up on the list for a second time, and that's the way it would play out. We would not expect to be added to the list for a second time, and therefore, we don't expect our US stock to be subject to the delisting that could occur if you're on the list for 3 consecutive times.

So that event will happen maybe next April or May when you report the 10-K?

That's right. It would be more likely, I guess, for us, an accelerated filer, the 10-K would be expected to come out in March, and so the list would come out, folks would show up as a second time on the list following that. We just simply wouldn't show up a second time on the list.

Maybe just one small follow-up about your new product line. Is that post-CMP cleaning is the so-called new product line, or just kind of appendix of your client cleaning tool?

Yes. Actually, that's the tool. We have put the development for the substrate manufacturer company, and why we do that is normally they have a CMP of the wafer, and however, cleaning performance from the typical CMP machine does not satisfy customer requirements. So, what they do is they probably do their just simple cleaning, either in the dry or in the wet, and we connect it with a cleaning tool, so then further, we clean the wafer then the dryer we'll live out. That's the process for this. Obviously, we are also designed for the 12-inch spending in substrate and also seeing carbide substrate, 60-inch, 80-inch. That's our product in market.

So it doesn't belong to the 2 new product lines?

No. That's just really an expansion of our cleaning portfolio. It's a cleaning part. There's no CMP only cleaning, we call that post-CMP cleaning modification. So it's belong to the cleaning product the cleaning part.

Yes, just a wish. I mean, management has been saying that in the second half, you announced 2 new product lines were literally in the second half. Do you think the next quarter result, meaning 3 months later, you will announce them? Or between you probably will announce at least one of the new products?

Yes. Well, we really have a lot of product development. I just make sure I couldn't be sure what announce the first, but we have about 4 products on the line and one is the supercritical CO2 cleaning, that's the one critical for the DRAM, I mean, the capacity cleaning process. The second one is ALD furnace; vertical furnace ALD. Then we also have 2 new categories, as we have not given name yet, but there's an addressable market, $8 billion as 2 complete new category products, and that one is all in the second half of this year. It's a really exciting moment.

We will be patient to that and also looking forward to the announcements. I think I will follow up on some detailed stuff in our follow-up call.

That would conclude Q&A for today. I will turn the call back to David Wang for final remarks.

Thank you, Operator, and thank you all for participating on today's call, and for your support.

With that, we conclude our conference. Thank you for participating, and you may now disconnect.