ACM Research Inc (ACMR) 2024 Q1 法說會逐字稿

Good day and thank you for standing by.

Welcome to the ACM Research first quarter 2024 earnings conference call.

(Operator Instructions) Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speakers today, Steve Pelayo, Managing Director of The Blueshirt Group.

Please go ahead.

Good day, everyone.

Thank you for joining us to discuss first quarter 2024 results, which we released before the US market opened today.

The release is available on our website as well as from Newswire services.

There's also a supplemental slide deck posted on the investor section of our website that we will reference during our prepared remarks.

On the call with me today, our CEO, Dr. David Wang; our CFO, Mark McKechnie; and Lisa Feng, our 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 SEC.

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 on this call will be on a non-GAAP basis, which excludes stock-based compensation and an unrealized gain and loss of short-term investments.

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 and to slide 12.

Let me turn the call over to David Wang who will begin with slide 3.

David?

Thanks, Steven.

Hello, everyone, and welcome to ACM Research the first quarter 2024 earnings conference call.

Please turn to slide 3.

I'm pleased with our results, a solid start for the year for the fourth quarter.

Revenue was $352.2 million (sic - see slide 3, "$152.2 million"), up 105%.

Profitability was good, a gross margin of 52.5% and our operating margin of 26.2%.

And we ended the quarter with just over $288 million of cash and time deposit.

Shipment for the first quarter were $245 million, up 175%.

As expected, first quarter shipments were higher due to delivery of our finished goods that were now the ship in the fourth quarter of last year.

And we also had execution from our production team during the Lunar New Year holiday period.

I will now provide a detail on product.

Please turn to slide 4.

The revenue from the single-wafer cleaning, Tahoe, and the semi-critical cleaning product grow 199% in Q1 and then represented 72% of the total revenue.

ACM offer what we believe is that industrial, most comprehensive cleaning portfolio.

We support near 90% of all cleaning process steps for memory technological devices.

At high end, we believe our flagships sets Tahoe and Tebo single-wafer cleaning products, delivered a technical feature not available from any of our competitors.

At the low end, our semi-critical tool, including auto bench have driving incremental growth for our cleaning category over the past two years.

We have recently made a progress in SPM market, which we believe was resolving sheer gain in the growth in our cleaning business starting this year.

Let me provide more detail.

SPM spell for sulfuric acid peroxide mixing.

These steps are normally used to clean wafer after photoresist removal process and post-CMP clean.

We estimate the total available market or the TAM for SPM tool, it's 25% to 30% of the total front-end cleaning market.

Today, SPM has been a small contribution to our business.

Our SPM tools including Tahoe, low-temperature single-wafer SPM, and now our high-temperature single-wafer SPM tool.

Here now, we believe there has been only one major supplier of high-temperature single-wafer SPM tools.

Our engineering team has recently made a greater technical progress with our high-temperature tool.

And we believe ACM can now participate as alternative supplier.

This is especially important as we believe our customer generally prefer a one-stop shop for all their SPM cleaning staff.

We saw a high-temperature SPM tool.

We believe ACM now has a full product line to meet our customer requirements.

Additionally, Tahoe has been qualified for production by multiple customers and is beginning a ramping phase with a substantial number of orders planned for delivery in 2024.

Enhancements have been made to its performance, allowing the tool to match particle removal efficiency comparable to the single-wafer process while reducing sulfur usage by 50% to 70%.

We now expect a meaningful ramp of SPM tools this year as we began volume delivery across the number of our key customers.

Finish up on cleaning, we also expect our wet etcher cleaning tool to contribute meaningful revenue in 2024.

And we are on track to complete evaluation of our supercritical CO2 dry cleaning tool this year for revenue in 2025.

Revenue from ECP, furnace, and other technology declined 3% in Q1 and represented 70% of total revenue.

As I mentioned last quarter, we see there are important milestones for this category in 2023 with more than $100 million in revenue.

The year-over-year revenue decline is primarily due to quarterly fluctuations.

In fact, we ship 3x more easily tool in Q1 '24 versus the same period last year.

And we expect the revenue growth for this category for the full year.

As noted in prior calls, we believe that furnace product cycle progress in the year and result behind ECP.

We have our brand broader footprint of customer activities with more than a temple funds tool currently under evaluation and multiple customers.

We are optimistic this was resolving qualification and the follow-on orders in coming quarters.

Revenue from advanced packaging, which exclude ECP but including service spare parts, grow figure 53.2% in Q1 and represented 11% of total revenue.

This category, including renewable packaging tool such as the coater, developer, scrubber, and wet etchers, and also service in spare parts.

And we continue to explore new products and their technology to participate in the next generation of advanced packaging.

We believe ACM is one of the only companies that offer full [lab] of electro copper polishing tool and their copper plating tool for advanced packaging.

In Q1, we deliver ULTRA C v Vacuum cleaning tool to a major customer to meet the flux removal requirements for chiplets and other advanced 3D packaging structures.

Today, we also introduced the frame wafer cleaning tool.

This tool is design for post debonding wafer cleaning that enable nearly 100% recycle solvent and filtration.

We have successfully complete the installation and the qualification of our first tool with a key customer.

Finish up our product, we are making good progress with our track in the PECVD platform.

We believe our advisory methodology for Asia in both tool for success for Mainland China and also global customers.

We are engaged with multiple customer that we expect as a bench of growth progress in product development and evaluation this year with revenue in 2025 end of the year.

Now move on to our customer, please turn to slide 7.

In China, we believe we have a leading position in cleaning.

We have had become a multiple product company with a competitive product in a market for plating and performance.

And we have a solid evaluation pipeline for track and PECVD.

Our sales and service team are now driving deeper adoption of our product across our customer base.

Our growth is also being driven by new entrants.

On the international front, we plan to deliver Ultra C v backside cleaning and a bevel etch tool in the second quarter of 2024 to a large US manufacturer that I qualify as a first SAP cleaning tool for revenue last year.

This demonstrate a deepening relationship which we believe can lead to production orders across multiple product lines.

Moreover, Asian brand and reputation are gaining recognition among other US chipmakers, with new engagement and potential opportunity to penetrate their global manufacture sites.

We recently hired additional seasonal marketing and sales professionals who bring, establish their relationship with the key US semiconductor players.

In Europe, we saw our first quarter evaluation tool, the Ultra C SAPS-V cleaning tool at a major global semiconductor manufacturer in the fourth quarter last year.

The initial feedback has been positive, and we are optimistic that the volume production order are possible by middle of the year.

We think Korea we see opportunity with SK Hynix high bandwidth memory HBM product.

We see a potential game with their set cleaning tool for high aspirational reopening as whereas Ultra ECP for Tier 3 applications.

To support the draw, we made a progress in our facility, expanding in China and other regions.

Please turn to slide 8.

In China, construction of our Lingang production R&D center is nearly complete.

We expect to initiate production later this year.

In Korea, we are making progress with a key customer.

We believe our strong commitment to Korea to improve our relationship with key Korean customers.

Our resource in Korea can also provide another basis to supporting international customer in the US, Europe, and other parts of Asia.

We recently hired a new leader to run our Korea operations, David Kim.

He has a long time rendering of SK Hynix.

We are optimistic.

He has the experience and relationship, will help work adoption of technology and accelerate our business in the region.

We continue to invest in our Oregon site to add to our service support and the demonstration capability for R&D and customer activity in the US and Europe.

I will now provide our outlook, please turn to slide 9.

We believe that the heavy spending in China will remain solid as the country continue on its goal to match its production capacity with end market consumption.

We are focused on gaining market share in China, new product introduction, and expanding our business to new customer in USA, Korea, Europe, and other Asia markets.

Where we are from?

2024 revenue outlook to be in the range of $650 million to $725 million.

This implied '23 year-over-year growth at the middle point.

We expect our full year revenue growth for 2024 to outpace both the China and the global WFE crossing bridge.

Now let me turn the call over to our CFO, Mark, who will review details of our first quarter results.

Mark, please.

Thank you, David, and good day, everyone.

Please turn to slide 11.

Unless I note otherwise, I'll refer to non-GAAP financial measures, which excludes stock-based compensation and unrealized gain or loss on short term investments.

Reconciliation of these non-GAAP measures comparable to GAAP measures is included in our earnings release.

Unless otherwise noted, the following figures refer to the first quarter of 2024 and comparisons are with the first quarter of 2023.

I will now provide financial highlights for the first quarter of 2024.

Revenue was $152.2 million for the first quarter, up 105%.

Revenue for single-wafer cleaning, Tahoe and semi-critical cleaning was $109.5 million, up 199%.

Revenue for ECP, furnace, and other technologies was $25.8 million, down 3%.

As David noted, we anticipate good growth for the full year 2024 in this category,

Revenue for advanced packaging, excluding ECP services and spares, was $16.9 million, up 53.2%.

Total shipments were $245 million for the first quarter, up 175%.

Gross margin was 52.5% versus 54%.

This exceeded our normal expected range of 40% to 45%.

For the full year, we now expect gross margins to fall in the upper end of our target range.

We do continue to expect gross margin to vary from period to period due to a variety of factors such as sales volume, product mix, and currency impacts.

Operating expenses were $40.1 million for the first quarter, up from $29.2 million. R&D

was $19.4 million versus $13.3 million.

The year-over-year increase reflects additional personnel and other expenses to support our product development pipeline.

The decline versus Q4 '23 was primarily due to reduced spending on internal R&D development tools.

Sales and marketing was $11.1 million versus $8.9 million and G&A was $9.5 million versus $6.9 million.

For 2024, we plan for R&D expenses in the 13% to 15% range, sales and marketing in the 7% to 8% range, and G&A in the 5% to 6%.

Operating income was $39.8 million for the first quarter, up from $10.9 million.

Operating margin was 26.2%, up from 14.7%.

We recorded a realized gain of $0.3 million for the first quarter from the sale of short-term investments.

Recall that realized gains are included in non-GAAP range.

Income tax expense was $4.4 million for the first quarter versus $2.9 million.

For the full year, we plan for effective tax rate on non-GAAP pre-tax income in the 15% to 20% range.

Net income attributable to ACM Research was $34.6 million for the first quarter, up from $9.9 million.

Net income per diluted share was 52 -- sorry, net income per diluted share was $0.52 for the first quarter versus $0.15. Our non-GAAP net income excludes $14.6 million or $0.22 per share in stock-based compensation expense.

This reflects a full quarter impact of the significant grant of ACM Shanghai shares made in the third quarter of last year in addition to our normal ACM Research grants.

This was the first major grant by our subsidiary since the 2021 STAR Market

(technical difficulty).

Our management team considers the grant as a critical differentiator to attract new talent for new product development and to retain key employees.

I will now review selected balance sheet items.

Cash, cash equivalents, restricted cash and time deposits were $288.3 million versus $304.5 million at the end of the last quarter.

Total inventory was $581.1 million versus $545.4 million at the end of last quarter.

This includes raw materials and work in progress, which totals $318.2 million and finished goods inventory of $262.9 million.

Finished goods inventory mainly includes first tools and evaluation tools at our customers and also includes finished goods at ACM facilities.

Capital expenditures were $25.4 million.

For the full year, we expect to spend about $100 million in capital expenditures.

This primarily includes continued investments in our Lingang facilities, remodeling for our new headquarters for ACM Shanghai, and our investments in Korea and the US, and some fixed asset expenditures.

That concludes our prepared remarks.

Now let's open the call for any questions that you may have.

Operator, please go ahead.

(Operator Instructions) Suji Desilva, ROTH.

Hi, David and Mark, congratulations on the progress here.

Hi, Suji.

Hey, guys.

So maybe some high-level question.

So outside of the core SAPs products, which are the new product category is going to help drive the highest growth in '24 just to understand how you're diversifying the product categories?

Yeah, good.

And obviously, as I mentioned here, cleaning tool is continue our major portion of the revenue.

And we see that there, as I mentioned, the SPM tool with a cover middle and lower temperature by Tahoe and also single wafer.

And also, we have made a breakthrough in a high-temperature SPM tool, and that's albeit also another driving factor.

And class also we have this (inaudible) etcher and also continues growing our auto bench for the mature older notes.

Then look into real next year, we're looking for property our supercritical CO2 to start contributing our revenue too.

So that's the one on the cleaning side.

And they look in the ECP.

We'll continue to see that grow in both in the front end and also on the advanced packaging side and wherever quite good backlog in ECP.

And also, we see the furnace was that contributing for revenue too this year and also will continue next year.

And we have basically over LPCVD, and [ARD] study evaluation and orders vacuum anneal versus (inaudible) anneal conveniently getting the market.

So that's the major driving force this year for our revenue contribution.

Mark, anything you want to add on that?

Yeah.

No, thanks, David, and thanks, Suji.

Yeah, I think one of the things we wanted to stress on this call is within cleaning -- we've been doing cleaning for a while.

We have a few pretty strong product cycles underneath that that can drive additional growth.

And then we start looking internationally, it's hard to say how our mix is going to play out between products as we go late this year and into 2025 because it seems like a lot of our new customers might be starting with cleaning as well.

So I'll leave it at that, Suji.

Okay, great.

Yeah.

My second question was going to be similar on the geographic diversification.

Maybe I can hone in on the US customer and perhaps you can give a sense of what some of the next milestones or steps are as you seem to be making good progress there.

Yeah.

As I mentioned, we're continuing on marketing expanding our customer base in the US.

And wherever our one key customer shipping our second type of tool with a bevel and backside and to key customer.

A new line, we are also targeting this multiple customer in US and both for the front end and also for the packaging side.

So we see the big potential and their grow in the US market.

In the meanwhile, we'll also access market in the Singapore and also European, right?

Our first store has been delivered to the one key US -- I mean, European customer.

And we think they'll be in a qualification phase now.

We're expecting this first tool were resulting second repeat order.

And then that's it, right.

Hey, Mark, anything you want to add?

Yeah.

No, thanks.

International, I think when we talked about our guidance, when we first presented it last quarter, we got out a lot about how much would contribute from international.

This year is still a build year.

We're hopeful that we can get -- following the qualification of the US customer, we're hoping that we can get some orders here soon.

We're not certain how much we'll fall into this year versus next, and that's always been the plan and even for the European.

So we probably expect some contribution, but really, this is a build year, and any significant orders would probably be for shipments next year.

Okay.

Thank you, David.

Thanks, Mark.

I'll pass it along.

Thank you.

Christian Schwab, Craig Hallum.

Hey, great.

Thanks for taking my question.

I just had one follow-up to the earlier conversation.

Now that you're seeing broadening potential success in the international market, it seems that on a bigger picture, multiyear area, I know you've outlined $1 billion in sales in China.

The market outside of China for your products is materially greater on a multiyear outlook.

Do you have increased conviction now that this business can be much bigger than $1 billion?

Yeah.

Actually, in our layout, we're pretty confident we're going to reaching even billion-dollar market by only China market.

And obviously, at the same time, we're penetrate or they're exploring international markets with our differentiated technology.

So we see that trend continue accelerating.

So as I said, we're looking to the key customer in US, and property, they're manufacturing in Singapore.

And also, we're looking with the Taiwan customer too.

Plus, recent, we hire our key core top manager in the Korean operation, which David Kim is a real veteran of SK Hynix.

And so we are really for the effort and the marketing to sell our product in the global.

So we're seeing, obviously, their international revenue and the contribution we're getting to our total growth.

As I said, in the long term, we want to half of their revenue come from China and half of them from outside China.

So that's the goal of scaling our goal here.

Fantastic.

No other questions.

Thanks.

Thank you.

Thanks, Christian.

(Operator Instructions) Ross Cole, Needham.

Thank you, guys, for taking my question on behalf of Charles Shi today.

So shipments in the first quarter were pretty high.

I know you don't typically guide shipments, but do you have any thoughts on the rest of the year?

Would you expect the Q1 shipment level to sustain through a similar level or possibly go higher or lower in the next three quarters?

Yeah.

Okay, let me answer, maybe Mark can follow.

Obviously, first quarter, assuming higher, partially contributed by our delayed shipment in Q4 of last year, right?

So that's why part of the reason, plus also our manufacturing did a good job in the Lunar New Year.

So I would say probably Q2 was slightly lower than Q1.

We're also continuing to see that grow into Q2 and Q3 and Q4.

So Mark, anything you want to comment?

Yeah.

No, thanks.

And Ross, I appreciate the question.

So we still -- we certainly expect shipments to be higher than our revenue growth for the year.

I mean, it's a pretty solid shipment year.

But yeah, as David noted, Q2, they probably normalize a bit relative that inventory piece of it.

But we'd expect it to ship backup in Q3 and Q4.

Great.

Thank you.

That's my only question.

Great.

Thanks, Ross.

Charlie Chan, Morgan Stanley.

Hi, David, Mark, and thanks for taking my question and congrats for very good results, accretion, et cetera.

So I'm not sure, but I feel like this time around you are more open to talk about Hynix, HBM business, (inaudible) the ECP business opportunity.

May I know if you have taken a very [peripheral] there?

I remember you have some demo to there, but you said that now a conference project winter, and the recurring order may come from that.

Yeah.

Actually, Hynix, one of our key customer, and the [US] is a real long-term customer, too. they were now -- we add more of our office in our flagship SAPs.

Megasonic cleaning offer much uniform Megasonic energy contribution.

So therefore, you can all clean every via of the wafer, which is very important for carefully in their process.

And second one is electro copper plating, right?

It's really either packaging 3D, 2.5, 3D and also in their TSV.

So we're engaging with the customer.

And we're hitting our differentiated product and definitely can be their potential choice for them to take.

So we're feeling positive right now.

Okay.

Okay. (inaudible) those are key technology, right?

It can be used in advanced packaging, for example

(inaudible).

So just my understanding, I think it's not just TSMC can provide the [cost] of 2.5D advanced packaging.

I think Intel even [Amcor] may have that advanced packaging stuff, right?

So are you guys going to supply to those opportunity?

Yeah.

Obviously, like you said, [Devaney] are calibrating, can use for their other customer for this advanced packaging process.

And so we're approaching model, other customer right now.

And as in this market, obviously only a few player, and we can be the alternative of choice for them to take.

Also, we do have some differential in our technology what differentiate our performance with other guys.

So we're very confident we can get it in the market or the outside China markets?

Okay.

Yeah, and actually, my second question is about also international markets.

I remember four years ago, to cover the stock, there's a question when are going to carry TSMC.

And four years later, I feel like TSMC will be very, very bold and target.

They continue to open a new fabs, not just US, but also Japan, and next would be Germany, including both mature nodes and a leading edge.

So my question is that what you need to do to really -- when is that customer?

Can you give us some color whether it is a technology, or production location, or pricing, whatever?

What was the issue right now?

Yeah.

Well, I mean, obviously, like you said, TSMC is one of our key customer target.

And we're working with them more than a year and there was to engage with them by the way.

And so we're in a really valued evaluation parking process right now.

As I said, our cleaning, our copper plating revenues is one of the key product differentiate with other player.

So we're confidents in anyway.

Probably, I cannot tell you now what's going on, but we are fully engaged with the TSMC as our potential target, obviously.

Okay.

Okay.

That's all the question that I have.

Thanks for your your time.

Thank you.

Mark Miller, Benchmark Company.

Congratulations on another upside report.

Just wondering if you're seeing any impacts such as pushouts from the slowing of EV demand in China.

Okay.

Very good question.

Actually, we see the -- I feel quite a bit of customer focus on the IGBT production line.

And we see it as continuing to grow because -- anyway, IGBT production in China still early stage, right?

So we see their customer continue expanding for this IGBT investment.

And also, we do have a regular partner in cleaning and also in the furnace that supporting this IGBT market.

Just wondering to how cash flow went during the quarter.

Did you consume cash?

Yeah.

Hey, Mark, I'll take that.

And it'll show up in our Q, but cash flow from operations was $9.6 million.

We used about $9.6 million.

Thank you.

Thank you.

And I'm not showing any further questions in the queue.

I'd like to turn the call back over to Steve for any closing remarks.

Okay.

Thank you, operator, and thank you all for participating in today's call, our important support.

Before we close, let me just mention a couple of upcoming investor relations events.

On May 29, we will present at Craig-Hallum 21st Annual Institutional Investor Conference in Minneapolis.

From June 25 to 26, we will present at the 10th Annual ROTH London Conference at the Four Seasons, Park Lane, London.

Attendants of the conference is by invitation only.

For interested investors, please contact your respective sales representative to register and schedule one-on-one meetings with the management team.

This concludes today's call, and you may now disconnect.

Thank you for your participation in today's conference.

This concludes the program.

You may now disconnect.

Everyone, have a great day.