ACM Research Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 7, 2023

There are 8 speakers on the call.

Operator

Good day, and thank you for standing by. Welcome to the ACM Research Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer is raised. Please be advised that today's conference is being recorded.

Operator

I would now like to hand the conference over to your speaker today, Gary Dvoichak. Please go ahead.

Speaker 1

Thank you, operator, and good day, everyone. Thank you for joining us to discuss Q3 2023 results, which we released before the U. S. Market opened today. The release is available on our website as well as some Newswire services.

Speaker 1

There's also a supplemental slide deck posted in the Investors section of our website that we will reference during our prepared remarks. On the call with me today are our CEO, Doctor. David Wong our CFO, Mark McKechnie and Lisa Feng, the CFO of our operating 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.

Speaker 1

Those risks are described under Risk Factors and elsewhere in ACM's filings with the 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 This call will be on a non GAAP basis, which excludes stock based compensation and an unrealized loss on 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. With that, let me now turn the call over to David Wong, who will begin with Slide 3.

Speaker 1

David, go ahead.

Speaker 2

Thanks, Gary. Hello, everyone, and welcome to ACM Research 3rd quarter 2023 earnings conference call. Please turn to Slide 3. For the Q3, revenue was $168,600,000 up or 26% from the same quarter last year. Shipments were a record $213,000,000 up 31%.

Speaker 2

Gross margin was 52.9 percent and operating margin was 26%. For the 1st 9 months, we grew revenue by 38%. This is in light of a decline in global WFE spending. We attribute our Our performance to market share gain and the penetration of new products and new customers And general healthy market for mature nodes in China. Let me touch on each of this, Beginning with the mature note investment in China.

Speaker 2

China Domestic Mature Note, WFE Investment, remains solid. We believe due to China's goal to reduce the gap between its domestic mature nodes capacity And end market consumption of semiconductor chips. We see continued investment in 28 nanometer, 45 nanometer and power devices for EV market. The ramp of EV production in China is a driver for capacity investment in power devices and other Trading Edge Devices. This creates a tailwind for us and we believe we are still in early stage China's semiconductor capacity expansion plan, which we believe will continue to be a growth driver for us As China intensify effort to boost its domestic semiconductor capability, we believe we are well positioned to benefit Further increased our market share due to our strong market position, differentiated technology and multi product portfolio.

Speaker 2

Moving to products. Please turn to Slide 4. Single wafer cleaning, Tahoe and the semi critical cleaning grow 33% in Q3 and 42% year to date. In the last few years, we introduced And began ramping our semi critical product line, including AutoBench and then last year, we introduced Advanced and high temperature SBM tools. In Q2, we introduced our supercritical CO2 dry and cleaning tool.

Speaker 2

This quarter, we introduced our Ultra CV Vacuum Cleaning tool to meet the FLAX removal Requirements for chiplets and other advanced 3 d packaging structures. We have Already received a press order for the new tool from our major Chinese manufacturer, which we expect to be delivered In the Q1 of 2024, ACM has one of their broadest cleaning Our portfolio in the industry covering early 90% of all cleaning process step in both memory and the logic devices applications. We believe this product portfolio will play a key role Among mature nodes development in China and advanced nodes in our international effort going forward, ECP, furnace and other technology grew 4% in Q3 and 24% year to date. Growth in this category was driven primarily by ECP product cycle with some contribution from furnace. Our high temperature anneal and LPCVD furnace including silicon nitride and poly are in production at the key customers And ALD Furnace is under evaluation on the multiple customer side.

Speaker 2

Advanced packaging, Excluding ECP, spot including service and spare grew 12% in Q3 and 40% year to date. This category includes a range of packaging tool, including coater, developer, scrubber, PR striper and wet hatchers And the services spare parts, ACM is only customer that offer both a full set of wet tool and advanced plating tool. We believe that advanced packaging will become more important as industry looks for packaging innovations such as 2.5D

Speaker 3

And the

Speaker 2

3 d in the puzzle and fan out to drive higher performance for new applications such as AI and GBT. Finishing up on product, we continue to make a good progress on sales effort with our new TRAC and PECVD platforms. We're in active discussion with our key customer and we plan to deliver more evaluation tools this year. Similar to our cleaning, plating and shortness product line, our TRAC and the PCVD platforms have a Proprietary technology that we believe will make them winner with the major customer, both in China and outside China. I'm pleased to report good progress with our track tool evaluation at the customer side.

Speaker 2

We believe our track tool With the new proprietary architecture design, we'll meet the requirements of a higher throughput of the next generation lithography tool. Moving on the customer, please turn to Slide 5. We continue to make a progress on customer both inside China and internationally. In China, we believe ACM tools are now used by new order semiconductor manufacturers with Our sales and the service team are working to expand the deployment of each of our major product line Across our growing customer base, in addition to our current customers, we are also seeing a good number of 4 funded new entrants. Our team has done a good job of getting traction for our products with these customers.

Speaker 2

As these are the new customer, This will be reflecting our shipment this year until some until customer acceptance at a later date. In the U. S, we announced this morning a purchase order for another product from a large U. S. Manufacturer, OchoC E backside cleaning and bevel etch tool.

Speaker 2

This tool combined backside cleaning and bevel etch function. The tool is expected to be shipped to their U. S. Facility in the Q2 of 2024. And As this customer's ongoing evaluation of 2 SAPS cleaning tools, we believe this demonstrates a deepening relationship, which we hope will result in demand for additional ACM tools.

Speaker 2

Furthermore, we believe this will enhance ACM's brand and positions us to attract new opportunities with other major global customers. In Europe, Early this year, we announced our order for our first evaluation tool, the Ultra C SEVSA5 Canadian tool from a major European based global semiconductor manufacturer. We delivered the tool about 4 weeks ago And our team have already started installation process. To support our growth initiatives, We continue to make progress on our facility expansion in China and other regime, presented to Slide 6. In China, Construction of Lingam Production and R and D Center is nearly complete and is expected to begin initial production early 2024.

Speaker 2

In Korea, as noted in the prior calls, we have increased our commitment to support our objective to address the global market. We now have more than 150 employees in Korea with the 3 facilities including sales and administration, development labs, Small scale production and the clean room to support the wafer test for customer evaluation, and we are making plans to building new factory on the land We purchased early this year. We believe a strong commitment to Korea will improve our relationships with our Key Korean customers, our resource in Korea will also offer another base of supporting international customers in U. S, Europe and other part of Asia. In the U.

Speaker 2

S, we leased the facility in Oregon early this year to add to our service support And their demonstration capability for R and D and the customer activity in the region. As a reminder, for 2023, We expect to spend about $75,000,000 CapEx. This includes continued investment in our Lingang facility, Remodeling for our new headquarter for ACM Shanghai and our investment in Korea and the U. S. I will now provide our outlook For the full year 2023, please turn to Slide 9.

Speaker 2

We are updating our 2023 revenue outlook to be in the range of $520,000,000 to $540,000,000 versus our prior range of $515,000,000 to $585,000,000 The range of outlook reflects among other things management's current assessment of the continued impact From international trade policy together with the virus, expected spending scenario of key customer, Supply chain constraint and the timing of acceptance for first tools on the evaluation in the field. Now, Let me turn the call over to our CFO, Mark, who will review details of our Q3 results. Mark, please.

Speaker 4

Thank you, David. Good day, everyone. Please turn to Slide 10. Unless I note otherwise, I will refer to non GAAP financial measures, which excludes stock based compensation and unrealized loss on short term investments. Reconciliation of these non GAAP measures to comparable GAAP measures is included in our earnings release.

Speaker 4

Also, unless otherwise noted, the following figures refer to the Q3 of 2023 Comparisons are with the Q3 of 2022. I'll now provide financial highlights for the Q3. Revenue was 168 point $6,000,000 up 26.1 percent. Total shipments were $213,000,000 up 31%. Revenue for single wafer cleaning, Tahoe and Semicritical Cleaning was $132,400,000 up 32.8 percent.

Speaker 4

For the 1st 9 months of 2023, this category grew by 42.0% versus The prior year period. Revenue for ECP Furnace and Other Technologies was $25,500,000 up 4.0 percent For the 1st 9 months of 2023, this category grew by 24.4% versus the prior year period. Revenue for Advanced Packaging, excluding ECP, services and spares was $10,600,000 up 12.4%. For the 1st 9 months of 2023, this category grew by 40.2% versus the prior year period. Gross margin was 50 2.9%, up from 49.4%.

Speaker 4

This exceeded our normal expected range of 40% to 45%. The increase in gross margin was primarily due to a favorable product mix, improved gross margins for specific product lines and a favorable impact fluctuations in the renminbi to U. S. Dollar exchange rate. We expect gross margins to continue to vary from period to period due to a variety of factors such as sales volume, product mix and currency impacts.

Speaker 4

Operating expenses were $45,300,000 up from $32,600,000 The increase was due to higher R and D, sales and marketing and G and A costs in support of new customer and new product activities and a boost in post COVID travel activities. Operating income was $43,800,000 up from $33,500,000 Operating margin was 26.0 percent, up from 25.1%. We recorded a realized gain of $700,000 from the sale of short term investments Recall that realized gains are included in non GAAP earnings. Income tax expense was $700,000 down from $10,500,000 This is driven by one time items for the Q3, but we still expect the full year tax rate to be in the 20% range. Recall that as a result of a change in Section 174 of the U.

Speaker 4

S. Internal Revenue Code, our effective tax rate for the full year remains elevated. Net income attributable to ACM Research was $37,600,000 up from $28,200,000 Net income per diluted share was $0.57 up from at $0.42 I'll now review selected balance sheet items. Cash, cash equivalents, restricted cash and time deposits were $326,500,000 versus $376,100,000 at the end of the second quarter. Total inventory was $507,400,000 versus $471,100,000 at the end of the second quarter.

Speaker 4

And it was split between raw materials, dollars 202,000,000 work in process, $83,400,000 finished goods inventory at $223,000,000 Capital expenditures were $26,200,000 for the quarter. Year to date capital expenditures were $49,500,000 That concludes our prepared remarks. Now let's open the call for any Questions that you may have. Operator, please go ahead.

Operator

Thank you. We will take our first question. Your first question comes from the line of Charles Hsieh from Needham and Company. Please go ahead. Your line is open.

Speaker 5

Hi, good evening, Dave and Mark. Congrats on the strong Q3 results. I have a first question on shipment. The shipment figure you posted for Q3 looks like You're making a new record here. I just really want to understand what do you see in terms of shipment going into Q4?

Speaker 5

Do you largely See the number going to be flat Q on Q or for Q4? Or what's the dynamics behind the very strong shipment figures? Thanks. That's my first question.

Speaker 2

Yes. Okay. So, actually, I think the shipment is really number Indicated we have got a new customer and also have our product spread out And with the cleaning, cover plating and also our latest new product in the furnace. Yes. So I think that's the reason driving the shipment.

Speaker 2

And also we think Q4 shipment continue in our timeline. And I would say, obviously, there are certain Components, right? And also there are also some maybe customer, their production line, There may be some, I call it, pausing may impact our shipment. But anyway, we think the whole year and our shipment will be still Very good number for our for Saponea growth. Mark, anything you want to add on this, Jimin?

Speaker 4

Yes. No, thanks, David. Yes, mean shipments, I think as David noted, it's repeat shipments for revenue and it's also the first tool. So yes, we're certainly pleased with the shipments in the quarter. We don't guide specifically by quarter on shipments, but we're not anticipating a big increase sequentially in Q4.

Speaker 5

Thanks. So David, I just want to have a follow-up because I think I heard you mention certain customers may be pausing, which may have an impact on shipment. Did I hear you correct? Is that the Q3 comment or Q4 comment? Thanks.

Speaker 2

Yes. Well, I just said another specific certain For the quarter, right, and looking at the whole year, right, we do see some I mean customer, their production line is not a facility not ready, And they do have a Phase 1 and Phase 2 deliver. So that's something we can feel there, Francine already and that costs our There's no delay, right?

Speaker 5

So Okay. So just want to make sure. So it's not anything related to export controls, etcetera?

Speaker 2

No. Actually, at this moment, our product, we follow order, I call it expert control rule there. Whatever we received order, order follow their order, I call it restriction and also we follow the rule, right, also U. S. And there were also component selection.

Speaker 2

So anyway, so far, we do not have any Because of our export control, we cannot ship.

Speaker 5

Got it. Thanks. Maybe a second question from me. Congrats on shipping receiving a PO from the other from the U. S.

Speaker 5

Semiconductor manufacturer For another set of evaluation, I believe. Wondering, can you remind us what was the first evaluation That you shipped to this customer, what application was that for? What's the status of that first evaluation? Thanks.

Speaker 2

Great. Actually, we do have a 2Q, right, we said order we delivered last year. Actually, we made quite a progress, Even this is our first 2 door shift to this new customer and we make a lot of progress and we're making the A product call and the customer happy with our performance. And obviously, we're looking for future We did order because our R2 does offer measure requirement, especially using the mezzanine cleaning. They offer a much better cleaning efficiency and also dilute the chemistry, a consuming consumption chemical.

Speaker 2

So we're looking for this tool, a major Bigger contribution for their process.

Speaker 5

Yes. Any expected time line for the Closure of the first evaluation since you already shipped the second. Thanks.

Speaker 2

Yes. I mean, well, I think we're Close to there are 2, 2, right? 1 is real R and D or evaluation tool, another one is just like I repeat the Order tool. So for the R and D tool, it's 2 year, right? We're making 2 year finish.

Speaker 2

But the second tool, I think we're very close to Final qualification and we call the sign off for our revenue. We're very close.

Speaker 5

Thanks, David. I'll hop back to the line.

Speaker 4

Great. Thanks,

Operator

We will take our next question. And the question comes from the line of Suneet Przybylma from Roth and Co. Please go ahead. Your line is open.

Speaker 3

Hi, David. Hi, Mark. Congrats on the progress here. Mark, on the gross margin, you said something about improving gross margin for specific product lines. Any Color there, it seems like you're trending above the target consistently.

Speaker 3

Just want to get any update there.

Speaker 4

Yes. Suji, we won't really break it out By product line, but there were kind of we had a good mix of differentiated products And some cost downs. We also got a little bit of tailwind from foreign exchange. Obviously, we're pleased with that level, but we're not changing our 40% to 45% target at this point.

Speaker 3

Okay, great. Thanks. And then, I noticed you mentioned, AI GPT chips in the prepared remarks, David. Clearly, there's importexport controls on some of those products for U. S.

Speaker 3

Semi's vendors. Is there a burgeoning China AI chip market that the foundries Our servicing there, can you give us a sense of how big that might be versus the global AI chip market because that could be a very exciting opportunity for you guys?

Speaker 2

Yes. Well, I really mean that amongst packaging, most of our cover plating, right? I mean, this is a real product we're talking. And we're talking about not only China market, we're also talking about in the global market too. So in general, we see that, right?

Speaker 2

And in China, they still say most of our tool is for mature product And at this moment for the packaging. So as I said, we're really looking for R2 to be Not only in China market, which is a more mature node, also looking for our cover advanced fiber bleeding We sell to the global market, which is more for more around AI and also GDD. Okay.

Speaker 3

Appreciate that color, David. And last question I have is on the vacuum cleaning tool. You mentioned chiplets. It's the first time I heard you guys talk about chiplets. Is that a new growth Driver area or is that really just an element of the advanced packaging functionality that you have?

Speaker 3

I was curious there if that's an incremental opportunity.

Speaker 2

Yes. We see that new product, new requirement come out, right? You look at this order advanced packaging, order chiplet, When they have a package finishing, there's also a flag inside the gap. So those kind of gaps are hard to clean and those are flags. So with our vacuum time of the cleaning, you can really either chemical or the water getting more gap Because of vacuum status.

Speaker 2

That's really made the flasks clean very well. So we see that market grow. And again, there's a lot of chip lag going on in the whole industry. And for both, I said, Mature nodes or the advanced nodes. So we're looking for this product to be add another record revenue booster for For our product portfolio.

Speaker 3

Okay, great. Appreciate the color. Thanks guys.

Speaker 4

Thanks, Suji. Thank you. Yes.

Operator

We will take our next question. And the question comes from the line of Christian Schwab from Craig Hallum Capital. Please go ahead. Your line is open.

Speaker 6

Great. Hey, Mark, can you just walk us through the puts and takes on your original top line revenue guidance Your guidance for the year is near the low end versus the high end?

Speaker 4

Yes. Actually, David, do you want to take That and

Speaker 2

I can You can take care first. I will answer that.

Speaker 4

Okay. Yes, I'll go ahead and take that then. So Christian, thanks for the question. I think there's a couple of things here kind of from the beginning of the year. I'd say first is, if you just think about the overall China market, we're not necessarily market readers.

Speaker 4

But based on some third party data, It does sound like the China market as a whole is down year on year versus our expected flat. Still great spending on mature nodes, but The market may be a little less strong than we had anticipated. I would say despite that, our year to date revenue was up 37%. Our midpoint of our outlook is up 36%. So our product cycles and our new customer activity is contributing.

Speaker 4

The third point is, we did I think David talked about a little bit certain customers, We saw maybe a slight delay, 1 to 2 quarter delay, either due to their Facilities, just kind of a timing thing for them to get their tools installed or just Almost a digestion where some of our bigger customers may have seen a large number of tools shipped and they're just kind of Working to get those deployed. The last thing I'd say on that is, also Christian, A lot of our shipments this year have been first tools to new customers or newer products. And so For those ones, we'll get more revenue next year. So kind of a combination of things there. I mean, we're still pleased with the growth.

Speaker 4

We would have liked obviously to be at the higher end, but this is where things stand right now. David, anything to add?

Speaker 2

Yes, that's fine. I mean, perfect. I don't have anything to add on that.

Speaker 6

Yes. And then as you guys look to calendar 2024, Would you expect the aggregate TAM in China To be flat, to be up, to be down and what specifically would cause you to outperform the TAM growth Inside of China, once again.

Speaker 2

Okay. Good question. So actually, you're looking at 3rd party data Next year, China is operating. And we also feel the good year next year for China. And because I think China market is still in their early or middle stage of the capacity expansion, Especially mature 28, 45, also EV market, right, for their power devices continue to grow.

Speaker 2

And then also we have a new product. Our furnace, as I mentioned, end of last year, we have 3 customers. End of this year, we're part of 10 customers. So expanding quite rapidly with the customer in the furnace product, right? We have LPCVD, high temperature NEO, Plus our new ALD product.

Speaker 2

So we'll see their revenue contribution, right, and for the year 2024. And plus other new cleaning products, you mentioned that as other supercritical CO2 And also our Tahoe product, I will mention that is we see next year our multiple repeat order We'll come in for our Tahoe Duo. Also Tahoe has offered 40%, probably to 70%, so free car saving Compared to their single SPM dual, and we see their big interactions from not only larger customer, also from their Memory customer was not only domestic I mean only in China also we see the customer outside China interest for this Tahoe product. We believe this is real revolutionary, continuing to offer real environment friendly process For Seabee, the sulfuric acid. Next one, I see that 2024, we see also international Market penetration become more of a, I call, materialize and we see their property pickup in the international sale.

Speaker 2

And for our cleaning, for our cover creating and those well proven and also advanced product, right? And As I mentioned, even in the cleaning, I want to mention one more. It was above on the backside cleaning we just announced today And today, same customer we have in the U. S, that's another indication our backside bevel cleaning tool There will be also another booster for our cleaning product, right, and for the 2024. And last time I still mentioned that we still continue to grow our cleaning AutoBench, Pavel AutoBench, Canadian Corp has been growing rapidly.

Speaker 2

And for a lot of mature product in China, they're using This is the bench tool, right? So that's another growing factor. And further than that is, I should say, next year we see our track system. We'll probably go to market customer and also PECVDs are getting into their evaluation with the customer too. But those 2 new products made a contribution for 20 25 revenue, right?

Speaker 2

Maybe that's very general my view in 2024. Mark, anything you want to add on that?

Speaker 4

Yes. No, I think you hit it pretty good, David. I mean, one thing It is interesting to talk about, Christian, is we actually had our international sales conference last week here. And post COVID, it was our 1st face to face conference in a while. We had teams from Korea, U.

Speaker 4

S, Europe, Even Taiwan in here meeting for 3 to 4 days. And I mean, David, you might say a few more things about it. But It's pretty clear to us that the international markets, there's good opportunity. There's a lot of Customer activity in these regions and next year we do think international can be more meaningful And but we would see next year as a building year. Yes, that's it.

Speaker 4

Thanks.

Speaker 6

Thanks for that. It sounds like we have a lot of things going on on both the product and the customer front. But If we could just ask one more question about the customer front. As you've made a couple of tools with A new customer in the United States in Oregon,

Speaker 4

can you give us

Speaker 6

an idea of How substantial that could be over time, not 24 or 25, but over time? And then in addition to that, I think you mentioned that selling out of the Korea facility to international customers, but also expanding opportunities with Inside Korea, now do you think you can expand the customer base inside of Korea? Or are you just talking about expansion of opportunities with your historical customer in Korea? And that's my last question. Thanks.

Speaker 2

Okay. Thank you. Well, actually, let's our customer in U. S. And including our recent shipment of customers in Europe, right, is really And our customer base and for international customer, and as we said, we got to repeat order for the same customer, it will show Our relationship closer with the customer, plus we offer differential, I call the product For the customer, and that's really a major attraction to the customer.

Speaker 2

And regarding to their Korean customer, again, we have a historic customer. We have a fully cooperation with them. And not only we talk about Clinini, We worked on our additional new product, right, to the collaboration with them. We also have almost 90% The process is that we can cover in Canadian side. So we have a lot of advanced and also our only ACMA defending product, which are working with the In this historic customer, obviously, we're also looking for other customers in the area and not only for Our Canadian core was including a carbon trading draw and also other product we develop right now.

Speaker 2

So we're And plus, I want to add one more part, we didn't mention in the script. And we are also actively working with customers in Singapore, right? So again, Our goal is still long run goal is still remain. We wonder in the future, our 50% of revenue come from Mainland China And also 50% of revenue comes from most eminent China, right? That's our future global strategy.

Speaker 6

Great. Thank you, guys.

Speaker 4

Thanks, Christian. Thank you.

Operator

We will take our next question. Please stand by. And the question comes from the line of Charlie Chan from Morgan Stanley. Please go ahead. Your line is open.

Speaker 7

Thank you. Hi, David and Mark. Good evening and good morning. So First of all, my question is about your potential exposure to The high end memory, meaning the high bandwidth memory, we do know you have some memory customers. So can you explain to us, first of all, what kind of a tool you potentially can Supplied to the memory customers for the HBM?

Speaker 7

And secondly, what is the progress for this That's it for your tool for HBM module. Thanks.

Speaker 2

Yes. Okay. Charlie, I really cannot tell too detail, right? But we have multiple products and working for This customer for the HBM, right, and this is a real new growing market. And as I said, we have more than 2 products Working with them.

Speaker 2

Also, we're trying to spreading also other product in our portfolio And they're working more closely with their R and D group and to qualify our advanced technology for the community. So I'd say we have put all the effort in Korea and we have now 150 engineer R and D in the Korea. And we are really become local supporting for the customer and get a closer and faster response to the customer. So we're building on continuously and building our production capacity and to meet the requirement And not only for the Korean customer, probably also for the older customer internationally. So that's the three effort we're putting right now.

Speaker 7

Okay. Understood. Thanks, David. So next question is for Mark. I know you explained the OpEx trend, but it's still a very, very big jump, right?

Speaker 7

Even There's a new R and D expense, a lot of customer activity, but still pretty, pretty A big jump versus the previous quarter. So how much of those increases like one off Post COVID travel, and should we use that US45 million dollars A quarter as the new norm for the future OpEx?

Speaker 4

Yes. Thanks for that on the OpEx question. So we're obviously investing in the R and D And our sales and marketing, we've got public companies, 2 public stocks. So I think the quick answer to the new level, yes, I mean, I would actually expect the OpEx To be maybe even up a little bit next quarter. There is as you know, a lot of our expenses are in, Remin B.

Speaker 4

So 3rd quarter, so Rem and B actually strengthened on the quarter. So that moved things a little bit. But In general, we would anticipate the OpEx to be it that's about the right new run rate, Yes, Charlie.

Speaker 7

Okay. And so can we justify that increased OpEx was a very strong Shipment because when you calculate the OpEx ratio, OpEx by revenue, right? It seems like Pretty high OpEx ratio. So is that like more like correlates with the shipment because Seems like shipment into Q3 and Q4 are

Speaker 4

pretty strong. There's a correlation there, Charlie. I don't We don't break it out specifically, but of course, there's a correlation to our shipment level and our OpEx.

Speaker 7

Okay. Yes. And also associated to the R and D, do you think that The peak spending of your R and D, I know you already introduced your new power lines, right? So How much more APHIRIS or R and D you need to invest in for the future power line or current power lines?

Speaker 2

Yes. Let me cover that or maybe Mark can add more. I think R and D is still a major penny, right? And you look into 2 years ago or 3 years ago, our general R and D spending about 12%, right? Actually, especially after IPO In China, our stock market and so we have started boosting our asset.

Speaker 2

Also, we have started putting more Investment into new product, right? Furnace is number 1, furnace ALD and plus the key CVD and also truck. So we look at the next 2, 3 years as a very big opportunity for us to grab in the market in China. And plus, with our new innovation or proprietary technology building to the corners, PECVD and also track, And we were also getting to the market in international, right? Especially, I want to mention the truck.

Speaker 2

The truck system is doing very well in the customer Qualification and plus, our new architecture really is aiming for high throughput of this next generation You saw going to be 2, right? And so people talk about even 400, 450 WPHE High throughput. So we are attached our truck system, we are aiming for that market. And we're planning to be the 2nd player, right, in this very, like I said, competitive market. So as I see that is So I think probably 50%, 16%, that's the range where we'll be KP.

Speaker 2

And with that percentage wise, probably not much changing, but And we have a revenue core, right? You can see that we still maintain a lot of our through their R and D money into their Our existing product and also new product, especially even for existing product, like a cover painting and also their Clinene, right, we also do put effort in there. Reason is we see there this Clinene product become more and more important And for the new advanced technology plus, I should say the copper bleeding market grew rapidly. I mean, this is a cheap lad The monthly packaging, this cover become cover ratings will become very important. So we're also putting R and D into both existing production line.

Speaker 4

Yes. Hey, one last thing. Charlie, we've said this before, but if you look at and kind of rasstax behind what David said, R and D expected around 15% of sales, but we should see some operating leverage on the G and A and the sales and marketing side. We got a little bit this year and in general that's the way our operating model is built.

Operator

Okay.

Speaker 7

Okay. So the R and D intensity will keep at 15% at the coming couple of years. Okay. Fair enough. Thanks and for the comments.

Speaker 7

Thank you.

Speaker 2

Yes. Thank you.

Operator

Thank

Speaker 2

you.

Operator

There seems to be no further questions. Apologies. We have a question that's come through. One moment, please. And you have a follow-up question from the line of Charles Shi from Needham and Company.

Operator

Please go ahead. Your line is open.

Speaker 5

Hi, thanks for taking my follow-up question. So, Ben and Mark, I really just want to go back to your comment, the overall China market, I know you said you're not the market reader here, but can you kind of explain why you're seeing China market down year on As a whole and what about quarter on quarter? What do you see there? I'm just looking at the data And the commentary from your U. S.

Speaker 5

Peers, it seems like they are probably expecting Q4 overall China market to be holding Relatively strong. I don't exactly know where you will land Q on Q or year on year, but I was kind of curious why you think the overall China market was down year

Speaker 2

Thanks. Well, let me add on that. Maybe, Charles, is there actually we don't have whole data, right? We're not collecting the holders of margin data. However, you look in the order of research report The semi or other Invest Banker published, people talk about probably A few percent now, I should say, less than 10% down.

Speaker 2

People say whole year, more than quarterly basis, right? And we see probably early this year, we see Almost like flat in over. But I don't know yet. This moment I'd say probably flat is that we will stay here, But we remember was probably end of the this year, somebody published real result. But I will say even this year flat, we see our customer expansion and we think next year is still another good year.

Speaker 2

And everybody is expecting probably 35% and 6% in the global market back. But I think in China's This time, even downturn globally, the current market in general is still with and maintained. And I will say, next year, This is another good year. These are also new product.

Speaker 4

Yes. And David, if you don't mind, maybe I'll add a little bit on to that. I mean, it's Again, it's hard for us to kind of agree the overall market. So we look at 3rd parties and we look at some of the same public companies you probably look at If you look at some of the semi cap names, our Investor Relations team pulled together some data where Q3, a lot of companies had a pretty big uptick Sequentially, hard to know exactly what that was driven by, but we were encouraged by Kind of a big lithography ramp in Q3 for 1 of the players. And We look at that hopefully as some kind of a leading indicator.

Speaker 4

But David, I don't know if you wanted to add anything on about that as well. There's a lot of tea leaves that we try to pay attention to and we look at our own business and this is Kind of how we see it.

Speaker 2

Yes. I mean, I think you're right that the sarcoid 2 companies expansion there this year's revenue in China, right, almost double, right? Look at that. So, it's really indications, say, normally, the cyber 2 is the advanced buying, right, or a shim. So, therefore, They got it right in first.

Speaker 2

So we'll see that those 2 are definitely driving another

Operator

Thank you. There seems to be no further questions. I would like to hand back to David Wang for closing remarks.

Speaker 2

Thank you, operator, and thank you all for participating on today's call and for your support. Before we close, Gary is going to mention our upcoming Investor Relations event. Gary, please.

Speaker 1

Thanks, Steven. Before we conclude, I just want to give everyone a quick reminder on our upcoming investor conferences. On November 15, we'll present at the 12th ROTH The 12th Annual ROTH Technology Conference in New York City. On November 16, we'll present at the 14th Annual Craig Hallum Alpha Select Conference also in New York City. From November 29 to 30, we'll present UBS Global Technology Conference in Scottsdale, Arizona.

Speaker 1

And finally, on December 12, we'll present at the Annual CEO Summit in New York Attendance at the conferences is by invitation only. For interested investors, please contact your respective sales representative

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Key Takeaways

  • ACM Research reported Q3 revenue of $168.6 million (up 26% YoY) and record shipments of $213 million (up 31% YoY), with a gross margin of 52.9% and an operating margin of 26%.
  • The company saw robust growth in China’s mature-node market (28 nm, 45 nm and EV power devices), driven by capacity expansions to meet domestic chip demand and ACM’s market‐share gains.
  • ACM continues to broaden its product portfolio with advances in single‐wafer and semi‐critical cleaning (including supercritical CO₂ and the new Ultra CV vacuum cleaning tool), as well as ECP furnaces, LPCVD/ALD furnaces and advanced packaging tools.
  • International traction accelerated with a U.S. purchase order for a combined backside-cleaning/bevel-etch tool, delivery of its first European Ultra CV evaluation system, and expanded R&D and service facilities in Korea and Oregon.
  • The company updated its 2023 revenue outlook to $520–540 million (previously $515–585 million), reflecting ongoing trade‐policy impacts, supply-chain constraints and tool‐acceptance timing.
AI Generated. May Contain Errors.
Earnings Conference Call
ACM Research Q3 2023
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