ACM Research Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 4, 2023

There are 10 speakers on the call.

Operator

Good morning and thank you for standing by. Welcome to the ACM Research Second 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 Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Yujia Zhai, Managing Director of The Blueshirt Group.

Operator

Please go ahead.

Speaker 1

Thank you, operator. Good morning, everyone. Thank you for joining us on today's call to discuss 2nd quarter of 2023 results. We released results before the U. S.

Speaker 1

Market opened today. The release is available on our website as well as from Newswire Services. There is also a supplemental slide deck posted to the investor portion of our website that we will reference during our prepared remarks. On the call with me today are our CEO, Doctor. David Wang our CFO, Mark McKechnie and Lisa Tsang, the CFO of our operating subsidiary, ACM Shanghai.

Speaker 1

Before we continue, please turn to Slide 2. Let me remind you that remarks made during this call may include predictions, estimates and 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 the Risk Factors and elsewhere in ACM's filings with the SEC.

Speaker 1

Please do not place undue reliance on these forward looking statements, which reflects 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 This includes stock based compensation and unrealized gain, loss and 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 in Slide 12. With that, let me now turn the call over to David Wang, who will begin with Slide 3.

Speaker 1

David?

Speaker 2

Thanks, Yujia. Hello, everyone, and welcome to ACM's Q2 2023 earnings conference call. Please turn to Slide 3. For the 2nd quarter, revenue was 144,600,000 up 39% from the same quarter last year. Shipments were $153,000,000 up 37% from the same quarter last year.

Speaker 2

Gross margin was 47.6% and operating margin was 22.4%. We achieved record revenue and EPS as our operating and industrial supply chain largely returned to a new normal following several years of COVID related disruption. These results were driven by strong mature notes led by our China customer, Market share gain and the penetration of new product and new customer. Let me touch on each of these, beginning with mature note investment in China. Last year, following U.

Speaker 2

S.-China trade restriction, Some industrial analysts predict that China's WFE market will be declined dramatically. At that time, we predict A fairly quicker shift to spending on mature nodes in China after I expected the pause As industrial adjusted to the new export regulations, our prediction appear to be playing out As we are now seeing broader signs that China is indeed speed up its capacity expansion in mature nodes. This is driven by the substantial gap between China's mature nodes capacity and Under market consumption, we see continued investment in 28 nano and 45 nano and above front end fab capacity. We also see the ramp up EV production in China as a driver of China based investment in both power devices and other 28 and 45 nano devices. This creates a good tailwind for us that we believe is still in early stage as China And densifying effort to boost its domestic semiconductor capacities, capabilities, we believe we are well positioned leading differentiated technology and broad multi product portfolio.

Speaker 2

Moving to product, please turn to Slide 4. Single wafer cleaning, Tahoe and semi critical cleaning grow 55%. In the last few years, we introduced and began ramping our same critical product line, including Autobank And then last year, we introduced Bebo Etcher on high temperature SPM tools. Over past quarter, we still have supercritical CO2 dry. Now ACM has one of the broadest We believe this product portfolio will play a key role among mature nodes, development in China and advanced notes in our international effort going forward.

Speaker 2

ECP, furnace and other technologies declined 7% due to quarterly fluctuation. However, for the 1st 6 months of 2023, ECP, furnace and other technology grew 40% year over year. Growth in this category was driven primarily by ECV product cycle with some contribution from furnace. Our higher temperature anneal And LPCVD furnace, including Syng Nitride and Poly and ARD have expanded to multiple customer and are under evaluation. Advanced Packaging, excluding ECB, Service and the spell grew 14% in Q2 and 58% year over date.

Speaker 2

This category includes a range of our packaging tools, including encoder, developer, scrubber, PS3, and wet etcher, and service and spare parts. ACM is only company that offers both a full set of web tools and Advanced Plating Tools. We believe Advanced Packaging will become more important as the industrial looks for packaging innovations such as 2.5D, 3 d in the puzzle and find out to drive the higher performance for new applications such as AI and GPT. To finish up on products, we continue to make good progress on sales efforts with our new Trac and PECVD platform. We are in active discussion with our key customer and we plan to deliver more evaluation tools this year, Similar to our cleaning, plating and furnace product line, our TRAC and the pxcd platform We have a proprietary technology that we believe will making them winner with major customer both in China and outside China.

Speaker 2

Moving on to customer, please turn to Slide 5. We continue to make progress Our customers both inside China and internationally, in China, we believe ACM tools are now used by nearly all of the Semiconductor Manufacturers. Our sales and service team are working to expand their Deployment of each of our major product line across our growing customer base. In addition to our current customer, We are also seeing a good number of where founded new entrants. Our The team has done a good job of getting good traction for our product with these customers.

Speaker 2

As this, our new customer This will be reflecting our shipment this year until customer acceptance at a later date. Also, as some of you may have heard, on July 21, 2023, Huahong and expect it to start the trading soon. The total proceeds were RMB21.2 billion or approximately $3,000,000,000 In the U. S, evaluation at our key customer is progressing well and we remain optimistic for clarification later this year. In Europe, We announced an order for our first evaluation tool from major semiconductor manufacturer in the Q1 of this year.

Speaker 2

The tour is planned for deliver in early Q4, and we are beginning to build a local service team to support effort. To support our growing initiatives, we continue making progress on our Facility expansion in China and other regions. Please turn to Slide 6. In China, construction of a Lingang production and R and D center is nearly completed and expected to begin initial production later this year. In Korea, as noted in prior call, we have increased our commitment in this region.

Speaker 2

We believe a strong commitment to Korea We improved our relationship with our key customer SK Hynix and others. In Q1 of this year, We completed the purchasing of our land in a high-tech area outside Inchang as a site for new R and D and production center. In the U. S, as lower than last quarter, we leased a facility in Oregon to add to our service As a reminder, for 2023, we expect to spend about $100,000,000 CapEx. This includes continued investment in our Lingang facility, remodeling for new headquarters for ACM Shanghai and our other investment in Korea and the U.

Speaker 2

S. I will now provide our outlook for the full year 2023. Please turn to Slide 9. We are reaffirming our 2023 revenue outlook to be in the range of $550,000,000 to $585,000,000 The range of outlook reflects, among other things, Management's current assessment of the continuing impact from their international trade policy together with the various Expect a spending scenario of key customer, supply chain, constraint and the timing of acceptance for the first two on the evaluation in the field. Now let me turn the call over to our CFO, Mark, who will review detail of our 2nd quarter results.

Speaker 2

Mark, please.

Speaker 3

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

Speaker 3

Also, unless otherwise noted, the following figures refer to the Q2 of 2023 comparisons are with the Q2 of 2022. I'll now provide financial highlights for the Q2. Revenue was 144,600,000 up 38.5%. Total shipments were $153,400,000 up 37%. Revenue for single wafer cleaning tools and semi critical cleaning was $112,500,000 up 55 percent.

Speaker 3

Revenue for ECP, Furnace and Other Technologies was $19,100,000 down 6.7%. For the 1st 6 months of 2023, this category grew by 39.6% versus the prior year period. Revenue for Advanced Packaging, excluding ECP Services and Spares was $12,900,000 up 14.3%. Gross margin was 47.6%, up from 42.4%. This exceeded our normal expected range of 40% to 45%.

Speaker 3

The increase in gross margin was primarily due to a favorable product mix, improved gross margins for specific product lines and a favorable impact from fluctuations in the Reminb to U. S. Dollar exchange rate. We expect gross margin to continue to vary from period to period due to a variety of factors such as sales volume, product mix and currency impacts. Operating expenses were $36,300,000 up from $22,300,000 The increase was due to higher R and D, sales and marketing and G and A costs in support of our new customer and new product activities and a boost in the post COVID travel.

Speaker 3

Operating income was $32,400,000 up from $22,000,000 Operating margin was 22.4%, up from 21.1%. We recorded a realized gain of $3,900,000 from the sale of trading securities for the quarter. Recall that realized gains are included in the non GAAP earnings. Income tax expense was $7,600,000 down from $7,700,000 Recall that as a result of the change in Section 174 of the U. S.

Speaker 3

Internal revenue code, our effective tax does remain elevated primarily due to the requirement to capitalize and amortize previously deductible Research and experimental expenses. Net income attributable to ACM Research was $31,300,000 up from 14,600,000 Net income per diluted share was $0.48 up from $0.22 Now I'll review some selected balance sheet items. Cash and cash equivalents, restricted cash and time deposits were $376,100,000 at the end of the second quarter versus $381,700,000 at the end of the Q1. Total inventory was $471,100,000 at the end of the second quarter, generally flat versus the end of the Q1. Capital expenses for the Q2 were about 6,700,000 I'll now provide an update on our auditor.

Speaker 3

On July 21, 2023, Armenino informed us that it will resign as our independent auditor effective as the earlier of A, when we engage a new auditor or B, the filing of this year's Q3 10 Q report. They advised us this was due to their decision to exit from the practice of providing financial statement audit services to all public companies. As a result, our audit committee has begun the process to select and appoint a new auditor. We filed an 8 ks with the full details on July 27, 2023, and I would note that we've also seen a number of similar filings from other Armanino clients. Regarding the search for a new auditor, We are considering several options, including U.

Speaker 3

S. And China based auditors. That concludes our prepared remarks. Now let's We'll open the call for any questions that you may have. Operator, please go ahead.

Operator

The first question comes from Quinn Bolton with Needham and Company. Your line is open.

Speaker 4

Hey guys, congratulations on the very strong second quarter results. I guess kind of big picture question for the second half of the year. I know you're not Increasing your 2023 guidance, but since you're not increasing the guidance, it looks like revenues may flatten out or at least Grow at a much, much slower rate in the second half. How are you thinking about the second half? Was the 2nd quarter really that Sort of COVID supply chain catch up and you see more normalization now or just any thoughts you could share on the second half or the shape of revenue in the second half would be helpful.

Speaker 2

Yes. Okay, Quinn. In general, actually, looking at the last Couple of year, our second half year was strong than the first half year, right? I think that trend probably continue. And regarding to the supply chain, I should say, it's much better than last year, I still feel some components get constrained.

Speaker 2

I'm thinking maybe second half of this year are going to improve further and for supply chain. Mark, anything you want to add on?

Speaker 3

Yes, you bet. So Quinn, Our overall outlook, obviously, we factor in we're looking at a flattish overall CapEx for overall China, I think there's a lot of debate about that, but we see better growth from our new products, share gains and new customers. First half, second half, I mean, you can look at the numbers, but it's about 40%, 60%. And so we'd expect Q3 to be up. And depending on where the year plays out, Q4 could be down, which is that's a normal type seasonality for us.

Speaker 3

Yes.

Speaker 4

Got it. So sort of perhaps a return to more of a down 4th quarter post a couple of years Of COVID where I think seasonality was largely out the window. Got it. Second question just more for you on the auditor. I know that this has been Thrown in your side for probably a couple of years now.

Speaker 4

To the extent that you select a China based auditor, can you just sort of walk us through, I believe there's now a process in place where PCAOB has oversight of China based auditors. And so if you select China, that shouldn't have any impact on your listing status in the U. S. But I know it's been a subject that's raised lots of questions. So can you just walk us through the latest implications to the extent you do select a China based auditor?

Speaker 4

Thanks.

Speaker 3

Yes, you bet. No, thanks for that question, Quinn, so I think as you know, yes, last year we did cut over to Armenino as a U. S.-based auditor and they completed a good audit Our 2022 was signed by officially a U. S. Auditor.

Speaker 3

But yes, the rules, there was a positive development late last year. The PCAOB was able to inspect the China auditors. And so the so called HIFICA Act, which would result in a delisting if you were on a certain list 3 consecutive years in a row. That became moot At least for the foreseeable, now that we believe the PCOB has been granted So that's why we pointed out in terms of our possibilities Range, U. S.

Speaker 3

Auditor, we could certainly go with the China based auditor as well and maintain our listing at this point. Great.

Speaker 4

And then a final quick one for me. David, you mentioned sort of expanding placements of TRACK in PECVD this year. Can you give us Sort of any sense how broad you may be able to go with those evaluations to an expanding customer base, or to an expanding base within your existing customers with TRAC and PECVD?

Speaker 2

Yes. Actually, as I mentioned there, We do have also differential technology with the PUCVD, right? So now we're actually have our 2 model, one for Memory application, another one for the real logic, right, and foundry application. So This year, we're working with probably both side of customer and we try to get evaluation going on. And obviously, revenue will come next year, Right.

Speaker 2

So PCVD is a huge market and also has really our second to drive product other than our furnace. We have a really high expectation and also we put a lot of effort and put the both on this product and also expecting And very good outcome, good future and the driver ACM continue to grow in the next few year at a high growth rate. So it's an exciting product.

Speaker 4

Thanks, David. Thanks, Mark.

Speaker 2

Thank you,

Operator

Question? The next question comes from Suji Desilva with ROTH Capital. Your line is open.

Speaker 5

Hi, David. Hi, Mark. Congrats on the progress here. So just digging a little bit on the ECP furnace category, I want to make sure with the decline here. Was the furnace products uptake, the newer product uptake still ramping and or within is there just supply chain catch up across that category?

Speaker 2

Great, great. Actually, our partners and by end of last year and we only have a we got a fleet customer. However, this year, we're really we're expecting increase more customer, right? Probably By end of this year, we're hoping our customer base become double digit. So, revenue wise, yes, not as quickly as contribution as the copper plating.

Speaker 2

However, our customer base increased quite dramatically, right? And now we also have other high temperature NEO And also FPCVD and Nitrile and Poly, DeepPoly. And also we are 2 of We call them ALD process tool also on the customer qualification process and show they're very promising data. So we'll see that will be play in probably next year, right, more of a contribution for revenue. And I said, this is also quickly growing market for us.

Speaker 2

Okay,

Speaker 5

great. That's good progress there. And then For the Korea operations, David, could you give us a sense what the next milestones are as you start to get the land there and try to build that out? Just Give us some kind of things to look for in the next several quarters to keep track of.

Speaker 2

Great. Actually, Korean and SK Hynix become a customer in 2011, right? It's really long term relationship. We sell a lot of tools onto the Wuxi fab. And obviously, now they're building more of their property building factory, more advanced nodes, most likely they couldn't probably focus on the Korean side.

Speaker 2

That's really because our effort more focus on the Korean market. And that's why we're going to increase investment and we're still going to hire more R and D people and like our furnace, ECVD And also their track in real joint development team in Shanghai and Korea. So we're now really fully engaged with Hynix regarding not just only cleaning, right? Cleaning actually we have about 90% of their process that we can cover And also engage with the cover party and further we're going to also obviously further in the PCVD And also track, we're also trying to we'll probably become the major supplier in the future for Hynix. Meanwhile, we're being a strong R and D and also their manufacturer base in Korea.

Speaker 2

We're really helping us expanding our technology And further to U. S. And Taiwan and region and also Europe market. So We have a real new R and D manufacturing center is really what make ACM to be in real Flexible, it is a dynamic status situation.

Speaker 5

Okay, Great. And that sounds like a good opportunity. And then lastly, just one last question in. Just on your advanced packaging, with the talk in the market of AI and hi Ben with memory, co was at TSMC and Intel's EMEA of all these areas. I'm just curious, You see an exposure there to the growth in AI, Gen AI or maybe is that advanced nodes versus trailing nodes?

Speaker 5

Just give me a sense of the advanced packaging opportunity. You may be able to lever you may have re leveraged you there.

Speaker 2

Yes, actually good. And AC has real good product lined up, right, for their real advanced packaging. And we have really flagged, I call the shape of their tool with cover plating. And also we have Wider cover weather process tool, including coater, developer, wet etcher, striper And cleaning, right. So it's real and well preparation.

Speaker 2

Also, we do have our SFPs just in polishing And also for this advanced packaging application. So we are well positioned. And like I said, yes, we're fully engaged with all their top tier customers. And also, we have also engaged with the demand in our customer in China too. So it's really I see the very growing in the market.

Speaker 2

And like I said, AI GBD, that's been driving high end of their advanced packaging and application. So our product really prefer for this application.

Speaker 5

Okay. Thanks, David.

Operator

Please standby for the next question. The next question comes from Christian Schwab with Craig Hallum Capital. Your line is open.

Speaker 6

Great. Thanks for taking my question. In the prepared comments, we talked about market share gains Inside of China, do you think that can you give us an elaboration on that? Are we gaining market share across all product lines? Or is it more targeted at cleaning and ECP and furnace.

Speaker 6

Any color there would be great.

Speaker 2

Yes. Actually, you look at the cleaning, right? And Canadian product, where we increased 55%. I mean 3 years ago, we only have our single wafer or semi critical tool, Mostly still a single wafer side. However, last year, 2, 3 year introduced AutoBench, which is really major, I call the market for their 45 nano technology and above, Also including Power Device.

Speaker 2

So this is really driving our cleaning tool continue to increase. And obviously, Coverplating Also increased quite a lot, right? Now we're definitely number 1 in the like a local Supplier cleaning, number 1, also the copper plating, number 1. And also, I would say, furnace wise, As I mentioned, we're continuing to increase the customer base and that will be also there. I look into next few years, we'll also become bigger driving For the revenue too.

Speaker 2

More than that is also we're now spread our cleaning and copper plating in the outside China, Right. That's really big sign. We see that again, their intention or gain their interest and from their top tier customer outside China.

Speaker 5

Great. And then my question for Mark.

Speaker 6

Given the supply chain issues And COVID costs are kind of behind us or at least greatly diminished. Is it time to potentially raise the gross margin target range for the company on a consistent basis? Or Is there just still too much volatility and mix to raise it at this point?

Speaker 3

Yes. I'll take that. So on the gross margin, you're Correct. I mean, we've come in at the upper end of our range or maybe a little better half a few quarters or so. Christian, I think we our gross margins are quite dependent upon product mix, New products and old products and that we have a range across them.

Speaker 3

I think for now, We're going to keep our 40% to 45% range. Of course, we always like to do as well as we can, but we're not ready to move that range higher.

Speaker 6

Okay, great. No other questions. Thanks guys. Great quarter. Thanks, Chris.

Speaker 6

Thank you.

Operator

Please stand by for the next Question? The next question comes from Chalian Singh with Credit Suisse. Your line is open.

Speaker 7

Hi, Debbie and Mark. Thanks for taking my questions. The first question is about the customer new order momentum. Can you talk more about the recent customer new auto automotive? Do you see that improving or compared with the first And can you talk about the order momentum by front end and back end?

Speaker 7

Because we are thinking that Back end equipment order had earlier correction. We are thinking that as of now the back end order may have

Speaker 2

Okay. Actually, I should say Our front end customer, existing customer, obviously, they continue spending, right, and that's driving our growing. Also, we see significant of our 2nd tier, 3rd tier customer order coming, right? And that's really also become our Actually, they're driving our shipment and also driving our revenue too. So that's one side and the end.

Speaker 2

And also the back end It really depends. Some customers still like pausing and some customers still is kind of investment too, right? You want to say I should say this year, obviously, not good as last year, right? So looking forward, I should say still keep going, but maybe some customers still slow down, but there's some customers invest for back end. We'll

Speaker 7

see. Okay. So front end, we understand that there are Many, many Tier 2, Tier 3 emerging fabs in China. I mean, SML talked about the same a few weeks ago. But we are just thinking if we do get front end revenue exposure, do you would you say that right now the revenue contributions From the order momentum, would you say it's about maybe 1 third from these Tier 2, 3 customers already or even maybe help of the new orders from the Tier 2, 3 customers?

Speaker 7

Thank you.

Speaker 2

Yes. I really cannot give the real Breakdown, right? I mean, this is real dynamic moving. For the end of this year, we can give you really what's the top 10, whatever, 10% above customer, Right. I can say some 2nd tier, the 3rd tier customer will become obviously adding to our 10% customer end of this year, Right.

Speaker 2

That you can see the people I mean, all the 2nd tier growth. But this moment, I really cannot break it down percentage wise. But I can see significant over, I can say, shipment revenue come from the 2nd tier, 3rd tier customer, because they are all driving for the mature nodes.

Speaker 7

Okay. Significant revenue and shipments from okay.

Speaker 2

Yes, increase, right, compared, correct.

Speaker 7

Okay. Do you mean significant revenue shipments from the Tier 2, 3 customers? Or do you mean the significant Chris, you have your Increase. Increase. Okay.

Speaker 7

And next question is about When you look across your product, across cleaning, copper printing, Verneek, do you still have any tools that With over 6 months lead time or even say 10, 12 months lead time, we still hear from a small number of International equipment suppliers that there remain some tools they always over So I'm just wondering if it's the same for ACM. Thank you.

Speaker 2

Yes. Actually, last year, right, we do have a real It's a long leading time, right? Some product, 10 months, sometimes even more than 10 months. This year, actually, that time has been shrinking, Right. Actually, every still between 5 to 7 months depends on product and also depends on specific components we have get in hand.

Speaker 2

So it has been improved and we're expecting continue to improve.

Speaker 7

Okay. Thank you, Debbie. And next question is that when I look at the revenue by region, It's very good to see that the revenue from China actually grew quite decently In Q2, although that's still just 7% revenue. So I'm just wondering if this increase mainly from the front end or back end Business?

Speaker 2

You mean outside China?

Speaker 7

Yes.

Speaker 2

Yes. Our majority is still come from We're in China right now, right? But we see that as I said, there are outside China sales activity give growth And more attention from the customer, as I mentioned, in Korea. And Korea, so far, we have Hynix as a major customer. Also, we see traction for other packaging and customer in Korea Interest in our plating tool.

Speaker 2

And the same thing, we also have customer from U. S. Continue Interesting other application tool and also we have also European customer, right. So we'll say in next few years, we're expecting a lot of happen for our international efforts And for cleaning, for operating and also expecting furnace, we'll be also playing another Revenue driving in our international efforts.

Speaker 7

Understand. Thank you. And Debbie, if possible, may I just ask about Verneal because I was I have been expecting some decent revenue growth from the furnace, but I see in Q2, it seems that Still not yet a lot of new revenues from Furnace. So I'm just thinking, can you share a bit more about Furnace? I mean, I know you talked about this earlier already, but I'm just thinking from the revenue perspective, what would be the major revenues, new revenues from furnace Coming from 4Q this year or maybe from 2024?

Speaker 2

Yes. I will say, we'll have More customer base increase, right? I just mentioned earlier. And by end of last year, we have 3 customers for furnace. And this year, probably, we're hoping by end of this year, we can increase the total customer number to double digit, Right.

Speaker 2

So again, revenue wise, it's hard to tell, right, new customer, it will take time. So I will say more of the revenue we Back in next year for contribution.

Speaker 7

Okay. Thanks for that.

Speaker 3

Great. Next question please, operator.

Operator

Please standby for our next question. The next question comes from Mark Miller with The Benchmark Company. Your line is open.

Speaker 8

Congratulations on a very strong quarter. Thank

Speaker 5

you, Mark.

Speaker 9

Just a couple

Speaker 4

of

Speaker 8

questions about the eval tools In Europe and also U. S, when would you expect them to be revenues? Would that be next year probably?

Speaker 2

Good question. Actually, we have just 2, 2 is in the evaluation And we are expecting more and one of the I mean, the 2 will get a qualification end of this year, right? So either End of this year or beginning next year, that's how we're expecting to become record revenue.

Speaker 8

Are there any other tools outside of Europe and U. S. And especially in China that are eval tools?

Speaker 2

Outside China or inside China?

Speaker 8

Inside China.

Speaker 2

We also have EVAR too, right, inside China and I mentioned about the foreign company have they have their manufacturing in China And we have a cover plating, also have our Canadian tool, also at the Mounts of Packaging tool, right, in those Foreign company, which has a factory in China. I will continue expecting expanding that base too. Obviously, we also have Evaluation tool into the Chinese customer too, right, which is quite a bit in the furnace and some palladium tool And also our variety of cleaning tools, right? For instance, we have a bubble etcher and also supercritical CO2 And those 2 are also in the customer for evaluation.

Speaker 8

Just a couple of housekeeping questions. What was stock based comp and cash from operations?

Speaker 3

Yes. Hey, Mark. Stock based comp was about it's in the press release, but about $2,000,000 for Q2. And then Cash flow from operations in Q2 was positive, about $6,000,000

Speaker 5

Thank you.

Speaker 2

Thank you, Martin.

Operator

Please standby for our next question. The next question comes from Robert McKay with Blue Lotus. Your line is open.

Speaker 9

Mark, thanks for taking my question. I wanted to ask about inventory levels. They've been a little bit high for a couple of quarters. And I was just kind of wondering what the reason for that is and if we can expect to see that come down in later quarters.

Speaker 2

Hey, Mark, you want to take care of that question?

Speaker 3

Yes, I didn't hear the question.

Speaker 2

Can you Can you speak louder? I think his questions are regarding inventory and a little higher. He said in next few quarter is going to be Reduction or not, that's his question.

Speaker 3

Okay. Yes, we did not. Can you hear us on our end? We didn't hear that question.

Speaker 9

Yes, I can hear you. I can hear you.

Speaker 3

Okay. Yes, we okay. So David repeated the question. So it's about the inventory. Is that correct?

Speaker 9

Yes, exactly. Just wondering why it's a little bit high.

Speaker 3

Okay. So Again, I didn't hear the question well, but I think I can address it if it has to do with the inventory. So our inventory at the end of the June quarter, there were three factors to it. So it's $471,000,000 It was split between raw materials About $192,000,000 work in process was $109,800,000 and then finished goods inventory was $168,900,000 We did the finished goods inventory, a lot of that is tools that are under evaluation being evaluated by our customers. And so that is an important metric for us.

Speaker 3

In terms of our overall inventory levels, we are working on bringing them down a bit. We built some inventory, 1 based on our forecasts, but also given the supply chain tightness. But as David noted, some of the supply chain is loosening up. So we're looking to bring those inventories down to more normalized levels.

Speaker 9

Got it. Got it. Super clear. I don't know if you can hear me now.

Speaker 2

Well, your phone is still live. Can you close the speaker?

Speaker 9

I'm on the headset. I'll speak as loud as I can.

Speaker 5

I was

Speaker 9

wondering if there's Kind of any information you can share on the orders from Huahong on its new expansion this year? Are we already factoring that into our revenue guidance?

Speaker 2

Yes. Actually, all has been as I said, They're trying to I mean, they're going to get IPO very soon, right? The reason about the property, USD 3,000,000,000. So they have also multifab building in different location, right? So it's really Our strategic customer will be real we're expecting quite a bit of contribution from our revenue in the future, right?

Speaker 2

And this year, something happened also a lot of expecting next year, next 2 year. As it's greater customer Also, we have a strategic relationship with our Canadian tool, the Global Canadian tool, our furnace, right? And it's wider acceptor evaluates and qualify in the Baohong Group. So it's great. We're looking for customer continue to grow and also we'll continue You are better service supporting with our portfolio partner to the Von Group.

Speaker 9

Got it. Very clear. Once again, sorry for my microphone quality. I just wanted to follow-up a question on the revenue guidance. I think our revenue guidance is still quite wide.

Speaker 9

And I was just wondering if there's anything you can share about why it remains so wide?

Speaker 2

Yes. Well, I mean, probably you're right, a little wider. I mean, that's still the uncertain, right? We'll be keeping that, no changing.

Speaker 9

Got it. So is there just some uncertainty about Yes. I just wanted to know if the wide range is maybe due to some uncertainty about some customer orders or What kind of information do we need to be more certain about our guidance for the year?

Speaker 2

Yes. I think probably You're right. Some are still orders, some are still component outage, right, both together. That probably give us kind of wider projection right now.

Speaker 9

Got it, got it. Great. And then the last question I'll ask and maybe I'll go back in the queue after is about the dividend. I think we our Shanghai Subsidiary issued quite a large dividend. And I was wondering what we are what our plans are for that dividend, if we're just going to invest it And what we're planning to do with that?

Speaker 9

Yes. Thanks.

Speaker 2

Great. Actually, as we announced, have a dividend, right? And go to all the shareholder, ATEM Shanghai Company, which is 82.5% will come to the ATM USA. We've been doing this money and investing in market We also continue investing in our other R and D activity, A demo center in the U. S.

Speaker 2

And also we're playing other regions, right? So we're going to put the money into the enhance Our sales and marketing and sales capability, helping the product go to their First, your customer, Ewen.

Speaker 9

Got it. Got it. Thank you very much. And sorry for my audio quality. I'll go back into the queue.

Speaker 9

Thank you.

Operator

Our next question comes from Mark Miller with The Benchmark Company.

Speaker 8

Thank you for the second question. How should I think about modeling R and D for the remainder of this year?

Speaker 3

Mark, I'm sorry, can you repeat the question?

Speaker 8

How should I think about modeling R and D expense for the rest of the year?

Speaker 3

R and D expense. Yes, let me give you some thoughts on that. R and D overall was about 12.7% Non GAAP in 2021, 15.3% in 2022. So, yes, we're looking at for the year about 14% to 15%

Operator

I show no further questions at this time. I would now like to hand the call back over to David Wang for closing remarks. Again, I show no additional questions.

Speaker 2

Thank you, operator, and thank you all for participating for this call and for your support. Before we close, Yujia is going to mention our upcoming investor relations events. Yujia, please?

Speaker 1

Thanks, David. From August 22 to 23, we will be conducting an annual medium semiconductor and semicap conference. From August 29 to 30, we will be presenting at the 20th Annual Jefferies Semiconductor Conference In Chicago, on September 13, we will be joined at the 10th Annual Benchmark TMC Conference in New York City.

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Key Takeaways

  • ACM Research delivered Q2 2023 record revenue of $144.6 million (up 39% year-over-year), shipments of $153.4 million (up 37%), a 47.6% gross margin and a 22.4% operating margin, driven by normalized supply chains, market share gains and new product/customer penetration.
  • In China, domestic mature-node capacity expansion at 28 nm and 45 nm—supported by EV production and onshore investment—provides a sustained tailwind for ACM’s broad multi-product portfolio.
  • The company’s product portfolio saw single-wafer and semi-critical cleaning tools grow 55% in Q2 and advanced packaging tools up 14%, while newer lines like AutoBench, Bebo Etcher, supercritical CO₂, TRAC and PECVD are in evaluation ahead of expected ramps next year.
  • ACM is expanding its customer base both in China—where its tools are now used by nearly all domestic fabs and emerging entrants—and internationally, with evaluation orders from major European and Korean manufacturers, and new R&D/production centers in Lingang, Korea and the U.S.
  • The full-year 2023 revenue guidance of $550 million to $585 million was reaffirmed alongside a planned ~$100 million CapEx program, and the audit committee is replacing Armanino with U.S. or China-based auditors under PCAOB oversight to maintain its U.S. listing.
A.I. generated. May contain errors.
Earnings Conference Call
ACM Research Q2 2023
00:00 / 00:00