ACM Research Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 28, 2024

There are 9 speakers on the call.

Operator

Good day, and thank you for standing by. Welcome to the ACM Research's 4th Quarter and Full Year 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 first speaker today, Stephen Corlejo, Managing Director of The Blueshirt Group.

Operator

Please go ahead.

Speaker 1

Great. Thank you. Good day, everyone. Thank you for joining us to discuss Q4 fiscal year 2023 results, which we released 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 section

Speaker 2

of our website that

Speaker 1

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, our CFO of our operating subsidiary, ACM Shanghai. Before we continue, please turn to Slide 2. Let me remind you that the remarks made during this call may include predictions, estimates or other information that might be considered forward looking.

Speaker 1

These forward looking statements represent ACM's current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results to differ materially. Those risks are described under Risk Factors and elsewhere in ACM's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward looking statements, which reflect ACM's opinions only as of the date of this call. ACM is not obliged to update you on any revisions to these forward looking statements.

Speaker 1

Certain of the financial results that we provide on the call will be on a non GAAP basis, which excludes stock based compensation and an unrealized gain and 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 also on Slides 13 14. With that, let me now turn the call over to David Wong, who will begin with Slide 3. David?

Speaker 3

Thanks, Stephen. Hello, everyone, and welcome to ACM Research 4th quarter and the fiscal year 2023 earnings conference call. Please turn to slide 3. I'm pleased with our 4th quarter results, which conclude a strong year. For the Q4 2023, we delivered US170 $1,000,000 in revenue, upper 57%.

Speaker 3

For the year, we delivered $558,000,000 in revenue, upper 43%. Profitability was good for both the 4th quarter and the full year with operating margin of 21% 22% respectively. We ended the year with just over $300,000,000 of cash and time deposit. For shipments, the shipments for the full for Q4 were $140,000,000 down 29% year to year. Shipment for the full year were $59,700,000 up 11%.

Speaker 3

On our Q3 call, we know the delay of shipment to several customer due in part to adjustment in their fab build outs. While we don't normally share our expectation for shipment, I will provide more color in this case. We view the low shipments for the Q4 to be a 1 quarter event. We expect to deliver nearly all of the delayed tool during year 2004. We expect our Q1 shipment to be much higher than the Q4 levels, even with a normal Chinese New Year shutdown.

Speaker 3

And we expect our total shipment to grow faster than revenue for the full year 2024. Now I will discuss the key growth drivers, both for the market and specific to the ACM. According to a third party estimate, the overall Mainland China WFE market grow around 15%. If we exclude its geography tool, which more than double in China in 2023, we believe the rest of the market growth for China WFE was close to 5%. In any case, we attribute ACM higher growth rate of 43% to 1, a leading product portfolio for the China market, including auto bench clean and our ECP tool for the front end and packaging 2, continual spending and market share gain at our current customer 3, broader participation with new customer in China and 4, good execution by our production and the service team.

Speaker 3

I will now provide detail on product. Please turn to Slide 4. Revenue from single wafer cleaning, Tahoe and semicritical cleaning product grew 48% in 2023 and represented 72% of total revenue. ACF offers what we believe in the industry's most comprehensive cleaning portfolio. We support nearly 90% of our all cleaning process step for memory and logic devices.

Speaker 3

This coverage positions us as a key partner for both China mature nodes development and international markets. At the high end, we believe our flagship SAFs, Tahoe and TEBO single wafer cleaning products deliver technical feature not available from any of our competition. We entered into the 30 millimeter auto bench cleaning market several years ago is proving to be a significant winner for their mature node spending. We have delivered more than 70 auto bench tools today and note a very strong contribution in 2023 with good profitability. By our estimate, ACM become the largest China based supplier for auto bench in 2023.

Speaker 3

For Tahoe, we made a good progress during the year. Our engineering team modified technical feature to meet production requirements for the key customer. I'm pleased to report ACM has been qualified for mass production at several customers and we expect a strong ramp with good orders for delivery in the first half of twenty twenty four. This is good for our customer and good for their environment as our proprietary Tahoe design significantly reduce the consumption of the sulfuric acid. We continue to innovate in our cleaning and look forward to additional market share gain in 2024.

Speaker 3

We ramp up several key new products, including our bevel etcher cleaning tool, high temperature SPM single wafer cleaning tool and the supercritical CO2 dry cleaning tool. Revenue from ECP, furnace and other technology grew 33% in 2023 and representing 19% of total revenue. We hit an important milestone for this category in 2023 with more than $100,000,000 in revenue. ECP demonstrated strong performance. I want to note that our first tool shipment grow even higher than 33%.

Speaker 3

We are taking a good share for overall plating with a particular strong growth in front end process in 2023. For furthers, 2023 was a customer development year with many evaluations underway. We expect an even broader customer footprint and good revenue contribution in 2024. We also made a great progress with our furthest ARD product development. In summary, we expect another year of strong growth in this product category in 2024.

Speaker 3

Revenue for advanced packaging, which excludes ECP, but includes service and the spell, grew 31.5% in 2023 and represent 9% of total revenue. This category includes a range of packaging tools, including coater, developer, scrubber, PR striper and wet etches and service and spare parts. Last year, we also introduced Ultra CV Vacuum Cleaning Tools and we continue to explore new product and technology to participate in the next generation of advanced packaging. We believe ACM is the only company in the world that offer a full set of wet tool, polishing and the plating for advanced packaging. We expect the advanced packaging to become more important as industrial looks for packaging innovation such as 2.5D and the 3 d in the puzzle and fan out.

Speaker 3

These are critical for high performance computing application such as AI, which is seeing increasing demand globally. Finishing up on product, we made good progress with our new track and PECVD platform. We are engaged in active dialogue with our key customer and intend to release additional evaluation tools this year. As with our cleaning, plating and furnace product line, our track and PCVD platform, both the proprietary technology that position them as a successful choice for major customer globally, including both in and outside China. We are making a good progress in the evaluation of our track tool.

Speaker 3

We are confident that the proprietary architecture of our track tool is well suited for the high throughput required in next generation of the software tools. We are engaged with multiple customers for our PECVD tool. We're expecting significant progress for PCVD product development and evaluation in 2024. Turn to Slide 5 for our product SAM. We estimate our product portfolio address a $16,000,000,000 market opportunity.

Speaker 3

Our business is now primarily driven by 3 major product groups: cleaning, plating and advanced packaging. We anticipate continued growth in this category and look to incremental revenue contribution from our newer products starting with the furnace in 2024, followed by TRAC and DCVD in 2025. Please turn to Slide 6. We remain committed to our medium term $1,000,000,000 revenue target. We believe we can achieve this with a range of market share by product in the mainland China alone.

Speaker 3

We have achieved scale with a differentiated product that have been improving in China market and we have put resource in place to address international markets. To be clear, long term, we see additional $1,000,000,000 plus opportunity from international markets. Moving on to the customer, please turn to Slide 7. In China, we are market leader in cleaning and cleaning tool with sales to nearly every semiconductor manufacturers. Our sales and service team are now driven deeper adoption of our products across this customer base.

Speaker 3

Beyond established payer, market growth is being driven by an influx of well funded new entrants. For 2023, we had 3 10 percent customer. SMIC was our top customer at 18% of the sale. Cyan was our 2nd largest at 15% and 6MP was our 3rd at 13%. We had a stronger contribution from 2nd and third tier semiconductor manufacturers, including power, analog, CMOS, image sensor and current power semiconductors and other devices and some new customers.

Speaker 3

Total second and the third tier player represent about 30% of our 2023 sales. On the international front, I'm pleased to report that a large U. S. Manufacturer qualified in the First Steps' convenient tool for revenue in the Q1. We also plan to deliver the Ultra CD backside cleaning and a bevel edge tool to this customer in the Q2 of 2024.

Speaker 3

This demonstrates a deepening relationships, which we believe can lead to production orders. Furthermore, this enhanced ACM brand and position us to attract new opportunities with other major global customers. Beyond the U. S, we install our first evaluation tool, Ultra C SAPS 5 cleaning tool at a major Europe based global semiconductor manufacturers in the 4th quarter. To support growth, we made progress on our facility expansion in China and other regime.

Speaker 3

Please turn to Slide 8. In China, construction of our Lingam production and R and D center is nearly complete. We expect initial production in middle 2024. In Korea, we are making progress with the key customer. As noted in the prior call, we have increased our commitment to support our objectives to address global market.

Speaker 3

We now have more than 150 employees in Korea with their facility including sales administration, small scale production and the development lab with a clean room to support internal R and D and wafer demos for the customer evaluation. And we are making initial plans to building a new factory on the land we purchased early last year. We believe a strong commitment to Korea. We're improving our relationship with our key Korean customer. Our resources in Korea are providing another basis to support international customers in the U.

Speaker 3

S, Europe and other part of Asia. In the U. S, we leased a facility in Oregon last year to add to our service support and demonstration capability for R and D and the customer activity in the U. S. And Europe.

Speaker 3

I will now provide our outlook for the full year 2024. Please turn to Slide 9. In early January, we introduced our 2024 revenue outlook in a range of 650 to $725,000,000 This implying 23% year over year growth at a midpoint. We are reiterating this outlook today. We believe the China equipment market will grow in 2024.

Speaker 3

We expect our full year revenue growth for 2024 to outpace both China growth and global growth rates. Now let me turn the call over to our CFO, Mark, who will review details of our Q4 and full year results. Mark, please.

Speaker 4

Thank you, David. Good day, everyone. Please turn to Slide 11. Unless I note otherwise, I will refer to non GAAP financial measures, which exclude stock based compensation, unrealized gainloss and short term investments. A 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 Q4 of 2023. Comparisons are with the Q4 of 2022. I'll now provide financial highlights for the Q4 and full year of 2023. Revenue was $170,300,000 for the 4th quarter, up 56.9%. Revenue for single wafer cleaning Tahoe and semi critical cleaning was $122,300,000 up 63.9%.

Speaker 4

For the full year 2023, this category grew by 48.0%. Revenue for ECP, Furnace and Other Technologies was $32,100,000 up 59.0 percent. For the full year 2023, this category grew by 33.4%. Revenue for advanced packaging excluding ECP, services and spares was $15,900,000 up 15.8%. For the full year of 2023, this category grew by 31.5%.

Speaker 4

Full year 2023 revenue was $557,700,000 up 43.4%. Total shipments were $140,000,000 for the 4th quarter, down 29%. For the full year of 2023, shipments were $597,000,000 up 11%. Gross margin was 46.8% for the 4th quarter versus 49.7%. For the full year 2023, gross margin was 49.8% versus 47.4% in 2022.

Speaker 4

This exceeded our normal expected range of 40% to 45%. We do expect gross margin to vary from period to period due to a variety of factors such as sales volume, product mix, currency impacts. Operating expenses were $43,600,000 for the 4th quarter, up from $34,800,000 R and D was $28,800,000 versus $17,000,000 as we invest in our new product initiatives. Sales and marketing was $7,200,000 versus $11,800,000 The decline in sales and marketing was primarily due to a significant reduction of costs related to promotional tools. G and A was $7,600,000 versus $6,000,000 For the full year 2023, operating expenses were $154,400,000 up from $117,400,000 R and D was 15.1 percent of sales, sales and marketing was 7.4 percent of sales and G and A was 5.2% of sales, all for 2023.

Speaker 4

For 2024, we are planning for R and D in the 16% range, sales and marketing in the 7% to 8% range and G and A in the 5.5 percent range. Operating income was $36,000,000 for the 4th quarter, up from $19,200,000 Operating margin was 21.2%, up from 17.7%. For the full year 2023, operating margin was 22.1% versus 17.2% in 2022. For the Q4, we recorded a realized gain of $500,000 from the sale of short term investments. Recall that realized gains are included in the non GAAP earnings.

Speaker 4

Income tax expense for the Q4 was $8,100,000 versus $2,700,000 For the full year 2023, income tax was $19,400,000 versus $16,800,000 in 2022. Net income attributable to ACM Research was $28,700,000 for the 4th quarter, up from 12,600,000 For the full year 2023, net income attributable to ACM Research was $107,400,000 versus $54,800,000 in 20.22. Net income per diluted share was $0.43 in the 4th quarter, up from $0.19 For the full year 2023, net income per diluted share was $1.63 versus $0.83 I will now review selected balance sheet items. Cash, cash equivalents, restricted cash and time deposits were $304,500,000 at year end versus $326,500,000 at the end of the 3rd quarter. Total inventory at year end was 545 point $4,000,000 versus $507,400,000 at the end of the Q3.

Speaker 4

The mix was split between raw materials, dollars 235,100,000 work in process, dollars 81,400,000 finished goods inventory, dollars 228,900,000 Inventory also included finished goods at our own facilities. As David said, nearly all of the finished goods at our own facilities is expected to ship during the year 2024. Capital expenditures were $15,000,000 in Q4 $61,900,000 for the full year. For 2024, we expect to spend about $80,000,000 in capital expenditures. This will be primarily to complete our investment in Lingang and will also include remodeling the new headquarters for ACM Shanghai and investments in Korea and the U.

Speaker 4

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

Operator

Thank Our first question comes from the line of Suji Desilva with ROTH MKM. Your line is now open.

Speaker 2

Hi, David. Hi, Mark. Congratulations on the progress. Great job there. Can you talk about the international customers?

Speaker 2

It sounds like you're making progress there. Just trying to gauge the pace of that. As you guided 24 full year, do you have some contribution from international customer in that assumption or would that be upside and is it potential first half timing? Or is it most likely back end loaded second half?

Speaker 3

Okay. Thanks, Suji. Okay. At this tool, we shipped a year ago, right? Then there are through our service, the parts engineer hardworking and then we have our first 2 will get their acceptance.

Speaker 3

So this will be getting to the production, the mass production. And also, I want to see that this specific SAPS, mechatronic tool, will address the customer needs and we can see get a gooder convenient performance and also much less part of your consumption. So that's really a customer like the tool. And we believe this definitely first tool qualification will lead to their additional order for the same customer, right. So meanwhile, and as mentioned, we also have a secondary different tool, which is backside and then also fiber clean.

Speaker 3

It was ordered by the same customer and we shipped them in the Q2 of this year. So obviously that is this is a key customer in the U. S. And we want this to be another example and also encouraging other big player in adapt to our differential technology, right? So we're saying that's what will be their good outcome.

Speaker 3

And also there's, of course, international, I call it, revenue contribution to our year 2024 forecast. We can see that too.

Speaker 4

Yes. Suji, I'd just add for 2024, I mean, a lot of things go into our forecast. We don't have a 2024 will be a building year for us the international and we'd expect some additional contribution. Whether we get an order that ships for 1 or several tools that ships this year or next year will depend on how big it could

Speaker 5

be for us. Okay.

Speaker 2

And then my second question is, can you just explain again the shipments and what the delays, what the dynamic was there? I didn't catch that in the prepared remarks.

Speaker 3

Yes. I think in the Q3, we also mentioned about that delay. And it's because of our customer, they're building a plan and there's certain, the plan delay or the installation not enough either resource or floor plan not fast enough. Anyway, this continuing investment going on. So those portion of the delay, as I said, will be definitely delivered in 2024.

Speaker 3

And that's also added to our shipment. Those 2 has been built already. It's going to also save the cash. We spent the last year already. So we'll see that happen.

Speaker 3

And I would say that also the total shipment there we're expecting 2024 and there will be quite an increase. We believe even increased rate higher than their call it revenue increase, right, in compared to 2023. So that's another, I can say, a great year for us in 2024.

Speaker 6

Okay. That sounds like

Speaker 2

you mentioned. My last question is around the overall demand environment. I'm trying to understand in China whether the memory market is stabilized and capacity is increasing again across NAND and DRAM. And maybe is someone like CXMT actually progressing to DRAM production versus development effort?

Speaker 3

Yes. I mean, you can see that our 670 is still our 3rd customer in the year 2023, right? So we're expecting this memory business to continue to grow. And again, it's order memory in China is still multiyear expansion. And so we see that as good market for us and also we see that continue to grow.

Speaker 2

All right. Thanks guys. Congrats again.

Speaker 4

Yes. Thanks Suji.

Speaker 3

Thank you.

Operator

One moment for our next question please. Our next question comes from the line of Charlie Chan with Morgan Stanley. Your line is now open.

Speaker 5

Thanks for taking my questions. David, Mark, happy Chinese New Year and Gongxi Fasai and congrats for a very solid 2023 results. So my first question is actually on the full year guidance because I had the impression that your AFM Shanghai entity, they have a preliminary 2024 outlook revenue growth more than 30%. Remember, you are like 37% Y on Y growth. So I calculate your midpoint suggesting the ACMR is growing like 23% Y on Y.

Speaker 5

So what's the discrepancy between your ACM Shanghai entity versus the parent company?

Speaker 3

Yes. Well, there's a slight difference like a revenue recognition rule and we're using either Chinese GAAP versus U. S. GAAP. So that's the primary reason to show the difference of both I got a forecast.

Speaker 3

Yes, in general, we see that is U. S. GAAP will be first tool, take a long time evaluation. And after that, you can recognize repeat order just on the shipment, right? But in China, gap is you have to no matter is new or is a repeat order, you have to really install and basically accept kind of initial acceptance by their customer, then you can reckon revenue.

Speaker 3

So that's slightly different show their, I call their revenue difference. In other words, probably you can say, China is a forecast, meaning that is we have a lot of probably a new tool and a new customer, right? That will be the quickly can be recognized revenue versus the U. S. Recognition rule.

Speaker 3

So that's the difference we see there.

Speaker 5

I see. Thanks, David. So my next question is about the China CapEx sustainability, right? I mean, right now, as you said, right, it's for local sufficiency, but you also see that some of your major customer, their gross margin already dropped to like 10% gross margin. So I'm a little bit worried about the sustainability.

Speaker 5

So any kind of signs or lead indicator we should pay attention to, right, to check the China CapEx sustainability?

Speaker 3

Yes. Well, I should say there, as we said a couple of times before is China's fab is still in the multi expansion, No matter the logic or memory, right? Also a lot of our, I call their mature nodes is very related to the EV IGBT is still in the I call the product in the building process. Also, I want to say another thing is the consumption of the chip, especially mature nodes in China is way higher than capability can be produced in China, right? So you look at that gap and still say next few year and China and WFE, this market will continue to grow.

Speaker 5

Okay, got you. So, yes, one last question, I will bring you back to the queue. So, question to Mark, Since you are ramping up the Lingang new campus, can you give us some updated gross margin and also OpEx assumption for 2024?

Speaker 4

Yes. Hey, Charlie. Thanks for asking. So, yes, I said in my prepared remarks, I gave some detail there, but I'll go ahead and repeat it. We're anticipating our target model for gross margin is unchanged at 40% to 45%.

Speaker 4

Obviously, we've done better than that for the last several years, but that's kind of the margin level that we're that's our target level. And then for the OpEx levels and these are non GAAP numbers, we expect R and D continue to invest pretty strong in R and D. And you should always expect as we're a growing company to spend at about a 16% level is our outlook for non GAAP in 2024. Sales and marketing, we expect in the 7% to 8 percent range and then G and A about 5.5%.

Speaker 5

Okay. Okay. Thanks for yes. So yes, thanks for the recap of those guidance.

Speaker 4

You bet. You bet.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Mark Miller with The Benchmark Company. Your line is now open.

Speaker 7

I believe you well, first of all, congratulations on another great quarter. But just wanted to get a little more into the OpEx in the December quarter. You did mention the SMS sales and marketing was down. You said it was because of demo systems. I'm confused why that fell so much.

Speaker 4

Yes. We it was a significant decline in the sales and marketing promotion tools. So we took that out of the sales and marketing expense. And going forward, you won't see that expense level in the sales and marketing. And so we look at it kind of for the full year, Sales and marketing was about 7.4% on a non GAAP basis.

Speaker 4

And so we expect that sales and marketing level to be kind of in the 7% to 8% in non GAAP next year.

Speaker 7

Can you give us a little you said you had a lot of QUALS underway. Can you give us a little more color of what's going with your quals and timing of quals in terms of when you expect revenue generation?

Speaker 4

In terms of yes, David, he's asking about our evals at our customers. Maybe I'll let you address that and then I can add to it. In general, right? Yes. And so that's I think, Mark, our finished goods inventory is largely comprised of evaluation tools at our customers.

Speaker 4

And so I think, yes, David?

Speaker 3

Yes. Let me see that is obviously, there's finished goods in the customer side for evaluation mostly in the first tool. And those first tool can be their first tool for new customer, right, especially their first time buyers. They want to make sure those tool and not just qualify for tool itself, sometimes they qualify the whole production line to look at the yield to come out. That takes some time, right?

Speaker 3

Also, there's also the first tool is a pretty new brand new tool and we need a customer to real we call it beta tool, right? You need a real evaluate that and that sometimes take a process 1 year, even 1.5 years, depends on how that tool first building be mature, how mature it is. So those kind of tool where we consider as our first tool.

Speaker 7

And just final question. You previously said you were doing more investment in Korea to, I guess, get more business from SK Hynix. Can you give us an update on what's going on there?

Speaker 3

Okay, great. So Hynix actually is a real long term customer, right? And we are fully engaged with the customer, I mean, Hynix right now because we're real emphasize our investment, also expansion, our R and D force in also manufacturing in Korea. We do have about 150 employees in Korea right now. As I mentioned, we bought land and it will give us also to building factory there at a future proper time.

Speaker 3

So key point I'm trying to see that is we have a multiple tool like cleaning, copper plating and including furnace and then also a development of PCVD and also track. So all these 5 tools, we're trying to engage with the customer in Hynix and because of our relationship and also because of our local R and D force and also we offer customer with differential product and differential technology, which is quite interest or get interest from the customer in Korea.

Speaker 7

Thank you.

Operator

Thanks, Mark. Thanks. Thank Our next question comes from the line of Christian Schwab with Craig Hallum Capital. Your line is now open.

Speaker 8

Hey guys, fantastic year and great quarter. So I'm trying to better understand the 2 or 3 reasons better, either from a product category standpoint or a customer standpoint, your conviction and your ability to outgrow WFE not only in China, but also globally year over year.

Speaker 3

Okay, great. I think the ACM there, we're starting beginning even from Bay Area, right? ACM there, our R and D philosophy is, I would call, differentiation, right? And each product we're building like cleaning, you already know that steps, TEBO and Tahoe is pretty our differential product. And same thing for the copper plating.

Speaker 3

So our goal is building differential product and this moment widely has been accepted by the local customer in China. And with those differential product and the technology, I think we can penetrate or get into international, right? Example is we already get into the Panix and also we have 1 bigger manufacturing U. S. Adapter SAPS already, Also our European company and also adapter SAPS makes some Canadian too.

Speaker 3

Beyond that, the next one is our Tahoe. Our TEBO plus we have our supercritical CO2 dry with Tahoe with TEBO tool will be really exciting for their patent wafer Canadian tool, right? And beyond that is also, as I said, we have also furnace and for produce ALD and including copper plating and it was another very candid product and to be able to penetrate international market. So as I say that is of course we're developing PECVD and the track also has our proprietary differential design point. So ACM really developed their I call this a differential product, which is really offered differentiation, offered a different benefit than our other competitor doing.

Speaker 3

That's our confidence and also our proven record. We can put a tool and sell in international market.

Speaker 8

Great. So congrats again on a very differentiated and better product than your competitors. Just as a quick last follow-up then is on the international front, how much of the year over year growth are you looking for from that? I guess, I know it was kind of asked earlier, but you mentioned it numerous times as why you thought you would outgrow the market. So I'm just wondering if you really to provide any clarity more clarity there.

Speaker 4

Yes. Hey, Christian, I'll hit that. So in terms of our outlook, I mean the range, we have a pretty small contribution from international this year. It's still going to be kind of development. So really substantially, most of that growth that we're planning for in 2024 is from the China market, the Mainland China market.

Speaker 4

New product cycles, customer additional customer traction.

Speaker 8

Okay. And then I guess my very last question then is the TAM for your products outside of China globally is substantially larger. How many years do you think is reasonable for us to assume it takes for broad based success internationally. It sounds like this year was a great building year, initial shipments starting in 'twenty four. Is that a 'twenty six, 'twenty seven or 'twenty five event or is it too early to know?

Speaker 3

Yes, Christian, this is a very good question. I think the way we're doing right now, obviously, it's quite a quicker fast growth in the Mainland China market, right? There's a lot of product we qualify here now. So those are I think our goal, we'll say, reaching $1,000,000,000 even by China market only, right? We think in the next few years, we should be reaching our goal.

Speaker 3

And simultaneously, in a couple of years, 2 years ago, we started also global market expectation, I mean, penetration. So the key is really how we're execution our international sales plan. Now we have hiring good people and sales guy in Korea, actually also in the U. S, in the Europe. And we'll see that there are quite a bit of progress.

Speaker 3

And let's put it this way, for the international market and as we talk to the customer, everybody looking for a packet again differentiation, right? So with that in mind and as I mentioned, couple of products we have right now, we do have a confidence as the first I call the U. S. Customer adapt our tool. We see more of our customer may adapt additional other tool too.

Speaker 3

So we see that happen. But then you're asking which year is how do we give you precisely. But I think as I said, we have a bigger revenue with our strong financial supporting from sales here with also the patient product definitely will penetrate into the international market. If asking, next few years is very exciting. We have to quickly execution our plan and to quickly reach our goal.

Speaker 3

And eventually, as I mentioned a couple of times before, we are on the half of our Mainland China, half of our Mainland China, right. So like you said, the real revenue contribution actually more bigger outside Mainland China.

Speaker 8

Thank you. That's great. No other questions. Thanks guys.

Speaker 4

Thank you.

Operator

Our next question comes from Charlie Chan with Morgan Stanley. Your line is now open.

Speaker 5

Thanks for taking my question again. So I think the new customer contribution caused our eye, Qingdao Xingnan. So it wasn't in our radar screen. So I'm not sure why XinDao becomes such a big customer. And if you can provide some more details, is that purely 12 inches equipment or also including some 8 inches equipment?

Speaker 5

Thank you.

Speaker 3

Yes. I think the primary we sell to the Xinyuan is a 12 inches tool, right? And also their most expansion now is mature node. So we actually sell a lot of our auto bench. They're probably the largest auto bench customer right now for us in China.

Speaker 3

So of course they also buy the wafer, right? So that's why primary driving that become the 2nd largest customer in 2023. And looking forward, and then also we are very good relation and engage with them in the copper plating, our furnace and also on the line. And so that's another contribution we can say from machine, right? It's a great customer and we're happy with our I said our auto bench tool.

Speaker 3

Be largely deployed in the Xinyuan production line.

Speaker 5

Okay. So yes, so it's a great business, right? So I'm assuming company consults your lawyer about the U. S. Export control before you ship in to all the customers including Xinyuan, right?

Speaker 5

Is that the right assumption?

Speaker 3

Well, I mean, we're straight to follow all the export control rule, right, as said here. And for those whatever are restricted customer, we have to be very carefully U. S. Parts, right, and personally involved and also now you say technology. Yes, so we are pretty very carefully managing and control and follow their strictly with the standard of the export control of the U.

Speaker 3

S.

Speaker 5

Okay. Okay. Thanks, David. And next question is about the advanced memory, HBM. So can company talk about your opportunity in Korea for the HBM production line?

Speaker 5

I think we asked that question last quarter as well. And also there's some recent news about China may also have the own HBM production. So can comment about your potential opportunity at Korea and also China customers?

Speaker 3

Yes. Well, let's say, obviously, Hynix is the number one provider, right? They're also technology leader, HBM. And I think our current product definitely evolved their process. And also we see HBM either this is a copper plating tool, right?

Speaker 3

TSV, order the packaging, whatever they needed. So that's the next tool we are working closely with the Hynix. And I should say, rest of our other tools, furnace and we're working with them too. So there's a lot of including cleaning, by the way. Actual other cleaning other than we sold them SAPS and mezzanine also working with the Chinese too.

Speaker 3

So it's a very good opportunity. HBM is a greater, I call it, demand and greater drilling. Also, they need a lot of differential technology for the supporting and HDM development in the future. In China, really not much we can hear right now really, right? It's just not much we have right now.

Speaker 3

So in other words, we're really focused on the outside China for HBM expansion for the business opportunity.

Speaker 5

Yes. So based on your comments and also other global ecoin vendors, right, they talk about actually this year the global FTE revenue comes from the memory. So why Hynix? Is that your kind of the top customer? Or do you think this year Hynix can contribute more than 10% of revenue given HBN opportunity and also the memory spending recovery?

Speaker 3

Well, I mean, obviously, more than I mean, other than highly also looking for other player, right? This is key here. Then the memory market, HBM is really booming, right? That's key here. So we see that there is demand there, as I mentioned, right?

Speaker 3

This is for us, cleaning, cover plating, it's real demand there. I don't know what's the time we come to back to 10% our customer. It's hard to predict right now. So really we'll see, right, especially second half year or next year is really we want to see something recover from DRAM market.

Speaker 5

Okay, got you. Thanks, David. Thank you.

Operator

Thank you. One moment for our next question please. Our next question comes from the line of Edison Li with Jefferies. Your line is now open. Thank you.

Speaker 6

Thank you for taking my question. So, David and Mark, congratulations on a great quarter. I have just one question, which is the contribution of your 3 customers for 2023, which amounted to almost 50% of the revenue. So can you give us some color as to whether you think that those top three customers will continue to be top three customers in 2024? And what is your expectation on the contribution of the top three customers in 2024?

Speaker 3

Yes. Actually, I look at this year's order list, right? And the top three customer continue, I think, with growth, right? And they probably still are major customer. Also, we see their additional body of our home, they have also their expansion plan.

Speaker 3

And they are probably simultaneously building 2 fab this year and also they're building probably next year, 3 fabs simultaneously, right. So that's another bigger, I see the top customer will come back in our 2024 revenue contribution.

Speaker 6

Maybe a related question is that based on your revenue guidance at a midpoint that implies 20% plus growth. And so significantly below the growth rate in 2023. So do you think the key driver there is just some digestion period or is it's a matter of taking time for the evaluation tools to be recognized as revenue? So what are the key factors for the slowdown in terms of the growth rate?

Speaker 3

Yes. I think the key driving force is I want to say that China WFE market is continuing people say maybe, I mean, slightly increased, at least flat or we see that as number one important. But second, the most important is we have our gain for our, I call it a higher growth rate is because we have a continue to have a new customer coming and also we have gained our market share from existing customer and also do have like a furnace, what do the more contribution this year and for our revenue, right? So that's all there added together. That's our give us a basis to forecast our growth rate higher than their growth rate of WFE market in China.

Speaker 6

Okay. And maybe the last one is that for 2024, what do you think is the percentage of overseas revenue in your guidance?

Speaker 4

Yes. Hey, Ed, we didn't break it out, but we did a couple of other questions about that. We mentioned it wouldn't be a very significant contribution in 2024. We expect that to build in the coming years, but it's not a very significant piece. It's we think it will be bigger than it was this year.

Speaker 4

And so you got the numbers in the international numbers shortly, but it's not going to become a huge I wouldn't expect it to be more than 10%, right? Yes.

Speaker 3

But I should say, grocery is higher, right? I mean, obviously, there's a small number. So then the real absolute number, like you said, we're still a fixed number of the total revenue.

Speaker 5

Yes.

Speaker 6

Right. Okay. Got it. Thank you very much.

Operator

Thank you. I'm showing no further questions at this time. I'd like to hand the conference back over to Stephen Pelleo for closing remarks.

Speaker 1

Okay, great. Thanks, Mark and David, and thank you all for participating on today's call. Before we conclude, I just want to give everyone a quick reminder on our upcoming investor conferences. On March 18, we will present at the 36th Annual ROTH Conference in Dana Point, California. Attendance at the conference is by invitation only.

Speaker 1

For interested investors, please contact your respective sales representatives to register and schedule 1 on 1 meetings with the management team. This concludes the call and you may now disconnect.

Speaker 3

Thank you.

Operator

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.

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Key Takeaways

  • Record Revenue & Margins: Q4 revenue rose 56.9% to $170.3 M and full‐year revenue grew 43.4% to $557.7 M, with operating margins of 21.2% in Q4 and 22.1% for the year.
  • Strong Segment Growth: Single‐wafer cleaning sales grew 48% in 2023 (72% of revenue), ECP/furnace revenue exceeded $100 M with 33% growth, and advanced packaging tools rose 31.5%, representing 9% of total revenue.
  • Product Innovation & Qualification: New offerings such as the Tahoe and TEBO single‐wafer cleaners, supercritical CO₂ dry cleaning, bevel etcher cleaning tools, high‐temperature SPM, and upcoming track and PECVD platforms have been qualified with multiple customers, driving future ramps.
  • 2024 Outlook: The company reiterated guidance for $650–725 M in 2024 revenue (23% growth at midpoint), expects shipments to grow faster than revenue, and targets 40–45% gross margins with non‐GAAP R&D at ~16%, S&M at 7–8% and G&A at ~5.5% of sales.
  • Global Expansion: ACM is broadening its international footprint with tool qualifications at major U.S. and European fabs, and strengthening service and R&D capabilities through new facilities in Lingang (China), Korea, and Oregon.
AI Generated. May Contain Errors.
Earnings Conference Call
ACM Research Q4 2023
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