ACM Research, Inc.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the ACM Research First Quarter 2022 Earnings Conference Call. Currently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time now. Now, I'd like to turn the call over to Mr. Gary Dvorak, Managing Director of the Blue Shirt Group. Mr. Dvorak, please go ahead.

Good morning, everyone. Thank you for joining us on today's call to discuss first quarter 2022 results. We released results before the U.S. market opened today. The release is available on our website as well as from Newswire Services. There's also a supplemental slide deck posted in the investor portion of our website that we will reference during our prepared remarks. On the call with me today are our CEO, Dr. David Wong, our CFO, Mark McKechnie, and Lisa Fung, the CFO of our operating subsidiary, ACM Shanghai. Before we continue, please turn to slide two. Let me remind you that remarks made during this call may include predictions, estimates, or other information that might be considered forward-looking. These forward-looking statements represent ACM's current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results to differ materially. Those risks are described under risk factors and elsewhere in ACM's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward-looking statements, which reflect ACM's opinions only as of the date of this call. ACM is not obliged to update you on any revisions to these forward-looking statements. Also, certain of the financial results that we provide on this call will be on a non-GAAP basis, which excludes stock-based compensation and an unrealized gain or loss in trading securities. For our GAAP results and reconciliations between GAAP and non-GAAP amounts, you should refer to our earnings release, which is posted on our IR section of our website and on slide eight. With that, let me now turn the call over to Dr. David Wong, who will begin with slide three. David. Thanks, Kerry.

Good afternoon, everyone, and welcome ACM Research, first quarter 2022 earning conference call. I would like to start today by review of Q1 results and then provide or update on latest status of a Shanghai operation. Please turn to slide three. As we mentioned in our business update prior to this call, late in the first quarter, our operations were impacted by citywide lockdown in Shanghai. Our hearts go out to all those affected, including our employees, business partners, and customers. The government is working diligently to bring the outbreak under control, and we fully support the effort. We also thank our dedicated and hardworking team, some of whom have literally lived at our facility. Our team has kept ACM operating as fast as we could under these challenging circumstances. Q1 revenue was $42.2 million, Shipments were $67 million, and non-GAAP earnings per share was a one cent loss. We ended the quarter with $533 million of cash and time deposit. Revenue and shipments were significantly below plan as the lockdown limited our ability to ship finished products, process final acceptance, and produce new tools. As an example, we had 13 completed tools that could not be shipped in Q1 due to logistical issues. We expect to deliver all of these tools in the second quarter. We expect the Shanghai lockdown to be temporary, and we have began to increase the level of operations. At the end of April, Shanghai government put ACM on the flight list of essential business. This enabled us to increase production and restore logistics to our facility. We started closed-loop production at our China Star facilities, also known as Two Spots, One Line. This is where workers travel as a group between our factory and their hotel or dorm on a dedicated bus. We have started receiving incoming supplier and shipping products, and we are bringing back more people to work every day. Demand remains very strong. We are in constant contact with our customers, and we are committed to deliver tools to support their capacity expansion plans. As of today, we have not seen any changes to our order book, which remain full through Q2 and Q3. and is building into Q4. We expect a solid growth in 2022 from our core cleaning products, the significant ramping of ECD product tools, and increased shipment of our furnace products. The main obstacles to achieve our plan are the pace of reopening of the city of Shanghai and, in turn, our ability to scale production. We have been able to partly offset the lockdown by having our Shanghai R&D and management team working from home. Our team is focused on extending our current portfolio and introducing two new platforms later this year. Please keep in mind that our R&D center and production facility in South Korea aren't affected by the Shanghai lockdown and are assisting with the recovery. Meanwhile, our global sales team in the rest of Asia and the U.S. and Europe are pursuing potential new customers in those regions. We are committed to gaining additional share of the $8 billion market addressed by our current products. We are on track to double our addressable market opportunity by year-end with introduction and initial shipments of two new product categories, Q1 R&D expense increases significantly due to the increased manpower and was also elevated for the quarter due to the cost of building development tools. We are committed to investing in new product, but do expect R&D expense to moderate to a long rate level in Q2 and beyond. I will now highlight new product development, and recent announcements. Our ECP product cycle remaining strong. Q1 revenue for ECP furnace and other product was 12.2 million, or 29% of the sale. We shipped 20 tools in 2021 and participate significant growth for 2022. We are gaining market share with our proprietary ECP technologies in China market for both the front end with our ECP MAP and the advanced packaging with our ECP AP products. Long term, our goal is to achieve a 50% market share of China plating market and a 25% share of the global plating market. Today, we announced new volume purchasing contract. for 10 Ultra-ECP AP high-speed plating tools from leading China-based OSAT customers. Our ECP AP was previously qualified by multiple China-based OSAT customers for advanced WLP application. We expect to deliver some of those tools in the later 2022 and majority in 2023. Also, on February 17, we announced order of 21 ECB tools. Those orders were split between 13 Ultra-ECB MAP and 8 Ultra-ECB AP copper plating systems. On April 21, we announced that our 18-chamber, 300-millimeter Ultra-C6 single wafer tool was qualified for mass production by a mainstream memory chip manufacturer in China. This tool provides 50% more throughput than our 12-chamber tool, but with a similar full printer and is an important tool to supporting high-volume production line and one of our key memory customers. We expect the 18-chamber cleaning platform to play an important role with this customer and others for 3D DRAM, and advanced logical production. On February 13, we also announced volume purchasing order of 29 O2C WB wet bench tools for 300 millimeter wave applications from several China-based customers. While these are semi-critical tools, we believe our newly developed low-pressure dry technology allows us to gain wet bench market share from our majority or from our major international competitors and give us a strong advantage over the small local competition. I will now provide an update on our major customer initiatives. First, for our major U.S. customer, our U.S. service team is Stanford and is engaged in daily sessions to prepare for the delivery of the tool for O2C Staff 5, 12-chamber community tool. The evaluation tool is in final assembly and will remain on track to deliver it later this quarter. And the production tool assignment is soon to follow. We believe a successful evaluation could lead to a larger opportunity with this and other major customers in the region. With a global IDM with a China-based packaging facility, we delivered the first Ultra-C PR web shipping system in Q4 2021, followed by a second tool in Q1. We have also received orders for two additional systems to be delivered in Q3. We are hopeful that success with our first product can lead to a broader adoption of other WAFD tools including ECB-AP and its important customer. Third, for the major global semiconductor manufacturer, the ChinaFast, they ordered an Ultra-C SAS-5 12-chamber cleaning tool to evaluate in their China facility, and we are on track to leave the tool in Q2. Finally, we received an order for Ultra-ECB-MAP carbon plating tool for regional Asia-based semiconductor manufacturer. This tool was delivered in Q1, and the customer has began its evaluation with our service and process team. We are confident that a successful qualification of this opportunity can result in larger business opportunities, and we continue to build our sales pipeline with other top-tier players. We continue to move forward with our Lingang construction and plan to complete the first production building in the beginning of 2023, with production commerce in the middle of the year. We are also planning R&D centers in Wuxi and Beijing to support the server-key mainland China customers. And we are considering a more meaningful investment in South Korea. We currently have more than 100 R&D engineers and supporting staffers, and two of these production facility. In addition, we'll actively evaluate land in South Korea and build our own facility and to further establish a local full printer near two additional major player and to provide customer with a secondary production center to ensure robust supply chain and production continuity. Now, let me discuss our outlook. Since we have been added to the choir list and we are increasing our production and logistics activities, we feel that the worst impact of the lockdown could be behind us. While there is some uncertainty on the pace of the city of Shanghai reopening, our order book remains intact, and we believe we can make up lost ground for the full year, starting with the second quarter. As such, we are maintaining our full year guidance for revenue in the range of 365 to 405 million. Among other factors, are looking assuming a timely return to scale of ACM production and shipping operation in Shanghai, the absence of unexpected interruption of our supply chain, and continued demand by our customers. Before I turn the call over to Mark, I want to update you on auditor situations. As we have previously discussed, in early March, we are include on SDC list of a non-compliant company due to our use of China-based auditing firm for 2021. As indicated in our prior press release, when we began to interview potential US auditors and it would allow us to comply with the PCAOB inspections. Although the current SEC guidance allow us until the 2023 fiscal year to transition, we are in the wrong stage of evaluating potential auditors, and we are committed to engage PCAOB-compliant auditor firm for our 2022 fiscal year. Now let me turn the call over to Mark will reveal detailed first quarter results in March.