ACM Research, Inc.

Good day, ladies and gentlemen. Thank you for standing by. And welcome to the ACM Research Third 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're recording today's call. If you have any objections, you may disconnect at this time. Now, I will turn the call over to Mr. Gary. Dvorak, managing director of the Blue Shirt Group. Mr. Dvorak, please go ahead.

Thanks, Lisa, and good morning, everyone. Thank you for joining us on today's call to discuss third 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 to the investor portion of our website that we'll reference during our prepared remarks. On the call with me today are our CEO, Dr. David Wong, our CFO, Mark McKechnie, and Lisa Fong, the CFO of our operating subsidiary, ACM Shanghai. Before we continue, please turn to slide two. Let me remind you that the 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 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. 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 the IR section of our website and slide 12 in the supplemental deck. With that, let me now turn the call over to David Wong, who will begin with slide three. David.

Thanks, Gary. Good afternoon, everyone, and welcome to ACM's third quarter 2022 Earnings Conference Call. I will start with the New China Trader Restrictions issued by the U.S. Department of Commerce Bureau of Industry and Security in October. The updated export controls cover equipment and parts subject to U.S. export controls, including items from U.S. and the activities of U.S. personnel. Based on our preliminary assessment, the new policy restricts export U.S. parts for tools delivered to advanced node facility or for tools that meet certain ECCN parameters. Some of our Siemens will be impacted as our tools currently have 5 to 10% of the components sourced from the US and we produce some tools in certain ECCN categories. Let me provide more detail. First, some of our customers have advanced node facilities. Shipment to this facility may be impacted due to U.S. export restriction. As advanced node facility is defined as building where production at their restricted technology level occurs. The policy does not apply to other customer building with mature nodes. However, even when they are on the same campus. Second, some ACM Shanghai products needed a parameter of a certain export control classification number or ECCN number on the commerce control list. Treatment of this tool may also be impacted if those tools need parts from the US. This may include our ECB tools that specifically support cobalt metal plating, several furnace products, and one of the new platform products that we plan to introduce. It does not include our cleaning tools, most of our ECB tools, our WFP tools, or other new platform product we plan to introduce. Third, the policy restricts U.S. persons from facilitating shipment and servicing products involved with advanced nodes or list the new DCCN number. We have no U.S. employee in our Shanghai and Korea R&D teams. Therefore, the impact from the new U.S. person policy is minimal. We have, however, implemented compliance protocols concerning U.S. persons' involvement in facilitation, treatment, and services supporting activities. We believe the new policy will not impact treatment of ACM Shanghai tool that do not have U.S. parts or do not include the strict activity of U.S. persons. And we believe that ACM Shanghai tools that are not in the restricted ECCN category can be shipped to the mature nodes even with U.S. partners and U.S. personal involvement. I will now move on to the third quarter highlights. Listen to slide three. Our third quarter results were record for the company. Revenue was $134 million of nearly 100% driven by our flagship Canadian tools and strong growth from our new ECP and furnace products, which tripled. Shipments were 163 million compared to the 99 million last year. Growth margin was 49.3%. Gap operating margin was 23.7%, and non-gap operating margin was 25.1%. And we ended the quarter with 473.2 million of cash equivalents, restricted cash, and time deposits. From first nine months of 2022, revenue grew 70%, Canadian tool grew 56%, ECAP and the furnace tool grew 316%, and it contributed to 20% of sales. We had three 10% customers, which together accounted for over 30% ourselves versus 66% mixed for the same period last year. We made a good progress with our initiative and a major semiconductor manufacturer outside mainland China. The evaluation of two Canadian tools and a US factory of their large US-based manufacturer is going well, and we are gaining traction with the potential new customers in Europe and other regions. In Q3, we launched our first ARD furnace product. ARD is one of the fastest-growing applications for manufacturing advanced nodes in memory and logic, making it a critical new capability for our furnace portfolio. We delivered our evaluation tool to a top-tier China-based foundry manufacturer and targeted qualification in 2023. This is the first in a series of furnace ARD tools with a product line extension ahead. We expect our furnace ALD product to make a good contribution starting next year, with ALD technology expected to represent about half of the total furnace market. Furnace ALD offers significantly higher throughput than traditional single-weaver ALD tools and presents a compelling value proposition. We believe that ACM's ALD furnace with proprietary technology can narrow the performance gap between furnace ALD and their single wafer ALD. Next, we plan to grow our operation with investment in new facilities. Construction of our Lingam production and R&D center is in full gear and remains on track for initial production in the middle of 2023. I also want to announce we are close to purchasing a new headquarter in Zhangjiang, Shanghai, the Silicon Valley of China. We are committed to the China market and this new headquarter will provide stability for employees and help us attract new talent. We are also in the final stage of selecting a site to expand our R&D and production facility in South Korea. Lastly, we are on track to double our address of market opportunity with upcoming introduction of two new product category planned for later this year. Now, I want to provide more thought on the impact to our future business from new U.S. restrictions. We expect a temporary pause in some customer as industry adjusts to the new policy. ACM Shanghai is committed to complying with new regulations and meeting the demands of its customer base. We are actively managing our supply chain to source compliant components to ensure maximum assurance of our tools. For mature nodes, we expect a fairly quick recovery. Most of our business has been for 28nano and above logic devices, 96 layer or less 3DNet and 90 nano and above DRAM. Looking forward, we expect our China customer to continue add or even speed up capacity as the mature nodes. This is because mature nodes made in China is much lower than China's market consumption. And we are strongly in position to participate in this opportunity. For the month nodes, we remain committed to participating in that market in full compliance with the new U.S. export control. ACM is focusing more effort to bring its advanced technology to leading-edge FAPs of global customers. We are making good progress with U.S. and European customers and expanding our global sales and support teams. We are also accelerating our R&D and production facilities in South Korea to be close to several major semiconductor players. and provide a second site to supporting worldwide customers. I will now provide our outlook. Please turn to slide six. As a result of new US trade policy and supply chain constraints, we have lowered the upper end of our full year revenue outlook. We now expect 2022 revenue in a range of $365 to $385 million versus the previous range of $365 and $405 million. The range of the company's 2022 outlook reflects, among other things, the impact from the new U.S. trade policy, supply chain constraints, various spending scenarios for the production ramping of key customers, and the timing of acceptance of the first tool on the evaluation in the field. and assuming stability with respect to the COVID-19 pandemic in China. Now, let me turn the call over to our CFO, Mark, who will reveal detail of our third quarter results. Mark, please.