ACM Research, Inc.

Thank you for standing by, and welcome to the ACM Research First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. To remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Gary Dvorak, Managing Director of the Blue Shirt Group. Please go ahead.

Thanks, Jonathan, and good morning, everyone. Thank you for joining us on today's call to discuss first quarter 2023 results. We released results before the U.S. market opened today. The release is available on our website as well as the 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 Phan, 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 revision to these forward-looking statements. Certain of the financial results that we provide in 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 look at slide 12. With that, let me now turn the call over to David Wong, who will begin with slide three. David?

Thanks, Gary. Hello, everyone, and welcome to ACM Research, the first quarter 2023 Earnings Conference Call. Please turn to slide three. For the first quarter, revenue was $74.3 million, up 76% from the same quarter last year. Shipments were $89 million, up 33% from the same quarter last year. Growth margin was $53.8. and the non-GAAP operating margin was 14.7%. Our operation in the first quarter was impacted by several factors, including COVID policy, the Chinese New Year holiday supply chain challenges related to U.S. restrictions, and some delays that deliver to certain customers. We expect our business to improve in the second quarter with expected acceleration in the third and fourth quarters. Study with the product presented to slide four. We had a good growth from our cleaning tools and increased contribution from our ECEP furnace and other technology with a continual strong product cycle from ECEP products, which were more than one-third of the first quarter sales. Single-wafer cleaning, Tahoe, and semi-critical cleaning grow 41 percent, driven by single-wafer cleaning tools. and strong mature nodes demand in China. ACM has one of the broadest cleaning product portfolio in the industry, covering nearly 90% of all cleaning process steps. We recently introduced several important new cleaning tools, including the bevel etcher tool and high temperature SDM single wafer cleaning tool, which is important for our international efforts. In Q1, we received the customer qualification of our single wafer wet bevel edge tool. ECP and furnace and other technology grow 117%. Growth in this category was driven primarily by ECP product cycle with some contribution from furnace. Our higher temperature anneal and LPCVD furnaces including silicon nitride and poly have expanded to multiple customers and are in qualification. Advanced packaging, including ECP, service, and spare parts grow from our small base last year and represent about 15% of the sales. This category includes a range of packaging tools, including coater, developer, scrubber, PR stripper, and wet etcher, and service spare parts. ACM is the only company that offers both a full set of web tools and advanced plating tools. We believe advanced packaging will continue, will become more important as industry looks for packaging innovation such as 2.5D and 3D in the portal and fan out to drive a higher performance. Our product line is very well suited for the mature nodes and power devices investment we see in a near term for China. We see continued investment in 28, 45 nano and above nanometer in front end fab capacity as China is committed to close the gap between its consumption and production of semiconductors. We also see the ramp up of EV production in China as a driving of China-based investment in both power devices and other 28 and 45 nano devices. In this mature node expansion environment, we expect solid growth from our cleaning tools, especially our AutoBench, which is well-suited for those applications. To finish up on products, I feel great about both our PCVD and TRAC platforms. Similar to our cleaning, plating, and furnace products line, our PCVD and TRAC platform have a proprietary technology that we believe we're making them winner with a major customer both in China and outside China. We are in active discussion with our key customers. They are accepting to our new approach and technologies, cost and their way for throughput. Although we do not expect revenue in 2023, we plan to deliver a several innovation tool to key customers this year. ACM has built a scale business in cleaning, and we have strong product cycle from ECP, Furnace, and other technologies. With the track and PECVD, we are moving from proof of concept during the last year to accept to active evaluation with the key customers. At this point, we now believe our differential technology can go head-to-head with any of their major players. Moving on to customer, please turn to slide five. I'm pleased with our position with the China-based customer and the progress we are making with the potential new customers in other markets. In China, we believe ACM tool are now used by nearly all the semiconductor manufacturers. Our sales and service teams are working to expand the deployment of each of our major product line across our growing customer base. we continue to go to gain traction from second and third tier semiconductor manufacturers, including power, analog, CMOS image sensor, compound semiconductors, MEMS, and other devices. In the US, the evaluation of a key potential customer is progressing well, and we remain optimistic that this could lead to production orders. In Europe, we announced an order for our first evaluation tool from top tier customer in the first quarter. The tool is a plan for deliver in the early Q4 this year, and we are beginning to build a local service team to support the effort. To support our growth initiatives, we continue add a facility in China and other region, present to slide six. I will start with update on China. Construction of Lingang production and R&D center is on track for initial production in the second half of this year. We took ownership of our new headquarter for ACM Shanghai in Zhangjiang this quarter and plan to move in later this year. This is an important addition for us that we believe will provide the stability for employee, help us attract new talent and allow us to invest in world-class R&D center to speed up the development of our tools. Next, in Korea, we have a strong basis of more than 70 R&D engineers and more than 50,000 square feet of at least R&D administrative and production facilities. ACM Korea co-developed our furnace, track, and PECVD products together with our Shanghai R&D team. As I have noted in previous course, we have increased our commitment to Korea.