ACM Research, Inc.

Good day, and thank you for standing by. Welcome to the ACM Research fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. 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 Correo, Managing Director of the Blue Shirt Group. Please go ahead. Great.

Thank you. Good day, everyone. Thank you for joining us to discuss fourth quarter and fiscal year 2023 results, which we released before the U.S. 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 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 Fang, our 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, 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 guidance. 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 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 slide 13 and 14. With that, let me now turn the call over to David Wong, who will begin with slide three. David?

Thanks, Stephen. Hello, everyone, and welcome to ACM Research, first quarter and the fiscal year 2023 earning conference call. Please turn to slide three. I'm pleased with our fourth quarter results, which conclude a strong year. For the fourth quarter 2023, we delivered $170 million in revenue, upper 57%. For the year, we delivered $558 million in revenue, upper 43%. Profitability was good for both the fourth quarter and the full year with operating margin of 21% and 22% respectively. We ended the year with just over $300 million of cash and time deposit. For Siemens, the Siemens for the fourth quarter were $140 million down 29% year to year. Shipments for the full year were $59.7 million, upper 11%. On our third quarter call, we know the delay of shipment to several customers 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 first quarter to be a one-quarter event. We expect to deliver nearly all of the delayed tool during the year 2024. We expect the first quarter shipment to be much higher than the first quarter levels, even with a normal Chinese New Year shutdown. And we expect the total shipment to grow faster than revenue for the full year 2024. Now I will discuss the key growth drivers, both for their market and specific to the ACM. According to a third party estimate, the overall mainland China WFE market grow around 15%. If we exclude isography tool, which more than double in China in 2023, we believe the rest of the market grow for China WFE was close to 5%. In any case, we attribute ASEAN higher growth rate of 43%. Two, one, a leading product portfolio for the China market, including AutoBench Clean and our ECB tool for the front end and packaging. Two, continual spending and market share gain at our current customer. Three, broader participation with new customer in China. And four, good execution by our production and service team. I will now provide details on product. Please turn to slide 4. Revenue from single wafer cleaning, Tahoe, and semi-critical cleaning products grew 48% in 2023 and represented 72% of total revenue. HCM offers what we believe in the industry's most comprehensive Canadian portfolio. We support nearly 90% of our all Canadian process staff for memory and logic devices. 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 SAPs, Tahoe and Tebow single wafer Canadian 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 the mature node spending. We have delivered more than 70 auto bench tools today and noted very strong contribution in 2023 with good profitability. By our estimate, ACM became the largest China-based supplier for AutoBench in 2023. For Tahoe, we made a good progress during the year. Our engineering team modified technical features to meet production requirements for the key customers. I am pleased to report ACM has been qualified for mass production as several customers, and we expect a strong ramp with a good orders for delivery in the first half of 2024. This is good for our customers and good for their environment as our proprietary Tahoe design significantly reduces the consumption of sulfuric acid. We continue to innovate in our cleaning and look forward to additional market share gains in 2024 when we ramp up several key new products. including a 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 grow 33% in 2023 and representing 19% of total revenue. We hit an important milestone for this category in 2023 with more than $100 million in revenue. ECP demonstrated strong performance. I want to note that our first two shears grew even higher than 33%. We are taking a good share for overall plating with a particularly strong growth in front-end process in 2023. For Furnace, 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 great progress with our further ARD product development. In summary, we expect another year of strong growth in this product category in 2024. Revenue for advanced packaging which excludes ECP but includes service and 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 sweeper, and wet etchers, and service and spare parts. Last year, we also introduced ultra-CV vacuum cleaning tools, and we continue to explore new products and technology to participate in the next generation of advanced packaging. We believe ACM is the only company in the world that offers a full set of web tools, polishing, and plating for advanced packaging. We expect advanced packaging to become more important as the industry looks for packaging innovations such as 2.5D and 3D in the puzzle and fan-out. These are critical for high-performance computing applications such as AI, which is seeing increasing demand globally. Finishing up on product, we made a 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 PECVD 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. We are confident that the proprietary architecture of our track tool is well suited for the high throughput required in the next generation of the software tools. We are engaged with multiple customers for our PCVD tool. We're expecting significant progress for PCVD product development and evaluation in 2024. Turn to slide five for our product SAM. We estimate our product portfolio address a $16 billion market opportunity. Our business is now primarily driven by three 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 track and DCVD in 2025. Preceding to slide six, we remain committed to our median term $1 billion revenue target. We believe we can achieve this with range of the market share by product in the mainland China alone. We have achieved scale with the differential product that have been proven in China market, and we have put the resource in place to address international markets. To be clear, long term, we see an additional $1 billion plus opportunity from international markets. Moving on to the customer, please turn to slide seven. 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 achieving deeper adoption of our products across this customer base. Beyond establishing the payer, market growth is being driven by an influx of well-founded new entrants. For 2023, we had three 10% customer. SMIC was our top customer at 18% of the sale. Cyan was our second largest at 15%. And 6MT was our third at 13%. We had a stronger contribution from second and third tier semiconductor manufacturers, including power, analog, CMOS, image sensor, and current power semiconductors and other devices. and some new customers. Total second and third tier players represent about 30% of our 2023 sales. On the international front, I'm pleased to report that a large U.S. manufacturer qualifies its first SAPs cleaning tool for revenue in the first quarter. We also plan to deliver an Ultra-CD backside cleaning and a bevel edge tool to this customer. in the second quarter of 2024. This demonstrates a deepening relationship, which we believe can lead to production orders. Furthermore, this enhances ACM brand and position us to attract new opportunities with other major global customers. Beyond the US, we installed our first evaluation tool, Ultra-C Saps 5 cleaning tool and a major Europe-based global semiconductor manufacturers in the fourth quarter. To support growth, we made progress on our facility expansion in China and other regions. Please turn to slide eight. In China, construction of our Lingam production and R&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. We now have more than 150 employees in Korea with their facility including sales and administration, small scale production, and the development lab with a clean room to support internal R&D and wait for 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 US, Europe, and other part of Asia. In the US, we leased a facility Oregon last year to add to our service support and demonstration capability for R&D and custom activity in the U.S. and Europe. I will now provide our outlook for the full year 2024. Please turn to slide nine. In early January, we introduced our 2024 revenue outlook in a range of 650 to $725 million. This implying 23% year-over-year growth at a better point. We are reiterating this outlook today. We believe the China equipment market will grow in 2024. 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 first quarter and full-year results. Mark, please.

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 gain loss on short-term investments. Reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings released. Also, unless otherwise noted, the following figures refer to the fourth quarter of 2023. Comparisons are with the fourth quarter of 2022. I'll now provide financial highlights for the fourth quarter and full year of 2023. Revenue was $170.3 million for the fourth quarter, up 56.9%. Revenue for single-way for cleaning Tahoe and semi-critical cleaning was $122.3 million, up 63.9%. For the full year 2023, this category grew by 48.0%. Revenue for ECP, furnace, and other technologies was $32.1 million, up 59.0%. For the full year 2023, this category grew by 33.4%. Revenue for advanced packaging, excluding ECP, services, and spares was $15.9 million, up 15.8%. The full year of 2023, this category grew by 31.5%. Full year of 2023, revenue was $557.7 million, up 43.4%. Total shipments were $140 million for the fourth quarter, down 29%. For the full year of 2023, shipments were $597 million, up 11%. Gross margin was 46.8% for the fourth quarter versus 49.7%. For the full year 2023, gross margin was 49.8% versus 47.4% in 2022. 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 43.6 million for the fourth quarter, up from 34.8 million. R&D was 28.8 million versus 17.0 million as we invest in our new product initiatives. Sales and marketing was $7.2 million versus $11.8 million. The decline in sales and marketing was primarily due to a significant reduction of costs related to promotional tools. G&A was $7.6 million versus $6 million. For the full year 2023, operating expenses were $154.4 million, up from $117.4 million. R&D was 15.1% of sales, Sales and marketing was 7.4% of sales, and G&A was 5.2% of sales, all for 2023. For 2024, we are planning for R&D in the 16% range, sales and marketing in the 7% to 8% range, and G&A in the 5.5% range. Operating income was $36.0 million for the fourth quarter, up from $19.2 million. Operating margin 21.2% up from 17.7%. For the full year 2023, operating margin was 22.1% versus 17.2% in 2022. For the fourth quarter, we recorded a realized gain of $0.5 million from the sale of short-term investments. Recall that realized gains are included in the non-GAAP earnings. Income tax expense for the fourth quarter was $8.1 million versus $2.7 million. For the full year 2023, income tax was $19.4 million versus $16.8 million in 2022. Net income attributable to ACM research was $28.7 million for the fourth quarter, up from $12.6 million. For the full year 2023, net income attributable to ACM research was $107.4 million versus $54.8 million in 2022. Net income for diluted share was $0.43 in the fourth quarter, up from $0.19 For the full year 2023, net income for 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 $304.5 million at year end versus $326.5 million at the end of the third quarter. Total inventory at year end was $545.4 million versus $507.4 million at the end of the third quarter. The mix was split between raw materials, $235.1 million, work in process, $81.4 million, and finished goods inventory, $228.9 million. 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 are $15 million in Q4 and $61.9 million for the full year. For 2024, we expect to spend about $80 million in capital expenditures. This will be primarily to complete our investment in Lingong, and will also include remodeling the new headquarters for ACM Shanghai and investments in Korea and the U.S. That concludes our prepared remarks. Now let's open the call for any questions that you may have. Operator, please go ahead.

Thank you. As a reminder, to ask your question, you'll need to press star 11 on your telephone. To withdraw your question, please press star 11 again. Please wait for your name to be announced. Please stand by while we compile the Q&A roster. One moment for our first question, please. Our first question comes from the line of Suji De Silva with Roth MKM. Your line is now open.

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

Okay, thanks, Sujit. Okay, I think this tool we shipped a year ago, right? Then through our service project engineer, hard of working, and then we have our first tool, Gather Acceptance. So this is what we get into the production, their mass production. And also, I want to see that this is a specific SAPS, megasonic tool. We will address the customer needs, and we can see, get a good Canadian performance and also much less particle consumption. So that's really what our customers like as a tool. And we believe this definitely, you know, first tool qualification will lead to their additional order, you know, for the same customer, right? So meanwhile, and as I mentioned, we also have a second different tool, which is a backside and also fiber clean. It was ordered by the same customer and we shipped them in the second quarter of this year. So obviously that is, this is a key customer, you know, in the U S and we want this to be another example and also encouraging other big player in adapt to our, uh, differential technology. Right. So, so we're saying that's what would be their, um, go their outcome. And also, um, there's a, of course, uh, international, um, I call their revenue contribution to our. year 2024 forecast. You know, we can see that too.

Yeah, Suji, I'd just add for 2024, I mean, a lot of things go into our forecast. You know, we don't have a – 2024 will be a building year for us for the international, and we'd expect some additional contribution. You know, whether we get an order that ships or, you know, for one or several tools that ships this year or next year will depend on, you know, how big it can be for us.

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

Yeah, 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, you know, I call the plan delay or the installation not enough either resource or flow plan not fast enough. But anyway, there's continuing investment going on. So those portion of the delay, as I said, will be definitely delivered in 2024. And that's also added to our shipment. Those two have been built already. It's going to also save the cash. We spent it last year already. So we'll see that happen. I would say that also the total shipment there, we're expecting 2024 and there will be, you know, quite an increase. We believe even our increase rate is higher than the quarterly revenue increase, right, compared to 2023. So this is another, I consider, great year for us in 2024.

Okay, that sounds like good momentum. My last question is around the overall demand environment. I'm trying to understand and trying to know 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?

Yeah, I mean, you can see that CXMT is our third customer, you know, year 2023, right? So we're expecting, you know, this memory business to continue to grow, and we're Again, all the memory in China is still multi-year expansion, and so we see that as a good market for us, and also we see that continue to grow.

All right, thanks, guys. Congrats again. Yeah, thanks, Suzy. Thank you.

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.

Thanks for taking my questions. David, Mark, happy Chinese New Year and 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 ACM Shanghai entity, they have a preliminary 2024 outlook revenue to grow more than 30% and remember you was like 37% YMY growth. So I calculated your midpoint suggesting the ACMR is growing like 23% YMY. So what's the discrepancy between your ACM Shanghai entity versus the parent company?

Yeah, well, you know, 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 forecasts. In general, U.S. GAAP will be your first tool, take a long time evaluation, and after that, you can recognize repeat order just on the shipment. But in China, no matter if it's new or it's a repeat order, you have to really install and basically accept, you know, kind of initial acceptance by their customer, then you can reckon revenue. So that's a different show there. I call their revenue difference. In other words, probably you can say China, the forecast mean that is a, we have a lot of, you know, probably a new tool and the new customer, right? That's what would be there. quickly can be recognized revenue versus the U.S. recognition rule. So that's the difference we see there.

I see. Thanks, David. So my next question is about the China capex sustainability. I mean, right now, as you said, it's for local sufficiency, but You also see that some of your major customers, their gross margin already dropped to like 10% gross margin. So I'm a little bit worried about the sustainability. So any kind of signs or lead indicator we should, you know, pay attention to, right, to check the China CapEx sustainability.

Yeah, well, I should say there, as we said a couple of times before, China's fab is still in the multi-expansion, no matter the logic or memory. Also, a lot of what I call the mature nodes is very related to the EV, IGBT. It's still 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, I'm still saying next few year and China and WFE, this market will continue to grow.

Okay, gotcha. So yeah, one last question, I will be back to the queue. So a question to Mark, since you are ramping up the, the Lingang new campus. Can you give us some updated gross margin and also OPEX assumption for 2024?

Yeah. Hey, Charlie. Thanks for asking. So, yeah, 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 percent. Obviously, we've done better than that for the last several years, but that's kind of the margin level that's our target level. And then for the OPEX levels – and these are non-GAAP numbers. We expect R&D, continue to invest pretty strong in R&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% range. And then G&A, about 5.5%. Okay.

Okay. Okay, thanks for, yeah, so, yeah, thanks for the recap, those are guidance. You bet. You bet.

Thank you. As a reminder, to ask a question, you'll need to press star 11 on your telephone. 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.

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

Yeah, it was a significant decline in the sales and marketing promotion tools. So 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 looked at it kind of for the full year. Sales and marketing was about 7.4% on a non-GAAP basis. And so we expect that sales and marketing level to be kind of in the 7% to 8% in non-GAAP next year.

Can you give us a little bit, you say 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?

Oh, in terms of, yeah, 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?

Yeah. Okay. Yeah, and so that's, I think, Mark, you know, our finished goods inventory is

You know largely comprised of evaluation tools at our customers, and so that I think yet David Yeah, let me see that is obviously there's this finished goods in the cost in the customer side for evaluation mostly the first tool and Those first who can be their first of a new customer right especially their first time by us they want to make sure those two are and not just qualify for to itself sometimes i've qualified the whole production line to look at the yield to come out that takes some time right also there's also the first tool is a pretty new brand new tool and we need a customer to real we call the beta tool right you need a real evaluate that and that sometimes take a process you know one year even a year and a half you know depends on how the other tool you know first building the material how mature it is So those kind of tools will be considered as our first tool.

Okay. And just final question. You were, 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?

Okay, great. So Hynix actually is a real long-term customer, right? And we're fully engaged with the customer, I mean, Hynix right now, because we're a real emphasize our investment, also expansion, our R&D force, also manufacturing in Korea. We do have about 150 employees in Korea right now, as I mentioned with Borderlands, and also to building factory there at a future proper time. So key point I'm trying to see that is we have multiple tools, like cleaning, carpet plating, and including furners, and they're also a devout of PCBD and also track. So all these five tools, we're trying to engage with the customer in Hynix, and because of our relationship, and also because of our local R&D force, and also we offer customer with differential product and differential technology, which is quite their interest, or get interest from the customer in Korea.

Thank you. Thanks, Mark.

Thanks. Thank you. As a reminder, to ask a question, you'll need to press star 1-1. Please wait for your name to be announced. One moment for our next question, please. Our next question comes from the line of Christian Schwab with Craig Hallam Capital. The line is now open.

Hey, guys. Fantastic year and great quarter. So I'm trying to better understand, you know, the two or three reasons better for 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.

Okay, great. I think, you know, the ACM, where I started beginning, you know, even from the Bay Area, right? In ACM, our R&D philosophy is, we call it differentiation. Right. And each product we're building, like cleaning, you already know that steps, you know, Tebow and Tahoe is pretty, our differential product. And same thing for the copper plating. So our goal is building differential product. And this moment widely has been accepted in by the local customer in China. And with those, the differential product and the technology, I think we can penetrate or get into international, right? Example is that we already got into the panics, you know, and also we have our One bigger manufacturer in the U.S., Adaptive SAPs already. Also have a European company and also Adaptive SAPs, Microsoft Canadian too. Beyond that, the next one is our Tahoe. Our Tebow Plus, we have a super critical CO2 dry. With Tahoe, with Tebow too, it will be real exciting for their patent way for Canadian too, right? And beyond that is also, as I said, we have also, you know, Furnace and for Furnace ALD, and including copper plating, and it was another very candid product, and to be able to penetrate the international market. So, as I say that is, of course, we developed PECVD and the track, also has our proprietary differential design points. So, ACM really developed their, I call this the differential product, which is a real offer, differentiation offer, their different benefit than our other competitors doing. That's our confidence and also our proven record. We can put a tool and sell in the international market.

Great. So congrats again on a very differentiated and better product than your competitors. Just in a quick last follow-up then is on the international front, how much of the year-over-year growth are you looking for from 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're willing to provide any clarity, more clarity there.

Yeah. 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. New product cycles, additional customer traction.

Okay, and then I guess my very last question then is the TAMP for your products outside of China globally is substantially larger. How many years do you think is reasonable for us to assume that it takes for broad-based success internationally. It sounds like this year was a great building year, initial shipments, you know, starting in 24. Is that a, you know, 26, 27, or 25 event, or is it too early to know?

Yeah, Christian, this is a very good question. I think the way we're doing right now, obviously, It's quite a quicker, fast grow in the mainland China market, right? A lot of product we qualify here now. So those are, I think, our goal. We're saying, you know, reaching $1 billion even by China market only, right? We think in the next few years, we should be reaching our goal. And the same tendency, you know, in a couple of years, two years ago, we started also global market expectation, I mean, penetration. So, uh, the key is really how we execution our international sales plan. Uh, now we have, uh, you know, uh, hiring good, their people and their sales guy in the, in the Korea, uh, actually also in the U S in the Europe. And we'll see that they're, uh, quite a bit of progress and let's put this away, you know, for their international market. And as we talk to the customer, everybody looking for it back at, again, you know, differentiation, right. So with that in mind, and as I mentioned, a couple of products we have right now, we do have confidence as their first, you know, I call their U.S. customer adapter tool. We see more of our customer may adapt additional other tool too. So we see that happen. But then you're asking which year is how the real give you precisely. But I think as I said, we have a bigger revenue with our strong financial supporting and from sales here, and with also defensive product, you know, definitely will penetrate, you know, into the international market. If asking, you know, next few year is a very exciting, you know, we will have to, you know, quickly execution or plan and to quickly reach that goal. And eventually, as I mentioned a couple of times before, we are the half from mainland China, half from outside mainland China, right? So like you said, the real revenue contribution actually more bigger outside of China.

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

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

Uh, thanks for taking my question again. So, um, I think, uh, the, uh, the new customer, uh, contribution, uh, cost, uh, all right. Uh, uh, so it wasn't, you know, radar screen. Um, so I'm not sure why, why, uh, uh, seeing them becomes such a big customer. And, uh, if you can provide a, some more details, he said that purely, 12-inch equipment or also including some engine equipment.

Thank you Yeah, I think their primary we sell to the sheen and is a 12-inch tool right and also their most expansion now as a maternal so we are actually a lot of our Auto bench, they're probably the largest auto bench Customer right now and for us in China. So of course they also buy waiver, right? So that's why primary driving their become the second largest customer in 2023. And looking forward, I think also we're in a very good relation and engaging with them in our cover plating, our furners, and also online. So that's another contribution you can say from the Sheehan. And they're a great, great customer. And we're happy with our, I said, our AutoBenji tool. largely deployed in the Xin'an production line.

Okay. So, yeah, so it's a great business, right? So I'm assuming the company counsels your lawyer about the US export control before you ship in to other customers, including Xin'an, right? Is that the right assumption?

Well, I mean, we're straight to follow all the expert control rule, right. And it said here, and for those, whatever, you know, uh, restrict the customer, we have to be real carefully, you know, your spot, right. And, uh, personally well, and also, you know, now you'll say technology. Yeah. So we're pretty, very carefully and managing and control and follow their, uh, uh, strictly with the standard, uh, their expert control law of the U S.

Okay. Okay. Thanks, David. And, and next question is about the, the, uh, advanced memory, uh, HBM. So, uh, can, can come in, talk about your, uh, community in, uh, uh, Korea for the HBM production line. I think we asked that question, uh, last quarter as well. And also there's, uh, some recent news about, uh, China may also have, uh, the own,

HBM production so can coming coming about your potential opportunity at You know Korea, I know so China customers Yeah, well, let's this way obviously, you know Hynix the number one and provider right there all the technology leader HBM and I think our current product definitely involved their process and Also, we see the HBM, you know, this is the copper plating tool, right? You know TSV order the packaging, whatever they needed. So that's the next tool we are working with closely with Hynix. And I should say the rest of our other tool, Furnace, and we're working with them too. So there's a lot of, including Canini, by the way, actual other Canini, other than we sold them SAF to Megatonic, also working with Hynix too. So it's a very good opportunity. HBM is a greater I call it demand and they need a lot of differential technology for the supporting and the HDM development in the future. In China, really not much we can hear right now. Not much we have right now. So in other words, we're really focused on the outside China for HPM expansion for the business opportunity.

Yeah. So, so based on, uh, your comments and also other, uh, global equipment vendors, right. They talk about, uh, actually this year, uh, the, uh, global FP revenue comes from the memory. Um, so why, uh, high next is on your kind of the top customer, or do you think, uh, this year high next, um, you know, can contribute more than 10% of revenue given, HBM opportunity and also the memory spending recovery?

Well, I mean, obviously the more than, I mean, other than highly also looking for other player, right? This is me here. Then the memory market, HBM is really booming, right? That's key here. So we see that there demand there, as I mentioned, right? This is a, for us, you know, cleaning, cover pleating, it's really demand there. I don't know what's the time to come back to 10% of our customers. It's hard to predict right now. I want to see, especially the second half of the year or next year. We want to see something recover from the direct market.

Okay, got you. Thanks, David.

Thank you.

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. 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 three 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?

Yeah, actually, I looked at this year's order, you know, this, right? And the top three customers continue, I think, will grow, right? And they probably still are, you know, major customers. Also, we see their, you know, additional body of our home, they have also their expansion plan. And they're probably simultaneously building two fab this year, and also they're building probably next year, you know, three fab simultaneously, right? So that's another bigger, I see their top, you know, customer will come back, you know, in our 2024 revenue contribution.

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

Yeah, I think the key driving force is I want to see that the China WFU market is continuing. You know, people say maybe, I mean, slightly increase, at least a flat. I see that as number one important. But second, most important, we have our gain for our, you know, I call it a higher growth rate is because we have continued to have new customers coming. And also we have gained our market share from existing customers. and also do have a like a furnace what do the more contribution this year and for revenue right so that's all they're added together uh that's our you know give us the basis to uh forecast our uh growth rate higher than their you know and their uh growth rate of the wfg market in china okay and maybe the last one is that for 2024 what do you think is the percentage of

overseas revenue in your guidance yeah hey edison we didn't we're not we didn't break it out uh but uh we did a couple other questions about that we mentioned it wouldn't be a very significant contribution 2024. uh you know we expect that to build in the coming years but um it's not a a very a significant piece it's um we think it'll be bigger than it was this year and so you got the numbers in uh you'll get the international numbers um shortly, but it's not going to become a huge, you know, I wouldn't expect it to be more than 10%.

But I should say, growth rate is higher, right? I mean, obviously, it's one number. So then the real absolute number, like you said, you know, we're still a friction number of the total revenue. Yep.

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

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

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 18th, we will present at the 36th Annual Roth Conference in Dana Point, California. Attendance at the conference is by invitation only. For interested investors, please contact your respective sales representatives to register and schedule one-on-one meetings with the management team. This concludes the call, and you may now disconnect. Thank you.

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