ACM Research, Inc.

Good day and thank you for standing by. Welcome to the ACM Research First Quarter 2024 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 the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded I would now like to hand the conference over to speakers today. Steve Paleo, Managing Director of the Blue Shirt Group. Please go ahead.

Good day, everyone. Thank you for joining us to discuss first quarter 2024 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 on the investor section of our website that we will reference during our prepared remarks. On the call with me today, 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 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 filings with the SEC. 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-and-loss short-term investment. 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 to slide 12. Let me turn the call over to David Wong, who will begin with slide 3. David?

Thanks, Stephen. Hello, everyone, and welcome to ACM Research. the first quarter 2024 earning conference call. Please turn to slide three. I'm pleased with our results. A solid start to the year for the first quarter. Revenue was $252.2 million, upper 105%. Profitability was good, with a gross margin of 52.5% and operating margin of 26.2%. And we ended the quarter with just over $288 million of cash and time deposit. Shipping for the first quarter was $245 million, upper 175%. As expected, first quarter shipment was higher due to delivery of finished goods that were not shipped in the fourth quarter of last year. And we also had an exclusion from our production team during the Lunar New Year holiday period. I will now provide a detail on product. Please turn to slide four. Revenue from a single wafer cleaning, Tahoe, and a semi-critical cleaning product grew 199% in Q1, and it represented 72% of the total revenue. ACM offers what we believe is the industry's most comprehensive cleaning portfolio. We support near 90% of all cleaning process steps for memory and logic devices. At the high end, we believe our flagship steps, Tahoe and the Tebow single wafer cleaning products, deliver a technical feature not available from any of our competitors. At the low end, Our semi-critical tool, including AutoBench, have driven incremental growth for our cleaning category over the past two years. We have recently made progress in SPM market, which we believe was resulting in sheer gain and growth in our cleaning business starting this year. Let me provide more detail. SPM stands for sulfuric acid. peroxide mixing. These steps are normally used to clean wafer after photoresistor removal process and post-CMP cleaning. We estimate the total available market for the TEM for SPM tool is 25 to 30 percent of the total front-end cleaning market. Today, SPM has been a small contribution to our business. our SPM tools, including Tahoe low-temperature single-wafer SPM, and now our high-temperature single-wafer SPM tool. Here now, we believe there has been only one major supplier of high-temperature single-wafer SPM tools. Our engineering team has recently made greater technical progress with our high-temperature tool, and we believe HCM can now participate. as an alternative supplier. This is especially important as we believe our customers generally prefer one-stop shop for all their SPM cleaning steps. With the high-temperature SPM tool, we believe ACM now has a full product line to meet our customer requirements. Additionally, Tahoe has been qualified for production by multiple customers and is beginning a ramping phase with a substantial number of order planned for delivery in 2024. Enhancements have been made to its performance, allowing the tool to match particle removal efficiency comparable to the single vapor process, while reducing sulfuric usage by 50 to 70%. We now expect a meaningful ramp of SPM tools this year as we begin volume delivery across the number of key customers. Finishing up on cleaning, we also expect our Bible Etcher cleaning tool to contribute meaningful revenue in 2024. And we are on track to complete evaluation of a supercritical CO2 dry cleaning tool this year for revenue in 2025. Revenue from ECT, furnace, and other technology declined 3% in Q1 and represent 70% of total revenue. As I mentioned last quarter, we hit an important milestone for this category in 2023 with more than $100 million in revenue. The year-over-year revenue decline is primarily due to quarterly fluctuations. In fact, we shipped 3x more ECT tool in Q1 2024 versus same period last year, and we expect the revenue growth for this category for the full year. As noted in a prior course, we believe the furnace product cycle is perhaps a year and so behind ECD. We have a brand broader footprint of customer activities with more than a handful of first tools currently under evaluation and multiple customers. We are optimistic This will result in qualification and follow-on order in the coming quarters. Revenue from advanced packaging, which excludes AP, but including service spell pass, grow 33.2% in Q1 and represent 11% of the total revenue. This category including a range of packaging tools, such as the coder, developer, scrubber, PR sweeper, and web etchers. and also service and spare parts. And we continue to explore new products and technology to participate in the next generation of advanced packaging. We believe ACM is one of the only companies that offer a full set of wet tools, copper polishing tools, and copper plating tools for advanced packaging. In Q1, we deliver an ultra-CV vacuum cleaning tool to a major customer to meet the flux removal requirements for chip labs and other advanced 3D packaging structures. Today, we also introduce the drain wafer cleaning tool. This tool is designed for post-debounding wafer cleaning that enables nearly 100% recycled solvent and filtration. We have successfully completed the installation and the qualification of first tool with a key customer. Finish upon and product, we are making good progress with our track and the PCVD platform. We believe our proprietary technology provision both tool for success for mainland China and also global customers. We are engaged with multiple customers that we expect substantial growth, progress in product development. and evaluation this year with revenue in 2025 and a deal. Now move on to our customer, please turn to slide seven. In China, we believe we have a leading position in cleaning. We have become a multiple product company with a competitive product in the market for plating and furnace. And we have a solid evaluation pipeline for track and PCVD. Our sales and service team are now dreaming deeper adoption of our product across our customer base. Our growth is also being driven by new entrants. On the international front, we plan to deliver ultra-CB backside cleaning and a bevel edge tool in the second quarter of 2024 to a large U.S. manufacturer that qualifies as the first SAP cleaning tool for revenue last year. This demonstrates a deepening relationship, which we believe can lead to production orders across multiple product lines. Moreover, ACM's brand and reputation are gaining recognition among other US chip makers with new engagement and potential opportunity to penetrate their global manufacturing site. We recently hired additional seasonal marketing and sales professionals who established the relationship with the key U.S. semiconductor players. In Europe, we installed our first core evaluation tool, the Ultra-C Step 5 cleaning tool, at a major global semiconductor manufacturer in the fourth quarter last year. The initial feedback has been positive, and we are optimistic that the volume production order is possible by the middle of the year. Korea, we see opportunity with SK Hynix, high bandwidth memory HBM product. We see potential gain with our CEPPS cleaning tool for high aspirational vehicle as well as ultra-ECP for TSV applications. To support Glock, we made a progress in our facility expanding in China and other regions. Please listen to slide eight. In China, construction of our production on the center is nearly complete. We expect the initial production later this year. In Korea, we are making progress with the key customer. We believe a strong commitment to Korea can improve our relationship with the key Korean customers. Our resource in Korea can also provide another basis for supporting international customer in the US, Europe, and other parts of Asia. We recently hire a new leader to run our Korea operation, DG King. He is a long time veteran of SK Hynix. We are optimistic his experience and relationship will help for adoption of technology and accelerator of business in the region. We continue to invest in our Oregon site to add to our service support and the demonstration capability for R&D and customer activity in the US and Europe. I will now provide our outlook. Please turn to slide nine. We believe WFE spending in China will remain solid as the country continues on its goal to match its production capacity with end market consumption. We are focused on gaining market share in China new product introduction, and expanding our business to new customer in the USA, Korea, Europe, and other Asia markets. We are reaffirming our 2024 revenue outlook to be in the range of 650 to 725 million. This implies 23 year-over-year growth at the middle point. We expect our full year revenue growth for 2024 to outpace both the China and global WFE growth rate. Now, let me turn the call over to our CFO, Mark, who will reveal detail of our first quarter results. Mark, please.

Thank you, David. Good day, everyone. Please turn to slide 11. Unless I note otherwise, I'll refer to non-GAAP financial measures, which exclude stock-based compensation and unrealized gain or loss on short-term investments. Reconciliation of these non-GAAP measures comparable to GAAP measures is included in our earnings release. Less otherwise noted, the following figures refer to the first quarter of 2024 and comparisons are with the first quarter of 2023. I will now provide financial highlights for the first quarter of 2024. Revenue was $152.2 million for the first quarter, up 105%. Revenue for single wafer cleaning, Tahoe, and semi-critical cleaning was $109.5 million, up 199%. Revenue for ECP, furnace, and other technologies was $25.8 million, down 3%. As David noted, we anticipate good growth for the full year 2024 in this category. Revenue for advanced packaging, excluding ECP services and spares, was $16.9 million, up 53.2%. Total shipments were $245 million for the first quarter, up 175%. Gross margin was 52.5% versus 54%. This exceeded our normal expected range of 40% to 45%. For the full year, we now expect gross margins to fall in the upper end of our target range. We do continue to expect gross margin to vary from period to period due to a variety of factors such as sales volume, product mix, and currency impacts. Operating expenses were $40.1 million for the first quarter, up from $29.2 million. R&D was $19.4 million versus $13.3 million. The year-over-year increase reflects additional personnel and other expenses to support our product development pipeline. The decline versus Q4 23 was primarily due to reduced spending on internal R&D development tools. Sales and marketing was $11.1 million versus $8.9 million, and G&A was $9.5 million versus $6.9 million. For 2024, we planned for R&D expenses in the 13% to 15% range. sales and marketing in the 7% to 8% range, and G&A in the 5% to 6% range. Operating income was $39.8 million for the first quarter, up from $10.9 million. Operating margin was 26.2%, up from 14.7%. We recorded a realized gain of $0.3 million for the first quarter from the sale of short-term investments. Recall that realized gains are included in non-GAAP earnings. Income tax expense was $4.4 million for the first quarter versus $2.9 million. For the full year, we planned for an effective tax rate on non-GAAP pre-tax income in the 15% to 20% range. Net income attributable to ACM research was $34.6 million for the first quarter, up from $9.9 million. Net income for diluted share was 52 cents for the first quarter versus 15 cents. Our non-GAAP net income excludes $14.6 million, or $0.22 per share, in stock-based compensation expense. This reflects a full quarter impact of the significant grant of ACM Shanghai shares made in the third quarter of last year, in addition to our normal ACM research grants. This was the first major grant by our subsidiary since the 2021 Star Market IPO. Our management team considers the grant as a critical differentiator to attract new talent for new product development and to retain key employees. I will now review selected balance sheet items. Cash, cash equivalents, restricted cash, and time deposits were $288.3 million versus $304.5 million at the end of the last quarter. Total inventory was $581.1 million versus $545.4 million at the end of last quarter. This includes raw materials and work in progress, which totals $318.2 million, and finished goods inventory of $262.9 million. Finished goods inventory mainly includes first tools and evaluation tools at our customers. It also includes finished goods at ACM's facilities. Capital expenditures were $25.4 million. For the full year, we expect to spend about $100 million in capital expenditures. This primary layer includes continued investments in our Lingdong facilities, remodeling for our new headquarters for ACM Shanghai, and our investments in Korea and the U.S., and some fixed asset expenditures. That concludes our prepared remarks. Now let's open the call for any questions that you may have. Operator, please go ahead.

Thank you. And as a reminder, to ask a question, you need to press star 1-1 on your telephone and wait for it to be announced. And to withdraw your question, just press the star 11 again. Once again, please stand by. We'll compile the Q&A roster.

One moment for our first question.

Our first question will come from the line of Suji De Silva from Roth. You are now connected.

Hi, David. Hi, Mark. Congratulations on the progress here. Just a couple... Hey, guys. Maybe some high-level questions. So outside of the core SAP products, which of the new product categories is going to help drive the highest growth in 24? Just to understand how you're diversifying the product categories.

Yeah, good. And obviously, as I mentioned here, Canadian tool is continuing our major portion of the revenue. And we see that this, as I mentioned, is SPM tool. with a cover, you know, middle and low temperature by Tahoe and also single wafer. And also, we're make a breakthrough in a high temperature SPM tool, and that's also another driving factor. And plus, also, we have our bevel etcher, and also, you know, continues where growing our old bench, you know, for the mature old nodes. And then, looking at real next year, I'm looking for probably our supercritical CO2, will start contributing on our revenue, too. So that's the one on the cleaning side. And then you look in the ECP, we'll continue to see that growth, both in the front end and also on the advanced packaging side, and wherever, you know, in the quieter, gooder backlog in the ECP. And also, we see the foreigners will start contributing for revenue, too, in this year and also continue next year. And we have basically all the LPCVD and ALD start evaluation, and all this vacuum-anneal versus MS-VERB-anneal continue getting in the market. So that's the major driving force this year for revenue contribution. Mark, anything you want to add on that?

Yeah, no, thanks, David, and thanks, Suji. Yeah, I think one of the things we wanted to stress on this call is, you know, within cleaning, even though, you know, we've been doing cleaning for a while, we have a few pretty strong product cycles underneath that that can drive additional growth. And then, you know, when we start looking internationally, it's hard to say how our mix is going to play out between products, you know, as we go on late this year and into 2025. Because it seems like a lot of our new customers might be starting with cleaning as well. So I'll leave it at that, Suji.

Okay, great. Yeah, no, my second question was going to be similar on the geographic diversification. Maybe I can hone in on the U.S. customer and perhaps you can give a sense of what some of the next milestones or steps are as you seem to be making good progress there.

Yeah, as I mentioned, we're continually, you know, marketing, expanding our customer base in the U.S., and wherever our one key customer, you know, we're gonna shipping our second tool, second type of tool with a bevel and backside and to this key customer. And meanwhile, we're also, you know, talking, discussing multiple customer in US and both for their, you know, front end and also for their packaging side. So we see their, you know, big potential and their growth in the US market. And meanwhile, we also, you know, access market in their Singapore, and also European. Our first tool has been delivered to the one key European customer, and we think they'll be in the qualification phase now. We're expecting this first tool by resulting their second repeat order. I think that's it, right? Hey, Mark, anything you want to add?

Yeah, yeah. So no, thanks.

International, I think when we talked about our guidance when we first presented it last quarter, we got asked a lot about how much would contribute from international. This year is still a build year. We're hopeful that we can get, following the qualification of the US customer, we're hoping that we can get some orders here soon. We're not certain how much will fall into this year versus next, and that's always been the plan. So, and even for the European, so we'd probably expect some contribution, but really this would be a build year and any significant orders would probably be for shipments next year. Okay. Thanks, David. Thanks, Mark. I'll pass it along.

Thank you. Thank you. One moment for our next question. Our next question. Our next question will come from the line of Christian Schwab from Craig Halem. Your line is open.

Hey, great. Thanks for taking my question. I just have one follow-up to the earlier conversation. You know, now that you're seeing broadening, you know, potential success in the international market, it seems that on a bigger picture, multi-year area, I know you've outlined a billion dollars in sales in China and And the market outside of China figure products is materially greater. You know, in a multi-year outlook, do you have increased conviction now that this business can be much bigger than a billion?

Yeah. Actually, you know, in our layout, we're pretty, you know, confident we're going to reach even a billion-dollar market by only China market. and obviously at the same time we're penetrate or they're you know exploring international market with our differential technology uh so we see that uh trend you know continue accelerating so as i said we're looking to their key customer us and their you know their property their manufacturing in singapore and also we're looking at with the you know taiwan customer too and plus recent right we hire our key top manager in the Korean operation, which is DG Kim. He is a real veteran of SK Hynix. And so we really put effort in marketing and sell our product in the global. So we're saying, obviously, their international revenue and their contribution will get into our total growth. As I said, in the long term, we want half of our revenue to come from China and half of them from outside China. So that's a goal still in our, you know, it's continuing our goal here.

Fantastic. No other questions. Thanks.

Thank you.

Thanks, Christian.

Thank you. One moment for our next question. And as a reminder, that's star 101 for questions. Our next question comes from Ross Cole from Needham. Your line is open.

Great. Thank you guys for taking my question on behalf of Charles Shi today. So shipments in the first quarter were pretty high. I know you don't typically guide shipments, but do you have any thoughts on the rest of the year?

Do you expect the Q1 shipment level to sustain through a similar level or possibly go higher or lower in the next three quarters?

Yeah. Okay. Let me answer. Maybe Mark can follow up. Obviously, you know, first quarter shipment hire is partially contributed by our delayed shipment in Q4 of last year, right? So that's why part of the reason, plus also our manufacturer did a good job in the new year. So we're saying probably Q2 was slightly lower than Q1, but also continue to see that it grow in Q2 and Q3 and Q4. So Mark, anything you want to comment?

Yeah, no, thanks. ross i appreciate the question um yeah so we uh we still uh we certainly expect shipments to look to be uh higher than our revenue growth for the year i mean it's it's a pretty solid shipment year um but yeah as david noted uh q2 they probably normalized a bit relative that inventory piece but but we'd expect it to kind of shift back up in q3 and q4 great thank you that was my only question great thanks ross

Thank you. One moment for our next question.

Our next question will come from Charlie Chan from Morgan Stanley. Your line is open.

Hi, David, Mark. Thanks for taking my question, and also congrats for very good results, inclusion, et cetera. So I'm not sure, but I feel like this time around you are more open to talk about Hynix, HBM, business no matter cleaning or the ECP business opportunity. May I know if you have a significant breakthrough there? I remember you kind of have some demo tool there, but is that now a conference project wins or in the recurring order? May I come from that?

Yeah, actually, you know, Hynex is one of our key customers, right? And they're also a real long-term customer, too. They will now add more of a, you know, flagship Saps megasonic cleaning can offer much uniform megasonic energy contribution. So, therefore, you can clean every via of the wafer, which is very important for TSV and their process. and second one in real copper plating, right? It's really in there, either packaging, you know, 3D, 2.5, 3D, and also in there, PSV. So we're engaging with the customer, and they're, we think of eventually the product, and definitely can be their, you know, potential choice for them to take. So we're still in the process right now.

Okay, okay. Mando does kind of the, key technology, right, can be used in advanced packaging, for example, COAS or TSMC SOIC. So that's my understanding. I think it's not just TSMC can provide the COAS or 2.5D advanced packaging. I think Intel, even the M-Core, I mean, have those advanced packaging stuff, right? So are you guys going to supply to those opportunities?

Yeah, obviously, like you said, definitely our carbon-prating can be used for the other customer, right, for this advanced packaging process. And so we're approaching multiple other customers right now. And in this market, you know, obviously only a few players, and we can give an alternative choice for them to take. Also, we do have some differential technology what defines our performance with other guys. So we're very confident and we can get it in the market and, you know, for the outside China market.

Okay. Yeah. Actually, my second question is about this also international markets. I remember four years ago when I started to cover the stock, always I had this question, when we're going to get in TSMC? And four years later, I feel like TSMC is going to be a very, very important target. They continue to open the new fabs, not just the US, but also Japan. And next will be Germany, including both the mature nodes and the leading edge. So my question is, what do you need to do to really win this customer? Can you give us some? whether it's a technology or production location or pricing, whatever. What's the issue right now?

Yeah, well, I mean, obviously, like you said, TSMC is one of the key customer targets. And, you know, we're working with them multiple years. And we're still engaging with them, by the way. And so we're in a very, very talking process right now, right? As I said, our cleaning process, Also, copper plating is definitely one of the key products, differentiating with other players. So we're confident. Anyway, I cannot tell you now what's going on, but we're fully engaged with TSMC. It's our potential target, obviously.

OK. OK. Yeah, that's all the questions I have. Thank you for your time. Thank you.

Thank you. Thank you.

One moment for our next question.

And our next question comes from Mark Miller from the Benchmark Company. Your line is open.

Congratulations on another upside report. Just was wondering if you're seeing any impacts such as push outs from the slowing of EV demand in China?

Okay, that's a good question. Actually, we see there, you know, a few, I mean, quite a bit of customer, you know, focus on their IGBT production line. And we see that it's continuing to grow, because anyway, IGBT production in China is still early stage, right? So we see their customers continue expanding for this IGBT investment. And also, we do have a very good product in cleaning, And also in the foreigners, right, supporting this IGBT market.

Just wondering how cash flow went during the quarter. Did you consume cash?

Yeah. Hey, Mark, I'll take that. So it'll show up in our queue. But cash flow from operations was 9.6. We used about $9.6 million. Yep. Thank you. Thank you.

And I'm not showing any further questions in the queue. I'd like to turn the call back over to Steve for any closing remarks.

Okay. Thank you, operator, and thank you all for participating in today's call and for your support. Before we close, let me just mention a couple of upcoming investor relations events. On May 29th, we will present at Craig Holland's 21st Annual Institutional Investor Conference in Minneapolis. June 25th to 26th, we will present at the 10th Annual Roth London Conference at the Four Seasons Park Lane London. Attendance at the conference is by invitation only. For interested investors, please contact your respective sales representatives to register and schedule a one-on-one meeting with the management team. This concludes today's call, and you may now disconnect.

Thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone have a great day. you Thank you.

Thank you.

Good day and thank you for standing by. Welcome to the ACM Research First Quarter 2024 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 the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded I would now like to hand the conference over to speakers today. Steve Paleo, Managing Director of the Blue Shirt Group. Please go ahead.

Good day, everyone. Thank you for joining us to discuss first quarter 2024 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 on the investor section of our website that we will reference during our prepared remarks. On the call with me today are 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 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 filings with the SEC. 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-and-loss short-term investment. 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 to slide 12. Let me turn the call over to David Wong, who will begin with slide 3. David?

Thanks, Stephen. Hello, everyone, and welcome to ACM Research. the first quarter of 2024 earning conference call. Please turn to slide three. I'm pleased with our results. A solid start to the year for the first quarter. Revenue was $52.2 million, upper 105 percent. Profitability was good, with gross margin of 52.5 percent and operating margin of 26.2 percent. And we ended the quarter with just over $288 million of cash and time deposit. Shipping for the first quarter was $245 million, upper 175%. As expected, first quarter shipment was higher due to delivery of finished goods that were not shipped in the fourth quarter of last year. And we also had an exclusion from our production team during the Lunar New Year holiday period. I will now provide a detail on product. Please turn to slide four. Revenue from a single wafer cleaning, top-up, and a semi-critical cleaning product grew 199% in Q1, and it represented 72% of the total revenue. ACM offers what we believe is the industry's most comprehensive cleaning portfolio. We support near 90% of all cleaning process steps for memory and logic devices. At the high end, we believe our flagship steps, Tahoe and the T-Ball single wafer cleaning products deliver a technical feature not available from any of our competitors. At the low end, Our semi-critical tool, including AutoBench, have driven incremental growth for our cleaning category over the past two years. We have recently made progress in SPM market, which we believe will result in sheer gain and growth in our cleaning business starting this year. Let me provide more detail. SPM stands for sulfuric acid. peroxide mixing. These steps are normally used to clean wafer after photoresistor removal process and post-CMP cleaning. We estimate the total available market for the TEM for SPM tool is 25 to 30 percent of the total front-end cleaning market. Today, SPM has been a small contribution to our business. Our SPM tools, including TAOHO low temperature single wafer SPM, and now our high temperature single wafer SPM tool. Here now, we believe there has been only one major supplier of high temperature single wafer SPM tools. Our engineering team has recently made greater technical progress with our high temperature tool, and we believe HCM can now participate. as an alternative supplier. This is especially important as we believe our customers generally prefer one-stop shop for all their SPM cleaning steps. With the high temperature SPM tool, we believe ACM now has a full product line to meet our customer requirements. Additionally, Tahoe has been qualified for production by multiple customers and is beginning a ramping phase with a substantial number of orders planned for delivery in 2024. Enhancements have been made to its performance, allowing the tool to match particle removal efficiency comparable to the single vapor process while reducing sulfuric usage by 50 to 70%. We now expect a meaningful ramp of STM tools this year as we begin volume delivery across the number of key customers. Finishing up on cleaning, we also expect our Bible Etcher cleaning tool to contribute meaningful revenue in 2024. And we are on track to complete evaluation of a supercritical CO2 dry cleaning tool this year for revenue in 2025. Revenue from ECP, furnace, and other technology declined 3% in Q1 and represents 70% of total revenue. As I mentioned last quarter, we hit an important milestone for this category in 2023 with more than $100 million in revenue. The year-over-year revenue decline is primarily due to quarterly fluctuations. In fact, we shipped 3x more ECP tool in Q1 2024 versus the same period last year, and we expect the revenue growth for this category for the full year. As noted in a prior course, we believe the furnace product cycle is perhaps a year and so behind ECD. We have a broader footprint of customer activities with more than a handful of furnace tools currently under evaluation and multiple customers. We are optimistic This will result in qualification and follow-on order in the coming quarters. Revenue from advanced packaging, which excludes AP, but including service spell pass, grow 33.2% in Q1 and represent 11% of the total revenue. This category including a range of packaging tools, such as the coder, developer, scrubber, PR sweeper, and web etchers. and also service and spare parts. And we continue to explore new products and technology to participate in the next generation of advanced packaging. We believe ACM is one of the only companies that offer a full set of wet tools, copper polishing tools, and copper plating tools for advanced packaging. In Q1, we deliver an ultra-CV vacuum cleaning tool to a major customer to meet the flux removal requirements for chip labs and other advanced 3D packaging structures. Today, we also introduce the drain wafer cleaning tool. This tool is designed for post-debounding wafer cleaning that enables nearly 100% recycled solvent and filtration. We have successfully completed the installation and the qualification of first tool with a key customer. Finish upon and product, we are making good progress with our track and the PCVD platform. We believe our proprietary technology provision both tool for success for mainland China and also global customers. We are engaged with multiple customers that we expect substantial growth progress in product development. and evaluation this year with revenue in 2025 and a deal. Now move on to our customer, please turn to slide seven. In China, we believe we have a leading position in cleaning. We have become a multiple product company with a competitive product in the market for plating and furnace. And we have a solid evaluation pipeline for track and PCVD. Our sales and service team are now driving deeper adoption of our product across our customer base. Our growth is also being driven by new entrants. On the international front, we plan to deliver ultra-SAP backside cleaning and a bevel edge tool in the second quarter of 2024 to a large U.S. manufacturer that qualifies as the first SAP cleaning tool for revenue last year. This demonstrates a deepening relationship, which we believe can lead to production orders across multiple product lines. Moreover, ACM brand and reputation are gaining recognition among other US chip makers with new engagement and potential opportunity to penetrate their global manufacturer site. We recently hired additional seasonal marketing and sales professionals who bring establish the relationship with the key U.S. semiconductor players. In Europe, we installed our first core evaluation tool, the Ultra-C Step 5 cleaning tool. At a major global semiconductor manufacturer in the fourth quarter last year, the initial feedback has been positive, and we are optimistic that the volume production order possible by middle of year. We think Korea. We see opportunity with SK Hynes. high bandwidth memory HBM product. We see potential gain with our CEPPS cleaning tool for high aspirational vehicle as well as ultra-ECP for TSV applications. To support growth, we made a progress in our facility expanding in China and other regions. Please listen to slide eight. In China, construction of our Lingang production R&D center is nearly complete. We expect the initial production later this year. In Korea, we are making progress with the key customer. We believe a strong commitment to Korea can improve our relationship with the key Korean customers. Our resource in Korea can also provide another basis for supporting international customer in the US, Europe, and other parts of Asia. We recently hired a new leader to run our Korea operation, DG Kim. He is a long time veteran of SK Hynix. We are optimistic his experience and relationship will help for adoption of technology and accelerator of business in the region. We continue to invest in our Oregon site to add to our service support and the demonstration capability for R&D and customer activity in the US and Europe. I will now provide our outlook. Please turn to slide nine. We believe WFE spending in China will remain solid as the country continues on its goal to match its production capacity with end-market consumption. We are focused on gaining market share in China, new product introduction, and expanding our business to new customers in the USA, Korea, Europe, and other Asian markets. Where we are from, our 2024 revenue outlook could be in the range of 650 to 725 million. This implies 23 year-over-year growth at the middle point. We expect our full-year revenue growth for 2024 to outpace both the China and global WFE growth rate. Now let me turn the call over to our CFO Mark who will reveal detail of our first quarter results. Mark, please.

Thank you, David. Good day, everyone. Please turn to slide 11. Unless I note otherwise, I'll refer to non-GAAP financial measures, which exclude stock-based compensation and unrealized gain or loss on short-term investments. Reconciliation of these non-GAAP measures comparable to GAAP measures is included in our earnings release. Unless otherwise noted, The following figures refer to the first quarter of 2024 and comparisons are with the first quarter of 2023. I will now provide financial highlights for the first quarter of 2024. Revenue was $152.2 million for the first quarter, up 105%. Revenue for single wafer cleaning, Tahoe, and semi-critical cleaning was $109.5 million, up 199%. Revenue for ECP, furnace, and other technologies was $25.8 million, down 3%. As David noted, we anticipate good growth for the full year 2024 in this category. Revenue for advanced packaging, excluding ECP services and spares, was $16.9 million, up 53.2%. Total shipments were $245 million for the first quarter, up 175%. Gross margin was 52.5% versus 54%. This exceeded our normal expected range of 40% to 45%. the full year we now expect gross margins to fall in the upper end of our target range we do continue to expect gross margin to vary from period to period due to a variety of factors such as sales volume product mix and currency impacts operating expenses were 40.1 million for the first quarter up from 29.2 million r d was 19.4 million versus 13.3 million The year-over-year increase reflects additional personnel and other expenses to support our product development pipeline. The decline versus Q4-23 was primarily due to reduced spending on internal R&D development tools. Sales and marketing was $11.1 million versus $8.9 million, and G&A was $9.5 million versus $6.9 million. For 2024, we planned for R&D expenses in the 13% to 15% range. sales and marketing in the 7% to 8% range, and G&A in the 5% to 6% range. Operating income was $39.8 million for the first quarter, up from $10.9 million. Operating margin was 26.2%, up from 14.7%. We recorded a realized gain of $0.3 million for the first quarter from the sale of short-term investments. Recall that realized gains are included in non-GAAP earnings. Income tax expense was $4.4 million for the first quarter versus $2.9 million. For the full year, we planned for an effective tax rate, a non-GAAP pre-tax income in the 15% to 20% range. Net income attributable to ACM research was $34.6 million for the first quarter, up from $9.9 million. Net income for diluted share was 52 cents for the first quarter versus 15 cents. Our non-GAAP net income excludes $14.6 million, or $0.22 per share, in stock-based compensation expense. This reflects a full quarter impact of the significant grant of ACM Shanghai shares made in the third quarter of last year, in addition to our normal ACM research grants. This was the first major grant by our subsidiary since the 2021 Star Market IPO. Our management team considers the grant as a critical differentiator to attract new talent for new product development and to retain key employees. I will now review selected balance sheet items. Cash, cash equivalents, restricted cash and time deposits were $288.3 million versus $304.5 million at the end of the last quarter. Total inventory was $581.1 million versus $545.4 million at the end of last quarter. This includes raw materials and work in progress, which totals $318.2 million, and finished goods inventory of $262.9 million. Finished goods inventory mainly includes first tools and evaluation tools at our customers. It also includes finished goods at ACM's facilities. Capital expenditures were $25.4 million. For the full year, we expect to spend about $100 million in capital expenditures. This primary layer includes continued investments in our Lingdong facilities, remodeling for our new headquarters for ACM Shanghai, and our investments in Korea and the U.S., and some fixed asset expenditures. That concludes our prepared remarks. Now let's open the call for any questions that you may have. Operator, please go ahead.

Thank you. And as a reminder, to ask a question, you need to press star 1-1 on your telephone and wait for it to be announced. And to withdraw your question, just press the star 11 again. Once again, please stand by when you compile the Q&A roster.

One moment for our first question.

Our first question will come from the line of Suji De Silva from Roth. You're now connected.

Hi, David. Hi, Mark. Congratulations on the progress here. Just a couple... Hey guys, maybe some high level questions. So outside of the core SAP products, which of the new product categories is going to help drive the highest growth in 24? Just to understand how you're diversifying the product categories.

Yeah, good. And obviously, as I mentioned here, Canadian tool is continuing our major, you know, a portion of the revenue. And we see that there, this, as I mentioned, is SPM tool. with a cover, you know, middle and lower temperature by Tahoe and also single wafer. And also, we're make a breakthrough in a high temperature SPM tool, and that's also another driving factor. And plus, also, we have our bevel etcher, and also, you know, continues where growing our old bench, you know, for the mature old nodes. And then, looking at real next year, I'm looking for probably our supercritical CO2, will start contributing on our revenue, too. So that's the one on the cleaning side. And then you look in the ECP, we'll continue to see that growth, both in the front end and also on the advanced packaging side, and wherever, you know, in the quieter, gooder backlog in the ECP. And also, we see the foreigners will start contributing for revenue, too, in this year and also continue next year. And we have basically other LPCVD and ALD start evaluation and all this vacuum anneal versus an MS-VERB anneal continue getting the market. So that's the major driving force this year for our revenue contribution. Mark, anything you want to add on that?

Yeah, no, thanks, David, and thanks, Suji. Yeah, I think one of the things we wanted to stress on this call is, you know, within cleaning, even though, you know, we've been doing cleaning for a while, we have a few pretty strong product cycles underneath that that can drive additional growth. And then, you know, when we start looking internationally, it's hard to say how our mix is going to play out between products, you know, as we go on late this year and into 2025. Because it seems like a lot of our new customers might be starting with cleaning as well. So I'll leave it at that, Suji.

Okay, great. Yeah, no, my second question was going to be similar on the geographic diversification. Maybe I can hone in on the U.S. customer and perhaps you can give a sense of what some of the next milestones or steps are as you see me making good progress there.

Yeah, as I mentioned, we're continuing, you know, marketing, expanding our customer base in the U.S., And wherever our one key customer, you know, we're going to shipping our second tool, second type of tool with a bevel and backside and to this key customer. Meanwhile, we're also, you know, talking, discussing multiple customers in the U.S. and both for their, you know, front end and also for their packaging side. So we see their, you know, big potential and their growth in the U.S. market. And meanwhile, we also, you know, access the market in their Singapore and also European. Our first tool has been delivered to the one key European customer, and we think they'll be in the qualification phase now. We're expecting this first tool by resulting their second repeat order. I think that's it, right? Hey, Mark, anything you want to add?

Yeah, yeah. So, no, thanks.

International, I think when we talked about our guidance when we first presented it last quarter, we got asked a lot about how much we'd contribute from international. This year is still a build year. We're hopeful that we can get, following the qualification of the US customer, we're hoping that we can get some orders here soon. We're not certain how much will fall into this year versus next, and that's always been the plan. And even for the European, so we'd probably expect some contribution, but really this would be a build year, and any significant orders would probably be for shipments next year.

Okay.

Thanks, David. Thanks, Mark. I'll pass it along.

Thank you. Thank you. One moment for our next question. Our next question. Our next question will come from the line of Christian Schwab from Craig Halem. Your line is open.

Hey, great. Thanks for taking my question. I just have one follow-up to the earlier conversation. You know, now that you're seeing broadening, you know, potential success in the international market, it seems that on a bigger picture, multi-year area, I know you've outlined a billion dollars in sales in China and

the market outside of china for your products is materially greater you know in a multi-year outlook do you have increased conviction now that this business can be much bigger than a billion yeah actually you know in the in the in our layout we're pretty you know um confidence we're gonna reach even billion dollar market by only uh china markets And obviously at the same time, we're penetrate or they're exploring international market with our differential technology. So we see that trend, you know, continue accelerating. So as I said, we're looking to the key customer, US and their, you know, their probably their manufacturing in Singapore. And also we're looking at with the, you know, Taiwan customer too, and plus recent, right? our key, I call it key top manager in the Korean operation, which is DG Kim. He is a real veteran of SK Hynix. And so we're really put effort and marketing and sell our product in the global. So we're saying obviously their international revenue and their contribution will get into our total growth. As I said, long-term, we want half of our revenue to come from China and half of them from outside China. So that's a goal still in our goal here.

Fantastic. No other questions. Thanks.

Thank you.

Thanks, Christian.

Thank you. One moment for our next question. And as a reminder, that's star 101 for questions. Our next question comes from Ross Cole from Needham. Your line is open.

Great. Thank you, guys, for taking my question on behalf of Charles Hsu today. So shipments in the first quarter were pretty high. I know you don't typically guide shipments, but do you have any thoughts on the rest of the year?

Do you expect the Q1 shipment level to sustain through a similar level or possibly go higher or lower in the next three quarters?

Yeah. Okay. Let me answer. Maybe Mark can follow up. Obviously, you know, first quarter shipment hire is partially contributed by our delayed shipment in Q4 of last year, right? So that's why part of the reason, plus also our manufacturer did a good job in the new year. So we're saying probably Q2 was slightly lower than Q1, but also continue to see that it grow in Q2 and Q3 and Q4. So Mark, anything you want to comment?

Yeah, no, thanks. Ross, I appreciate the question. Yeah, so we certainly expect shipments to be higher than our revenue growth for the year. I mean, it's a pretty solid shipment year. But yeah, as David noted, Q2, they probably normalized a bit relative to that inventory piece. But we'd expect it to kind of shift back up in Q3 and Q4. Great.

Thank you. That was my only question. Great. Thanks, Ross. Thank you. One moment for our next question.

Our next question will come from Charlie Chan from Morgan Stanley. Your line is open.

Hi, David, Mark. Thanks for taking my question, and also congrats for very good results, execution, et cetera. So I'm not sure, but I feel like this time around you are more open to talk about Hynix, HBM, business no matter cleaning or the ECP business opportunity. May I know if you have a significant breakthrough there? I remember you kind of have some demo tool there, but is that now a conference project wins or in the recurring order? May I confirm that?

Yeah, actually, you know, Hynix is one of our key customers, right? And they're also a real long-term customer, too. They will now add more of our, you know, flagship Saps megasonic cleaning can offer much uniform megasonic energy contribution. So, therefore, you can clean every via of the wafer, which is very important for TSV and their process. and second one in real copper plating, right? It's really in there, either packaging, you know, 3D, 2.5, 3D, and also in the TSV. So we're engaging with the customer, and they're, when they think of eventually the product, and definitely can be their, you know, potential choice for them to take. So we're still in the process right now.

Okay, okay. Mando does kind of the, key technology, right, can be used in advanced packaging, for example, COAS or TSMC SOIC. So that's my understanding. I think it's not just TSMC can provide the COAS or 2.5D advanced packaging. I think Intel, even the mCore, I mean, have those advanced packaging stuff, right? So are you guys going to apply to those opportunities?

Yeah, obviously, like you said, definitely our copywriting can using for their other customer, right, for this advanced packaging process. And so we're approaching multiple other customer right now. And I think this market, you know, obviously only a few player and we can be an alternative choice for them to take. Also, we do have some differential technology what defines our performance with other guys. So we're very confident and we can get it in the market and, you know, for the outside China market.

Okay. Yeah, actually, my second question is about this also international markets. I remember four years ago when I started to cover the stock, always I had this question, when are we going to get in TSMC? Right. And four years later, I feel like, uh, TSMC is to be very, very important target. They continue to open a new fabs, uh, not just us, but also Japan. And next will be Germany, including both a mature notes and a leading edge. So, so my question is that, uh, what, what do you need to do? Right. To really, uh, when it's, when it's a customer, um, yeah. Can you give us some. whether it's a technology or production location or pricing, whatever. What's the issue right now?

Yeah, well, I mean, obviously, like you said, TSMC is one of the key customer targets. And, you know, we're working with them multiple years. And we're still engaging with them, by the way. And so we're in a very overarching talking process right now, right? As I said, our cleaning... Also, our copper plating definitely is one of the key products, differentiating with other players. So we're confident. Anyway, I cannot tell you now what's going on, but we are fully engaged with TSMC. It's our potential target, obviously.

OK. OK. Yeah, that's all the questions I have. Thank you, Sim, for your time. Thank you.

Thank you. Thank you.

One moment for our next question.

And our next question will come from Mark Miller from the Benchmark Company. Your line is open.

Congratulations on another upside report. Just was wondering if you're seeing any impacts such as pushouts from the slowing of EV demand in China?

Okay, that's a good question. Actually, we see there, you know, a few, I mean, quite a bit of customer, you know, focus on their IGBT production line. And we see that it's continuing to grow because anyway, IGBT production in China is still early stage, right? So we see their customers continue expanding for this IGBT investment. And also, we do have a very good product in cleaning, and also in the foreigners, right, supporting this IGBT market.

Just wondering how cash flow went during the quarter. Did you consume cash?

Yeah. Hey, Mark, I'll take that. And it'll show up in our queue. But cash flow from operations was 9.6. We used about $9.6 million. Yep. Thank you. Thank you.

And I'm not showing any further questions in the queue. I'd like to turn the call back over to Steve for any closing remarks.

Okay. Thank you, operator, and thank you all for participating in today's call and for your support. Before we close, let me just mention a couple of upcoming investor relations events. On May 29th, we will present at Craig Holland's 21st Annual Institutional Investor Conference in Minneapolis. June 25th to 26th, we will present at the 10th Annual Roth London Conference at the Four Seasons Park Lane London. Attendance at the conference is by invitation only. For interested investors, please contact your respective sales representatives to register and schedule a one-on-one meeting with the management team. This concludes today's call, and you may now disconnect.

Thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone have a great day.