ACM Research, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the ACM Research Fiscal Second Quarter 2024 Earnings Conference Call. Currently, all participants are in the listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now, I'll turn the call over to Mr. Stephen Pelayo, Managing Director of the Blucher Group. Mr. Pelayo, please go ahead.

Thank you, Desmond. Good day, everyone. Thank you for joining us to discuss second quarter of 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 to the investor section of our website that we will reference during our prepared remarks. On the call with me today are our CEO, 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 the risk factors and elsewhere in ACM's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward looking statements. which reflect ACM's opinions only as of the date of this call. ACM is not obliged to update you on any revisions to these forward-looking statements. Certain of these financial results that we provide on this call will be on a non-GAAP basis, which excludes stock-based compensation and an unrealized gain or loss on short-term investment. For our GAAP results and a reconciliation between GAAP and non-GAAP amounts, you should refer to our slides Pardon me, you should refer to our earnings release, which is posted on the IR section of our website and to slide 12. 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 second quarter 2024 earning conference call. Please turn to slide three. For the second quarter, revenue was $202.5 million, upper 40%. Shiman worked $203 million, up 32%. Profitability was good, with a gross margin of 48.2% and operating margin of 25.6%. And we ended the quarter with approximately $367 million of cash and time deposit, with a positive cash flow from operation for the quarter. Revenue for the first half of the year was $354.7 million, upper 62%. We believe this growth rate is higher than the growth rate of China WFE and demonstrates market share gain for ACM and the contribution from new product cycles. Now I will provide detail on product. Please turn to slide four. Revenue from single wafer cleaning, Tahoe, and the semi-critical cleaning product grow 36% in Q2, and represent 76% of total revenue. ACM offers what we believe is among the industry's most comprehensive cleaning portfolio. We estimate the global total available market, or TEM, for cleaning is close to $6 billion, and ACM produces products supporting 90% of all cleaning process steps in the both memory and their logic. During the last earning call, we highlight the sulfuric peroxide or SPM portion of the Canadian market, which has been a relatively small contributor to our business, but represented 25 to 30% of the total front-end Canadian market. ACM now offers a full product line of SPM tool across all temperature range. We have already been shipped Tahoe and a single wafer tools for lower and middle temperature SPM steps. We now have differentiated high temperature SPM tool that we believe position us to gain market share from the current market leader. We currently have more than 10 SPM customer in production or evaluation and look forward to increase contribution to shipment or revenue as we ramp up production in the next 12 to 24 months. We also expect our bevel-edger cleaning tool to contribute more revenue in 2024, and we are on track to complete evaluation of a supercritical CO2 dry cleaning tool this year and revenue in 2025. We believe ACM cleaning portfolio, including SEP, Tebow, Tahoe, semi-critical, together with SPM and supercritical CO2 dry has achieved world-class status. We see good opportunity for continual market share gain in mainland China, and we are confident we have what it takes to scare major customers in the international market. Revenue from ECP, furnace, and other technology grow 104% in Q2 and represent 19% of total revenue. We achieved another quarterly record in this category with nearly 39 million in revenue in Q2. In plating, we are seeing strong demand for both front-end wafer processing and back-end packaging. We have a major new product announcement today, the Ultra ECP-AP-P plating tool for the next generation fan-out panel-level packaging, or FOPLP. We believe this is a game-changing data position ACM to participate in growing demand for AI solutions. Our proprietary design employ a horizontal plating method that deliver film uniformity and the precision across the entire panel. We believe ACM is among the first to employ horizontal plating for panel application. And it will strengthen the market, enabling advanced packaging with some micro feature on large panel. This technology is specially applicable to GPU and high-density, high-bandwidth memory HBM. We see a large opportunity as several major semiconductor leaders have chosen PANEL for their AI chip packaging solution. And we continue to make good progress with our furnace product, which addresses more process steps ranging from oxidation, anneal, to LPCVD and ARD. As noted in prior call, our furnace product cycle is about 18 months Behind the plate, we believe our furnace product portfolio will benefit from increasing capacity for both memory and logic. Overall, we expect to have more than 16 furnace customers by the end of this year, compared to the nine at the end of 2023. Revenue from advanced packaging, which includes ECP, but including service and spare, declined by 20% for Q2, but was up 13.5% for the first half of the year. This category includes a range of packaging tools, such as a coater, developer, scrubber, PR stripper, and wet etchers, and also service and spare parts. And we are exploring new product and technology to participate in the next generation of advanced packaging. We believe ACM is one of the only company that offers a full set of wet tool, polished tool, and a carbon plating tool for advanced packaging. Last week, we announced the O2C Vacuum-P flux cleaning tool for fan-out panel-level packaging. This is a companion tool to the ECAP AP-P, which I mentioned earlier, and extending ACM product portfolio to the panel space. In July, we shipped our first O2C Vacuum-P flux tool to a new China packaging manufacturer. Putting together, we believe those two panel tools, including plating and cleaning, mark a strong offering by ACM to address a final panel-level packaging market. We believe ACM is among the first to applying horizontal plating technology into panel packaging application. And we believe our technology will help accelerate ACM's global market share gain as the interest in panel-level packaging is growing rapidly at the Foundry, IDM, and OSEP in the US, Korea, Taiwan, and mainland China. Finishing up on product, we are making good progress with our track and PCVD platform. We believe our proprietary approach positions both tools for success for mainland China and the global customer. We shipped our beta version of PCVD tool in July to a larger customer The innovative platform is capable of handling a wide variety of the PCVT process. We expect multiple evaluations this year and a number of local customers in foundry, logic and memory, and other areas. We're moving forward in the development of our track tool, which has a differentiated design with a focus on high throughput and low maintenance. In addition to ARF evaluation tool and a major Chinese foundry, We are also engaging with several customers for inline and KF line based lithography. We expect good progress for both PSVD and TRAC over the next year with revenue likely in later 2025 and more notable contribution in 2026 and beyond. Moving on to customer, please turn to slide seven. In Q2, we saw broader demand from Foundry Logic, Power, and Memory, both NAND and DRAM. For the second quarter of 2024, we had four 10% customers representing 58% of the revenue versus three customers representing 52% in the second quarter of 2023. In China, we have a leading position in cleaning with a significant room to grow. We believe we have become a world-class multi-product company with competitive product in markets for plating and furnace. And we have a solid evaluation pipeline for track and PCVD. Overall, we believe our China growth is being driven by the market share gain, new product, and increased localization. In the U.S., we deliver an 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 SAFs Canadian tool for revenue later last year. This demonstrates a deepened relationship, which we believe can lead to a production order across a multiple product line. And today, I'm pleased to announce we have received an order from a U.S.-based wafer-level packaging house for a colder developer tool. We expect to deliver this tool to the U.S. facility in the first half of 2025. Last month, we had a greater week at the Semicon West trade show in San Francisco. We had several days of a solid meeting with a number of U.S. chip makers with fabs in the U.S. and abroad. With good interest in our SEP, Tebow, Tahoe, supercritical CO2 drying, plating, and our wet edge tools. In Europe, we are in the final stage of our qualification of Ultra-C SEP 5 cleaning tool at a major global semiconductor manufacturer. In Korea, we engage with multiple customers for both front-end and packaging tools, including single wafer and batch cleaning, Tahoe, ECB, Furnace, ALD, PUCVD, and TRAC. We see an opportunity for our tool with SK Hynix high bandwidth memory capacity product to support growth. We made progress on our facility expansion in China and other regions. Please turn to slide eight. In China, our lingang production and R&D center is nearly complete. We expect our initial production to begin in the second half of this year. In Korea, we believe a strong commitment can improve our relations with key Korean customers. Our resources in Korea can also provide another basis to support international customers. We continue investing in our Oregon site to add our service support and demonstration capability for R&D and customer activity in the US and Europe. In Q3, we enter into an agreement to purchasing a 40,000 square feet R&D facility in Oregon with a full functional 5,000 square feet clean room. The purchasing is scheduled to close in Q4. This new facility demonstrates a strong commitment to the U.S. market, allowing us to conduct R&D and administration of ACM technology near major semiconductor producers. Several years ago, we set a long-term revenue target of $1 billion. We are now closing to this level, and we have made good progress with new products and international marketing. As a result, I'm happy to report that today we have set a new long-term revenue target of $3 billion. Please turn to slide six. Key reasons for increase include, first, we have scaled our business in mainland China and also Korea. We now ship a cleaning, plating, and advanced packing tool to near the order major and the smaller semiconductor manufacturers. We are amongst the top. one or two local producers for each category. Second, we believe our products are worth cost. This includes our current offering and our new product roadmap. We are committed to innovation and we believe we can compete head to head with top tier players both in China and international markets. At a high level, we believe a marketer's ship to AI is moving the market towards ACM technology warehouse. We have been investing in key technology for years, and we are now seeing good interest to apply key technology to several industrial trends. Let me highlight a few. The shift of 3D structure for NAND, DRAM, and logic is driving demand for our vertical cleaning solution, including table, and supercritical CO2 dry, and also our proprietary furnace ALD design. Next, HBM required a driving demand for our TSV plating and 2.5D advanced packaging solutions. For PECVD, ACM has a very unique approach, including one chamber with three chucks that allow our customer to address multiple process with the same platform. For track, ACM differentiated platform is designed for high throughput and no maintenance to scanners. And for panel plating, as we announced today, we believe ACM's new Ultra-ECP AP-P is a game changer that will support future AI chip packaging at the panel level. Third, with our product line improving at a scale in China and Korea, we are seeing good traction with our global customers. We have multiple tools under evaluation and several major customers in the US, European, Korea, and Southeast Asia. We are confident those can lead to volume production orders and the longer term, we expect up to half our business in market beyond mainland China. Bringing it all together, our 3 billion dollar target, assuming that China will account for about $1.5 billion revenue, and the rest of the world, which is 2 to 3x larger than China, will account for other $1.5 billion. I will now provide our outlook. Please turn to slide 9. We have reached our 2024 revenue outlook to be in the range of $695 to $735 million versus prior outlook of $650 million to $725 million. At the middle point, our new outlook represents 28% year-over-year growth, compared to 23% previously. We expect the shipment in the second half of the year to grow, with the full-year shipment growth rate outpacing revenue growth rate. We note our visibility for the year is largely driven by our current order book. anticipate the new orders and the qualification or customer acceptance of the previous shift evaluation tool to a range of the customers. We believe WFG spending in mainland China will remain stable as the country continue to on its goal to match the production capacity with end market consumption. We are focused on gaining market share in mainland China, running our new product and expanding our business. to new customers in the U.S., Korea, Taiwan, Europe, and other Southeast Asia markets. Now, let me turn the call over to our CFO, Mark, who will review details of our second quarter results. Mark, please.