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.

Thank you, David. Good day, everyone. Please turn to slide 10. Unless I know otherwise, I'll refer to non-GAAP financial measures which exclude stock-based compensation, unrealized gain loss, and short-term investments. Reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release. Unless otherwise noted, the following figures refer to the second quarter of 2024 and comparisons are with the second quarter of 2023. I will now provide financial highlights for the second quarter of 2024. Revenue was $202.5 million, up 40%. Revenue for single wafer cleaning, Tahoe, and semi-critical cleaning was $153.2 million, up 36.2%. Revenue for ECP, front-end packaging, furnace, and other technologies was $39.0 million, up 103.8%. Revenue for advanced packaging, excluding ECP, services and spares was $10.3 million for the second quarter, down 20.4%. But for the first half, it grew by 13.5%. Total shipments were $203 million, up 32%. Gross margin was 48.2% versus 47.6%. This exceeded our long-term gross margin target of 40% to 45%. For the full year, we now expect our gross margins to be above the high end of the range. This is due to gross margins above the range for the first half and our expectations for gross margin at the upper end of our target range for Q3 and Q4. We 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 $45.6 million up from $36.3 million. R&D was $21.8 million versus $19.4 million. The year-over-year increase primarily reflects additional personnel expenses to support our product development pipeline. Sales and marketing was $14.1 million versus $11 million, and G&A was $9.8 million versus $6.0 million. For 2024, we plan for R&D 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 $51.9 million versus $32.4 million. Operating margin was 25.6% versus 22.4%. We had no realized gain from the sale of short-term investments for the quarter as compared to a gain of $3.9 million in the year-ago period. Recall that the realized gains are included in our non-GAAP earnings. Income tax expense was $9.3 million versus $7.6 million. For the full year, we plan for an effective tax rate on non-GAAP pre-tax income in the 15% to 20% range. Net income attributable to ACM research was $37.3 million versus $31.3 million. Net income per diluted share was $0.55 versus $0.48. Our non-GAAP net income excluded $14.3 million, or $0.21 per share, in stock-based compensation expense. We note that due to the accelerated amortization for ACM Shanghai stock option grants, we do expect SPC expense to gradually roll off in the third quarter and beyond. I will now review selected balance sheet and cash flow items. Cash equivalents, restricted cash, and time deposits ended the second quarter at $366.8 million versus $288.3 million at the end of last quarter. Total inventory was $602.9 million versus $581.1 million at the end of last quarter. This included raw materials and working process of $324.0 million and finished goods inventory of $278.9 million. Finished goods inventory mainly includes first tools under evaluation at our customers, also includes finished goods at ACM facilities. Cash flow from operations was $61 million for the second quarter and $51.9 million for the first half of the year. Capital expenses were $13.6 million for the second quarter, $39.7 million for the first half of the year. For the full year 2024, we expect to spend about $100 million in capital expenditures. This primarily includes continued investments in our Lingang facilities, remodeling for the new headquarters for ACM Shanghai, and our investments in the Korea and the U.S. together with fixed asset expenditures. That concludes our prepared remarks. Now let us open the call for any questions that you may have. Operator, please go ahead.

Thank you. We will now begin the question and answer session. To ask questions on the phone, please press star 11 and wait for an AMTB announcement. If you'd like to cancel your request, please press star 11 again. One moment for the first question. Our first question comes from the line of Suji De Silva from Roth Capital. Please go ahead.

Hi, David. Mark, Lisa. Congrats on the progress here and the guidance. For the second half, your shipments appear to be increasing. Can you talk about maybe 1% or give us some sense of how much of that shipment base is outside of China versus China and how that will increase in the mix over time?

You want to take care, Mark? Yeah, sure.

Hey, Suji, thanks. Yeah, so you did point out, yeah, that we expect our shipments to be a bit higher in the second half versus the first half of the year. You know, we'd expect shipments up, obviously, in the third quarter. In terms of the mix internationally or outside of mainland China, Suji, I would say that The substantial majority of our shipments will still be within China. And so we will have some shipments outside, but really a substantial majority is going to be to the mainland China market in the back half of the year.

Okay. And then specifically for the Korea customers, I know you've been shipping into the China fabs for Korea customers, but are you already shipping into Korea fab for Korean customers? And if not, what's the timing of that starting? Because that sounds like something... newer as an opportunity I've heard versus kind of U.S. and Europe?

Okay, so we are definitely working with the Korean customer. And so this moment, we are now, I mean, Q2, we have no shipment go to Korea right now. However, you know, we do see the opportunity including also R&D tool and for their, you know, beyond the Canadian product, we are heavily engaged with the Korean customer. So, so we see that additional new, new product, you know, we'll hopefully can be shipping there, you know, second half of this year, uh, which is really another, uh, bigger, uh, product for the HBM, you know, right. That's where we're looking for.

Outstanding. That's great. And then my last question's, um, on the high bandwidth memory supply chain in Taiwan, which has been growing very strong. Um, can you talk about your opportunity there? Um, if that's soon and, um, who the competition today is in that market because, you know, we know with AI that's growing very fast.

Okay, you mean the panel-sided new product? You mean that? Is that correct?

The high bandwidth memory opportunity, the supply chain there, the products, into that in China, Taiwan rather.

Yeah, you mean our new panel product?

You talk about... Yes, yeah, yeah, right. The back-end packaging.

Oh, back-end packaging. Okay, I see. Well, for their facts and packaging in, you know, we're engaging with the customer in Taiwan and also engage with customer in the U S right. Which are announced. We have received their, our first, um, uh, coded developer, uh, order from one of the U S advanced packaging house. And definitely, you know, wherever, uh, well set up there, this, uh, uh, where the, where the tool for the advanced packaging. So where. having engaged with multiple customers in Taiwan. Meanwhile, we just announced this, our panel, you know, low pressure cleaning for flux, and also announced this horizontal plating for the panel. I think the two new products were definitely addressed. The new trend also, you know, new of this packaging requirement. So we're engaging with the multiple customers right now in mainland China and also in Taiwan and also in the U.S. So we believe that will bring another exciting market for our new panel product. Plus, we're still engaging also developer additional new type, other type of the panel product too. So we believe that will bring another our revenue growth potential, right, in this product portfolio.

Okay. Sounds like great progress all around. Thanks, David. Thanks, guys.

Thank you, Suji.

Thank you for the questions. One moment for the next question. Our next question comes from the line of Chao Xu from Nidham & Co. Please go ahead.

A couple of questions. The first one, looks like you are implying a half over half largely flat for the second half of the year, but the shipment is probably higher in the second half. So I also want to clarify, when you say a shipment in the second half of the year to grow, hopefully that's a half over half comment or that's a sequential quarter over quarter comment? That's the first question.

It's a half over half. Yeah, we'd expect shipments to be higher in the second half than they were in the first half.

Yeah, but any thoughts on the implied revenue guide for second half being largely flat versus in the first half? And how should people think about this?

Actually, revenue also second half is higher than first half, right? You look at our middle point of the new sectors.

Okay. Then the second question is about the capital allocation. Definitely the ACM Shanghai is already paying a dividend to ACM Shanghai customers. I wonder any thoughts on starting a dividend policy with the ACM research investors, and especially when... the ECM Shanghai probably going to see that lock-up expiry pretty soon.

Yeah, okay, good point. And we do have a dividend, right? And last year, and probably will continue this dividend disputing to all the events of ECM Shanghai, you know, for near future. Then you talk about the lock-up of the ECM USA, you know, for their share in China, Shanghai. I think in this moment, our still major business from Shanghai and ACM USA definitely can sell their share. However, you know, you can see our status right now, we're keeping our share, right? The reason is that we do have a dividend and also ACM USA have, you know, the cash going on. And there's no reason to sell our precious, you know, share inside of China.

Sorry, David, just want to clarify when I say dividend, I mean the dividend for ACM USA shareholders, not the ACM Shanghai shareholders. Okay, okay.

So the dividend we got from ACM Shanghai and will come to ACM USA. So this money, I think, will be reinvested into our marketing cell and also potential supporting and R&D for all the purposes. So at this moment, we believe the cash we got from dividend, the best interest for the investor USA is reinvest back to the business instead of just distribute dividend to their ACM USA investor. So we think that will be our major purpose for the dividends usage. Mark, anything you want to add on that?

Yeah, I mean, Charles, I think it's an interesting question, but echoing what David says, we don't have any plans to pay a dividend from the U.S.

Thank you.

Thank you for the questions. One moment for the next question. Our next question comes from the line of Mark Miller from the Benchmark Company.

Please go ahead.

Let me say congratulations, another very good quarter. And, again, you're probably the greatest growth stock, at least in my universe, and hopefully the investors will respond to that more aggressively in the future. In terms of your evals going on, especially outside of China, can you give a little more color in terms of evals, in terms of what type tools and what countries?

Okay, sure, Mark. At this moment, we do have a cleaning tool, right, as we go to a U.S. customer. We do have two types of tools, one is SAP's cleaning, and another one is really backside and also BibleClean, right, in the same customer. And recently, we're receiving another order from a quota developer from U.S., you know, Advanced Packaging House. And also, we do have also another evaluation tool or SPO tool from the European customer in the evaluation. Also, meanwhile, we're heavily engaged with the Korean customer for copper plating and tool. That's in the demo status. And hopefully, quickly, we can ship to their production for their final production evaluation. And also, we're talking with a few customers in Singapore and also in the U.S. and talk about our new cleaning capability, including Tebow and Tahoe, and also our, I want to say that is our supercritical CO2, as really we design for advanced technology evaluation, especially for 3D cleaning and also for acid cleaning. So that kind of also powerful cleaning tool, we're engaging with multiple customers right now.

Okay. In terms of your margin guidance, margins have been certainly above the target range. You're guiding the margins being at the top of the guiding range. I assume that implies that your backlog, the margins of the tools in the backlog are at or above your target range.

Mark, you want to answer that?

That's right, Mark. I mean, you know, we mentioned that, you know, for the year, our gross margins would be above the normal 40% to 45% range, really because they were, you know, stronger margins. above the range for the first half of the year. And the rest of the year, we're expecting them to be at the upper end of our range. And so, yeah, I mean, our visibility on the margin profile for the end of the year is pretty good.

Thank you. Thank you for the questions. Once again, to ask questions, please press star 11 and wait for a name to be announced.

One moment for the next questions.

Next question comes from the line of Robert McKay from Blue Lotus. Please go ahead.

Hey there. Thanks for taking my question. Am I coming in clearly? Yes. Robert, please. Oh, great. Okay, great. So I have a bit of a touchy question, and I think it might be important. I was wondering if we've evaluated, if there's any, you know, there's been some discussion regarding some further restrictions uh, on, you know, Chinese companies. I was wondering if there might be, uh, if we've evaluated, we know what kind of impact there might be, uh, if that unfortunately does come through and, uh, uh, you know, what, what our thoughts are on that, if there's anything we can talk about in that, in that respect.

You, you talk about this new, uh, new rule for the export control.

Is that what you mean?

Yes, exactly.

Okay. Well, I mean, again, right. Well, you just heard some, you know, real, their market, their, uh, you know, rumor. We're carefully, you know, I should say, you know, watch out the new rule come out and where ACM definitely will follow the law, right? And the USA law and follow Chinese law with the international business. And, you know, well, we're carefully, I mean, this moment, no speculator, but I will say that if something come out is only, not only ACM, right? A lot of US company got impacted too. So we just want to watch out what's going on to, you know, to whatever adjustment based on the new regulatory come out.

I would add to that is, you know, we take a deep step back and we look at the China WFE. You know, I think David's view, our view on WFE in China is that pretty stable for this year. uh and and uh you know for the years to come that uh you know the country will continue to invest um in uh in their production capacity uh and so you know we'll we'll like david mentioned we'll monitor the uh the the any of the new regulations of course we'll follow the rules uh but you know we generally anticipate um wfe in china to remain pretty stable i've got it thanks thanks for the clarity uh in terms of our supply chain then is there any

you know, potential impact to supply chain if there is any of these rumors do come to fruition?

Supply chain at this moment, I see they're, you know, pretty stable right now, right? Obviously, we're looking for all different kind of supply chain, you know, and for mature product, we still buy U.S. components, but for whatever, the most notes we have using, you know, non-U.S. parts. And this moment, we're also looking for the multiple supply chain, both in other countries, also inside of China. We also qualify the local player of the components. So we definitely have a plan to secure our supply chain. And when any new regulatory come out, we can quickly switch into other alternative choice of the supply chain.

Okay. Got it. That makes a lot of sense. So you have some backups. That's very good to hear. And then I had one more question I think is related to the private offering that we announced in January. I think we were going to some private offering with our, with our Shanghai shares. I was just wondering if we have any update in regards to the, into that private offering, if there's any progress on that front and when we get to hear more about it. Yeah.

Yes. Actually, you know, we're, we're in the process to the final formal application, right? But we know that the approving process in the second offering in China will take time. We estimate probably six, eight months, even longer. So our, you know, our permission probably we're expecting middle of next year, we might get it. And then within another one year of the permission we got, then we can, you know, probably see the second offering based on market situation. Now, obviously, I know we're expecting that time we're going to our, PCBD and the track system and also furners, including our panel packaging tool, get in the market. So we're choosing the right time and the right pricing to raise our second fund.

Okay, that makes a lot of sense. Thanks. And then I had one more question. It was just about if we have any new products that we can look forward to in the second half of this year or in early 2025 that that we can think about, or should we just wait until the announcement?

Well, obviously, we announced already, right? I mean, this Q2, we announced two products already. So I want to say we'll continue exploring a new product, and obviously, like this panel, right, we announced two. We'll still work on the additional other type of the panel product for this year, and probably we're going to announce another new product when it gets ready. Meanwhile, I still say we're still major focus on our UZC, what they're doing right now, you know, cleaning, cover plating, furnace, especially the furnace ALD and track and the PCVD. So our new product probably still, you know, along this major technology and also the product. We're not going to develop other new, which is a complete new, more than this category I mentioned.

Got it. That's very clear. Thank you very much. And also great results. And sorry for the touchy questions, but thank you very much.

Thank you, Robert. Thank you for the questions. Once again, to ask questions, please press star one.

There are no questions at this time. I would like to thank the committee for closing remarks.

Thank you, operator, and thank you all for participating on today's call and for your support. Before we close, Stephen is going to mention our upcoming investor relations events. Stephen, please.

Thanks, David. Before we conclude, I just want to give everyone a quick reminder on our upcoming investor conferences. On August 27th, we will present at Jeffrey Semiconductor IT Hardware and Communications Technology Summit at the Four Seasons Hotel in Chicago in the United States. On September 4th, we will present at Benchmark 2024 TMT Conference in New York City. Attendance at the conference is by invitation only. For interested investors, please contact your sales representatives to register and schedule one-on-one meetings with the management team. This concludes our call, and you may now disconnect. Bye-bye. Thank you. Thank you. Thank you. Bye. you you Thank you.

Good day, 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 as a 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 grew 36% in Q2, and represented 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 run from 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 SAP, Tebow, Tahoe, Semicritical, 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 delivers film uniformity and 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 micron feature on large panels. 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 products, which address 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 plating, 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, pure 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 Ultra-C Vacuum-P flux cleaning tool for fan-out panel-level packaging. This is a companion tool to the ECP AP-P, which I mentioned earlier, and extending ACM product portfolio to the panel space. In July, we shipped our first Ultra-C Vacuum-P flux tool to a new China packaging manufacturer. Putting it 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 an 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 positioning 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, memory, and other areas. We are 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, dry, plating, and our wet edge tools. In Europe, we are in the final stage of our qualification of Ultra-C SEP 5, cleaning tool, and 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, PSVD, and Track. 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 to invest in our Oregon site to add our service support and demonstration capability for R&D and customer activity in the U.S. 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 shift 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 P-CVD, 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 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. Bring 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 ship evaluation tool to a range of the customers. We believe WFG spending in mainland China will remain stable as the country continues on its goal to match the production capacity with end-market consumption. We are focused on gaining market share in mainland China, ramping our new product and expanding our business. to new customers in the U.S., Korea, Taiwan, Europe, and other Southeast Asian markets. Now, let me turn the call over to our CFO, Mark, who will review details of our second quarter results. Mark, please.

Thank you, David. Good day, everyone. Please turn to slide 10. Unless I note otherwise, I'll refer to non-GAAP financial measures, which exclude stock-based compensation, unrealized gain loss, and short-term investments. Reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release. Unless otherwise noted, the following figures refer to the second quarter of 2024 and comparisons are with the second quarter of 2023. I will now provide financial highlights for the second quarter of 2024. Revenue was $202.5 million, up 40%. Revenue for single wafer cleaning, Tahoe, and semi-critical cleaning was $153.2 million, up 36.2%. Revenue for ECP, front-end packaging, furnace, and other technologies was $39.0 million, up 103.8%. Revenue for advanced packaging, excluding ECP, services and spares was $10.3 million for the second quarter, down 20.4%. But for the first half, it grew by 13.5%. Total shipments were $203 million, up 32%. Gross margin was 48.2% versus 47.6%. This exceeded our long-term gross margin target of 40% to 45%. For the full year, we now expect our gross margins to be above the high end of the range. This is due to gross margins above the range for the first half and our expectations for gross margin at the upper end of our target range for Q3 and Q4. We 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 $45.6 million up from $36.3 million. R&D was $21.8 million versus $19.4 million. The year-over-year increase primarily reflects additional personnel expenses to support our product development pipeline. Sales and marketing was $14.1 million versus $11 million, and G&A was $9.8 million versus $6.0 million. For 2024, we planned for R&D 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 $51.9 million versus $32.4 million. Operating margin was 25.6% versus 22.4%. We had no realized gain from the sale of short-term investments for the quarter as compared to a gain of $3.9 million in the year-ago period. Recall that the realized gains are included in our non-GAAP earnings. Income tax expense was $9.3 million versus $7.6 million. For the full year, we plan for an effective tax rate on non-GAAP pre-tax income in the 15% to 20% range. Net income attributable to ACM research was $37.3 million versus $31.3 million. Net income per diluted share was $0.55 versus $0.48. Our non-GAAP net income excluded $14.3 million, or $0.21 per share, in stock-based compensation expense. We note that due to the accelerated amortization for ACM Shanghai stock option grants, we do expect SPC expense to gradually roll off in the third quarter and beyond. I will now review selected balance sheet and cash flow items. Cash equivalents, restricted cash, and time deposits ended the second quarter at $366.8 million versus $288.3 million at the end of last quarter. Total inventory was $602.9 million versus $581.1 million at the end of last quarter. This included raw materials and work in process of $324.0 million and finished goods inventory of $278.9 million. Finished goods inventory mainly includes first tools under evaluation at our customers, also includes finished goods at ACM facilities. Cash flow from operations was $61 million for the second quarter and $51.9 million for the first half of the year. Capital expenses were $13.6 million for the second quarter, $39.7 million for the first half of the year. For the full year 2024, we expect to spend about $100 million in capital expenditures. This primarily includes continued investments in our Lingang facilities, remodeling for the new headquarters for ACM Shanghai, and our investments in the Korea and the U.S. together with fixed asset expenditures. That concludes our prepared remarks. Now let us open the call for any questions that you may have. Operator, please go ahead.

Thank you. We will now begin the question and answer session. To ask questions on the phone, please press star 11 and wait for an AMTB announcement. If you'd like to cancel your request, please press star 11 again. One moment for the first question. Our first question comes from the line of Suji De Silva from Roth Capital. Please go ahead.

Hi, David, Mark, Lisa. Congrats on the progress here and the guidance. For the second half, your shipments appear to be increasing. Can you talk about maybe 1% or give us some sense of how much of that shipment base is outside of China versus China and how that will increase in the mix over time?

You want to take care, Mark?

Yeah, sure. Hey, Suji, thanks. Yeah, so we expect our shipments to be a bit higher in the second half versus the first half of the year. You know, we'd expect shipments up, obviously, in the third quarter. In terms of the mix internationally or outside of mainland China, Suji, I would say that The substantial majority of our shipments will still be within China. And so we will have some shipments outside, but really a substantial majority is going to be to the mainland China market in the back half of the year.

Okay. And then specifically for the Korea customers, I know you've been shipping into the China fabs for Korea customers, but are you already shipping into Korea fab for Korean customers? And if not, what's the timing of that starting? Because that sounds like something... newer as an opportunity I've heard versus kind of U.S. and Europe.

Okay, so we are definitely working with the Korean customer. And so this moment, we are now, I mean, Q2, we have no shipment go to Korea right now. However, you know, we do see the opportunity including also R&D tool and for their, you know, beyond the cleaning product, we are heavily engaged with the Korean customer. So we see that additional new product, you know, will hopefully can be shipping in the second half of this year, which is really another bigger product for the HBM, you know, production, right? That's where we're looking for.

Outstanding. That's great. And then my last question is on the high bandwidth memory supply chain in Taiwan, which has been growing very strong. Can you talk about your opportunity there? It's up soon. who the competition today is in that market because, you know, we know with AI that's growing very fast.

Okay, you mean the panel-sided new product? You mean that? Is that correct?

The high bandwidth memory opportunity, the supply chain there, the products. Internet in China, Taiwan rather.

Yeah, you mean our new panel product? You talk about... Yes, yeah, yeah.

Right, the back-end packaging.

Oh, back-end packaging. Okay, I see. Well, for their facts and packaging is, you know, we're engaging with the customer in Taiwan and also angry with customer in the U S right. Which announced that we have received their, uh, first, uh, um, uh, coded developer, uh, order from one of the U S advanced packaging house. And definitely, you know, wherever, uh, well set up there, this, uh, uh, where the, where the tool for the advanced packaging. So where. having engaged with multiple customers in Taiwan. Meanwhile, we just announced this, our panel, you know, low pressure cleaning for flux, and also announced this horizontal plating for the panel. I think the two new products were definitely addressed. The new trend also, you know, new of this packaging requirement. So we're engaging with the multiple customers right now in mainland China and also in Taiwan and also in the U.S. So we believe that will bring another exciting market for our new panel product. Plus, we're still engaging also developer additional new type, other type of the panel product too. So we believe that will bring another our revenue growth potential, right, in this product portfolio.

Okay. Sounds like great progress all around. Thanks, David. Thanks, guys.

Thank you, Suji.

Thank you for the questions. One moment for the next question. Our next question comes from the line of Chao Xu from Nidham & Co. Please go ahead.

A couple of questions. The first one looks like you are implying a half of a half largely flat for the second half of the year, but the shipment is probably higher in the second half. So I also want to clarify, when you say a shipment in the second half of the year to grow, hopefully that's a half of a half comment or that's a sequential quarter of a quarter comment? That's the first question.

It's a half over half. Yeah, we'd expect shipments to be higher in the second half than they were in the first half.

Yeah, but any thoughts on the implied revenue guide for second half being largely flat versus in the first half? And how should people think about this?

Actually, revenue also second half is higher than first half, right? You look at our middle point of the new shipments.

Okay. Then the second question is about the capital allocation. Definitely the ACM Shanghai is already paying a dividend to ACM Shanghai customers. I wonder any thoughts on starting a dividend policy with the ACM research investors, and especially when... the ECM Shanghai probably going to see that lockup expiry pretty soon.

Yeah, okay, good point. And we do have a dividend, right? And last year, and probably will continue this dividend disputing to all the events of ECM Shanghai, you know, for near future. Then you talk about the lockup of the ECM USA, you know, for their share in China, Shanghai. I think in this moment, our still major business from Shanghai and ACM USA definitely can sell their share. However, you can see our status right now, we're keeping our share. The reason is that we do have a dividend and also ACM USA have the cash going on. And there's no reason to sell our precious share inside of China.

Sorry, David, just want to clarify why I say dividend. I mean the dividend for ACM USA shareholders, not the ACM Shanghai shareholders. Okay, okay.

So the dividend we got from ACM Shanghai and will come to ACM USA. So this money, I think, will be reinvested into our marketing cell and also potential supporting and R&D for all the purposes. So at this moment, we believe the cash we got from dividend, the best interest for the investor USA is reinvest back to the business instead of just distribute dividend to their ACM USA investor. So we think that will be our major problems for the dividends usage. Mark, anything you want to add on that?

Yeah, I mean, Charles, I think it's an interesting question, but echoing what David says, we don't have any plans to pay a dividend from the U.S.

Thank you.

Thank you for the questions. One moment for the next question.

Our next question comes from the line of Mark Miller from the Benchmark Company. Please go ahead.

Let me say congratulations. Another very good quarter. And, again, you're probably the greatest growth stock, at least in my universe, and hopefully the investors will respond to that more aggressively in the future. In terms of your evals going on, especially outside of China, can you give a little more color in terms of evals, in terms of what type tools and what countries?

Okay, sure, Mark. at this moment and we do have our Canadian tool right as being go to us customer we do have a two type of tool why is there a SAP you know cleaning and another one is really backside and also fiber clean right in the same customer and recent was receiving another order from quota developer from us you know advanced packaging house and also we do have also another evaluation tool or SPO tool from the European customer in the evaluation. Also, meanwhile, we're heavily engaged with the Korean customer for copper plating, right, and tool. That's in the demo status. And, you know, hopefully, quickly, we can ship to their production for their final production evaluation. And also, we're talking with a few customers in Singapore and also, you know, in the U.S. and talk about our new cleaning capability, including TiVo and Tahoe, and also our, I want to say that is our supercritical CO2, as really we design for advanced technology evaluation, especially for 3D cleaning and also for acid cleaning. So that kind of also powerful cleaning tool, we're engaging with multiple customers right now.

Okay, in terms of your margin guidance, and margins have been certainly above the target range, you're guiding the margins being at the top of the guiding range. I assume that implies that your backlog, the margins of the tools in the backlog are at or above your target range.

Mark, you want to answer that?

That's right, Mark. I mean, you know, we mentioned that, you know, for the year, our gross margins would be above the normal 40 to 45% range, really because they were, you know, stronger margins. above the range for the first half of the year. And the rest of the year, we're expecting them to be at the upper end of our range. And so, yeah, I mean, our visibility on the margin profile for the end of the year is pretty good.

Thank you. Thank you for the questions. Once again, to ask questions, please press star 11 and wait for a name to be announced. One moment for the next questions. Next question comes from the line of Robert McKay from blue Lotus. Please go ahead.

Hey there. Thanks for taking my question. Am I coming in clearly? Yes. Robert, please. Oh, great. Okay, great. Uh, so I have a bit of a touchy question and, uh, but I know, I think it might be important is I was wondering if we've evaluated, uh, if there's any, uh, you know, there's been some discussion regarding some further restriction, uh, on, you know, Chinese companies. I was wondering if there might be, uh, if we've evaluated, you know, what kind of impact there might be if that unfortunately does come through and, you know, what our thoughts are on that, if there's anything we can talk about in that respect.

You're talking about this new rule for the export control?

Is that what you mean?

Yes, exactly.

Okay. Well, I mean, again, right, we just heard some, you know, real market, you know, rumor. Well, carefully, you know, I should say, you know, Watch out the new rule come out and where ACM definitely will follow the law, right? And the USA law and follow Chinese law with the international business. And, you know, we're carefully in this moment, no speculator. But I will say that if something come out is only not only ACM, right? A lot of US company got impacted too. So we just want to watch out what's going on.

To you know, do whatever adjustment based on a new regulatory come out That I would add to that is You know, we take a deep step back and we look at the China WFE You know, I think David's view our view on WFE in China is is that pretty stable for this year and uh and and uh you know for the years to come that uh you know the country will continue to invest um in uh in their production capacity uh and so you know we'll we'll like david mentioned we'll monitor the uh the the any of the new regulations of course we'll follow the rules uh but you know we generally anticipate um wfe in china to remain pretty stable i've got it thanks thanks for the clarity uh in terms of our supply chain then is there any

you know, potential impact to supply chain if there is any of these rumors do come to fruition?

Supply chain at this moment, I see they're, you know, pretty stable right now, right? Obviously, we're looking for all different kind of supply chain, you know, and for mature product, we still buy U.S. components, but for whatever, the most notes we have using, you know, non-U.S. parts. And this moment, we're also looking for the multiple supply chain, both, you know, in other countries, also inside of China. We also qualify the local player of the components. So we definitely have, you know, a plan to secure our supply chain. And when any, you know, a new regulatory come out, we can, you know, quickly switch into other alternative choice of the supply chain.

Okay. Got it. That makes a lot of sense. So you have some backups. That's very good to hear. And then I had one more question I think is related to the private offering that we announced in January. I think we were going to some private offering with our, with our Shanghai shares. I was just wondering if we have any updates in regards to the, into that private offering, if there's any progress on that front and when we get to hear more about it. Yeah.

Yes. Actually, you know, we're, we're in the process to the final formal application, right? But we know that the approving process in the second offering in China will take time. We estimate probably six, eight months, even longer. So our, you know, our permission probably we're expecting middle of next year, we might get it. And then within another one year of the permission we got, then we can, you know, probably see the second offering based on market situation. Now, obviously, I know we're expecting that time we're going to our PCBD and the track system and also furners, including our panel packaging tool, get in the market. So we're choosing the right time and the right pricing to raise our second fund.

Okay, that makes a lot of sense. Thanks. And then I had one more question. It was just about if we have any new products that we can look forward to in the second half of this year or in early 2025 that that we can think about, or should we just wait until the announcement?

Well, obviously, we announced already, right? I mean, this Q2, we announced two products already. So I want to say we'll continue exploring a new product, and obviously, like this panel, right, we announced two. We'll still work on the additional other type of the panel product for this year, and probably we're going to announce another new product when it gets ready. Meanwhile, I still say we're still major focus on our ECC, what they're doing right now, you know, cleaning, cover plating, furnace, especially the furnace ALD and track and the PCVD. So our new product probably still, you know, along this major technology and also the product. We're not going to develop other new, which is a complete new, more than this category I mentioned.

Got it. That's very clear. Thank you very much. And also great results. And sorry for the touchy questions, but thank you very much.

Thank you, Robert.

Thank you for the questions. Once again, to ask questions, please press star one.

There are no questions at this time. I would like to thank the committee for closing remarks.

Thank you, operator, and thank you all for participating on today's call and for your support. Before we close, Stephen is going to mention our upcoming investor relations events. Stephen, please.

Thanks, David. Before we conclude, I just want to give everyone a quick reminder on our upcoming investor conferences. On August 27th, we will present at Jeffrey Semiconductor IT Hardware and Communications Technology Summit at the Four Seasons Hotel in Chicago in the United States. On September 4th, we will present at Benchmark 2024 TMT Conference in New York City. Attendance at the conference is by invitation only. For interested investors, please contact your sales representatives to register and schedule one-on-one meetings with the management team. This concludes our call, and you may now disconnect. Bye-bye.