ACM Research, Inc.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the ACM Research Fiscal Fourth Quarter and Fiscal Year 2024 Earnings Conference Call. Currently, all participants are on a listen-only mode. Later, we will conduct a question-and-answer session. Instructors will find that time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now, I will now turn the call to Mr. Stephen Plale, Managing Director of the Blue Shirt Group. Stephen, please go ahead. Great.

Good day, everyone. Thank you for joining us to discuss fourth quarter and fiscal year 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's 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. Those risks are described under risk factors and elsewhere in ACM's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward-looking statements, which reflect ACM's opinions only as of the date of this call. ACM is not obliged to update you on any 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 on short-term investments. For our GAAP results and reconciliations between GAAP and non-GAAP amounts, you should refer to our earnings release, which is posted on the IR section of our website, and the slides 14 and 15. Also, unless otherwise noted, the following figures refer to the fourth quarter and full year of 2024, and comparisons are with the fourth quarter and full year of 2023. With that, I'll now turn the call over to David Wong.

Thanks Steven. Hello everyone and welcome to ACM Research fourth quarter and fiscal year 2024 earnings conference call. Before I review the results, I will address recent regulatory update from U.S. government. On December 2nd, the U.S. Department of Commerce added 140 companies to its entity list. Two of our subsidiaries, ACM Shanghai and ACM Korea, and other entity under their structure were added to the entity list. As we have noted, we are one of many that were added and we are not notified of any specific wrongdoing. To be clear, ACM Research, Inc., the U.S. company, we were founded in California in 1998. It is our subsidiary that were added to the entity list and not ACM Research, Inc. Move on. regarding the operation of ACM Shanghai in mainland China. The new regulation will make it difficult, if not impossible, to ACM Shanghai to obtain components from the U.S. On that note, we have been working to localize our supply chain for some time. Events of the past few years, including the U.S. restriction of 2022, have made it even more important for ACM Shanghai to localize its supply chain. Thus, we have reduced our US source components to just a small subset. And with our status on the end list, we are working quickly to complete the transition. Bottom line, we remain committed to support our customer and comply with all global regulations. We think the impact to our production is manageable and we do not expect a significant interruption of our business. Regarding our global customer outside of mainland China, the new Department of Commerce rule mainly restrict the U.S. export to ACM Shanghai and ACM Korea. They do not directly affect U.S. company buying tool from us. We are therefore confident we can continue our effort to expand our business to global customers. Now onto our business results. Please turn to slide three. I'm pleased with our fourth quarter results, which capped with a strong year. For the first quarter of 2024, we delivered $223 million in revenue, up 31%. For the 2024 fiscal year, we delivered $782 million in revenue of 40%. Gross margin was 49.8% for the first quarter and 50.4% for the full year. Operating profit increased 46% in the first quarter and 63% for the full year. We ended the year with $259 million of net cash and time deposits, compared to the $212 million at the end of 2023. Shipments for the first quarter was $264 million, up 88%. Shipments for the full year were $973 million, up 63%. We believe this strong growth reflects ACM's expanding market presence and the momentum gained from the new product cycle. Now I will discuss the key growth drivers, both for the market and specific to ACM research. Turn to slide four for our product, SAM. We now estimate our product portfolio address $18 billion global market opportunity. Our current business is primarily driven by three major product groups, cleaning, plating, and advanced packaging. We anticipate continual growth in this category and look to incremental revenue contributions from our newer products. starting with Tahoe, SPM, Furnace, followed by Track and PCVD. Third-party sources estimate that global semiconductor WFE grow by 4% in 2024 to $107 billion. Based on this global WFE, we now estimate that our product address a survey available market, or SEM, of about $18 billion in total. For mainland China WFE industry, Analysts estimate the market growth by 12% to $38 billion. Our growth rate, 40% revenue, and 63% shipping was much higher than China WFE growth. We attribute our stress to market share gain from the current product, new product cycle, and the new customer. We also had a good execution from our production and service teams. Our success started with our customer. Please turn to slide six. For 2024, we had four customers that individually accounted for 10% or more of our revenue. The Hua Hong Group was our top customer at 15% of the sales. SMIC was second at 14%. And 1TC and PXW were third and fourth at 12%. Now I will provide the detail on product presented to slide seven. Revenue from single wafer cleaning, town hall, and the semi-critical cleaning product growth 43% in the 2024, and represent 74% of the total revenue. Our growth was driven by a significant increase in ultra C, D, backside cleaning tool, and good growth from our SAF table tools. We also had a contribution from our Tahoe and Bevel Edge tool. Looking ahead in cleaning, we expect to see several significant product cycles, including high temperature SEM, Tahoe, and other tools from continued growth in mainland China. We offer a comprehensive top to bottom cleaning portfolio. We estimate the global total available market or 10 for the cleaning is close to 6.5 billion. And our product supports more than 90% of all cleaning process steps. If we take 6.5 billion, 10, and the ACM 579 million in cleaning revenue for 2024, it puts ACM global market share of cleaning at about 9%. We believe that our completed a portfolio of Canadian tools, including SAP, Thibault, Tahoe, Semicritical, SDM, Bevel Etcher, and others, put us in a strong position to take more share in China and the global market. Revenue from ECP, Furnace, and other technology grew 46% in 2024 and represented 90% of the total revenue. In the fourth quarter, the segment achieved a record quarterly revenue of more than $50 million, which will contribute to more than $150 million for the year. We continue to see momentum for our plating tool for both front-end and back-end applications. We are excited about the initial response to our new horizontal plating tool for panel-level packaging, where we believe our unique approach is opening the door to more global customers. In Q4, we announced that our thermal and plasma income ARD furnace tools have achieved product qualification to mainland China semiconductor customers. Chipmakers are increasingly relying on the presentation of the high-quality ultra-thin film with excellent step coverage. We believe ACM's proprietary ARD furnace design differentiate from the other suppliers and enable us to address challenges facing the advanced 3D structure manufacturing. Our furnace product cycle is also gaining traction with both memory and logic customers. Overall, we had 17 furnace customers in 2024, up from 9 at the end of 2023. We expect the revenue contribution from furnace to accelerator in 2025 versus a small amount for 2024. Revenue from advanced packages, which exclude ECP but include service and spare parts, grow 3% in 2024 and represent 7% of revenue. This category including a range of packaging tools, including coater, developer, scrubber, and wet etcher, and also service and spare parts. We believe ACM is one of the only companies that offer a full set of web tools, cover plating tool, and apology tool for advanced packaging. We had a new notable development for this category in 2024, including orders for the four wafer-level packaging tools, which are on track to ship to USA in the first half of 2025. And we announced three panel-level packaging tools, including vacuum flux cleaning tool for chiplet, horizontal plating tool, and the bevel edge tool, which we see as especially relevant for packaging of GPU and high bandwidth memory HDF. We are making good progress with our new track on the GCPT platform. Both of these products come with the ACM innovative and differentiated platform. design and allow for process flexibility and high throughput. We have a solid list of ongoing demonstration and evaluation for both TRAC and PECVD. For TRAC, we plan to deliver a 3mm WPH inline careful beta tool in the middle of 2025. We expect some initial revenue contribution in later 2025 with more in 2026 and beyond. Next, let me provide an update on our production facility. First, on Lingang, please turn to slide eight. In the first quarter of 2024, we had grand opening ceremonies for our Lingang production and R&D center. I'm pleased to report that we have begun initial operation and expect the site to play a key role in production development and efficiency. high-volume manufacturing. We expect most of our production to shift from our transom-leased facility to our company-owned in-ground facility by the end of Q2. We are proud of our 2,300 square meters plus 100 clean room, which we expect will accelerate our product development speed and in-house demonstration capability. Next, our Oregon facility, 3102 Slide 9. In October 2024, we complete the purchasing of our new 40,000 square foot Oregon facility. It includes a 5,200 square foot cleaning room, which will support advanced tool demonstration and R&D. The rest of this space will be for manufacturing for our global customers. We see this as a great opportunity to further expand our customer base in the U.S. Before I review our outlook, I want to share some thoughts regarding our ownership in ACM Shanghai's stock. We are very pleased by the success of ACM Shanghai team, which has now become a key supplier to the Asia semiconductor industry. ACM Shanghai has also proven to be a great source of capital to us in the form of a dividend. In 2023 and 2024, As a major shareholder of ACM Shanghai, we received dividend net of tax of $19.2 million and $28.5 million, respectively. And we expect the dividend to continue. In fact, ACM Shanghai has formally announced its intention to pay a dividend of 25% to 30% of net earnings over the next three years, subject to normal shareholder approval. We are using dividend to accelerate our global business development. ACM Shanghai stock, which is now traded at 6.3 billion market cap on the Shanghai stock market, is also a key strategic asset for us and our global shareholders. In fact, our 81.5% ownership is now worth about 5.2 billion, which is more than three times ACMR's current market cap. of $1.5 billion. This gives us some unique advantage. In 2021, ACM Shanghai raised $575 million in IPO, enabling us to scale our business and expand our product portfolio. ACM Shanghai is now in the process of another raising of up to $600 million to make the company to the next level. I will clarify a few points that might be helpful for the market to evaluate our options. Our three-year lockup on our ACM Shanghai stock expired last quarter, and we now have additional flexibility to sell shares. We're very comfortable that ACM can sell some share of ACM Shanghai stock and repatriate the cash back to US. The timing of any sale, of course, will depend on pricing, market condition, and our own cash needs and other factors. We believe a combination of ACM world-class technology and customer supporting and access to their substantial capital market make us unique position to become a world-class global WFC supplier. Now I will provide our outlook for the full year 2025. Please turn to slide 10. In early January, we introduced our 2025 revenue outlook in a range of 850 to 950 million. This implies 15% of year-over-year growth at the midpoint. We are re-irritating this outlook today. I'm pleased to announce today that we have adjust our gross margin target upwards. We now target a range of 42% to 48% versus the prior range of 40% to 45%. I'm proud of the strong growth our company has achieved since our foundation, our funding in California in 1998 and the establishment of ACM Shanghai in 2005. We have built a global competitive business. Our success has been built on innovation and differential technology, particularly in cleaning and electroplating, addressing evolving needs of semiconductor manufacturing. From this foundation, we have expanded our market reach and gained international traction while building strong partnership with a key industrial player. In China, ACM is recognized as a leader in advanced wafer cleaning and the front-end electroplating solution. and is preparing for new product ramp in the furnace, track, and the PCBD. Outside China, we are engaging with the multiple customer with the operation in US, Europe, and Korea, Taiwan, and Singapore. The global interest is a broader base across our entire product portfolio from the front end, the wafer fab, to the back end, the advanced packaging. including our innovative cleaning and plating offering for next-generation panel-level packaging. Now, let me turn the call over to the CFO, Mark, who will reveal detail of our fourth quarter result. Mark, please.