Q2 2021 ACM Research Inc Earnings Call
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Now I will turn the call over to Mr. Gary <unk>, managing director of Blue shirt group, Mr and you're fortunate.
Go ahead.
Thank you and good morning, everyone and good evening and China. Thank you for joining us on today's call to discuss second quarter 2021 results and.
And released the results after the U S market closed yesterday.
And this is available on our website as well as from Newswire services.
And so a supplemental slide deck posted to the investor portion of our website and will reference during our prepared remarks on the call with me today are our CEO, Dr. David Wang our CFO and Mark Mckechnie, and Lisa on the CFO of our operating subsidiary ACM Shanghai before we continue please turn to slide 2.
But let me remind you that remarks made during this call may include predictions estimates or other information that might be considered forward looking.
These forward looking statements represent Acm's current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results to differ materially. Those risks are described under risk factors and elsewhere in acm's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward looking statements, which reflect the ACM.
On the 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 loss relating to a change in fair value with from a financial liability and and unrealized gain on trading securities for our GAAP results and reconciliations between GAAP and non-GAAP amounts and you should refer to our earnings release, which is.
Posted on the IR section of our website with that let me now turn the call over to Doug.
And 1 will begin with slide 3 David.
Thank you Gary Good day, and and work on today's call.
We had another productive quarter with solid financial results, we delivered a record their revenue per shipment.
Was it good profitability.
Second quarter results reflect ACM growing customer base.
<unk> leadership <unk>.
Pending product line and increased production scale.
Revenue growth for mid and upper.
38% year over year.
Shipments.
2 million.
Hopper from 45 million and the second quarter of Tucson.
We did have a good balance of growth and profitability.
And with a 45 gross margin and $10 for operating margin.
And are committed.
To drive profitable growth as we increase our investment in R&D to drive innovation.
Further strengthening our existing product portfolio and growth.
Our addressable market with new product.
On the bottom line, we reported net.
Net income per diluted share compared with 29, <unk> and the same period last year.
We ended the quarter with 70 million of cash.
And with older smic's from market share or $31 million as of quarter and.
I will now discuss the recent operational highlights on slide 3.
First on.
Q2 revenue growth was.
Broader base driving by current and new products and current and new customers.
Our wet cleaning and other from and the process tools represent 85% on the total itself in Q2.
We've had a good their growth from our flagship SaaS product.
The incremental contribution from our semi critical to us.
Around packaging and other.
Yeah.
And their service and for Bell growth because every day commodity grew 15% and other cell versus about 3% last year.
Net growth of this group was driven by advanced packaging tools, including whether Azure steber developer and colder and a beta increase.
Service and spare parts business.
This first generation and semi critical and advanced packaging tool extra either on a revenue growth and further strengthening our position as the leading supplier in the China semiconductor industry and a higher mix thing.
However, partially dilute our gross margin, giving us the introduction stage with <unk>.
Enter this new market to.
To capture the strong demand from our China based customer and to deepen the moat that is really our flagship product from competitors.
And Canadian.
Our newer semi critical tool extra ACM flagship that tivo and cargo product for cover more than 80% of their total Canadian market opportunity.
Packaging on newer ECP AP product line and extending our current portfolio with a highly differentiated product.
Putting it altogether, we remain committed to our 40 and 45% corporate gross margin target.
As a part of our normal product management.
We expect the improvement in gross margin for our semi critical and advanced packages growth. This will come from tightening as feature content as we early model and beta a range of our shoe for customer evaluation and a cost reduction and later generation models. We also expand our cause.
Benefit from volume production.
And while gross modules.
And while our flagship Canadian product remained consistent with the past period, which we expect to continue.
ACM strategy is to enter a market with a demand differentiate products such as our flagship premium product, our ECP tools or the volume.
Further growth and other new innovative product.
This product allow us to win major customer and provided us the profits who found the future product development.
It also allows us to enter middle range, all lower and product that may come with a lower margin.
Early stage, but allow us to capture a much larger market opportunity as we scale that business.
We remain committed to our gross margin target would you wait and believe we can achieve by financing and continuous innovation and and high and with the planned product management cost engineering and production scale.
Let's turn to slide 5 and you've got ACM growing customer base.
We have a 5 major zone and a customer Inc.
Foundry.
<unk> NAND and.
On DRAM and.
In 2021, Spector, our home group and <unk> to remain our top 2 customers.
We expect good growth from them this year.
Ever each may represent a lower percentage of total revenue as we expect to see significant growth from other customers. We also expect that contribution from SMIC and.
And the Hynix and fixed empty.
And importantly, we resubmitted.
And with new orders for several tours from SMS.
For the second half of the year due.
And their past 12, 18 months, our team has done a great job.
Broader broadening ACM tool content.
And as MSC, including a full range of Canadian products and I'll use maybe force, we're getting indication of higher demand for SMIC took on hernia.
But it is still early as MSC demand is subject to further licensing progress by them with other U S equipment supplier.
We recently added a member of a new China based semiconductor customers, who manufacturer palm analog and Cmos image sensor compound semiconductor and other devices.
This customer, including 4 of the 5 tier 2 player and a handful of new tier 3 and other customers.
Although it is a relative small that's growth new tier 2 and tier 3 customer as a whole will contribute 10% more true.
And any 1 setting.
As newer customer investing in new capacity for supporting growth.
E L T and EV technology.
ACM is good or penetration with a range of tool including semi.
Semi critical cleaning and <unk>.
And the phone those products.
Our third customer growth.
He is advanced packaging and other processing.
And the other processing customers top customer half, including Jack have total mappers and their wafer works in Q1, we discuss the order from 2 advanced.
Advanced packaging house, and we now expect to add more customer as a moving through the year collectively we expect significant growth from the group driving and by increased industrial focus on advanced packaging.
The penetration on the new customers and a new product cycle for Asia, and UCP AP Force.
Looking ahead, we believe that our current customer base represents a significant opportunity for ACM.
Most of this customer early on middle aged middle stage of and a multiyear capacity expansions.
We remain committed to further broadening our customer base as we believe every major stemming from a manufacturer and benefitted from on technology.
Please turn to slide 6.
We deliver a total shipment of 82 million and the second quarter, a new record and the company's history Shim.
<unk> and Q2 were 8.8 million and higher than revenue.
That difference largely represent Sherman, our first true awaiting customer acceptance and we view this as a positive indicator.
<unk> demand for new products.
And from new customers.
This level of shipments is a testament to ACM production team and our trends are factory.
We are getting capacity from these strong customer demand.
Generally tightening supply chain environment.
Our unit cost high performance factory and the strength of our manufacturing team are healthy up manager near term supply chain.
<unk> strength does give us covenants and all.
Our ability to navigate the environment.
During the second half of this year.
We plan to begin production and a second the building of our China saw factory and the third quarter of this year.
<unk> increased our capacity plans and now targeted run rate.
Because they do and Q4 of this year that represent more than 500 million on annualized production capacity.
Upper from $350 million at the beginning of this year, we expect to further increase production capacity in 2020.
Our long term plan is to build a production and R&D center and an income.
On region of Shanghai.
There are 1 million square feet on the floor space will enable us to increase our annual production capacity to $1.5 billion.
U S dollar.
We completed additional architecture and design work and the second quarter with initial production now.
In the beginning of 2023.
Please turn to slide 7.
We continue to invest in new products to broaden our offering today I'm pleased to announce <unk> etch and extension to our weather product line.
This product using our wet etch and methods to remove dielectric and metal and organic material.
Loans as well as content on the waiver ACH.
<unk> edge approach minimize impact of etch condemnation on laser process steps and.
And.
Improving manufacturing yields.
The babble agile product leverage ACM wet processing expertise to deliver performance benefit compared with July approaches.
And the consumer less.
<unk> chemical and support a broader range of device type and process that <unk>.
Including <unk>.
DRAM and advanced logic process.
We expect to ship our first tool for high volume manufacturing from China based largely on manufactured this quarter.
Additionally, with ACM proprietary technology.
This new battle edge product kerchief, more accurate and efficient wafer assembly and Amit.
This will enable precise pavel etch and income product yields and and wafer throughput.
In addition, we are currently developing advanced technology to deepen our DD market.
Position, and Clinique, which we will and more products to our portfolio in 2000 and price.
We remain bullish Inc. Our ECB product line.
And from and smaller geometry require advanced <unk> Richard.
Meanwhile, backend advanced packaging and becoming more important as the industrial it looks for packaging innovation to drive a higher.
Higher performance as industrial moving beyond Moore's law.
All UCT product line indicate ECP map upfront and tool for damaging copper.
Interconnection the ECT TSV for who are sitting on via <unk>.
So far from and and ECB AP for advanced packaging.
We believe the total global market for UCP, where travel from.
$5 million last year too.
2 up to $1.5 billion and the coming years.
All right good enough.
Revenue and the second quarter with deliver 3 first tool from 3 customers.
We expect to deliver a higher volume of ECP tools and the second quarter second half this year.
With a good revenue contribution from the Peter shipment in Q3 until fall.
We also continue to see strong and true for ultra.
And furnace joining profit pool portfolio.
We delivered several first tool, including the over that non adult party CBD and the first half and expect to deliver additional units as we progress through the year.
We remain on track to add their high temperature oxidation annealing affordability.
Our front on the product line.
Third quarter of Tucson, and 21.
Building on that.
The next major development and our furnace roadmap is true is a patch atomic layer deposition or <unk> deposits.
We view this as a most of the challenging and the promising product for advanced manufacturing nodes, we expect from those product cycle to become more meaningful.
In 2022 timeframe.
We are making that could even the R&D investment in 2 major new product categories to achieve our goal of our company. Our total addressable market from 5 billion today to more than $10 billion.
We continue to bring and pop engineered entertainment and to support this program and are confident our team will deliver products and move forward with customer evaluations on our first product line and the first half on next year and.
And the second and proud on line and the second half of 2022nd.
I am happy to report, we made good progress with a potential U S and Taiwan based customers since our last call. Despite the Kobe related travel restrictions. Our team is heavily engaged and business development. We are confident that we can secure orders.
From at least 1 new <unk>.
Major firstly on global semiconductor manufacturers in 2021.
Before I provide our updated 2020 on outlook, let's discuss the status on the star market IPO of ACM Shanghai.
We continue to make good progress on June 10, 2 company won the Shanghai Stock Exchange and commission from the other ACM Shanghai's applications.
The illustration voices star market IPO for China Securities Regulatory Commission, DSO RFP moving up to have a closer towards our goal.
We are hopeful that the fifth IFC approves and.
Complete our registration suit.
When we received <unk> approval, we estimate that the issue.
Process will take on another 1 to 2 months keeping in mind that the timing is subject to numerous.
Factors.
ACM Shanghai's control, we are confident that our eventual star market is being combined with our non-GAAP. Obviously can provide a strong foundation to accelerate our mission to become a major global player in the semiconductor equipment industry.
Now, let's move to our 2000.
<unk> outlook on slide 8.
Our guidance reflects optimism about our growth opportunity of Tucson, and you want.
And on our strong results through the second quarter, and and improved visibility for demand and our supply chain through year end. We have reached for the full year, we now expect our revenue to ETP.
And plenty of 5 million and 240 million on.
From their private range of $205 million to 2 and a $30 million. The revised revenue range represents 48% annual growth and <unk>.
Our updated outlook for 2021 is based on several key assumptions.
First the global COVID-19 situation continues to improve.
Net.
Stability and U S China trade policy.
Third a range of spending scenario for their production ramp up key customers for <unk>.
<unk> and the trajectory of the DRAM recovery, and finally, a range or a timing of customer acceptance a first tool.
Our results and outlook demonstrate the successful execution of our strategy.
Our strong growth and supporting additional R&D spending on new products, we're building, our global sales and marketing and resource to penetrate a new customer a new region and we are scaling and production capacity to support our long term growth plan and our mission to become a major and clinical supply for the global chemicals.
The other industry remains on track to.
To conclude.
I would like to thank our employees for their hard work and dedication.
And also under thank our customer partners and shareholders for their continued support and confidence and ACM research I will now turn the call over to Marc to discuss the financial results and a more detail Mark please.
Thank you David and good day, everyone.
And solid financial results and the second quarter, unless I note, otherwise I will refer to non-GAAP financial measures, which exclude stock based compensation and unrealized gain and trading securities.
A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in our earnings release.
Now on the second quarter shown on slide 9.
Revenue was $53.9 million up 37, 9% for single wafer cleaning tools, which includes SaaS tebo and Tahoe and our semi critical cleaning was $45.5 million.
Up 36, 4% and $33.3 million.
We had no revenue from ECP strength or other technologies during the second quarter.
David noted however, we delivered 3 first tools and the quarter and we expect more revenue contribution and the back half of the year.
Revenue for advanced packaging.
Excluding ECP services, and spares and $8.4 million up from $1.2 million and 2020.
Total shipments were $82 million versus $45 million and the second quarter of 2020 and $74 million and the first quarter of 2021.
This includes deliveries for revenue and the quarter.
And deliveries assistance awaiting customer acceptance for potential revenue in future quarters, which represents another quarter of record steel shipments and a great accomplishment by our production team given industry wide and supply constraints.
Gross margin was 45% versus 49, 7%. This was at the lower end of our normal mix expectation range of 40% to 45% the.
The decrease in gross margin as David mentioned was due in large part to product mix. We expect gross margin continue to vary on a quarterly basis due to a variety of factors, including product mix and manufacturing utilization.
Operating expenses were $60.1 million versus $11.2 million, the increase and operating expenses reflected higher R&D on new products and.
And in U S sales team and legal costs related to our U S civil suits and the China Star market IPO.
R&D expenses grew by 52% to $7.7 million or 14, 2% of sales versus 5.5 million from 12, 9% of sales last year.
The increased R&D intensity reflects acm's commitment to new products and innovation, we expect to continue to increase our R&D spending and 2022.
Operating income was $5.7 million down from $8.2 million.
Operating margin was 10, 5% versus 21%.
Unrealized gain on trading securities related to change and the market value of our SMS and investments was $3.8 million and the second quarter of 2021.
And we exclude this noncash items from our non-GAAP results.
<unk> expense was $15000 versus <unk>.
And the year ago period.
Net income attributable to ACM research was $4.1 million versus $6.2 million and the year ago period.
Net income per diluted share was <unk> 19.
Compared to 2009, Inc.
Q2 and 2020.
Tax items and the effects of foreign exchange fluctuations on operating results provided a net headwind of $3 million or a penny per share and the first and the second quarter of 2021 versus a net headwind and $9 million on <unk> per share and the <unk>.
Second quarter of 2020 and.
I'll now review selected balance sheet items, our cash balance was $70.2 million at the end of the second quarter versus $78.8 million at the end of the first quarter and.
In addition to the cash balance we also had a trading securities and $31.3 million related to our estimates see investments. This includes a significant unrealized gain from our original purchase price.
Inventory was $136.9 million at quarter end up by $33.6 million from the prior quarter.
On quarter increase was driven by 2 items first finished goods inventory grew by $16.8 million to $64 million.
And this represents first tools that have been delivered to customers for evaluation and are carried on our balance sheet and cost cutting potential customer acceptance and the second item is work and process and raw materials, which in total grew by $16.8 million from the prior quarter.
This was due to purchases to support shipment growth expected for the remainder of the year.
Short term borrowings at quarter and were $22.1 million down from $23.5 million at the end of the first quarter long term borrowings were $18.7 million up $1.3 million from the first quarter.
Cash flow used by operations was approximately $10 million for the second quarter, but it was slightly positive for the first half of the year.
From 2021, our base case plan for capital spending is about $15 million. This includes $2.8 million already spent through the first half of the year. Our 2021 investments will be primarily focused on capacity increases and our transfer of factories investments to support our R&D programs and planning and some initial spending on me.
No.
And so we continue to execute on our strategy.
Providing we're participating and the growth of major new IC Fabs.
Ramping production, and we're and developing and delivering new products to a growing list of customers, we're positive on our opportunities and China and expansion outside of China and remain committed to achieving our mission to become a major player and the semiconductor equipment market.
And now open the call for any questions that you may have operator. Please go ahead.
Thank you at this time I would like to take any questions and we conference today and as a reminder to ask a question you will need to press Star then the number 1 on your telephone keypad.
Again, Please press star 1 to ask a question.
And we draw your request you may press the pound or.
We'll pause for a moment to compile the Q&A line.
Paul.
And we have our first question comes from the line of Patrick <unk> from.
From Stifel. Your line is open. Please go ahead.
Thank you very much can.
Rapidly rides outlook.
And maybe David or Mark.
And the.
Equipment industry has gone through a lot of supply chain constraints over the past quarter, giving you a result.
And look it looks like you've been through it very well.
And you just quantitatively give a little bit of color.
You know whether youre seeing any supply constraints on your supply chain is probably a lot different than some of.
My American companies, but I was just wondering how you source supply and supply chain constraints during the quarter or if any going forward.
Okay. Thank you.
And actually because the market and moving that.
The other type is tight and bank. So we do see some long lead and icon.
Good day.
The longer.
So on the way we manage that is based on our projections fell and there have a year and even beyond and then we're looking for the early ordering early purchases range and there is the non leaving either so we do see some.
<unk> got a longer which impact on us however.
Got it pretty much good control.
And there will continue to see that other.
Hopefully this issue and getting and this moment and we feel comfortable about the on revenue and this year and actually also what was the comment about also on shipment this year too.
Great. That's helpful, maybe and as my follow up question for Mark.
Gross margin between the 40% to 45% range.
A lot of moving pieces every quarter.
And we look at the height.
Relative to income.
And for non tools to customers.
And how do we balance that.
Versus the overall I guess normal operating too because if you get a quarter.
Multiple crews that crude.
And pressure on gross margin.
That range what are some of the debt.
Taking to try and ensure that the gross margin.
And you've stated range given the number.
And the valuation is.
And in the field.
Great.
And maybe David if you wanted to add to it.
And with Patrick.
Right.
It's an art and a science certainly I mean, right now demand is quite strong and so we're focused on and on our production.
And we do what we can of course to balance our revenue and earnings versus our shipments on our first tool shipment items.
And.
Balance of the gross margin, but many times really it's weak.
Our customers have strong demand and we do what we can to support our customers.
So.
We are it's very important for us.
<unk> focus on innovation at the high and but then we're also moving to deliver some.
Rounding out the product market to create a moat between us and our competition and so we.
We do feel very comfortable debt, we can balance all the items to delivered better gross margins and the range and the 40% to 45% range David.
David do you want to add anything to that.
Yeah, actually you mentioned quite a bit of goods and I want to add or something that really at this moment.
And from Us on together balance.
Part of the portfolio rate and you'll see that either you know say a year ago and most of our shipment to a single wafer clean and those are normally higher module and other module still keeping though changing.
As we introduce the semi critical upon us and also Moreover, the balance the tool.
And the packaging and their study and lower margin product come out right. So when you combine together that's kind of a module you'll see that dilution on however, as we continue mature and Paula you mean semi critical tool and also control on costs from manufacturing.
Gear production plants, where additional innovation partner get and CPE continue mature cell and also on the Bronco and front of come out and so let's get up and has continued and so we believe this moment.
And tried to also secure position and also specialty keeping and competitor getting into our flagship product is the walk through again.
Many critical all other relative low profit product.
However, with confidence with also future innovation and keep going on even add a new Canadian function more on renewal feature even to our community major partner, then where C band and the other margin eventually and.
Got it back and it was still covenant from 40% to 45% and our continued.
Continued innovation and the new property available and that's what helping our.
Margin keep going and.
And the range.
Great. Thank you very much.
Our next question. Thank you from the line of Ken Bolton from Needham and company. Your line is open. Please go ahead.
On the ETP sort of outlook and and hoping you might be able to spend just a little bit more time.
Talking about the ramp that you expect for ETP.
Maybe if you could give us a sense how many tools you have ECP tools, you have weighted customer acceptance and any thoughts whether ETP might be able to get to 10% of revenue next year as it ramps and customers accept.
Tools.
Okay.
Okay, and you look at it used.
And it can be a partner and we've got actually a major.
I should say 3 major categories, let me clear that wind is a damaging process, we call and UCB and maybe.
Matt and it's taken on line would call the UCB on <unk> leap and major for the deal we're typically operating number.
And 3 is actually our advanced packaging tool would you would deliver.
And for the packaging and all and dealer.
All other other months pregnant requirement number force we come was actually another.
Copper plating and Florida.
And compound semiconductor and relative small size 6 inch and mostly eventually and you spent 8 inch so is that all product portfolio and expanding.
This year, we see a quite a bit of a human and so the new customer.
Looking for actually probably plenty plus total tool and will deliver.
Total again this year and.
And some of them on a record revenue on most of them I mean as you say is how the channel.
But there are some other than what the technical connection.
But again, obviously next year will.
And what become a repeat order and then that there'll be other bigger.
And so.
Booster on revenue.
Called the product and on.
Sure.
Our portfolio of next year.
So it sounds like if you got 20 million plus of tools delivered this year.
Repeat on a continuum.
And thank you.
And there's another $20 million 20 tool member non member rules Wow, Okay, Yeah got it and number right and I know that every day.
And that's what yeah, Okay got it.
So we can definitely get the 10% of revenue pretty quickly got it. Thank you David and then Mark just your thoughts.
On Opex I know you guys are in creek, and the R&D to invest and all the new products, but as we look at the quarterly progression of Opex can you give us any sense as to what kind of increases you might expect into Q3 and.
Thoughts, whether opex would increase further in Q4, whether it would fall.
Follow normal seasonality and and maybe ticked down a little bit and the fourth quarter. Thank you.
Yeah, I mean, we don't we don't give a lot of detail on on.
And on your Opex, we tend to guide on the on the top line, but for.
For the year.
We think the Opex would be 28.29 percentage of sales.
And a kind of a good mix of R&D and <unk>.
<unk> talked about.
Sales and marketing and.
And then followed by G&A.
And so you don't expect any any kind of.
And the significant changes and the back half of the year, but Tim.
So you should get a little leverage and the back half of the year on year on the overall.
Revenue growth.
Got it thank you.
Our next question comes from the line of Krish Shankar from Cowen. Your line is open. Please go ahead.
Yeah, Hi, Thanks for taking my question I had 2 of them close to 1.
David on the debt.
And that's using debt with chemistry for the main competent and because it seems like most of the new drives and I'm just trying to figure out who the columns on on the bedroom.
And then I have a follow up.
Great.
And I actually like you said and so.
And I should say and launch probably tell you you're right a lot of the babble and she was buying a giant deposits would.
What should I should say.
Pretty good their performance however.
Johan.
Other and political remaining on that.
Interest rates right and day for.
And for that a portion of it and how do we yoga and a clean again.
Wet process and you.
Hedging tool you on.
Jonathan wet etch and buses.
Bad debt profile and also give you clean and share result, almost no particle on top that's really helping reduce the film on the political contamination and edge to edge die.
For all case actually also innovative methods.
And we have a very precisely alignment to ensure the center on tour.
Texas and the wafer and.
And so therefore, we can reach and much better centering performance therefore, our reach and much better you know control for the babble and Christie.
Well, leading to a better yield and Thats all product.
Got it got it very helpful and then just.
Follow up on the <unk>.
Thanks for the color on the different drivers for that are complete.
I'm just kind of curious David you mentioned, the Directv and leading market could triple to 1 and I've been even in the next few years.
I am just on the different drivers like couple of deals on the scene and compound semi but it almost seems like for the last few decades this market of Unbilled and $5 billion.
Oh, the 2 puts up pretty high and the ASP is a pretty low so I'm kind of curious.
What gets you to a tripling and market price to $1 billion is it just these 4 <unk>.
Drivers you spoke about other than anything else going on and the ASP increases are true.
Production happening thank you.
Yeah, Okay, great I think the debate and driving force is still from I should say, probably DSD and also the 3 day packaging right, obviously balance being processed.
It has been negative very stable, obviously with more volume more ways for people to talk about that as a convenient great and now you and Chris and then more of the JV. We see here is the.
And I get all other you know 3 day packaging now they're talking about pillar from.
And this decline.
Can we get to 200 and micron.
Total magazine.
And just kind of have a hydro pillar, you'll need a more of a positive time into plaguing the sneaker pillar.
So also they are talking about 2.5 D and 3 D. So there is a much more 3 D application come out and for the packaging.
And obviously you know not only for the balance there I called application even people today and consider even plenty of the non all you know 40 nano a day or tried to combine with the advanced packaging technology that further enhance the performance so with that and in mind, we think that.
Mark can get a quote and then people for January of this year property and whether it reaches 700 minute as a total and Tennessee and the packaging altogether. So so we're very feed other growing opportunity and again because.
Driving by the host I'm always law right people focused on there on a lot of other bulk package approach.
Very helpful. Thanks, a lot David Thank you very much.
Thank you.
Our next question comes from the line of Charlie Chan from Morgan Stanley. Your line is open. Please go ahead.
Thanks for taking my question and good yourself.
And David Good evening and Denmark.
Good morning.
And my first question is about.
The lead time between you and Shimon Tahira.
Total revenue so maybe mark can you please remind us what is the lead time.
Yes.
Moving on to the FERC muck and at the moment I should say on average is probably around 6 months already.
And every day from.
So other or something maybe longer.
It's about a 2 month longer than our previous full.
4 month time line so that's the.
And now.
And hopefully as time goes down.
Looking to shorten the other product cycle and at the moment is do I should say is supply and then leaving alone leading item and taken a much longer time to getting him. That's a major reason.
Okay.
Okay. Thanks, Yeah, because I ask because the U.
You took up all your cash.
And your annualized net production right. So if I look at.
Second quarter, you're assuming is that both on 80 million.
U S dollars and the full year.
Production and he's exactly that's true.
And you have 50 million U S dollars so on.
And thinking that when you you.
Tried to expand your annualized.
And do a 500 meter and U S dollars and my question and say when well company. The revenue scale will keep on $500 million.
Wow, that's a tough question.
Again, right I mean, as Jim and the member with normally to now there are real and corridor.
Our final radius and almost end of the year right. So all I can tell you this year, all humans and marginally higher than last year.
And I should actually remember I still say it might be and waiting for on Q4 earnings release.
By then.
As I mentioned and finding me and other revenue on shipment, Brian and I'll be careful.
And so you know if there's a shipment.
Probably easy for rich right hopefully within next year other revenue wise, we're still you know based on what he was saying because a lot of other new product and new customer Rev recognition take time right. So.
Again, I kind of see that a lot of shouldn't go down by the revenue wise.
And we'll give you a property by early next year, then we see more visibility on what is our.
Sales and.
All of the next year.
Your next question comes from the line of Donnie Teng from Nomura Securities. Your line is open. Please go ahead.
Thank you David and <unk> for taking my question on my question is related to customers right. So.
And your prepared remarks, you mentioned about that.
You recently received new orders from several tools false Inc.
And second half of the year right. So I'm just wondering.
Yes.
And if there any approval granted.
By snakes U S suppliers, so that they can start to you know.
Q and more.
Equipment from from price and research as well or is there and other reason behind.
And for another customer and like 1 P C rifle.
I think what and Pcs roaming Aldo.
Phase 1 and capacity expansion, maybe by the end of this year or maybe sometime next year. So.
Just wondering if you could kind of give us some update on and maybe 1 way or 1 Tc saw the potential phase II capacity expansion.
This is my first question.
Okay.
Okay, well and.
Again range regarding licensing thing is a lot of a different information flow and a market rate and with the C zone.
Anyway.
And the.
Same player in this industry it is bad because the light blue and.
And we look for the entire tool on a big tool and also we heard some even and component of the cost component supplier. They also get the license to right and I'll come on maybe full year onetime license. So again, we see the other.
And I called that attention got released.
And again I don't know all of this the total product and and somebody is going and by how much percentage and again, how much did not again, so that information and I really cannot comment.
And as I I heard so far whereas on the suite.
But however, we do have the indication and they're trying to expansion and their demand their customer it really demand and our capacity right. So next year, we do have are.
And expanding plan.
And then going into next year price right.
Right. So so let's say it probably is up and the timing and go reach this year and also maybe Q3, we're going to see more clear picture on that.
Regarding <unk> as we know there.
The line factory, almost a flaw occupying right and by the by capacity and product and this year. The other first faithful and fab is fully loaded.
And then.
And we're looking at their building and we just say what day as they hit right and all of that.
Caliber what is confidential and so you've been looking at outside of the beauty. There is the next 1 and that and the process. So you know by the other ability second ability and right now, we're probably going to say and probably end of this year. They can finish the other construction and then the.
And again, we're as a major supplier with vaccines.
And as construction issue they are expanding their second and fat.
And you heard that or they will make us successful 1.8 of their manufacturing.
Manufacturing right so with their technology.
<unk> developed a very natural thinking maybe continue expanding their 128 layer on mass production and obviously this is a racing game. We're also expecting to go into even 1 time, when 98 or even more of later on.
R&D for the coming year. So 1 do you see as a very good customer for us and we have a very good relation and also we're expanding our product portfolio and not draconian crude and product and we're expanding also other like copper plating and also other photos product eventual getting into there.
On the there why don't you see also or the new on the balance requirement.
Especially for the 1.2 and 25 liter and Bob we're doing very good or.
I call the planning and to improving all product we have today to make sure. We can meet their requirements right 2 year 3 of them now and I'm, probably not kind of a 300 day or even more so where we're working very close and to give that joined develop our new product and to meet their future requirements.
I have 1 follow up I'll sneak so.
When you say that do you received new orders from some Inc, and <unk>.
And therefore like Shanghai.
Fab from most of our French and I sat on it for like Beijing, and more mature nodes like 28 nanometer.
Yes, we got actually from Beijing, and then mature nodes.
And also I would say that the expansion plan and as I mentioned and they their compound and also there you know Beijing and most of that happened.
Ladies and didn't right that's the other way from silver.
Okay.
And my second question and you spoke before.
And maybe long longer term business expansion and right. So I think based on your sales scale right. Before you consider you have maybe like 80 personnel and sales roughly from wafer cleaning tools.
And I guess, he probably will translate into like at least more than 10 per singles market share in China already in terms of from wafer cleaning tool. So I think Paul you are the biggest.
Already the biggest 1 day and to continue expanding market share and China.
And that's the great but.
I think that kind of on market share has been pretty high right. So.
You need to spend to more new product portfolio and so you just mentioned like you see P F and its packaging.
Et cetera.
But on the other hand previously that you.
And also trying to penetrating into overseas.
Leading semiconductor customers.
I'm, just wondering which targets.
On the priority.
And now and.
Uh huh.
Could you kindly give us some update on <unk>.
Your expansion and the overall.
Overseas market. Thank you.
Great. Thanks.
Okay I should say both are important both of the margin Chinese auto and and also outside China and important and actually our long term goal and I think even with the long term goal. We are trying to make our revenue free people are saying come from you know.
China market and 50% from outside China market right and that's why we have activity.
Actual higher or building a strong team and.
And on the U S to approaching and a leading cause of the U S. Also in house our team.
And 2 right and plus recent wasn't will further enhance our sales team in Europe.
And believe our core proprietary technology like a SaaS and a table for 3 D cleaning and without damaging and also a powerful product and always.
And I call it a select us eating and projects.
And there also and we I should state and we also add additional new function new requirement and for.
Are there further strengthening our Canadian border right and the Mt.
And those 2 so with all the innovation and the hand, we have tried to first demonstrate and probably either China and Korea market and we believe our product whether eventually.
And Apache to all major countries.
And award the only be day.
Every key customer and then.
Either past technology, right and as I said again on.
And our proprietary technology and there is a real unique approach, we're providing and with all the benefit. We're seeing are you finished your product will get into their market I'll say, China, right and we're very confident and and we see that is big and movement and also duty a zone.
Other times in the U S. So with Devin you want to participate bather growth market and.
And the U S and also obviously, because it's either agree and market.
And the Taiwan and.
And also you know.
And there are potential Navy if on the App in New York right and people talk about it too so as ACM per day, really where again equal.
Important and even revenue on major come from mainland China right. Now however, we do see our future growth and also will come from outside China.
And I have a follow up price, so because Christmas day impression and it's like you put more focus on expanding overseas customers, but in past few quarters and he's like.
It looks like our new products or new and Cleveland expansion to be.
Faster than expected so we put more emphasis there.
I'm just wondering is this kind of situation.
Correct.
Correct.
Great way to say or a desktop and we all.
Our schedule.
Qualification on schedule with the overseas cost and most continuing to be postponed.
Well again range I'd say, we're working closely.
And again, that's another high share the final mature not and find them until they yet, but again I think we're making progress right and when a tiny and reaching them with announced that this morning.
And I said that we're very very working closely with the customer.
Okay.
Sorry.
Moving on to the next question please.
And I would like to remind everyone. If you wish to ask a question. Please press star 1 you'll know limit questions to 1 per participant or other questions to be addressed.
Our next question comes from the line of Channel and Siang from Credit Suisse. Your line is open. Please go ahead.
Yeah.
Okay. Thank you.
Sure.
First on color on sneak in 1 piece there and can you.
And they thought they above 6 empty because I'm just curious if it has.
Been doing pretty well with all the other major guys in China.
Thank god that business a little bit.
Yes.
Thank you.
Yeah actually.
We do see that or even the take up rate and probably a theater and 2 location lines of Aegean and why the whole thing right and again and we're working closely with them.
And I see that there are.
Some.
From a court order already C D and from Beijing, and the Beijing, New factory too.
I know they have a bigger 40, K expansion rate and the other that don't keep it going and and <unk>.
And a partial release the other order.
And we're saying it property and most of them happen next year, but there continue and improving and technology Inc.
Moving on capacity.
So is it right and we're already working very close with them to our Canadian products and also on Cabo Brady.
And there are also further tried to and are working with them together expanding furnace bottom right and so there are there are.
Production 92 for the evaluation so sales to.
And the customer and hopefully eventually they become top of customer for us and coming here soon right. So that's our effort.
They're they're here to to win the customer.
And 6 empty.
Thank you Debbie.
Our next question comes from the line of C. J just Silva from Roth Capital. Your line is open. Please go ahead.
Hi, David Hi, Mark Congrats on the progress here and.
And on the global customer I know, you said you're going to ship.
And calendar year 'twenty, 1 and since you have 6 months leads I guess the other visibility there just trying understand if this is a.
<unk> volume or a pilot volume is it SaaS T Bo or back and advanced trailing node those kind of that.
And that kind of color would help thanks.
Wow and I really couldn't really isn't on any product right on.
So the EBITDA control, even and not allow I'll talk about which bought on you know and thereby but anyway, when I got to say that probably the Canadian oil and.
And you know.
It won't be the evaluation tool and hopefully it would be and of their repeat order appeal and that's not typical process for school evaluation given the lagging effect.
They've got it and you know order production verification and then we'll hopefully go to and get all of it right. So that anything will repeat on what that they've had and next year right. That's what will be there and we're expecting.
Again, it's a good opportunity.
That's why we're at the very good effort and make our team really.
Net sales and also Somebody's Inc.
And all other read either you know large MTO supported and for those happen.
David appreciate that color. Thank you so much.
And your question comes from the line of Chi Tsang from Jefferies. Your line is open. Please go ahead.
Oh hi.
A question on cash.
Could you give us some color on debt.
And you said, it's going to take.
And other ones.
So can you share.
What kind of profits.
And lastly, with the CSR and see what's going to take off work.
Okay.
Okay. Good.
Actually as I mentioned and and Joon Kim Lee with actually is the S. E T Ray Shanghai stock changing based on these applications right.
2 of the CSR and see.
And so we're going through a question and answer I share. So far there are crushed and gave us almost other already.
And and now I think probably and their internal.
And procedure and process and to get a final pool and also just the 2 days ago. We also submitted a Q2.
Financial reveal right and to this day is here with US also so let's say it maybe you know and they come into some question come back you know.
And so our Q2.
<unk> data and so anyway, we're prepared for that.
And again.
And probably is the first there.
U S company has had.
I had a call to U S and they also have or not.
The IPO and was there a subsidiary and Shanghai and there are powerful and star market IPO right I'm pretty sure. This is a really unique and force case.
Is it reasonable and I, they take more time and computer and take them over a cautious effort, especially they will have this though.
This.
And I corridor.
Shops that are reported to come on right, but all things put together anyway, we have come and then as I said, there you know where do their housing company and go to the technology and with our strategy and I think.
We should be overcome and this.
I call other.
You mentioned on the IPO and if the market do I believe definitely both really benefit on.
Our real run on our expansion plan and the China and.
And that's there.
And that's where we believe in.
What would be there and a win win right and for the customer and China and are on.
Our financial Investor and the U S and also ACM global growth. So it's a good or.
And to try to you know to work on and make it happen.
Yeah. Thank you very much on my second question is regarding other R&D expense I think you have that the other.
Good job on the first half R&D.
And I think that's very positive.
And extending that.
Hello.
Can you get that.
Some color on the loans.
But well see.
Hi, Mitch.
Oh gosh.
Yeah.
Next 2.3 years.
And.
Yeah. Good question actually let me put this way.
And as a major problem.
Earning call and previous time all day.
On the balance right and profitability and also a growth opportunity right. So I think probably the last 2 years and feel about paying 11% R&D and this quarter, we got into the 14% right. So I think probably a 15% is a good range and force Tuesday right.
And why you had to.
And this gross margin and 40% to 45% and this is a off ratios coming together youll have together, 10% plus right that's kind of a profit or a range. There. So we thought about and seen a hand and that's why they give you 50% is our property remember we tried to be keeping on the next 2 or 3 years, but let me add another.
Difference where from other big Guy we spend it on the money and very efficient and I look and the last 2 or 3 year with developing cover operating and with your other photos with spend and also a semi critical cleaning process and also by end of this year, we're putting on additional new Canadian function and other.
Even dry on all ready to come out and with the Canadian border.
And we're spending very efficient and months, what's been all every opinion and to maximize their R&D effort.
So I think you from saying, it's a good number and we think we've got the spending we have confidence we'll get into our new product come out and on a timeline and also I think a key.
Our success our R&D is.
We are always get it innovation partner like always the I call. It the patient with the war on Academy to number 1 and then a junior we also have a very good the team and working in the Shanghai and working with the Korean market and.
Clean on site, so that really gave us a strong R&D effort and then really either are part of the market.
And that's really I mean, historically it them see that so with continued innovation. We are re covenants right. We'll continue pushing R&D and go next level with immune and innovation product come on.
Okay.
Thank you.
I'll come from.
Yes.
Yeah.
Thank you.
Great. Thanks next question. Your next question comes and our next question comes from the line of Christian Schwab from Craig Hallum Capital. Your line is open. Please go ahead.
Hey, great great quarter, guys trying to sneak in 2 quick questions. So I'll just ask them quick recent news about our leading customers and Bob default, you know would that potentially going to have any impact on you is question..1 question..2 is what happens if Y M. T. C gets put on the entity list is there any way.
The ship to them.
And Mark do you want to answer that.
Yes, I can I can start.
And then if you finished.
The first 1 on debt.
Bond defaults and David talked about that and on prior calls.
We and we're pretty we're pretty confident that the operations of that customer.
Our solid and you know our general thought is.
Debt.
The financing will be available.
And hopefully from them is so long as the operation continues to to execute that.
And they can NIM.
Seek funding from other areas and its more of about and ownership issue rounded and a funding operation issue.
Terms of the.
The entity list.
Yes.
And if they are an important customer mtc is an important customer.
I think David talked about we expect growth, but likely at a lower percentage.
Turning and closely and hopefully they don't get put on the entity list.
We feel pretty confident given our manufacturing operation in Shanghai and a lot of our technology came from there that day, we might have some more flexibility to shift to cash should they get put on the list.
And of course.
It is dependent upon.
And their ability for the other suppliers to get licenses. So we'll monitor it closely.
And.
We will update if and if necessary.
Great. Thank you for letting me sneak in 2 quick questions and again congrats on a good quarter.
Great. Thanks Christian.
Thank you.
Net Rob touched on our Q&A session and I will turn it back on the call over to Jay.
Yeah.
On it.
And she has a mood and Charlie Chen from China.
And the multi meter and excellent.
Alright, guys I think that's true.
Thanks, operator, and everyone for participating on the call.
I just wanted to mention some upcoming investor relations events and all.
August 24th were going to present at the Needham second annual virtual semi cap and <unk>.
EBITDA conference on August 31st will present at the Jefferies virtual semiconductor hardware and communications infrastructure summit and <unk>.
<unk> will present at the Jefferies Asia Forum on September 9 and the <unk> Credit Suisse Annotation Technology Conference on September 10th.
Attendance at these conferences is by invitation only for clients of each respective firms and so.
And investors. Please contact your respective sales representative to register for 1 on 1 meetings to secure time.
This concludes the call. Thank you everyone and you may now disconnect.
Thank you bye.
This concludes today's conference call you may now disconnect have a great day.
Okay.
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And.
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[music].
Good day, ladies and gentlemen, thank.
Thank you for standing by.
Welcome to the ACM research second quarter, 'twenty, 'twenty, 1 and earnings conference call.
All participants are in a listen only mode.
Later, we will conduct a question and answer session.
And instructions will follow at that time and.
As a reminder, we are recording today's call.
If you have any objections you may disconnect at this time.
Now I will turn the call over to and a chair Gary Your fortune managing director of newly shaped it Mr weighted watch it.
Go ahead.
Thank you and good morning, everyone and good evening and China. Thank you for joining us on today's call to discuss second quarter 2021 adults and.
And released the results after the U S market closed yesterday.
And is available on our website as well as from Newswire services.
And so a supplemental slide deck posted to the investor portion of our website and you referenced during our prepared remarks on the call with me today on our hours CEO, Dr. David Wang our CFO and Mark Mckechnie, and Lisa on the CFO of our operating subsidiary ACM Shanghai before we continue please turn to slide 2.
Let me remind you that remarks made during this call may include predictions estimates or other information and might be considered forward looking.
These forward looking statements represent Acm's current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results to differ materially. Those risks are described under risk factors and elsewhere in acm's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward looking statements, which reflect the ACM.
And the opinions only as of the day to this call ACM is not obliged to update you on any revisions to these forward looking statements.
Certain of the financial results and we provide on this call will be on a non-GAAP basis, which excludes stock based compensation loss relating to a challenge and fair value with a range.
Our financial liabilities, and an unrealized gain and trading securities for our GAAP results and reconciliations between GAAP and non-GAAP amounts and you should refer to our earnings release, which is posted on the IR section of our website with that let me now turn the call and day 1.
And we'll begin with slide 3 David.
Thank you Gary Good day and it work on today's call, we had another productive quarter with solid financial results with labor and rightfully their revenue and shipment.
Is it good profitability.
And quarter result reflects ACM quoting and customer base.
The allergy leadership expanding product line and increased production scale.
Revenue growth for meter upper 38% year over year.
Shipments were 82 million.
Profound and 45 million and the second quarter of Tucson and Glenn.
We did have a good balance of growth and profitability.
With a 45 gross margin and 10 points for operating margin.
And are committed.
To drive profitable growth.
And increase our investment in R&D to drive innovation.
Further strengthening our existing product portfolio and growth.
And the addressable market with new product.
On the bottom line, we reported non-GAAP net.
Net income per diluted share compared to a 29th day in the same period last year.
We ended the quarter is that 70 million of cash.
And with older Smic's buy market share or $31 million as of quarter and.
I will now discuss our recent operational highlights on slide 3.
First on.
Our Q2 revenue growth was a broader base driving by current and new products and current and new customers.
Oh, and cleaning and other from and deposits tours represent 85% on the total itself and Q2 we.
We've had a good their growth from our flagship <unk> product.
Incremental contribution from our semi critical to us.
Non packaging.
The other part.
And the service and it's about growth because everyday commodity grew 15% and other cell versus about 30% last year.
And the strong growth of.
This growth was driven by advanced packaging tools, including weather and true steeper developer and colder and it's easy and quick.
Service and spare parts business.
This is the first generation and semi critical and a lung hygiene and cool extra either on a revenue growth and further strengthening our position as the leading supplier.
And the China semiconductor industry.
And mixing other product however, partially dilute our gross margin.
And production stage, we're into this new market and speaking.
To capture the strong demand from our China based customer and to deepen the moat that is easily a flagship product from competitors.
And good evening.
Our newer semi critical tool extra ACM flagship that tebo and Tahoe product will cover more than 80% of the total Canadian market opportunity.
On the packaging on newer ECP AP product line and extending our current portfolio with a highly differentiated product.
Putting it altogether, we remain committed to our 40 and 45% corporate gross margin target and.
Part of our normal product management.
We factor improvement and gross margin.
And critical and the balance have you cool this will come from heightened and feature content as we early model and beta a range of and obviously, if a customer evaluation and and cost reduction and later generation models. We also expand that cost benefit from volume production. Meanwhile, gross margin.
Hello, and flagship Canadian product remain consistent with our past blip here.
We expect to continue.
And the strategy is to enter a market with a demand and engineered products.
And as our flagship premium product.
If they do to us.
Other cros and other new innovative product.
This product allow us to win major customer and provide to us the pockets who found the future product development.
And it also allows us to enter middle range, all lower and product that may come with a lower margin Inc.
Already stage, but allow us to capture a much larger market opportunity as we scale the business.
We remain committed to our gross margin and cognate would you wait and believe we can achieve by balancing continued innovation and and high and with.
And as planned product management cost engineering and production and scale.
Let's turn to slide 5 just got ACM growing customer base.
We have a 5 major from and a customer and foundry.
<unk> NAND and DRAM.
In Tucson, and 21, we expect <unk> on group and 1 PUC, who remain our top 2 customers. We expect good growth from them. This year. However, each may represent a lower percentage of total revenue as we expect to see significant growth from other customers.
And also expect that contribution by SMIC, SK Hynix and it takes empty and.
Accordingly, we reaffirm deliveries and seek new orders for several tools and it's M. S.
For the second half of the year.
And their past 12, 18 months, our team has done a great job a broader broadening ACM cool content.
And as MSC, including a full range of continued product and I'll, even say because we are getting indication of a higher demand. So SMIC pardon me a second.
And it's still early as MSC demand and subject to further licensing progress by then with other U S equipment supplier.
We recently added a number of a new China based semiconductor customers cool manufacturer palm analog and Cmos image sensor compound semiconductor and other advisors.
This customer, including 4 or 5 tier 2 player and a handful of new tier 3 and other customers. Although this is a rally just the mall that's growth new tier 2 and tier 3 customer as a whole could contribute 10% net more too.
Anyone.
And the newer customer and investing in new capacity to support and grow.
G L T and E beam technology.
ACM is good or penetration with a range of tool, including expense and semi critical cleaning and <unk>.
And the phone and those products.
Our third customer growth.
He is advanced packaging and other processing costs and other processing customers.
Customer have including J cap.
Mappers and wafer works in Q1, we discuss the order from share.
On the packing house, and we now expect to add more customer and moving through the year collectively we expect significant growth from the group driving and by increased industrial focus on.
On the packaging.
Penetration on new customer and a new product cycle for <unk>.
P 80 Cros.
Looking ahead, we believe that all current and customer base represents a significant opportunity for ACM most.
This customer.
Already or middle aged middle stage of and a multiyear capacity expansion, we remain committed to further broadening our customer base.
We believe every major stemming from the manufacturer can benefit from on technology.
Please turn to slide 6.
We delivered total shipment of 82 million and our second quarter and.
New record and the company's history shipment.
Jim and in Q2 were 8.8 million and higher than revenue.
That difference largely represent Sherman, our first tool awaiting customer acceptance and we view this as a positive indicator.
Flat demand for new products.
And from new customer list.
And this level of shipments is a testament to ACM production key and all kinds of our factory we.
We are scouting capacity from strong customer demand.
Generally tightened and supply chain environment.
And Carlos Hyperlinks factory and the strength of our manufacturing team are helping us manage your near term supply chain.
And how extreme doesn't give us covenants and all.
Our ability to navigate the environment entering the second half of this year.
We plan to begin production and a second ability of our China factory and the third quarter of this year.
And increase our capacity plans and now I'll talk on the run rate.
And Q4 of this year that represent more than 500 million on annualized production capacity.
Hopper from 3 and a $15 million at the beginning of this year, we expect to further increase production capacity and 2000 and plenty of second.
Our long term plan is to build a production and R&D center in on inbound region of Shanghai.
There are 1 million square feet, our floor space will enable us to increase our annual production capacity to $1.5 billion.
U S dollar.
We completed additional architecture and design work and the second of border with initial production now in the beginning of 2023.
Please turn to slide 7.
We continue to invest in new products to broaden our offering today I'm pleased to announce babble etch and extension for weather product line.
This product using our web methods to remove dielectric and metal and again income materially hurt films as well as content on that on the wafer etch.
<unk> approach and minimize impact of etch condemnation on laser process steps and on that.
And.
Improving manufacturing yields.
The babble and your product leverage ACM wet processing and clubs.
To deliver performance benefit.
Sales with July approaches.
And the consumer less.
Less chemical and support a broader range of growth device type and process that <unk>.
Including <unk>.
And as advanced logic process waste.
We expect with ship our first tool for high volume manufacturing for China based largely on manufacturers this quarter.
Additionally, with ACM proprietary technology.
This new battle Ash product cat achieved more accurate and the accretion wafer assembly and alignment.
This will enable precise pavel edge and <unk>.
On product yields and a weighted for throughput.
In addition, we are currently developing advanced technology to deepen our DB market.
Position, and Clinique, which we will and have more products to our portfolio in 2000, and probably a second.
We remain bullish and all our ECB product line and.
And from and smaller geometry require advanced plaguing our wishes.
Meanwhile, backend advanced packaging on <unk>.
And more important as the industrial and it looks for packaging innovation to drive a higher performance as in downstream moving beyond Moore's law.
And the CPE product line indicate ECP map upfront and tool for damaging copper Inc.
Interconnection, the ECT TSV for who are sitting on via.
Also for from and and ECB AP for them on packaging.
We believe the total global market for UCP, what travel from.
$500 million last year too.
2 up to $1.5 billion and the coming years.
Although we did not.
Revenue and the second quarter with deliver 3 first tool from 3 customers.
We expect to deliver a higher volume of ECP tools and the second quarter second half this year.
With a good revenue contribution from repeat of shipments from Q3 until fall.
We also continue to see strong interest.
Oh sure.
And fairness, drawing and profit pool portfolio.
We deliver several first tool, including over the non adult party CBD and the first half and expect to deliver additional units as we progress through the year.
We remain on track to other high temperature oxidation and meeting our credibility.
And to our front of the product line.
Third quarter of Tucson, and you want.
Building on that.
The next major development from this roadmap.
The roadmap is true is a badge atomic layer deposition and all are deposits. We view this as a most of the challenging and promising product for the balance of manufacturing nodes. We expect from this product cycle to become more meaningful.
In truth on 22 timeframe.
We are making it even the R&D investments in true major new product categories to achieve I'll go over our company. Our total addressable market from 5 billion today to more than $10 billion.
We continue to bring in top engineering talent to support this progress and.
And our confidence our team will give you their products and move forward with customer evaluations on our first product line and the first half of next year and the second on product line and the second half to solve and plenty of stagger.
And I'm happy to report, we made a good progress with a potential U S and Taiwan based customers since our last call. Despite the COVID-19 related travel restrictions and our team is heavily engaged and business development.
We are confident that we can secure orders.
At least the 1 you made.
Major Firstier global semiconductor manufacturers in 2021.
Before I provide our updated 2020 on outlook that is cost.
On the star market IPO of ACM Shanghai.
We continue to make good progress on June 10, 2 company 1 net.
<unk> stock exchange and commission from either.
Shanghai is on vacation.
And for registration.
The IPO for the China Securities Regulatory Commission <unk>.
I see.
Moving on up fiber closer towards our goal, we're hopeful that the fifth Aussie and proof and.
Complete our registration suit.
I don't really see <unk>, we estimate that the issue.
Process will take on another 1 to 2 months keeping in mind that the timing and stuff jetblue and numerous factors.
Factors I'll say ACM is sharp control, we are confident that our eventual star market is being combined with our non <unk>. Obviously can provide a strong foundation to accelerate our mission to become a major global player in the semiconductor equipment industry.
Now, let's move to our <unk>.
<unk> outlook on slide 8.
Our guidance reflects optimism about our growth opportunity from Tucson, and you want based on our strong results through the second quarter and improved visibility for demand and our supply chain through here and we have reduced our debt.
Full year, we now expect our revenue to ETP.
And plenty of $5 million and $240 million on.
Or from their private range of $205 million to 230 million.
The revised revenue range represents 48% annual growth and meet a point.
Our updated outlook for truth on 'twenty, 1 is based on several key assumptions.
First the global COVID-19, and situations continue to improve.
And our stability and U S China trade policy.
Third high range of our spending scenario for their production ramp up key customers for <unk>.
Various and the trajectory of the DRAM recovery and finally, a range on the timing of customer acceptance a first tool.
Our results and outlook.
<unk> suite of successful execution and our strategy.
Our strong growth and supporting additional R&D spending on new products, we're building, our global sales and marketing and resource to penetrate a new customer a new region and we are scaling and production capacity to support our long term growth plan and our mission to become a major and clinical prior to the global chemical.
Other industry remains on track to.
To conclude I would like to thank our employees for their hard work and dedication I also want to thank our customers partners and shareholders for their continued support and confidence in ACM research.
Ill now turn the call over to Marc to discuss the financial results in more detail Mark. Please.
Thank you David and good day, everyone, we delivered solid financial results and the second quarter unless I note, otherwise I will refer to non-GAAP financial measures, which exclude stock based compensation and unrealized gain and trading securities.
A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in our earnings release.
Now on the second quarter shown on slide 9.
And was $53.9 million up 37, 9% net.
And you for single wafer cleaning tools, which include SaaS, Tebo, and Tahoe and our semi critical cleaning and was $45.5 million.
36, 4% and $33.3 million.
We had no revenue for ECP during this or other technologies during the second quarter as David noted. However, we delivered 3 first tools and the quarter and we expect more revenue contribution and the back half of the year.
Revenue for advanced packaging, excluding ECP services, and spares and $8.4 million up from $1.2 million and 2020.
Total shipments were $82 million versus $45 million and the second quarter of 2020.
And $74 million and the first quarter of 2021.
This includes deliveries for revenue and the quarter.
And and deliveries assistance awaiting customer acceptance for potential revenue in future quarters, which represents another quarter of record steel shipments and a great accomplishment by our production team given industry wide and supply constraints.
Gross margin was 45% versus 49, 7%. This was at the lower end of our normal mix expectation range of 40% to 45%. The decrease in gross margin as David mentioned was due in large part to product mix. We expect gross margin continued to vary on a quarterly basis due to a variety.
And factors, including product mix and manufacturing utilization.
Operating expenses were $16.1 million versus $11.2 million, the increase and operating expenses reflected higher R&D on new products and expanded U S sales team and legal costs related to our U S civil suit and the China Star market IPO.
R&D expenses grew by 52% to $7.7 million or 14, 2% of sales versus 5.5 million from 12.9 percentage of sales last year.
The increased R&D intensity reflects acm's commitment to new products and innovation, we expect to continue to increase our R&D spending and 2022.
And income was $5.7 million down from $8.2 million.
Operating margin was 10, 5% versus 21%.
Unrealized gain on trading securities related to the change and the market value of our SMIC and investments was $3.8 million and the second quarter of 2021 no debt.
We exclude this non cash items from our non-GAAP results.
Tax expense was $15000 versus <unk> 9.
$9 million and the year ago period.
Net income attributable to ACM research was $4.1 million versus $6.2 million and the year ago period netting.
Net income per diluted share was <unk> 19.
Compared to 2009, Inc, Q2 and 2020.
Tax items and the effects of foreign exchange fluctuations on operating results provided a net headwind.
$3 million or a penny per share and the first and the second quarter of 2021 versus a net headwind and $9 million or <unk> <unk> per share and the second quarter of 2020 on.
I'll now review selected balance sheet items, our cash balance was $70.2 million at the end of the second quarter versus $78.8 million at the end of the first quarter.
In addition to the cash balance we also had trading securities and $31.3 million related to our estimates see investments. This includes a significant unrealized gain from our original purchase price.
Total inventory was $136.9 million at quarter end up by $33.6 million from the prior quarter to quarter on quarter increase was driven by 2 items first finished goods inventory grew by 16.8 million to $64 million.
This represents first tools that have been delivered to customers for evaluation and are carried on our balance sheet and cost pending potential customer acceptance and the second item is work and process and raw materials, which in total grew by $16.8 million from the prior quarter. This was due to purchases to support shipment growth.
For the remainder of the year.
Short term borrowings at quarter and were $22.1 million downturn and $23.5 million at the end of the first quarter long term borrowings were $18.7 million up $1.3 million from the first quarter.
Cash flow used by operations was approximately $10 million for the second quarter, but it was slightly positive for the first half of the year.
For 2021, our base case plan for capital spending is about $15 million. This includes $2.8 million already spent through the first half of the year. Our 2021 investments will be primarily focused on capacity increases and our transfer factories investments to support our R&D programs and planning and some initial spending on me.
Got.
And some we continue to execute on our strategy.
We're providing we're participating and the growth of major new IC Fabs and <unk>.
Ramping production, and we're and developing and delivering new products to a growing list of customers. We're positive on our opportunities and China and expansion outside of China, We remain committed to achieving our mission to become a major player and the semiconductor equipment market.
Now open the call for any questions that you may have operator. Please go ahead.
Thank you at this time I would like to take any questions and we have for US today and as a reminder to ask a question you will need to press Star then the number 1 on your telephone keypad.
Again, Please press star 1 to ask a question to withdraw your request you May press the pound key.
We'll pause for a moment to compile the Q&A line.
Yes.
You May have our first question comes from the line of Paul from Stifel. Your line is open. Please go ahead.
Thank you very much to.
Rapidly life's outlook.
And maybe for David or Mark.
And the semi equipment industry has gone through a lot of supply chain constraints.
Over the past quarter.
Given your results and your outlook it looks like you're benefiting from it very well can you just qualitatively give a little bit of color.
Whether you're seeing any supply constraints on your supply chain is probably a lot different than some of them.
My American companies, but I was just wondering how you source supply and supply chain constraints during the quarter or or if any going forward.
Okay. Thank you.
And actually because the market and moving.
The other titles.
Right.
We do see some long lead items.
For the longer.
So on the way we manage that is there were you know based on our projections fell and Theyre happy and even beyond and then we're looking for there early ordering early purchases right and there is the non leading either so we do see some.
And a longer which impact on us however.
Got it pretty much growth.
And we'll continue to see that other.
Hopefully this issue and get a book and this moment, we feel comfortable about the on revenue and this year and actually also what was the comment about also on human this year too.
Right. That's helpful and made me and as my follow up question for Mark.
Gross margin between the 40% to 45% range.
And lot of moving pieces.
The quarter as we look at the height.
Relative to the tools group non tools to customers and how.
Do we balance that.
Versus the overall I guess normal operating too because if you get a quarter.
Multiple christine that could.
And perhaps the only growth margin will take the other.
That range what are some of the steps you're taking.
Taking to try and ensure that the gross margin.
And you stated way given the number of growth.
And the value is needed on the field.
Okay.
Great and so Patrick.
Maybe David if you wanted to add to it.
And with Patrick.
It's an art and a science certainly I mean, right now demand is quite strong and so we're focused on and on our production.
We do what we can of course to balance our revenue items versus our shipping to our first tool shipment items.
And <unk>.
The balance of the gross margins, but many times really it's weak.
And have strong demands and we do what we can to support our customers.
So.
We are it's very important for us.
And focus on innovation at the high and but then we're also moving to deliver some.
Rounding out the product markets and create a moat between us and our competition.
So we do feel very comfortable debt.
We can balance all the items to delivered better gross margins and the range and the $40 to 45% range. David do you want to add anything to that.
Yeah, actually you mentioned quite a bit of goods and I wanted to other something really at this moment I think from us on together balance.
Part of the portfolio right and you'll see that either you know say a year ago and most of our share is single wafer cleaning and those are normally higher module and other module still keeping though changes.
As a weighted to deal with the semi critical upon us and.
And also more over the balance of the tool.
In our packaging and their study and lower margin product come out right. So when you combine together that's kind of other module youll see that dilution.
However, as we continue mature Paula you mean semi critical tool and also control on costs and manufacturing.
Gear production, plus additional innovation part and I couldn't continue mature cell and also other Banca and front has come out and so well see that behind us continue and so we believe this moment.
And we tried to also secure position and also especially keeping and competitor getting into our flagship product is a walk through of gadgets. The semi critical all other relative to low profit product. However.
And our confidence with also future innovation and keep going.
And the new Canadian a function more of a new feature even to our community and major pilot that was.
C band and the other Mark.
And then Judy.
And I've got a back and language still confidence and 40 or 45% and.
Continued innovation and the new probably a lot of them and that's all helping our.
Margin and keep going.
And the range.
Great. Thank you very much.
Our next question. Thank you from the line of Ken Goldman from Needham and company. Your line is open. Please go ahead.
On the ETP sort of outlook and and hoping you might be able to spend just a little bit more time.
Talking about the ramp that you expect for ETP.
Maybe if you could give us a sense how many tools you have ECP tools, you have weighted customer acceptance and any thoughts whether ETP might be able to get to 10% of revenue next year as it ramps and customers accept.
Tools.
Okay.
Okay, and Youre looking at and you'll see it can be a partner and we've got actually a major Ah I should say 3 major categories. Let me clear that why isn't the Amazon and process, we call ECB and maybe.
Matt and his team.
On the line, we would call the ECB Ucb's <unk> leap and major for the deal. We're typically played on.
And number 3 is actually our advanced packaging tool, which it would deliver for.
And for their packaging and all and the pillar on.
All other on demand.
And requirement number force, we come was actually another.
Carbon trading and for the <unk>.
Compound semiconductor and relative small size <unk> and mostly eventually and you spent 80 ish. So is that all our product portfolio and expanding.
And this year, we see on quite a bit on our shipment and so they're a new customer.
Looking for actually probably plenty plus total tool and.
And we'll deliver.
Total again this year and.
And some of them are Rick on revenue, but most of them I mean as you say if other.
And now, but some of them and work with that because of mix.
But again, obviously next year, what become a repeat order and then that there'll be other bigger.
And bill.
Most of our revenue.
And I called the product and are.
Our portfolio and next year.
So it sounds like if you've got 20 million plus of tools delivered this year.
Repeatable approach and she was not turnkey.
Other key.
And there's another $20 million <unk> tool.
Not a totally new rules wow okay.
Got it you got a lot of number right and I know that every.
And so that's.
That's right yes.
Got it.
And we can definitely get to 10% of revenue pretty quickly.
Got it. Thank you David for that and then Mark just a yeah thoughts.
Thoughts on Opex I know you guys are and creek and the R&D to invest and all the new products, but as we look at the quarterly progression of Opex can you give us any sense as to what kind of increases you might expect into Q3 and.
Thoughts, whether opex would increase further in Q4, whether it would fall.
Follow normal seasonality and and maybe ticked down a little bit and the fourth quarter. Thank you.
Yeah, I mean, we don't we don't give a lot of detail on on.
And on our Opex, we tend to guide on the on the top line, but for.
And for the year.
We think the Opex should be 2008, and 29 percentage of sales.
And on kind of a good mix of R&D and <unk>.
Talked about.
Sales and marketing and.
And then followed by G&A.
So you don't expect any any kind of.
And as a significant changes and the back half of the year, but Tim.
So you should get a little leverage and the back half of the year on year on the overall.
Revenue growth.
Got it thank you.
Our next question comes from the line of Krish Shankar from Cowen. Your line is open. Please go ahead.
Yeah, Hi, Thanks for taking my question I had 2 of them close to 1.
David on this bill.
And that's using vis vis chemistry for the main competent and because it seems like most of them use dry and I'm just trying to figure out who the columns on on the bedroom.
And then I have a follow up.
Great.
And I actually like you said.
And I should say and launch it probably tell me you're right a lot of other babble and she is buying it and try as deposits would.
And I should say is pretty good there performance. However.
Johan.
Other and how do you go remaining on there.
And just.
Right and day.
And with that approach and how do we get a clean again.
Wet process and U S.
And tool.
Jonathan.
Buses they can the much better profile and also give you clean and share with other almost no particle on top.
Really helping reduce the film or the particle contamination and edge to edge die.
For all case actually also innovative methods.
And we have a very precisely alignment to ensure the center on tour.
Texas and the wafer and so therefore, we can reach and much better centering performance, therefore, our reach and much better control for the babble and Christie.
And well leading to a better yield that's all product.
Got it got it very helpful. And then just a follow up on the editorial fleeting.
Thanks for the color on the different drivers for Electroplating I'm, just kind of curious David you mentioned, the delek temporary and plating market could triple to wanted to believe and the next few years.
I'm just on the different drivers like couple of yield on the scene and compound semi but it almost seems like for the last few decades.
Market of under $5 billion.
Oh, the 2 puts up pretty high and the agencies are pretty low so I'm kind of curious what gets you to a tripling and market price to $1 billion is it just these 4.
Drivers you spoke about other than anything else going on and the ASP increases or true production happening. Thank you.
Yeah, Okay, great I think the major driving force is still from I should say, probably TSV and also the 3 day packaging right, obviously balancing process, yes. It.
It has been negative both stable, obviously with more volume more ways for people to talk about that as a convenient great and that you and Chris and then more of their driving we see here is the and I get all of their 30 day packaging now they're talking about pillar from Dupont.
Could you talk to.
Your line.
And just kind of a hydro pillar, you'll need a more over parts of time and to play games like I think a pillar.
So also there and talk about 2.5 D and 3 D. So there is a much more 3 the application come out and for the packaging.
Obviously, you know not only for advanced there I'd call. It application even people today and consider even plenty of other nano all in and <unk>.
Hello, there try to combine with our advanced packaging technology.
Further enhance their performance so with that in mind, we think.
Mark can go right and the people who are Jack there this year, probably a 7 or whether it reaches 700 minutes as a total and Tennessee and the packaging altogether. So so we're very feedback that growth opportunity and again, because you're driving by the post them always law right people focused on there.
On a lot of the bulk package approach.
Very helpful. Thanks, a lot David Thank you very much.
Thank you.
Our next question comes from the line of Charlie Chan from Morgan Stanley. Your line is open. Please go ahead.
Thanks for taking my question and great yourselves.
And David Good evening and Denmark.
Good morning.
My first question and he is about.
The lead time between your shipment total.
And to the Remy So maybe mark can you. Please remind us what is the lead time.
Yes.
And he's a third mud and.
And at this moment I should say on average is probably around 6 months already.
And every day right from.
Big product, so other or something maybe longer.
And it's about a 2 month longer than our previous full.
4 months' time line. So that's good.
And now.
And hopefully as time goes down.
And we're going to shorten the other product cycle and at the moment is do I should say, it's appliance and then leaving alone leading item and taken a day.
And the other times of getting their hands, that's the major reason.
Okay.
Okay. Thanks, Yeah, because I ask this because.
You took up all your cash.
And your annualized net production right. So if I look at.
Second quarter shipment is that both on 80 median.
U S dollars and other that full year.
Production and you're exactly right and you're at 50 million U S dollars, so I'm thinking that when you.
<unk> tried to expand your analyzed and production to 500 million U S dollars on my.
And so when well companies at revenue scale, well keep $500 million.
Wow, that's a tough question.
And again right I mean, as Jim and the member would normally to now there are real.
Corridor.
Finally, it is and almost end of the year right. So all I can tell you this year, our shipments as a margin much higher than last year.
And actually extra number I'll, just say it probably waiting for on Q4 earnings release.
And then.
As I mentioned and find them in other revenue on shipment and I'll be careful so sorry for that.
Human.
Probably easy for rich right, Oh pretty within next year, but the revenue wise. We're still you know based on what he was saying because a lot of other new product and new customer recognition and take time right. So.
Again, I kind of see that a lot of shouldn't go down by the revenue wise will give you a property by early next year than we've seen more visibility on what is our sales.
All of the next year.
We have our next question comes from the line of Donnie Teng from Nomura Securities. Your line is open. Please go ahead.
Thank you David and more for taking my question on my question is related to our customers from us so.
And your prepared remarks, you mentioned the ball debt.
You recently received new orders from several tools from <unk> for the.
And half of the year right. So on.
Just wondering.
Yes.
Is there any approval granted.
By snakes U S suppliers, so that they can install too.
Procure more.
And equivalent from falling from a price and research as well or is there any other reason behind and.
And for another customer and like 1 P C rifle.
What do you see surrounding Aldo and.
So phase 1 and capacity expansion and maybe by the end of this year or maybe sometime next year. So.
Just wondering if you could kind of give us some update on maybe when will 1 D. C store the potential phase II capacity expansion.
This is my first question.
Okay.
Okay, well and.
And regarding the last thing and there's a lot over different other information flow and going to market right and with the C zone.
Anyway.
And the same player and the industry is that they've got the light blue and it.
And we go for the entire tool on quite a big tool.
And also we heard from even and component of the cash component supplier. They also get their license to right and on a couple of maybe a full year onetime license. So again, we see the other.
And I called out the pension income reduced.
But again I don't know all of this the total product and estimated and by how much percentage guide and how much of it and not again, so that information and I really cannot comment.
And as I I heard a sofa, whereas I'm gonna see.
But however, we do have an indication and they're trying to expansion on their demand and their customer it really demand and their capacity right. So next year, we do however.
Our spending plan.
And then going into next year right.
Right. So so let's say you know probably is up and the timing and go Richard and there was this year and also maybe 2 or 3 we can see more clear a picture on that.
Regarding <unk> as we know there.
The line factory, almost a flaw occupying right and by the by capacity and public and there was this year that the first phase 2 line plant is fully loaded.
And then.
And if we're looking at their building and when you say what else day here right and all.
And as I'd be careful what is non covered Asia or even looking at outside of the beauty and the next 1 and that and deposits. So you know by the other ability second ability and right now, we're probably going to stay in power and other this year. They can finish the other construction and.
And then.
Again, we're as a major supplier with backing off the construction. This year they are expanding their second at that.
And you heard that.
It will make us successful 1.8 of their manufacturing and so with their technology.
And develop it's very natural thinking maybe continue expanding their 1.8 layer on mass production and obviously this is a racing game. We're also expecting to go into even 198 or even more of layer on R&D.
R&D you can afford it.
On a year. So 1 do you see as a very good customer for us and we have a very blurry vision and also we're expanding our product portfolio right now, there's only a crude and product and we're expanding also other like Cabo braking and also other photos father eventual getting into there.
The there why don't you see also all the new and the balance requirement, especially for their 1 to 175 liter and Bob we're doing a very good day.
There are plenty and.
Improving all product we have today to make sure we can meet their requirement right 2 year 3 of them now and I'm, probably not kind of a 300 day or even more so we're working very close and to give out joined develop our new product and to meet their future requirements.
That'd be I have 1 follow up I'll sneak so.
When you say that do you receive new orders from some Inc.
And stuff or like their Shanghai fab.
Fabs and most of our pension and <unk> for like Beijing, and more mature nodes like 28 nanometer.
Yes, we got actually from Beijing, and then mature notes.
And also I would say that the expansion plan and as I mentioned, they their compound and also there you know paging and most of that happened.
And then right that's the other way from silver.
Okay.
And my second question and you spoke before maybe long longer term business expansion and ROI. So I think based on your sales scale right. If we call and see though you have maybe like 80 personnel sales roughly from wafer cleaning tools.
And then I guess, he probably will translate into like at least more than 10 per single flow market share in China already in terms of our wafer cleaning tool. So I think Paul you are the biggest.
Already the biggest 1 day and the continuing expanding market share in China.
Mystically, but.
I think that kind of on market share has been pretty high right. So inevitably you need to spend to more new product portfolio and so you just mentioned like you see P F and packaging.
Et cetera.
But on the other half and previously that you.
And also trying to penetrating into overseas.
Leading semiconductor customers.
I'm, just wondering which targets.
All the priority right now and.
Could you.
And it gave us some update on your.
Other expansion.
And the overseas market. Thank you.
Great. Thanks.
Okay, I should say both important right both on the margin China Auto and also other China important and.
And actually our long term goal and I think even with the long term goal. We are tied toolmaker, our revenue 50% income from.
China market and.
And so I'll, I'll say, China market right and Thats why we are actually.
And you'll hire and building a strong team and the U S to approaching a leading cause of the U S also enhance our team and <unk>.
And 2 right and plus recent wasn't will further enhance our sales team in Europe.
Our core proprietary technology, like SaaS, and and people for 3 D cleaning and without damaging and all.
So the tahoe product and always.
And I call this will take a saving projects.
And there also and you'll see that we also add additional new function new requirement and for their further strengthening our Canadian border right now.
And those 2 so with all the innovation and the hand, we had tried to first to demonstrate and probably either China and Korea market.
And we believe our product whether eventually.
And Apache the all major countries and.
And the world the OECD and.
Key customer they neither past technology, right and as I said again, our proprietary technology and there is a real unique approach, we're providing and with all the benefit. We're seeing are you finished your product we're getting into their market I'll say, China right and.
And we're very confident and and we see that is being and movement and also duty a zone.
Other times and the U S. So with Devin wanted to participate bad there and it goes the market and and.
The U S and also obviously kind of see the Korean market.
And the Taiwan.
And also you know.
And there are potential Navy, if I'm gonna have and New York right and that people talk about it too so as ACM per day, really where again equal.
And border and even revenue on major come from mainland China right. Now however, we do see our future growth and also will come from outside China.
And I have a follow up price so.
And it goes principles and pressuring and you put more focus on expanding overseas cosmos, but in past few quarters is like.
Looks like our new products or on new equipment expansion to be faster than expected. So we put more emphasis there.
I'm just wondering is this kind of situation.
Correct.
Correct.
And.
Great way to say or.
Does that mean, we schedule.
Qualification on schedule with the overseas cost and most continuing to be postponed.
Well again range I'd say well it wasn't closely right again, you know that's now there and I share the final mature another fund and mature yet.
And again, I think we're making progress right and when the timing and the reach and then we're gonna announced that this morning.
And I've said that we're very very working closely with the customer.
Great.
I'm, sorry, we should probably move on to the next question. Please.
Okay, and I would like to remind everyone. If you wish to ask a question. Please press star 1 you'll know limit questions to 1 per participant.
Other questions to be addressed our next question comes from the line of channel and Siang from Credit Suisse. Your line is open. Please go ahead.
Yes.
Okay. Thank you and do you think Julien.
It's a phone.
Some color on sneak in 1 piece there and can you talk a little bit about <unk> because I'm. Just curious if there has been doing pretty well with all the other major guys in China, but it seems that the business and they don't.
Yes M T.
Thank you.
Yeah actually.
We do see that are being on the take up rate and probably a theater and 2 locations lines of aging and why and the whole thing right.
And again, there we're working close with them.
See the other you know some.
From a I call other already CV and from Beijing, Beijing, New factory too.
I know they have a bigger 40, K expansion rate and the other that don't keep it going and.
Partially reduced by the order.
And we're.
Same property and most of them will happen next year, but there continue improvement and technology, Inc.
Moving on capacity.
So is it right and we're already working very close with them to our Canadian products and also on Cabo Brady.
And there are also further tried to work with them together expanding from the spot rate get into their production line too but for their evaluation. So sales grew the customer and hopefully eventually they become top of customer boss and.
And in the coming years sooner right. So that's our effort.
They're here to to win the customer and.
And 6 empty.
Thank you Debbie.
Our next question comes from the line of CJS and Silva from Roth Capital. Your line is open. Please go ahead hi.
David Hi, Mark Congrats on the progress here.
And on the global customer I know, you said you're going to ship.
And calendar year 'twenty, 1 and since you have 6 months leaves I guess you have the visibility there just trying understand if this is a production volume on a pilot volume is it saps tebo her back and advanced trailing node those kind of.
And that kind of color would help thanks.
Wow and I really couldnt really isn't on any product right on.
Obviously, the NBA control, even and not allow I'll talk about a witch, Bob, thereby but anyway, when I got to say that probably the Canadian tool.
And that's really there won't be the evaluation tool.
And hopefully it won't be.
And of the repeat order appeal and.
And that's not untypical process first of all the evaluation given the lagging other type product they've got other you know.
All other production verification and then we'll hopefully go to read all of it right. So that anything will repeat on what that mix you're right, that's what might be there where you're expecting.
And again.
It's a good opportunity.
And why we're doing very good effort and make all our team really.
Sales and also the semi IC.
And all other read either.
And I, just see a supportive right for those haven't.
David I appreciate that color. Thank you so much.
And your question comes from the line of Chi Tsang from Jefferies. Your line is open. Please go ahead.
Oh, Hi, David Hi, Lawrence.
Question on Covid.
David could you give us some color on your Asia.
It's going to take another 1 came on.
So can you share.
Kind of a process you are.
Last month, the CSR and see what's going on.
Sure.
Okay.
Okay. Good.
And actually as I mentioned and as John Kilroy, with and actually is the S. E T right Shanghai stock exchange and based on these applications.
C C.
So we're going through a question and answer actually is so far there are question and gave us almost other already.
And then now I think probably in there in total.
And procedure and process and.
The final group and.
And also just the 2.
2 days ago, we're almost on me to the Q2.
Financial reveal right and to this day is just the Aussie also so let's say it maybe you know and they come into some question come back and all.
Now to our Q2.
Data and so anyway, we're prepared for that.
And again.
ACM probably is the first or.
U S company has it.
And how the quarter U S and they also have or.
The IPO and was there a subsidiary and Shanghai and apply for Star market IPO right I'm pretty sure. This is a really unique and force case.
Is it reasonable and I, they take more time computer and take them over and cautious effort I, especially will have this.
This quarter.
Quarter.
Sharps reported to come on right the only thing and put together anyway, we haven't come with them as I say other you know, we're a good Halloween and company and go to technology.
And with our strategy and I think.
We should be overcome and this.
I call other.
You mentioned on the IPO and the thumb market diabetes and definitely both of their day benefit.
Our real run.
She and plan.
China and.
And that's it.
Good evening.
And the win win right and for the customer in China and.
Our finance and Investor in the U S and also ACM global growth. So it's a good thing to try.
2 to work on and make it happen.
Yeah. Thank you very much.
Regarding.
R&D expense I think you have that the other big job on the first half R&D expense I think that's very positive and you are extending their pocket below.
But can you give it.
Some color on the long kind of R&D expense.
Really well.
Let's say like high mixing mix Inc.
And Uh huh.
And next 2.3 years.
Yes, good question.
Let me put this way.
As a remainder probably knows.
And I didn't call and previous pie and we.
We want a balance and profitability and also a growth opportunity right.
I think probably the last 2 years and feel about 10, 11% R&D and this quarter, we got into the 14% right. So I think probably are thinking the same as a good range and force Tuesday right a line.
And this gross margin and 40 or 45% and this is all frankly coming together youll have together, 10% plus right that's kind of a profit or a range. There. So we've got a bad news and the hand, and that's part of what gives you 50% is our poverty number we tried to be keeping and for next 2 or 3 years, but let me add another.
And definitely as to where from other be guy we spend it on the money very efficient and I look and the last 2 or 3 year with the latter being cover operating and with your other photos with spend and also a semi critical cleaning process and also by end of this year, we're putting on additional new Canadian function other.
And even dry I think are all ready to come out and we've got Canadian border.
And at very efficient.
And every opinion and to maximize their on behalf of so so I think 50% is a good number and we can we've done to spending we have a counter then we're getting to our new product come out and on a time line and also I think are key.
Florida success, our R&D is.
Always get it innovation partner like always the I call it the patient.
We don't want again to me too that's number 1 and other too. We also have a very good team and working in the Shanghai and working with the Korean market and I came on site. So that really gave us a strong R&D effort and then really either are part of the market.
Really I mean, historically it demonstrate that so with continued innovation. We are re covenants right. We'll continue pushing on R&D Echo next level with news and innovation product come on.
Okay.
Thank you that's very helpful I'll come back on the goods.
No.
Yeah.
Thank you.
Great. Thanks next question. Our next question comes Yes. Our next question comes from the line of Christian Schwab from Craig Hallum Capital. Your line is open. Please go ahead.
Hey, great great quarter, guys trying to sneak in 2 quick questions. So I'll just ask some quick.
Recent news about a leading customers Bob default you know.
And it's like potentially going to have any impact on your <unk> question..1 question..2 is what happens if Y M. T. C gets put on the entity list is there any way to.
Ship to them.
And Mark do you want to answer that.
Yes, I can I can start.
And then if you finished.
The first 1 on debt.
Bond defaults and good David has talked about that and on prior calls.
We and we're pretty we're pretty confident that the operations of net customer.
Our solid and debt.
Our general thought is.
Debt.
The financing will be available.
And hopefully from is so long as the operation continues to to execute that.
And they can NIM.
Seek fund.
Funding from other areas and.
And it's more of a about ownership issue rather than a funding operation issue.
In terms of.
On the entity list.
Yes.
<unk>.
If they are an important customer mtc is an important customer.
I think David talked about we expect growth, but likely at a lower percentage, we're monitoring it closely and hopefully they don't get put on the entity list.
We feel pretty confident given our.
Manufacturing operation in Shanghai, and a lot of our technology came from there that day, we might have some more flexibility to shift to <unk>.
And you know should they get put on the list.
Of course.
It is dependent upon and.
And their ability for the other from suppliers to get licenses. So.
Monitor closely.
And.
And we will update if and if necessary.
Great. Thank you for letting me sneak in 2 quick questions again, congrats on a good quarter.
Great. Thanks Christian.
Thank you.
That wraps up the Q&A session and I will turn it back on the call over to Jay.
Yeah.
On a minute.
Hmm.
And then and it's resonating and Charlie Chen from China.
And the multi meter and excellent.
Okay.
And that's.
Thanks, Eric operator, and everyone for participating on the call.
I just wanted to mention some upcoming investor relations events and.
And I was 2000 and force we're going to present at the Needham second annual virtual semi cap and.
EBITDA conference on August 31st will present at the Jefferies virtual semiconductor hardware and communications infrastructure summit and <unk>.
Additions will present at the Jefferies Asia Forum on September 9 and the <unk> Credit Suisse and Asian Technology Conference on September 10.
Attendance at these conferences is by invitation only for clients of each respective firms and so.
Interested investors. Please contact your respective sales representative to register for 1 on 1 meetings to secure time. So this concludes the call. Thank you everyone and you may now disconnect.
Thank you bye.
This concludes today's conference call you may now disconnect have a great day.