Q3 2021 ACM Research Inc Earnings Call

[music].

Yeah.

Ladies and gentlemen, thank you for standing by and welcome to the ACM Research third quarter 2021 earnings Conference call. At this time, all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone keypad antibody Doug Your question Breasty Hashed E. If you require technical support at any time. Please press star Zero I would now like to hand, the conference over to your first speaker today, Gary Dave or check. Please go ahead.

Yeah.

Good day, everyone. Thank you for joining us on today's call to discuss third quarter 2021 results. We released results after the U S market closed yesterday.

It is available on our website as well as some new licenses. There's also a supplemental slide deck posted to the investor portion of our website, we will reference during our prepared remarks on the call with me today are our CEO, Dr. David Wang our CFO, Mark Mckechnie, and Lisa Pond, the CFO of our operating subsidiaries.

Before we continue please turn to slide two let me remind you that remarks made during this call may include predictions estimates or other information that might be considered forward looking these.

Forward looking statements represent Acm's current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results to differ materially. Those risks are described under risk factors and elsewhere in acm's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward looking statements which reflect ATM.

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 a loss relating to a change in fair value of the financial liability net unrealized gain in trading securities for our GAAP results and reconciliations between GAAP and non-GAAP amount you should refer to our earnings release, which is with that.

We now turn the call over to Dr. <unk>, who will begin with slide three.

David.

Thanks, Gary Good day and word concept to this call.

We had an excellent third quarter and strong financial results, we delivered record revenue and shipments with solid profitability.

Third quarter results demonstrate the strength of our expanding customer base.

Occupation agent multi product solution.

Loan product cycle for both front end and back end and our growing production scale.

Revenue grew up to a 67 million a 41% year over year humans, when 99 million offer a 68% from $59 million in the same period last year.

We maintain a good balance of growth and profitability.

With a 44, 5% gross margin 19, 5% operating margin.

We are focused on.

Profitable growth as we invest in R&D to drive innovation.

Our product portfolio and introduce new products.

On the bottom line, we report should be the extent of our net income per diluted share compared with 42 cents in the same quarter last year.

We ended the quarter with a 65 million of cash you know the issue, where the 30 million a quarter and from a holding of SMIC spot market shares.

I will now discuss recent operational highlight.

Three.

First of all.

Q3 revenue growth was broad base driving in bulk carrier and the new products.

All wet cleaning and other front end process tool well, 29%.

And represented 70% of the total itself in Q3.

The growth was driven by our flagship premium saps tool good contribution from Tivo can equal and all semi critical cleaning resource.

At advanced packaging other process tools.

He says and spare parts grew by 88% to 26% of our sale.

A strong pool of this school milk breathing by a peoples, including E. C. P. A T wet etch or sweepers and scrubbers.

Together with the increase in all in service and spare parts business.

Second we received good orders from three new major customers.

Weeks ago, we announced.

Evaluation orders from two potential new customer.

First of all there is a four steps comedian pool from a major global semiconductor manufacturer and is scheduled to be in school in the China base development in the first quarter of next year. The second order is for ultra ECP map Carver pleading pool for a major Asia based semiconductor.

The manufacturer.

So for delivery early next year yesterday.

Announced order from leading global integrated device manufacturer or IV in older. All four two ultra C. T R Webb shipping.

And to be used in a China based advanced there.

Packaging facility.

We already deliver their first order in October and plan the second delivery in Q1 of 2022nd.

<unk> offers a full product line offering probably a L. P. What buses tools.

Ranging from colder developer, what Edward Kennedy and P. S papers too.

<unk> advanced copper plating tools wire R. W. L. P. Wet process tool have gain wider acceptance with a number of China based manufacturers.

This older ACM first double L. P tool when there are major global player.

ACM progress with three new major player is a testament to our technology leadership.

Our support teams and production scale, we are confident that successful qualification of this tool can result in larger business opportunities. We continue the deals are scared.

Self pay team.

Pipeline was a top tier player I want to thank ourself and technical support teams for their outstanding execution.

China is among the largest and fastest growing market for semiconductors over the year and you see them has become a significant supplier of semiconductor equipment in China with all.

Major.

Domestic or from and the customer.

We believe acm's, you're facing pick allergy and multi product offering.

Provide us opportunity to capture significant market share on a global basis longer term, we are targeting half of ourselves from countries and regions outside of mainland China.

Third all U C. P product ramps is getting momentum we delivered multiple ECP tool in the first half to something you want even more in Q3 as noted in last quarters call. We expect that your C. P momentum to continue with the deliver of a 20 used to be tools for the full.

Year 2021.

We expect the ECP product line to drive meaningful growth.

Thousands of times a second.

We see good opportunity or ECP in both from an backend or packaging applications in a from an the smaller geometries requires the volatile trading solutions all from ECP portfolio includes the ECP map for damascene copper interconnection.

And do you see PTSD for through Silicon via Meanwhile, backend advanced packaging has become more important as industrial moves beyond Moore's law.

Many manufacturers are looking for packaging innovation that drives higher performance ECP ECP AP for advanced packaging addresses this the backend opportunity we estimate that the total global market. Please see P front and backend applications what people from 500 million.

And last year to up to one 5 billion in the coming years.

Fourth.

We are seeing strong interest for our onshore F N furnace.

<unk> process tool portfolio.

So far in 2021, we'd deliver several first tools and evaluation tools, including bulk and the Mount Polly L. P. CVD, we expect to go live.

Oliver additional units by year end more recently.

October.

Chip furnace product with high temperature oxidation and EMEA only capability building on this strong.

Fusion the next major development.

Furnace roadmap is a batch atomic layer deposition or eight hour D process.

We view this as the most challenging and the promising product for advanced manufacturing nodes for both memory and logic. We expect there for this product cycle to ramp in 2000 and foundry segment.

Based on two sometimes a second market data, we estimate our current products address the 5 billion total global market opportunity. We are committed to our goal to double our addressable market with $10 billion in the next several years.

Danone, we are making steady progress with our R&D investment in two additional major new product categories. This.

Long term commitment to major adjustments.

Market bleach, all customers are pushing us to invest in product roadmap.

Thats a port their advanced nodes, we have accelerated our hiring to supporting this program. We are confident that we can deliver the first tool each cut category in the first half second half of 2022, respectively.

We have a deep R&D program intended to address the next tube product generations by entering this category is at the leading edge nodes. We are in a strong strategic position to leverage our local relationships with some of their most advanced semiconductor fabs in the world.

Well, we can test driver and develop most of the month.

Technology.

Ill health driving most of our product line to the leading edge and the competing on a global basis.

Next I would like to recap ACM customer base on slide five.

I'll first group includes our firearm.

That represent the foundry three D NAND and DRAM manufacturers for 2021, we expect a good growth from all home group and the one P C, which we expect will remain as our top two customers. However, it may represent a lower percentage of total revenue.

As we anticipate meaningful growth from other customers for 301, we also expect a good their contribution Chu from from.

From all other pretty major front end the customer, but are now unlikely to be over 10% contributors.

This including as M. A C, which contributed to our third quarter results.

And you anticipated.

I anticipated.

Hi, Nick and six empty.

Our cellular group, including a number of new China based semiconductor customer who manufacture power analog Cmos.

The sensor compound semiconductors semiconductors, and other devices this customer, including four five tier two player.

The flow of new tier three and others, which each is relatively small this grew up a new customer combined with the contributed 10% or more.

More towards 2021 revenue.

The newer customer investing in new capacity to support the growth of five G. I O T E V and AI and other emerging picking all the juice ACM has good presence at this customer's supplying a broader range of tool, including SaaS semi critical cunneen.

D C T <unk>.

And the furnace products.

Our third group is advanced packaging and the wafer manufacturing customer.

Top customer here.

Including Jack have come true methods and wafer works, we ever had a good offer.

Good order momentum in this the group this year.

Orders from two new advanced packaging policy in Q1, and then and it yesterday announcements from the China based packaging facility.

Major global IBM.

We expect additional orders from more potential customers in this group.

By year and collectively we expect her tremendous growth from this group this should be driving.

Fire.

Increased investor focus on advanced packaging and away from manufacturing.

Penetration of new customers and a strong product cycle for ECP AP tools look.

Looking ahead.

We believe our current customer base represents a seeking these kind of opportunities you see EM most of this customer appeal.

Early or middle stage of a multiyear capacity expansion.

We are committed to further broaden our customer base as we believe every major semiconductor manufacturer companionship from all taken all these years.

Move on.

I'd like to discuss Q3 shipments and provide the update on all of them in a manufacturing facility.

To slide six.

We delivered record total shipments of $99 million in the third quarter shipments.

Shipments were 32 million higher than revenue.

The difference being first tools and the evaluation tools net of a customer acceptance for previous deliver first to us.

This is a positive indicator as it reflects demur.

Demand for new products and from new customers to achieve this level of our shipments.

Thank the production team.

You know it sounds that facility well ramping production capacity to meet strong customer demand.

Constrained supply chain environment.

We started production in the second building of our <unk> factory in Q3 as the plans. We are on track with our capacity road map, which targets a full rate of $5 million of annualized production capacity by the end of this year.

Her from 350 million as at the beginning of this year.

We expect a further increase production capacity to $625 million by the end of 2022.

We are committed to our long term strategic plan, the blueberry production and R&D Center in.

Beijing and Shanghai.

The 1 billion square feet of floor space.

What enabled us to increase our annual production capacity to one 5 billion.

Facility will also be used to support the launch of R&D with a state of art can you in the testing agreement.

Recently began initial construction.

The quantum of work.

Towards our plan for initial production in the beginning of 2023.

Before I provide our 2020 outlook I want to provide a update I see them, sometimes a star market IPO.

Yesterday, the Shanghai stock exchange and announced the pricing of the star market IPO share of ACM operating subsidiary.

You see in Shanghai.

An ideal ACM Shanghai.

Proposed to issue 43, 4 million shares, which is 10% of the total shares outstanding.

Knowing the IPO.

They're announced pricing.

85, RMB per share this would represent growth proceeds of 3.685 billion RMB.

Approximately 575 million U S dollar.

At the current exchange rate.

If all goes according to plan, we tended to be spec ACM Shanghai stock to begin trading on November 18 2021.

Please keep in mind that the term timing and the successful completion are subject to factors beyond ACM Shanghai's control.

We are confident that the stock market listing of ACM Shanghai shares combined with the not that distant ACM.

Costs E. Commerce here can provide a strong foundation, who are supporting our mission to become a major player in the global semiconductor industry.

Now, let's move to our 2021, Luke on slide eight.

Our guidance reflects optimism about our growth opportunity for 2021.

We have tightened our revenue guidance to the range of $230 million to $240 million.

Representing 50% of annual growth and then meet them point.

Our outlook for 2021 is based on several key assumptions.

Stability regarding the global COVID-19 pandemic second.

<unk> you.

The us China trade situation.

A range of this Friday.

Range of spending.

Darryl for their production ramps of our key customers force management of ACM supply chain and finally, a range of the timing of customer acceptance of our first force.

Our results and outlook.

Demonstrate successful.

Yes.

<unk> of all strategic.

We had strong strategy our strong quote.

Supporting additional R&D spending on new products, we are building, a global sales and marketing resource to penetrate new customers in June and we ask Gary.

<unk> capacity to support our long term growth plan.

We believe we can on track to achieve our mission to become.

Our major equipment supplier to the global semiconductor industry.

To conclude I would like to thank our employees for their hard work and dedication I also want to thank our customer partner and its shareholders for their support and the competence.

ACM research.

I will now turn the call over to Mark to discuss financial results in more detail Mark.

Thank you David and good day, everyone. We delivered strong financial results in the third quarter unless I note, otherwise I will refer to non-GAAP financial measures, which exclude stock based compensation and unrealized gains and trading securities.

A reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release.

Now the third quarter shown on slide nine.

Revenue was 67.0 million up 46% revenue for single wafer cleaning tools, which include SaaS Tebo Tahoe semi critical cleaning was $49 5 million up 29, 8% from $38 3 million.

Revenue for ECP furnace, and other technologies was $8 2 million up 69, 1% from $4 9 million Rev.

Revenue for advanced packaging, excluding ECP services and spares was 99.

$9 4 million up 195% from $4 $5 million in 2020.

Total shipments were $99 million versus $59 million in the third quarter of 2020 and $82 million in the second quarter of 2021, which includes deliveries for revenue in the quarter deliveries of systems awaiting customer acceptance for potential revenue in future quarters and deliveries of evaluation tools.

This represents another quarter of record shipments great accomplishment by our production team given industry wide supply constraints.

Gross margin was 44, 5% versus 42, 8%.

At the upper end of our normal expected range of 40% to 45% due to favorable product mix.

We expect gross margin to continue to vary on a quarterly basis due to a variety of factors, including product mix and manufacturing utilization.

Operating expenses were $16 7 million versus $10 1 million the increase in operating expenses reflected higher R&D on our new products, our expanded U S sales team and other costs.

R&D expenses grew by 82, 2% to seven 6 million or 11, 3% of sales versus $4 2 million or eight 7% of sales last year.

Increased R&D intensity reflects acm's commitment to new products and innovation.

We expect to increase R&D spending in 2022.

Operating income was $13 1 million up from $10 $3 million operating margin was 19, 5% versus 21, 6% unrealized loss on trading securities related to the change in market value for our SMIC investment was $1 million in the third quarter of 2021 versus an unrealized gain of $9 million in the year.

Ergo quarter.

Okay.

Excluding this noncash items from our non-GAAP results.

We had a tax benefit of $3 million versus a tax benefit of $1 7 million in the year ago period.

Net income attributable to ACM research was $12 4 million versus 9.0 million in the year ago period.

Net income per diluted share was <unk> 56, compared to <unk> 42 in Q3 of 2020.

Tax items and the effects of foreign exchange fluctuations on operating results provided a net benefit of $1 7 million or <unk> <unk> per share in the third quarter of 2021.

The net benefit of zero point $3 million or <unk> <unk> per share in the third quarter of 2020.

I will now review selected balance sheet items.

Okay.

This balance was $65 million at the end of the third quarter versus $70 2 million at the end of the second quarter. In addition to the cash balance. We also had trading securities $32 million related to our estimates see investment.

But it's a significant unrealized gain from our original purchase price.

Total inventory was $176 6 million at quarter end.

Up from $136 9 million at the end of last quarter.

$39 7 million quarter to quarter increase was driven by two items first finished goods inventory grew by $17 9 million to $81 9 million.

This represents the balance first tools that have been delivered to customers.

In evaluation and are carried.

On our balance sheet at cost pending a potential transfer of ownership.

The second item is work in process and raw materials, which in total grew by 28 $21 8 million from the prior quarter. This was due to purchases to support future shipment growth.

At quarter end short term borrowings, including the current portion of long term debt or $17 5 million down from $24 million at the end of the second quarter.

Now current long term borrowings for $23 1 million versus $18 $7 million to close in the second quarter.

Cash flow used by operations was approximately $4 million for the third quarter for.

For 2021 capital expanding is planned at approximately $10 million.

This includes $5 5 million already spent through the first nine months of the year. Our 2021 investments will be primarily focused on capacity increase at our tranche of factories.

To support our R&D programs and initial spending on Linda.

In sum we are successfully executing on our strategy.

<unk> participated in the growth of major new IC Fabs ramp of production and we are developing and delivering new products to a growing list of customers. We're positive about our opportunities in China and expansion outside of China, We remain committed to achieving our mission to become a major player in the <unk>.

Conductor equipment market.

Now, let's open the call for any questions that you may have operator. Please go ahead.

Thank you so much.

Ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you wish to ask a question. Please press star one on your telephone keypad robust for just a moment to compile the Q&A roster.

Yeah.

Yes.

Okay.

Okay.

Your first question from the line of Patrick Ho from Stifel. Your line is open.

Alright, Thank you very much and congrats on the nice quarter and outlook.

Actually Mark maybe just start off first with your supply chain based.

Based on your results your outlook and the margin profile. It looks like you guys managed it very well.

Can you discuss what problems you may have seen and how you mitigated the situation given the results and the outlook.

Yeah, Hey, Patrick maybe I'll, let David start on that and then I can add David.

Sure Patrick.

Patrick you know their market at the mall.

Actually.

You know the orders the constraining and Oh.

Semi conductor equipment spending double a compare last year. So we see a component also he is a constraint.

And wherever.

I should say.

Some components, we buy from U S and five on Japan, and he also by on Europe right.

Leading time get along that longer.

Okay.

Paul.

Normal path, we have a two months now getting the full months.

Some special path getting the six months.

Yeah. So for that reason delay what we had over forecast to ourselves and then based on sales forecast, we're buying those long lead items had on time.

And so that's the approach we're taking so far.

And obviously now when eroding base forecast next 12 months and what is the possible delay what is the.

In all our vendors.

Suppliers bathers and extra now we require R V.

Vendor gave us.

And our next 12 months and whether you can provide to US right. So that's the approach we're taking and hopefully we can have this.

Supply.

Security always caused supply on time.

To be improved.

And you can see that there are.

Third quarter.

We're doing a lot of good work and however, as compared with the regular last year, our leading EV lani the item.

Taking more time anyway, so that's the status right now.

Hopefully.

And we know our chief banking supplier increases hire more people and also increase the manufacturing floor and we're hoping those situations getting to you know.

Next year.

Hey, Marc anything want to add on that.

No. Thanks, David the only thing I would add Patrick as you know.

It's not new to deal with the supply chain I mean, we've been dealing with the situation related to Covid and the global supply chain and then of course, the big recovery, where the industry is.

It was building back semi capacity pretty aggressive, but you know it.

Our size is a company I think we're done.

Demonstrated some scale, it's really important that our customers are confident that we can deliver.

And so we're sending that message.

And.

I think our manufacturing and supply chain team did a good job in Q3.

We anticipate that as well in Q4.

Great. Thank you that was really helpful. As my follow up question, maybe for David in terms of the advanced packaging market are you showing some really nice growth. There. The marketplace itself is growing can you give a little more color on the type of applications, you're seeing today and how it may progress to say next generation.

<unk>.

Techniques like heterogeneous integration what are you seeing today and what are some of the opportunity say over the next couple of years.

Yeah.

Okay.

Patrick.

Actually I should say, we have laid out a very good product portfolio right and therefore that advanced packaging tool.

You know why the pause of cleaning.

Coulter developer payoffs paper and also the.

And the most important copper plating tool right. So we see the people in this closing growing in areas.

Obviously, the pillar and also we see the people even find out and also there are also people would talk about is the Michael Michael.

Mike Micro pillar right more than 300, Mike long, although copper is a pretty there so it's really.

High demand for our copper plating tool right and also I'll cover operating as a system benefit.

Perl to our competitors, including.

I called her add control and high placement rate is a special design of the plating chamber. So we see there are very strong.

I call, they're driving for our revenue grow or the hemoglobin.

This year and next year.

We're also.

I shouldn't say, we're also see they're a customer outside of the mainland China interest operating pool, and we're expecting those are cool.

For the next year or getting into the Taiwan market.

That's all.

Planning too so that's maybe either.

In general way of their I call there.

Packaging pool, and plus we also increased new customer in China.

Cap and Kung Fu is all traditional pop to a customer also we see a few other emerging or I call. It a new startup company.

Getting into this application to so we have very good there are positive or.

I called a forecast right for their for their advanced packaging to our growth.

Great. Thank you very much and congrats again.

Thanks, Patrick Thank you.

Thank you so much your next question from Charlie Chan from Morgan Stanley. Your line is open.

Hey, David Hey, Mark.

Hey, Adam and Lucy and I first of all congratulations for your claim yourself into an IPO and finally.

Great.

So my first question is about it seems like we're in that be the component shortage you can do more humans.

Right, so I'm not sure.

Do you see any stupid EBIT based on growth right. So next year do you think.

You can eat for even stronger growth rate for 2022.

<unk> Luke.

Okay, Yeah actually you're looking at a similar rate in Q2, almost double right I mean, 80% and our Q3 shipment also a 60% increase too so.

All told us human compare last year has been.

He brings along right at the end of this quarter I can give you more detail how much of a cent decrease at the margin much more than previous year.

So we're I'd say, we think next year continue we look at the strong forecast pipeline. So in other words, we have the real increase more of the components and the <unk>.

<unk> from our.

Supplier. So in other words, we're real working closely with our key supplier.

As I said it would give them a voting 12 months 12 months forecast plan and they'll get in Paas, what is deliver and what is the.

Capacity became gilead for us so we're working on that and I really hopefully next year got better.

But again, you know still very carefully watching the market.

And also working close to our supply chain.

It's ongoing and the <unk>.

Process.

Regardless the company also.

Manager this our supply chain.

Okay. Thanks.

I'm not sure if you take about days, but.

Right.

Previously you mentioned you have done to.

You Crown lines to launch right can you update.

The status right now.

You're talking about new product, although because its the product need.

Can you just talk about the New Orleans at the two new products.

Thanks, Yeah, I see I see okay well.

Probably there you know, let's put this way.

Three years ago, right with studying and are launching two new products.

Unfortunately, I cannot tell you what the product you know.

Name However.

We believe this is a two product repair than the bigger market and some of the market globally and also we see the two new products and also have or.

I called her Chani G also neither innovation with technology improvement. So now we're working closely with R&D and there are tier I.

<unk>, probably one product will come out.

First half next year and also we do have a customer talk together it gathers virtu as a beta matter.

Syed application Paas and also our second product targeting second half next year right, so with our team and working very delegate.

Hoping to to what deliver.

Online.

Okay.

I'm track and my last question has to do Mark.

Again.

Lots of works on China IPO.

I'm not sure.

The pricing.

Well, let's see kind of imply.

But if there's any implication.

You play the P multiple etcetera and.

Would that mean to your.

U S listing.

Recap.

Yes, Hey, Charlie.

So.

I think we've put a lot of the details out on where it was priced and the number of shares right.

The proceeds.

Three six.

605 billion renminbi or $575 million U S.

So we are in.

Terms of the valuation.

Thank you can kind of look at our numbers and work that out and of course, I don't know, how thats going to necessarily filter back into our U S market cap, but.

After after the offering when you mentioned that.

The U S.

We would only 82, 5% of the subsidiary.

Yes.

Okay. Okay. Thank you.

I thought that the peak calories to give any of us are.

Kind of an overhang.

So hope that you your monkey kept and can continue to expand.

Yep.

Thank you.

Thanks, Charlie.

Thank you so much next question from.

Keane Boston from Needham <unk> co. Your line is open.

Thanks, Dave.

David and Mark ill offer my congratulations on the star market IPO as well as the international customer intervention I wanted to start with the international customer attention. It sounds like the three customers you're working with or that you recently announced are all taking tools for delivery to their China manufacturing facilities and I'm wondering if you can give.

Just your thoughts as you first penetrate China manufacturing facilities, what's the opportunity to begin to place to deliver tools to internationally.

We lost you avoid a marketing to Ukraine.

Yeah, No David I heard I heard quint, Okay. I can repeat the question can you hear US say Marc are you there yes.

Yes, we are.

Yeah, Mark I can hear you.

Yes, you are coming through okay.

I don't hear David.

Maybe you can hear me okay.

David We can hear you okay.

I guess you cannot hear us.

Yes.

So.

Quinn I can take that question, while we wait for David to come back.

But I think your question was about the.

The new customer announcements I think we mentioned that two of those who are for deliveries to the China fab. Another one was there was an Asia based <unk>.

And so can you maybe just clarify your question again.

Yes, I guess maybe.

Maybe I misunderstood I thought all three were delivery smart.

Deliveries, taking place in China and was asking.

What's the progression.

The company's opportunity to first deliver towards the China facilities, but then to expand to other manufacturing facilities at those customers around the world.

Got it yes.

Thats a great question for David but.

But I think.

We've got a global sales force and so.

These are the three that we announced here.

Recently, but we still feel pretty positive about our opportunity for customer deployments.

Outside of outside of mainland China.

I think as David noted.

Our longer term goal is to have half of our business outside of China.

Outside of mainland China. So we've.

We've got activities that we think can that can result in that.

The coming years.

Got it and just to clarify did you say that one of the customers, which was taken delivery outside of China somewhere else in Asia well.

There were.

Of the three.

We talked about SaaS evaluation order from a global semi manufacturer with the China development Fab.

We talked about the two stripper orders right.

Global Ibm's, China packaging facility.

And then the ECP evaluation order, we just mentioned it was from our Asia regional semiconductor.

Manufacturer, but we didn't say where that tool is going.

Got it got it second question David talked about.

The growth in the advanced packaging business I.

I'm wondering if we might be able to get you to sort of give.

Give us your sense, how much of the business in 2022 might come from that broader advanced packaging.

Application.

Yeah, you bet, so quint I guess.

We gave.

The mix rate for Q3 and year to date.

About.

74%.

The front end products and 26%.

On the <unk>.

Yeah.

You got to be at this.

Sorry, you guys were having some technical issues I think the team in Shanghai.

I'm trying to get back into the call.

But yes I think.

For now Quinn, we would plan on kind of a similar mix I mean, it's hard to say for 2020 for next year.

Where the growth will come from will give more details on our Q4 call, but we don't anticipate a significant shift between those two groups.

Got it that's helpful. Thank you Mark Thanks, Glenn.

Thank you very much next question from <unk>.

<unk> Desilva from Roth Capital Your line is open.

Hi, Mark I don't know if Dave it's back on but congrats on the progress here.

I wanted to add that the tivo product has been out there for a while since the IPO I'm curious you started talking about it more in this call is that ramp opportunity now potentially inflect going to inflect what are the kind of the puts and takes of the of the pace of which tebo can grow versus steps.

Got it great.

We're going to we're trying to get.

Got it back in now can you hear me Okay. Okay. David can you hear me.

That's great Hey, David.

David It's Sanjay can you hear me.

Yes, very well.

Great I've got David.

I'll repeat the question that.

I said this this call you guys talked about the PMO product more and I get added to the IPO I'm curious is there an inflection ahead for the tivo product, what's the opportunity there.

What are the factors that puts and takes of that growth versus SaaS, which has done very well.

For the last few years.

Okay, well actually the people we have made the progress right and also we realized upheaval will have a combined with a sudden drive technology.

So year ago, we'd rather give up with their advanced technology and most of the first on <unk> one is a hub.

<unk> Hot IPA amortize over heating methods.

<unk> actually a supercritical sale too.

The two new joint technology.

I think we're one will come out probably Q1 next year and the underlying will come out probably Q2 next year, where this drawing technology and together with diesel where further again.

<unk> much wider application why because all other like a third.

70 mono.

DRAM.

The capacity structure.

You have to drive by steel tube because of many factoring also certainly 14 10 nano.

Corporate <unk> structure also there.

This ratio would either.

Okay.

I think.

So we're just adding additional dry and technology on the Tivo product and it was the another tool and a longer durability.

Vacation.

And also there.

Logic and memory logic or manufacturing.

Okay Alright.

Alright, Thanks, David.

Quinn just asked the question I wanted to maybe rephrase asking to make sure we get your answer.

The new customers.

It seemed to be shipping primarily into China in the region with one maybe in Asia and.

We're excited about the global customers, you're talking about 50% of business coming from outside of China longer term can you talk about what it would take for these customers to start.

Putting your tools in outside of China, and why maybe the dominant initial push is in the China facilities just to understand that dynamic.

Yeah actually no obviously, the tool with CP into the China facility or China fab their fab.

Good.

Starting point this way.

This data possibly capability.

And therefore, I think in China right.

The hunting deal.

It's all of the potential quarter, you know getting into their fab also I mean in China.

So that's what we're looking for so I think it's really good assigned and also a good starting point and those data come out there.

I mean in China.

Okay.

A driving force.

Uh huh.

Until their mother fab will have their facility outside of mainland China.

Okay. That's very helpful color, David Thank you congrats again.

Thank you.

Thank you so much at once again in order to ask a question. Please press star one on the telephone keypad.

Next question from Mark Miller from Benchmark Your line is open.

Thank you for the question and congratulations on the quarter.

We're seeing margins jumped around a lot and I believe that's through the mix and I'm. Just you said the mix looks like it's gonna be $75 25 front and backend.

Just wondering for the next quarter or is it a similar mix to the third quarter.

Oh, Yes, David do you want to answer that or you should I can take that too.

I can't even believe open online there right. This is normally your gross margins will fluctuate with that.

The <unk>, 40%, 45%.

There is a high margin tool and easier to single wafer and note that for a moment and give them my module.

Susan I called.

<unk> and also.

Margin for front end.

And then there is also a low margin tool and then say older bench as certain I call. There are why are the process tool advanced packages by two so it's good there I mean this is a good combination and also depend on combination.

Rather our margins really amazing changing right.

Okay.

I couldn't give you a precise number probably I think within the range of 40% to 45%.

Okay.

For the next quarters as it looked like a similar mix to the third quarter.

Alright.

Kind of give a precise number.

Perfect.

Sure.

Ill.

Despite customer.

And Brian one other one.

I'm trying so isn't it.

Okay.

But.

And maybe between I'd still come in as well.

5%.

Okay.

<unk>.

Yeah.

Okay.

You're breaking up at least on my side, just wondering if he'd been primarily more DRAM. There is supposed to come on stronger last year, how do you see opportunities more opportunities for yourself and then.

Oh Wow.

Okay.

Hey, David you're breaking up a lot and maybe I'll take the question Mark since that since David's breaking up.

Yeah, so mark just to be clear.

You can if you looked at our customers and kind of the way we.

It reflected our NAND business.

You know why Mtc is our is our big NAND customer rates.

They were in the 30% range last year.

So.

And then just kind of your premise.

We have pretty good mix in NAND, and then of course, SK Hynix CSM to your DRAM customers. So.

We.

We continue to expect to get good content, both in the <unk>, NAND and <unk> and the deep with our DRAM customers.

Thank you.

Got it.

Thank you so much.

Next question from an Ma.

Im from hung door. Your line is open.

Hey, guys. Congrats I'll first of all on the really strange Q3 on that just and my follow up.

My questions are probably more for anybody that's followed by Marcia will share your thoughts.

Daily is back online.

Yes, yes, I'm still here can you hear me okay.

Oh, Oh, that's great Hi, Yes, I can hear you.

Please go ahead.

That's wrong.

Thanks, So first Mike My first question is.

Probably related to <unk> question as well I just wanted to ask and then a lot of details about your future plans probably in the long term about expanding the global market.

Since we know that there are three Fox Chase.

ACM are all based.

No.

They're actually quite at the one year, Shanghai, if I remember correctly.

Particular reason for that like do you have any plans to build any other saatchi.

Outside of.

China or outside of Asia.

Okay.

Let me give you a little.

Sure.

Oh.

Market.

And after we have finished our market IP.

So both strong financial foundation right.

Sure.

Alright, David are you still breaking up quite a quite a lot.

Or does it just mean for sure.

<unk>.

Yeah. This is much better.

Okay.

Either.

Well, we already have a manufacturer on NUCYNTA in the Korea right.

From now actually.

Probably.

The center close AGL customer in China.

Beijing and also Wuhan.

And.

Potentially.

Right.

It's more than there were healthy.

Mostly in support of customer, but more than that is the also we consider all the region and also country right and as our business moving out of China, Let's say go Taiwan, and the U S and I'll, even go into Europe, and we do have a plan view of the R&D portfolio.

Center, and we believe the R&D closings, where the customer will give you a pass the choice of vascular supporting capability. Meanwhile, also will consider if we found good their tenant people for the company.

The company.

In their local region, that's a further.

In house R&D power in local so our goal is really getting into there.

Diversifying and global R&D.

Our road map and also as I.

Managing our.

The positive spirit.

Further we are going to have rate eventually.

Everything is still right outside of mainland China.

50% is it new site and Thats, our long term strategy and also with our observation technology I think it will be.

March strong driving force.

<unk> to be sold in global.

Like we mentioned tebo.

Tahoe and also what they brought a renewed hagar LNG also on the role as all emulation product come out be variety of date.

Local market, China, and then we can start to push those are verified the product into there.

A global market and Meanwhile, we see also some fab in China altogether the loans.

A process going on so so we have also our tool can be valued at most advanced technology nodes in other sense is we've got a better of there.

Technology being verify here, but they will help us getting into their market outside China.

Thank you David that's awesome.

Do you mind sharing a bit of a timeline for that.

<unk> had changed outside of China or is it just stopped.

One of our long term plan and it depends on how the R&D activities.

On other opportunities.

Yeah actually it really depends on how we penetrate the customer rate and also how we see the opportunity and the other MAA or a potential quarter group.

<unk> come out.

However, it is dynamic and.

As I said, there's a.

We're building.

I understand the two or three years ago, and we're definitely have or are in the plan and also according to our success our penetration to their local customer I'll say, China, there will be a speed up.

I understand there'd be it up I always found some good they're good people and a group with a product like <unk> maybe just.

Emma.

Our people there too that also can further enhance ourselves and supporting capability for that local region.

Great.

Awesome Thanks for that.

Yeah.

Anything want to add on that yeah, no nothing to add I think we are kind of at the end of our call here. So I think we need to wrap up.

Greater if you can.

I'm pleased to wrap up the call for next year.

Thank you so much that does conclude our conference for today. Thank you for participating you may all disconnect.

[music].

[music].

[music].

[music].

Ladies and gentlemen, thank you for standing by and welcome to the ACM Research third quarter 2021 earnings Conference call. At this time, all participants are in a listen only mode.

After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone keypad antibody Doug Your question Rusty hatched.

Have you ever quite technical support at any time, Please press star zero.

I would now like to hand, the conference over to your first speaker today, Gary Dave or check. Please go ahead.

Okay.

Good day, everyone. Thank you for joining us on today's call to discuss third quarter 2021 results. We released results. After the U S market closed yesterday. The release is available on our website as well as some of these live services. There's also a supplemental slide deck posted to the investor portion of our website, we will reference during our prepared remarks.

The call with me today are our CEO, Dr. David Wang our CFO, Mark Mckechnie and lease upon the CFO of our operating subsidiary ACM Shanghai.

Before we continue please turn to slide two let me remind you that remarks made during this call may include predictions estimates or other information that might be considered forward looking these forward.

Forward looking statements represent Acm's current judgment for the future. However, they are subject to risks and uncertainties that can cause actual results to differ materially.

Are described under risk factors and elsewhere in Acm's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward looking statements, which reflect acm's opinions only as of the date of this call.

It 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 of financial liabilities net unrealized gain in trading securities for our GAAP results and reconciliations between GAAP and non-GAAP amounts. Please refer to our earnings release, which is with that let me.

I just wanted to follow up on the doctor's bonds, who will begin with slide three.

Yeah.

Thanks, Gary Good day in the World concept to this call we had an excellent third quarter and strong financial results, we delivered record revenue and shipments are solid and profitability.

Third quarter results demonstrate the strength of our expanding customer base.

Our differentiated multi product solution strong product cycle for both front end and back end and our quoting production scale.

Revenue grew up to a 67 million or 41% year over year humans, when 99 million offer a 68% from $59 million in the same period last year, we maintained a good balance of growth and profitability.

44, 5% gross margin of 19, 5% operating margin.

We are focused on.

Profitable growth as we invest the R&D to drive innovation broadened our product portfolio and introduce new products.

On the bottom line, we report should be the extent of our net income per diluted share compared with 42 cents in the same quarter last year.

We ended the quarter with a 65 million of cash you know the issue, where the 30 million a quarter and from Oh, Dear Oh SMIC stock market shares.

I will now discuss recent operational highlight.

Three.

First.

Q3 revenue growth was broad based driving involved current and new products.

All wet cleaning and other front end process took well 29%.

They presented 70% of total sales in Q3.

Growth was driven by our flagship news App too good the contribution from Tivo comedian tool and all semi critical cleaning tool.

And advanced packaging other process tools services and spare parts grew by 88% to 26% of a sale.

<unk> grew out of the school was driven by a peoples, including ECP, a deep what Edgar Streeper and the scrubbers.

Together with the increase in our service and spare parts business.

Second we received good orders from three new major customers several weeks ago, we announced evaluation orders from two potential new customer. The first order in the fourth that's convenient tool from a major global semiconductor manufacturer and is scheduled to be.

You saw in the China base.

And in fact in the first quarter of next year.

Second the order is for ultra ECP map copper plating tool for a major Asia based.

Conductor manufacturer also for delivery early next year yesterday, we announced order from leading global integrated device manufacturer or IBM or others.

For two ultra C. T R. Webb shipping system to be used in a China based on the monster.

<unk> facility, we already deliver the first order in October and plan the second delivery in Q1 of 2022nd.

<unk> offers a small product line offered W. A L P. What buses to us ranging from colder developer what Edgar E. N. P. S papers to advanced copper plating tool wire R. W. A L P wet process tool.

A wider acceptance.

Remember all China based manufacturers.

This older or ACM first double L. P tool when there are major global player.

ACM progress, where the three new major player is a testament to our technology leadership.

Our support teams and production scale, we are confident that successful qualification of this tool can result in larger business opportunities, we continue to build our scare.

Dallas hygiene.

<unk> was a top tier player I want to thank all of South and technical support teams for their outstanding execution.

China is among the largest and fastest growing market for semiconductors over the year ECM has become a significant supplier of semiconductor equipment in China with all major <unk>.

<unk> from and the customer.

We believe acm's, you're facing pick allergy and maritime product offering.

Provide us opportunity to capture a significant market share on global basis longer term, we are targeting half of ourselves.

Some countries and regions outside of mainland China.

Third I'll use C. P product rents is getting momentum we delivered multiple ECP tool in the first half to something you want even more in Q3 as noted in last quarters call. We expect that you'll see P momentum to continue with the deliver of <unk> to be tools for the full year.

Year 2021.

We expect the ECP product line to drive meaningful growth in 2022nd.

We see good opportunity or ECP in both front end and backend or packaging applications.

From an a smaller geometries requires the volatile trading solutions all from ECP portfolio includes the ECP map for damascene copper interconnection and the ECP PTSD for through Silicon via Meanwhile, backend advanced packaging has become more.

Important as industrial moves beyond Moore's law.

Many manufacturers are looking for packaging innovation to drive higher performance ACM ECP AP for advanced packaging addresses this the backend opportunity we estimate that the total global market. Please see P front and backend application what people from 500 million.

Last year to up to one 5 billion in the coming years.

Sure.

We are seeing strong interest for our ultra F N furnace.

Dry process tool portfolio, so far improve Anthony one will deliver several first tools and evaluation tools, including bulk and the non third party CBD, we expect to deliver to deliver additional units by year end more recently.

October.

Chip furnace product with high temperature oxidation and EMEA only capability building on this strong a fusion the next major development.

This roadmap is a batch atomic layer deposition or <unk>, our deep process.

We view this as the most challenging and the promising product for advanced manufacturing nodes for both memory and logic. We expect there for this product cycle to ramp in 2017 second.

Based on the Southern Plains segment market data, we estimate our current products address the 5 billion total global market opportunity. We are committed to our goal to double our addressable market the $10 billion in the next several years.

Danone, we are making steady progress with our R&D investment in two additional major new product categories. This.

A long term commitment to major adjust them.

Market in which our customers are pushing us to invest in product roadmap.

I support their advanced nodes, we have accelerated our hiring to support in this program. We are confident that we can deliver the first tool each cat category in the first half second half of 2002.

Activity.

We have a deep R&D program intended to address the next tube product generations by entering this category is at the leading edge nodes. We are in a strong strategic position to leverage our local relationships with some of their most advanced semiconductor fabs in the world.

Well, we can test driver and develop most of the month.

<unk>, that's all helped driving most of our product line.

Leading edge and the competing on a global basis.

Next I would like to recap ACM customer base on slide five.

Oh first group includes all five major from and the customer doesn't represent the foundry, leading that and DRAM manufacturers for 2021, we expect a good growth from our own group and <unk>, which we expect will remain as our top two customers.

However, each may represent a lower percentage of total revenue as we anticipate meaningful growth from other customers for 2021, we also expect a good contribution Chu from Aw.

From all other pretty major front end the customer, but are now unlikely to be over 10% contributors. This.

This is including as M. A C, which contributed to our third quarter results.

As anticipated.

I anticipated.

SK Hynix and six M P.

Our second group, including a number of a new China based semiconductor customer who manufacture power analog Cmos.

Sensor compound semiconductors semiconductors, and other devices this customer, including four five tier two player and a handful of new tier three and others, which is relatively small this grew up a new customer combined with a country a good 10% or more.

While 2021 revenue.

The newer customer are investing in new capacity to support the growth of <unk>, Iot EV and AI and other emerging technologies ACM has good trends at this customer's supplying a broader range of tool, including SaaS semi critical cleaning.

D E and furnace products are.

Our third group is advanced packaging and the wafer manufacturing customer.

Top customer here.

Including Jack have come true methods and wafer works Weibo had a good offer.

The order momentum in this the group this year.

Orders from two new advanced packaging policy in Q1, and then Andrew yesterday announcement from the China based packaging facility.

<unk> Global IBM.

We expect additional orders from more potential customers in this group by year and collectively we expect tremendous growth from this group that should be driving.

Fire.

Increased investor focus on the lungs packaging and away from manufacturing.

Penetration of new customer and a strong product cycle for ECP AP tools.

Looking ahead.

We believe our current customer base represents a seeking these opportunities if I S. T M.

Most of this customer appeal.

Early or middle stage of a multiyear capacity expansion.

We are committed to further broaden our customer base as we believe every major semiconductor manufacturer can benefit from all taken all these years.

Move on I would now like to discuss Q3 shipments and provide the update on all of minute manufacturing facility. Please turn to slide six.

We delivered record total shipments of $99 million in the third quarter shipments.

Shipments were 32 million higher than revenue.

Difference being first tools and the evolution towards net of a customer acceptance for previous deliver first to us.

This is a positive indicator as it reflects.

Demand for new products and from new customer to achieve this level of our shipments.

Thank the production team.

You know it sounds that facility well ramping production capacity to meet strong customer demand.

The constrained supply chain environment.

We started production in the second building of our sensors factory in Q3 as the plans we are on track with our capacity roadmap.

<unk> targets, a full rate of $5 million of annualized production capacity by the end of this year.

Apart from $350 million at the beginning of this year.

We expect a further increase production capacity to $625 million by the end of 2022.

We are committed to our long term strategic plan, the blueberry production and R&D center in the Mena.

Beijing and Shanghai.

The 1 billion square feet of floor space.

Well enable us to increase our annual production capacity to one 5 billion.

Facility will also be used to support along with R&D with a state of art can you and it has the agreement. We recently began initial construction.

They're going to work.

Towards our plan for initial production in the beginning of 2023.

Before I provide our 2021 outlook I want to provide update on ACM Shanghai's the star market IPO.

Yesterday, the Shanghai stock exchange and announced the pricing of the star market IPO for share of ACM operating subsidiary ACM Shanghai.

In ideal ACM Shanghai.

Propose to issue 43, 4 million shares, which is 10% of the total shares outstanding following the IPO.

They're announced pricing.

85 RMB per share. This would agree for then gross proceeds of 3.6 85 billion RMB.

<unk> approximately 575 million U S dollar.

At the current exchange rate.

If all goes well.

According to plan, we tended to be back ACM Shanghai stock to begin trading on November 18, 2021.

Please keep in mind that the term tiny and the successful completion are subject to factors ACM Shanghai's control.

We are confident that the stock market listing of ACM Shanghai shares combined with not the least of ACM.

Costs E. Commerce here can provide a strong foundation, who are supporting our mission to become a major player in the global semiconductor industry.

Now, let's move to our 2021 I look on slide eight.

Our guidance reflects optimism about our growth opportunity for 2021.

We have tightened our revenue guidance to the range.

Range of 230 million to $240 million.

Representing 50% of our annual growth and then meet them point.

I'll look for 2021 is based on several key assumptions first stability regarding the global COVID-19 pandemic second the stability in the U S. China trade the situations third a range of Us Friday.

The range of a spending scenario for their production ramps of our key customers force management of ACM supply chain and finally, a range of the timing of customer acceptance of a first for us.

Our results and outlook.

Demonstrate successful.

Execution of all strategic.

We had strong strategy a strong quote is a supporting additional R&D spending on new products. We are building a global sales and marketing resource to penetrate new customers in June and we are scary.

Production capacity to support our long term growth plan.

We believe we can on track to achieve our mission to become.

Our major equipment supplier to the global semiconductor industry.

To conclude I would like to thank our employees for their hard work and dedication I also want to thank our customer partner and its shareholders.

Their support and the competence.

ACM research.

I will now turn the call over to Mark to discuss financial results in more detail Mark.

Thank you David and good day, everyone. We delivered strong financial results in the third quarter unless I note, otherwise I will refer to non-GAAP financial measures, which excludes stock based compensation and unrealized gains on trading securities reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings.

Release.

Now the third quarter shown on slide nine.

Revenue was 67.0 million up 46%.

For single wafer cleaning tools, which includes SaaS tebo Tahoe and semi critical cleaning was $49 5 million up 29% from $38 3 million.

Revenue for ECP furnace, and other technologies was $8 2 million up 69, 1% from $4 9 million.

Revenue for advanced packaging, excluding ECP services and spares was 99.

<unk> $9 4 million up 195% from $4 $5 million in 2020.

Total shipments for $99 million versus $59 million in the third quarter of 2020 and $82 million in the second quarter of 2021, which includes deliveries for revenue in the quarter deliveries of systems awaiting customer acceptance for potential revenue in future quarters and deliveries of evaluation tools.

This represents another quarter of record shipments great accomplishment by our production team given industry wide supply constraints gross margin was 44, 5% versus 42, 8%.

Was at the upper end of our normal expected range of 40% to 45% due to favorable product mix.

We expect gross margin to continue to vary on a quarterly basis due to a variety of factors COVID-19 product mix and manufacturing utilization.

Operating expenses were $16 7 million versus $10 1 million the increase in operating expenses reflected higher R&D on our new products, our expanded U S sales team and other costs.

R&D expenses grew by 82, 2% to seven 6 million or 11, 3% of sales versus $4 2 million or eight 7% of sales last year.

Increased R&D intensity reflects aam's commitment to new products and innovation.

We expect to increase R&D spending in 2022.

Operating income was $13 1 million up from $10 $3 million operating margin was 19, 5% versus 21, 6% unrealized loss on trading securities related to the change in market value for our SMIC investment was $1 million in the third quarter of 2021 versus an unrealized gain of $9 million in the year.

Ergo quarter.

Okay.

Excluding this noncash items from our non-GAAP results.

We had a tax benefit of $3 million versus a tax benefit of $1 7 million in the year ago period.

Net income attributable to ACM research was $12 4 million versus 9.0 million in the year ago period.

Net net income per diluted share was <unk> 56, compared to <unk> 42 in Q3 of 2020.

Tax items and the effects of foreign exchange fluctuations on operating results provided a net benefit of $1 7 million or <unk> <unk> per share in the third quarter of 2021.

<unk> is a net benefit of <unk> 3 million or <unk> <unk> per share in the third quarter of 2020.

I will now review selected balance sheet items.

Okay.

Cash balance was $65 million at the end of the third quarter versus $70 2 million at the end of the second quarter. In addition to the cash balance. We also had trading securities $32 million related to our estimate of the investment.

So it's a significant unrealized gain from our original purchase price.

Total inventory was $176 6 million at quarter end up from $136 9 million at the end of last quarter.

$39 7 million quarter to quarter increase was driven by two items first finished goods inventory grew by $17 9 million to $81 9 million.

This represents the balance first tools that have been delivered to customers.

In evaluation and are carried on our balance sheet at cost pending a potential transfer of ownership.

The second item is work in process and raw materials, which in total grew by 28 $21 8 million from the prior quarter. This was due to purchases to support future shipment growth.

At quarter end short term borrowings, including the current portion of our long term debt were $17 $5 million down from $24 million at the end of the second quarter.

Now current long term borrowings for $23 1 million versus $18 $7 million to close in the second quarter.

Cash flow used by operations was approximately 4 million for the third quarter for.

For 2021 capital expanding is planned at approximately $10 million. This includes $5 $5 million already spent through the first nine months of the year. Our 2021 investments will be primarily focused on capacity increase.

At our tranche of factories.

To support our R&D programs and initial spending on land.

In sum we are successfully executing on our strategy. We have participated in the growth of major new IC Fabs, we are ramping production and we are developing and delivering new products to our growing list of customers. We're positive about our opportunities in China and expansion outside of China, We remain committed to achieving our mission to become a major <unk>.

Here in the semiconductor equipment market.

Now, let's open the call for any questions that you may have operator. Please go ahead.

Thank you so much.

Ladies and gentlemen, we will now begin the question and answer questions. As a reminder, if you wish to ask a question. Please press star one on your telephone keypad, well pause for just a moment to compile the Q&A roster.

Yes.

Okay.

Okay.

Sure.

First quick question from the line of Patrick Ho from Stifel. Your line is open.

Alright, Thank you very much and congrats on.

Nice quarter and outlook.

Actually Mark maybe to start off first with the supply chain based.

Based on your results your outlook and the margin profile. It looks like you guys managed it very well.

Can you discuss what problems you may have seen and how you mitigated that situation given the results and the outlook.

Yeah, Hey, Patrick maybe I'll, let David start on that and then I can add David.

Thanks, Patrick.

Patrick you know their market at the mall.

Actually.

You know the orders the constraining in there.

Semiconductor equipment spending double a compare last year. So we see all components also he is a constraint.

Wherever.

I should say.

Some components, we buy from U S and Taiwan, Japan, and he also viable in Europe right.

Leading time get along that longer okay.

I can't give you. Some example.

Normal positive we have a two months now the getting those four months, even some special path getting the six months.

So for that reason.

The delay what we had over a forecast to ourselves and then based on sales forecast will buy those long lead items had on time.

And so that's the approach you would take it so far.

And obviously now when eroding base forecast next 12 months and what is the possible delay what was the.

No.

Our vendors.

Suppliers bathers and extra now we require R V.

Vendor gave us.

And our next 12 months and what it can provide to US right. So that's the approach we're taking and hopefully we can have this.

Supply.

<unk> secured he always caused supply on time.

To be improved.

You can see that they're all third quarter.

We're doing a lot of good work and I'll ever as compared with the regular last year, and our leading EV <unk> item.

Taking more time anyway, so that's the status right now.

Hopefully.

And we know our <unk> supplier. That's that includes hire more people and also increase the manufacturing floor and we're hoping those situations getting to you know.

Next year.

Hey, Marc anything want to add on that.

No. Thanks, David the only thing I would add Patrick.

It's not new to deal with the supply chain I mean, we've been dealing with the situations you know related to Covid and the global supply chain and then of course, the big recovery, where the industry is.

We're building back semi capacity pretty aggressive, but you know it.

Our size as a company I think we are.

Demonstrated some scale, it's really important that our customers are confident that we can deliver.

And so we're sending that message.

And.

I think our our manufacturing and supply chain team did a good job in Q3 and.

We anticipate that as well in Q4.

Great. Thank you that was really helpful and just my follow up question, maybe for David in terms of the advanced packaging market are you showing some really nice growth. There. The marketplace itself is growing can you give a little more color on the type of applications, you're seeing today and how it may progress to say next generation.

And techniques like heterogeneous integration what are you seeing today and what are some of the opportunity say over the next couple of years.

Yeah.

Okay.

Patrick.

I should say, we have laid out a very good product portfolio away and therefore that advanced packaging tool.

You know why the positive <unk> <unk>.

Coulter developer payoffs paper and also the.

And the most important copper plating tool right. So we see the people globally going on all the areas.

Obviously, the pillar and also we see the people even find out and also you know there are also people talk about as you know Michael Michael Mike Micro pillar right more than 300 Mic wall of copper is at play there.

It's really.

High demand and for all our copper plating tool.

And also I'll cover Brady as certain benefit.

Compel to all competitors, including.

I call their ads control and high Palais de rate is a special design of the plating chamber. So we see there are very strong.

I call that are driving our revenue grow or the hemoglobin.

This year and next year.

We also.

I'd say were also see there a customer outside of the mainland Chinese interests.

Ladies rule and we're expecting those are cool.

Hopefully next year, we're getting into the Taiwan market and that's our.

Planning too so that's maybe either in general way of their I call their advanced packaging tool and plus we'll also with new customer in China.

G a cab and Kung Fu is all traditional top top two customer also will see a few other emerging or I'll call. It a new startup company getting into this application too so.

Very good there are positive or.

I called a forecast right for their for their advanced packaging through our growth.

Great. Thank you very much and congrats again.

Thanks, Patrick Thank you.

Thank you so much your next question from Charlie Chan from Morgan Stanley. Your line is open.

Hey, John David Hey, Mark and.

Hey, Adam.

And first of all congratulations for your grading yourself into an IPO and finally just.

Just on grades.

My first question is about it seems like we're in that be the component shortage you can do more humans.

All right, so I'm not sure.

The theory is still could even very strong growth right. So next year do you think.

Pete.

Even stronger growth rate through 2018.

<unk> Luke.

Okay, Yeah actually you look at the our human rights in Q2, almost double right I mean, 80% and our Q3 shipment also 60% equating to so.

Total human compare last year and it has been in place along right at the end of this quarter I can give you more detail how much percentage increase.

The margin much more than previous year. So so we're I'd say.

Thank next year continue we look at the strong forecast pipeline. So in other words, we have the real increase more of the components and.

<unk> from our <unk>.

A player so in other words, we're real working closely with our key supplier.

And as I said, it would give them the voting.

12 months 12 months forecast plan and they'll get in Paas, what is deliver and what is the.

Capacity are they kind of deal for us. So we're working on that and I really hopefully next year go together.

But again, you know still very carefully watching the market and also working close with our supply chain.

It's.

It's ongoing and.

Process with.

Regardless the company also.

Manager this our supply chain.

Okay. Thanks.

I'm not sure if you take about days that.

Uh huh.

Previously you mentioned you have that too.

Crown lines to launch right and can you update.

The status right now.

You're talking about new product, although because this theme product. These are.

Comments about the newer on the two new products yet.

Thanks.

Yeah, Okay well.

Probably there.

Let's put this way all but three years ago right with studying and are launching their two new product and unfortunately I cannot tell you what the bother you know.

Name However.

We believe this is the two product repair than the bigger market and serve as a market globally.

Also we see the two new products and also have or.

I call there.

<unk> also neither innovation technology improvement.

So now we're working closely with R&D and the team I think are probably one product will come out first.

First half next year and also we do have a customer you know talk together it goes through as a beta beta site.

Vacation paas.

And also our second product targeting second half next year right, so with RP and looking very dedicate.

Hoping to tool what deliver.

Online.

Okay.

Track and my My last class next question has to do Mark.

Again.

Lots of groups in China IPO.

I'm not sure.

The pricing.

Whats the kind of imply.

But if there's any implication.

You pay the multiple that et cetera.

Would that mean to your.

U S <unk>.

Welcome to recap.

Oh, Yeah, Hey, Charlie.

So.

I think we've put a lot of the details out on where it was priced and the number of shares right.

The proceeds.

368, 5 billion renminbi or $575 million U S.

So we.

In terms of the valuation.

I think you can kind of look at our numbers and work that out and of course, I don't know, how thats going to necessarily filter back into our U S market cap.

After after the offering when you mentioned that the.

The U S.

We would only 82, 5% of the subsidiary.

Yes.

Okay. Okay. Thank you.

Thought that peak calories to give any of us are kind.

Kind of an overhang.

So hope that Youre monkey kept and can continue to.

Bank.

Yep.

For me thank you.

Thanks, Charlie.

Thank you so much next question from.

Kim Boston from Needham <unk> co. Your line is open.

Thanks, Dave.

David and Mark ill offer my congratulations on the star market IPO as well as the international customer intervention I wanted to start with the international customer attention. It sounds like the three customers you're working with or that you recently announced are all taking tools for delivery to their China manufacturing facilities.

Wondering if you can give us your thoughts as you first penetrate their China manufacturing facilities, what's the opportunity to begin to place to deliver tools to internationally green.

You avoid a mark can you hear me.

Yeah, No David I heard I heard quint, Okay. I can repeat the question can you hear us Dave Hey, Marc are you there yes.

Yes, we are.

Yeah, Mark I can hear you yeah, Mike coming through.

Yes, you are coming through Okay, Glenn I don't hear David.

Maybe you can hear me.

David We can hear you okay.

I guess you cannot hear us.

Got it.

So.

Quinn I can take that question, while we wait for David to come back.

But I think your question was about the.

The new customer announcements.

We mentioned that two of those who are for deliveries to the China Fab. Another one was there was an Asia based <unk>.

And so can you maybe just to clarify your question again.

Yes.

Maybe I misunderstood I thought all three were delivery smart tool.

Tool deliveries, taking place in China and was asking what's.

What's the progression.

The company's opportunity to first deliver towards the China facilities, but then to expand to other manufacturing facilities at those customers around the world.

Got it yes.

That's a great question for David.

Thank you.

We've got a global sales force and so these are the three that we announced here.

Recently, but we still feel pretty positive about our opportunity for customer deployments.

Outside of outside of mainland China.

I think as David noted.

Our longer term goal is to have half of our business outside of China.

Outside of mainland China so.

We've got activities that we think can result in that.

In the coming years.

Got it and just to clarify did you say that one of the customers, which was taken delivery outside of China somewhere else in Asia.

There were.

Of the three.

We talked about SaaS evaluation order from a global semi manufacturer with the China development Fab.

We talked about the two stripper orders right.

Global Ibm's, China packaging facility.

And then the ECP evaluation order, we just mentioned it was from Asia or regional semiconductor.

Manufacturer, but we didn't say where that tool is going.

Got it got it second question David talked about.

The growth in the advanced packaging business.

Wondering if we might be able to get you to sort of.

Give us your sense how.

How much of the business in 2022 might come from that broader advanced packaging.

Application.

Yeah, you bet, so quint I guess.

We gave.

The mix rate for Q3 and year to date.

<unk>.

74%.

The front end products and 26%.

On the <unk>.

You got to be at this.

Sorry, you guys were having some technical issues I think the team in Shanghai.

Just trying to get back into the call.

But yes I think.

Now Quinn, we would plan on kind of a similar mix I mean, it's hard to say for 2020 for next year.

Where the growth will come from will give more details on our Q4 call.

But we don't anticipate a significant shift between those two groups.

Got it that's helpful. Thank you Mark Thanks, Glenn.

Yes.

Thank you very much next question from <unk>.

GE did show over from Roth Capital. Your line is open hi.

Mark I don't know if davids back on but congrats on the progress here.

Yes.

I wanted to add that the tivo product has been out there for a while since the IPO I'm curious you started talking about it more in this call is that ramp opportunity now potentially inflect going to inflect what are the kind of the puts and takes of the pace of which tebow can grow versus steps.

Got it great and so we're going to we're trying to get.

Got it back in now can you hear me Okay. Okay. David can you hear me.

That's great Hey, David.

David It's Serge can you hear me.

Yes, very well.

Okay, Dave So I'll repeat the question that.

I said this this call you guys talked about the tivo product more and I get that it's at the IPO I'm curious is there an inflection ahead for the tivo product, what's the opportunity there.

What are the factors that puts and takes of that growth versus SaaS, which has done very well.

For the last few years.

Okay, well actually the Tivo, we made a progress right and also we realized tebo will have a combined with a sudden drive technology.

So year ago, we'd rather give up with their advanced technology and most of it has gone through a type one is a hub.

Uh huh.

Hot IPA amortize over heating methods.

<unk> actually a supercritical sale too.

There are two new joint technology.

I think we're one of them will come out probably in Q1 next year and the underlying will come out probably Q2 next year, where this drawing technology and together with diesel where further agreed with people much wider application why because all their.

70 mono.

DRAM their capacity structure.

You have to drive ICL too because the new factory also certainly 14 10 nano up there.

I call them client structure also there.

The ratio of either.

How do I think it's I think I heard.

So we're just adding additional dry and technology on the tivo product and at worst be in either two or longer ability.

Vacation policies.

And also there.

Logic, and memory or logic or a manufacturer.

Okay, Alright, thanks, David.

Quinn just ask the question I wanted to maybe rephrase asking to make sure we get your answer the new customers.

<unk> seem to be shipping primarily into China in the region with one maybe in Asia and.

But the global customers, you're talking about 50% of business coming from outside of China longer term can you talk about what it would take for these customers to start.

You too.

And then outside of China, and why maybe the dominant initial push is in the China facilities just to understand that dynamic.

Yeah actually no obviously, the tool will ship into the China facility or terminal that their fab.

Good.

Starting point this way.

Data processing capability and a variety of data in their fab in China right.

But how do you feel.

It's all of the potential quarter getting into their fab.

China.

And so that's what we're looking for so I think it's really well defined and also a good starting point and those data come out there.

China.

<unk>.

A driving force.

Paul.

Their mother Fab will have their facility outside of mainland China.

Okay. That's very helpful color, David Thank you congrats again.

Thank you.

Thank you so much and once again in order to ask a question. Please press star one on your telephone keypad.

Next question from Mark Miller from Benchmark Your line is open.

Thank you for the question and congratulations on the quarter.

We're seeing margins jump around a lot and I believe that's through the mix and I'm. Just you said the mix looks like it's going to be $75 25 front and backend.

So I'm just wondering for the next quarter or is it a similar mix to the third quarter.

Kevin do you want to answer that or need should I can take that too.

We believe online there right. This is more weighted towards laundry is a fluctuate.

The P P 40%, 45%.

There is a high margin tool.

Single wafer and note that for a moment and give us high module.

Susan.

The combo <unk> and also Canada.

Margin for front end.

And then there is also a low margin tool right and is that older bench as certain I call. There are why are the process tool the bulk packages side too. So that's good there I mean this is a good combination and also depend on combination that our margin and we made a change in rate.

Okay.

I couldn't give you precise number probably I think we're prudent range, 40% to 45%.

Okay.

For the next quarter, just it looked like a similar mix to the third quarter.

Alright.

I cannot give a precise number.

Good operation.

Despite customer.

And Brian one other one.

So isn't it.

Yeah.

Okay.

Okay.

Maybe I will still come in at.

5%.

Okay.

<unk>.

Yeah.

Yeah.

Okay.

Youre breaking you're breaking up at least on my side, just wondering if he'd been primarily more DRAM. There is supposed to come on stronger last year.

Do you see opportunities more opportunities for yourself and then.

Oh Wow.

Okay.

Hey, David you're breaking up a lot and maybe I'll take the question Mark since that since David's breaking up.

Yeah, so mark just to be clear.

If you look at our customers and kind of the way we.

It reflected our NAND business.

You know why Mtc is our is our big NAND customer rates.

They were in the 30% range last year.

So.

And then kind of your premise we have pretty good mix in NAND and then of course, SK Hynix <unk> T. Our DRAM customers. So.

We continue to expect to get good content.

In <unk>, NAND, and <unk> and the deep with our DRAM customers.

Thank you, yes, you got it.

Thank you so much.

Next question from an Ma.

From Hongbo your line is open.

Hey, guys first of all on the really strong Q3 and my follow up.

Yes.

My questions are probably more for anybody that's followed by Marcelo can you share your thoughts.

David Palmer.

Yes, yes, I'm still here can you hear me okay.

Oh, Oh, that's great Hi, Yes, I can hear you.

Please go ahead.

Thanks, So first Mike My first question is.

It's probably related to <unk> question as well.

Thank you and then more details about your future plans probably in the long term.

Expanding into global markets.

Since we know that there are three factors.

ACM are all based.

I know.

They're actually quite.

Shanghai.

Remember correctly.

Particular reason for that like do you have any plans to build any other saatchi.

So a.

Part of China.

Outside of Asia.

Okay.

Let me give you a little.

They are.

No.

And after we have finished yet.

Okay.

Our IPO.

Our financial Foundation right.

Sure.

Oh, sorry, David you still breaking up quite a quite a lot.

Or is it just means I'm sure.

Okay.

Sure.

Yeah. This is much better.

Okay.

Well, we already have a manufacturer Army center in Korea right.

Well from now actually.

Probably.

Yes.

Angel customer in China.

Thanks, Dave Beijing, and also <unk> and <unk>.

Potentially.

Right those R&D, it's more vendor were healthy closing in support of customer, but more than that is also we consider all the region and also the country and as our business moving all over China vehicle, Taiwan, and the U S and even though in Europe.

And we do have a plan view of the R&D portfolio Center, and we believe their R&D closings, where the customer will give you a pass the choice of vascular supporting.

Meanwhile, also will consider if we found good their tenant people for the company.

MAA those company.

In their local region that will further enhance our R&D power in local.

Our goal is really getting into their.

Diversifying and global R&D.

Road map and also as you know.

Managing that.

Talking of spirit.

We are going to have eventually.

Everything is still right outside of mainland China.

And thank you for saying is it new site and Thats, our long term strategy and also with our dimension.

I think it will be.

March strong driving force.

Sure could be sold in global.

Like we mentioned tebo.

Tahoe and also what the rollout of a new technology also on their role and is all innovation product come out be variety of date.

Our local market, China, and then we can start to push those are verified the product into there.

Our global market. Meanwhile, we see also some fab in China altogether the loans.

A process going on so so we have also our tool can be valued at north of advanced technology nodes in other sense.

We got a better of their technology.

Technology being verified here, but they will help us getting into their market outside China.

Thank you David that's awesome.

Do you mind sharing a bit of a timeline for that.

Patchy outside of China or is it just stop.

One of the long term plan and it depends on how the R&D activities.

And other opportunities.

Yeah actually it really depends on how we penetrate the customer rate and also always see the opportunity and the other MAA.

The initial quarter.

<unk> come out.

However, it is dynamic and.

As I said as you know.

We're building Korean center, two three years ago, and we're definitely.

Our plan and also according to our success our penetration to their local customer I'll say, China, there will be a speed up.

I understand there'd be it up I always found some good they're good people and a group with a product line we may be.

Emma.

The group of people there too that also can further enhance our cells and supporting capability provide a local agent.

Great.

Awesome Thanks for that.

Okay.

Anything want to add on that yeah, no nothing to add I think we are kind of at the end of our call here. So I think we need to wrap up.

Greater if you can.

Can you please wrap up the call for next year.

Thank you so much that does conclude our conference for today. Thank you Barb dissipating you may all disconnect.