Q4 2021 ACM Research Inc Earnings Call
Good day, ladies and gentlemen, thank you for standing by and welcome to the ACM Research fourth quarter 2021 earnings Conference call. Currently all participants are in listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.
As a reminder, we are recording today's call.
If you have any objections you may disconnect at this time.
Now I will turn the call over to Mr. Gary <unk>, managing director of the Blue shirt group. Mr divorced yet. Please go ahead.
So good morning, everyone. Thank you for joining us on today's call to discuss fourth quarter 2021 results. We released results before the U S market open today the releases available on our website as well as from Newswire services. There's also a supplemental slide deck posted to the investor portion of our website at will.
Referenced during our prepared remarks on the call with me today are our CEO , Dr. David Wang our CFO , Mark Mckechnie, and Lisa Pond as 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.
It be considered forward looking.
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 acm's opinions only as of the date of this call.
And it's not obliged to update you on any revisions to these forward looking statements certain of the financial results. We provide on this call will be on a non-GAAP basis, which excludes stock based compensation, a lot's relating to a change in fair value of a financial liability and an unrealized gain in trading securities for our GAAP results and reconciliations between GAAP and non-GAAP accounts.
You should refer to our earnings release, which is posted on the IR section of the website and slides 12, and 13 of the supplemental deck with that let me now turn the call over to David Wang who will begin with slide three.
David.
Thanks, Gary Good afternoon, everyone and welcome to ACM research fourth quarter and full year 2021 result conference call.
Coupon plenty one was a transformative year for <unk>.
We will expand it all.
Customer base.
We ramped production of new products, and they're so cute order well evaluation tool.
Several major semiconductor manufacturers, including a top global player in the U S.
I would now providing 2021 financial results, please turn to slide three.
All financial results demonstrate the power of ECM expended.
Customer base.
Our differentiated multi product solution.
So part of the cycle and are growing well.
She is scale.
The company wide revenue was $259 8 million.
Upper 60, some percent and the shipment of.
372 million.
Operator.
One 4% in the fourth quarter, you had a record revenue.
$95 1 million and assuming our one 7 million.
The first time in Acm's history.
Revenue growth was driven by both Newport and <unk>.
Ladies and gentlemen, please standby.
Please continue to stand.
By your conference call will resume momentarily.
Thank you for your patience please continue to standby.
Yeah.
Okay.
Okay.
Sure.
Hey, operator.
It sounds like Youre trying to dial David back to you and I know we had a couple of people that got dropped off the call or are the participants all still on the call.
Awesome.
Yes, Sir I'm still trying to reach out to David.
Okay, I think what we'll do is I'm going to continue with that.
The prepared remarks section that David was going to say and then when you get David Please just announcing to the group.
Yes, Sir thank you.
Okay, So I'm going to continue.
And thanks to the patients everyone, but we'll have David back soon.
Revenue growth was driven by both new products and new customers.
We had solid growth from cleaning 2.5 growth NIM 2.5 times growth in E. C. P furnace and other product and more than three times growth in advanced packaging and wafer manufacturing products, we benefited as a front end customers continue to scale the production capacity.
The incremental contribution from new customers, including second and third tier players.
We also maintain a good balance of growth and profitability with 44.4% non-GAAP gross margin, 16.9% non-GAAP operating margin.
And with the $545 million raised in the star market IPO, we now have a strong balance sheet to fund and accelerate our vision to become a global player in the semiconductor equipment industry.
And products, we are now world class multi product company.
Over a decade ago, we were positioned as a one product company with our single wafer cleaning saps tools over the years Acm's commitment to R&D and innovation has enabled us to grow into a multi product business that could penetrate adjacent markets along.
Following the introduction of our SaaS technology, we have expanded our cleaning portfolio with Tivo Tahoe and semi critical tools.
<unk> now offers a complete range of cleaning products that covers more than 80% of our cleaning processes.
Building on our core market positioning cleaning, we have achieved significant traction for our plating and advanced packaging products and our furnace product cycle is soon to follow we expect to continue to build on our momentum banks, reducing two major new product categories in 2022.
In production, we demonstrated the ability to deliver world class production tools in volume to many of the largest and most innovative fabs on the planet starting with our first factory in Zhenjiang Shanghai. We now have two buildings with considerable capacity in Chongqing, Shanghai and a third facility in South Korea.
We are now preparing for significant growth with our new factory and R&D facility under construction and link them.
In marketing, we have expanded our sales effort and we are now knocking on the doors of major industry, leading IC makers around the world.
We are also adding services personnel to support recent evaluation orders and we believe success with the major customer that attract even more customers outside of mainland China.
Putting it altogether with products people and capital we've built a strong foundation for robust growth in the years ahead.
Today I'm happy to share that we had established a longer term an internal target to reach more than 1 billion in annual revenue. We plan to achieve this by adding new products, new customers and new production capacity in the coming years.
I'll now provide detail on our 2021 results. Please turn to slide four.
First our 2021 cleaner results demonstrate the strength of Acm's multi product strategy cleaning grew by 44% to $189 2 million. This includes our flagship saps Tahoe and Tebo products. It also includes our recently introduced semi critical tools cleaning with 73% of sales in 2021.
Versus 84% in 2020.
Reflecting rapid growth in our other new product groups.
We expect solid growth from our flagship cleaning and semi critical cleaning products in 2022 with good support from our recent order for 29 auto bench tools.
Recently announced our ultra low pressure dry <unk> technology, which is now being qualified and a major customer and it expands our auto bench portfolio to cover nearly all in between steps performed by the auto bench tools. We're in development of a few new dry methods for advanced memory and logic applications such as the Super.
Critical C O two drive and advanced high temperature IPA dry technologies, which will further increase our cleaning product portfolio coverage from 80% of the process steps to 90% of the process steps.
E C P furnace and other products grew by 149% to 33 million and represented about 13% of sales. We delivered 20 ECP tools in 2021 with about one third front end or E. C. P. M E T and about two thirds for advanced packaging or ECP AP last week, we announced orders for <unk>.
One ECP tools. These orders include Acm's first volume per purchase order of 10 tools to our front end ECP map tools, which came from a top tier China foundry.
The order follows successful first tool evaluations in which the customer qualified or tool for 65 nanometer down to 28 nanometer processes.
Meanwhile, we delivered seven furnished tools in 2021. These are mostly demo tools and we expect to furnish contribute more meaningfully to revenue in 2022 as its product cycle commences.
We continue to refine our ECP technologies to meet our customers' increasing needs and advanced nodes and develop.
Furnish a L. D technologies that are critical for advanced nodes in both memory and logic applications.
Advanced packaging, not including ETP services, and spares and other processing tools grew to $37 million or about 14% of sales up more than three times from 2020 levels.
This group includes a range of packaging tools, including coder developer scrubber, PR stripper and wet at yours.
It also includes our services and spare parts.
<unk> has a broad offering of wet tools to support advanced packaging and we're the only company that offers both a full set of wet tools and the advanced planning tools.
Mobile IDM with a China based assembly facility is evaluating our tools with good progress. So far we are hopeful we can secure meaningful repeat orders for additional PR strippers and other products from this IBM and other customers.
[noise] commenced packaging has become more important as the industry looks for packaging innovation to drive higher performance.
We expect advanced packaging to be a solid contributor to revenue for 2022 and beyond as discussed in previous calls we believe that the Tam of planning tools will be driven significantly by advanced package applications for <unk>.
$700 million in 2021 to more than $1 5 billion market opportunity in the coming years.
Second we diversified our customer base in 2020 one.
Please turn to slide five.
Our first customer group is a major French ink manufacturers, we have five customers in this group a couple of St Foundry three D NAND or DRAM 2021, we had two greater than 10% customers. Both from this group.
<unk> high quality together with four hung semiconductor.
As a group known as the Quad Hung group was our top customer at 28% of sales. They are a leading foundry in China that is in the middle of a multiyear expansion projects in Shanghai and Wuxi for trailing edge 28 nanometer products.
We supply to all hung group with nearly all of our products being close to our Shanghai engineering team, they're offering among the first to try out our new tools why Mtc was our second largest customer at 21% of sales we have been working closely with why don't you see since the early days of the first fab in Wuhan that Bob has now reached scale close to par.
Full capacity ACM.
<unk> was the top cleaning tool supplier to why empty seat in 2021, we experienced good growth in sales of our flagship products in semi critical tools to why don't you see.
Public reports have indicated that why Mtc has completed the construction of the shell of its second fab building in Wuhan and will soon begin to installed tools to ramp production of its advanced three D. NAND product, we're working to win additional share of why Mtc's cleaning business and we also believe we are well positioned to participate with our ECP or <unk>.
This and other new tools and development.
Other key front end customers for SMIC see SMT and SK hynix each of these for mid to upper single digit revenue contributors in 2021, we are expecting more contribution from these three customers going forward.
Our second customer group consist of emerging China based semiconductor customers, who manufacture power analog Cmos image sensors compound semiconductors and other devices.
This group includes five second tier players a handful of new third tier companies and others while.
While revenue from each of these customers alone was relatively small the group in total contributed about 10% of our 2021 revenue.
These customers are investing in new capacity to support the growth of five G. Iot EV artificial intelligence and other emerging technologies.
<unk> has a good presence with these customers supplying a broad range of tools, including SaaS semi critical cleaning UCP and furnish products. We expect strong growth for this group in 2022.
Our third customer group is advanced packaging and wafer manufacturing.
Customers here have been included J cap home pool between semi and wafer works. This group is reflected in our advanced packaging other processing service and spare parts, which is about 14% of 2021 revenue.
See major investment in advanced packaging technology as the industry shifts spending to this area seek new sources of performance gains versus more traditional die shrinks.
China has an active ecosystem emerging advanced packaging and wafer.
Manufacturing startup companies, which provide additional opportunities for our products.
Third we continue to make great progress with additional major customers.
Semiconductors are a global market and we intend to extend our participation from China to the rest of Asia. The U S and Europe during the fourth quarter, we announced were positive developments I'll start with the U S. Based major global player in place an evaluation tool order and a production order for our ultra C. SaaS five fault chain.
Cleaning tool.
Plan to deliver both in the first half of this year for installation in the U S. Fabs for use in advanced processes.
We have begun to scale up our U S based services team to support this important valuation devaluation, we believe a successful evaluation could lead to larger business opportunities with this and other major customers in the region.
Second we received orders for two ultra C. P. R stripping systems from a leading global IDM discussed them or has a China based advanced packaging manufacturing facility. The first tool was delivered in Q4 of last year and the second one is scheduled for delivery. This quarter. Our third was an ultra C SaaS five.
12 chamber cleaning tool evaluation order from a global semiconductor manufacturer with the China fab.
And lastly, we received an order for an ultra ECP map copper plating tool from a regional Asia based semiconductor manufacturer. This is on track to be delivered early this year.
<unk> progress with these major players is testament to our technology leadership, the strength of our regional support teams and our ability to produce at scale. We are confident that successful qualification can result in larger business opportunities and we continue to build our sales pipeline with other top tier players.
Next I'd like to provide an update on our production capacity slide six.
We achieved it.
A key milestone with a record $117 million of shipments in the fourth quarter. This is our first full quarter of more than $100 million of production, we exited the year with nearly $500 million of annualized production capacity, despite the industry wide supply chain challenges.
Confidence in our production capacity is a critical factor to attract additional major players as future customers. We are working to increase production capacity to $625 million by the end of 2022.
We're also on track with our plans to build a production and R&D center in the link on recent of Shanghai, where the 1 million square feet of floor space could enable us to increase our annual production capacity to $1 5 billion in the coming years and facility will be used to support advanced R&D with a world class syndrome and metrology tools.
And will help to speed up our internal R&D and demo activities. We plan for initial production that link in the middle of 2023.
Please turn to slide seven for an update on ACM Sam.
ACM has become a trusted supplier.
Local supplier to some of the biggest and most innovative semiconductor producers in Asia.
We have scaled our business alongside these giants and many of them now look to ACM to work together to solve some of the more challenging issues that they face. This provides ACM already testing ground with beta customers to develop our ideas into products.
We have the opportunity to deploy our newest differentiated technologies that leading manufacturers for just a short flight or a drive from our Shanghai factory.
We seek to first develop our technology.
Scale it with our local partners and then when ready leverage Acm's global presence and to expand our business to international markets.
But this operating environment, we have grown our product offerings substantially over the past several years, we now estimate acm's current product portfolio addresses an $8 billion market opportunity the increase from our previous estimate of $5 billion. Sam is based on a much higher third party estimates for the 2021 W. P.
Market, which now stands at about $88 billion.
By product line, we estimate a contribution of $3 7 billion from cleaning $2 9 billion from furnace $732 million from ECP and $650 million from stress free polishing advanced packaging wafer processing and other processing equipment.
Yeah.
We are committed to our goal to double our Sam to more than $16 billion in the next several years with the addition of or the introduction of two major new product categories. We plan to do this with the level of innovation that our customers have come to expect from ACM. We expect that we can deliver these first tools for each of the major new product.
Categories in the second half of this year.
As I've noted in prior calls we plan to enter these categories at leading edge nodes and we have built an innovative and differentiated technology roadmap to address the requirements for the next generation nodes.
Turning to slide eight we are tremendously excited about the growth opportunities in front of us our expanding product line, our global sales effort and production capacity combined with the capital raised from the ACM Shanghai Star market IPO provides us with a great opportunity to celebrate to accelerate our penetration of our Sam.
Both with our current customer base in mainland China.
And the ramp of other new customers in other regions.
This chart offer some more detail around a $1 billion revenue target. We are proud of what we have achieved since our U S. IPO in 2017 with a 'twenty 'twenty 2021 revenue up seven times versus our 2017 revenue and we are committed to continue on this growth path.
Given that many of our customers are still in the early stages of multiyear capacity expansion. We believe we can achieve our $1 billion revenue target largely from mainland China alone.
Our model assumes that China may change about a 20% to 25% share of the global Capex with modest growth and at ACM achieved target a 50% share in cleaning tools, 50% of ECP tools at 40% of furnished tools and then another incremental $100 million from advanced packaging.
For manufacturing services and spare parts.
Well, we're not setting a specific timeline to achieve this target.
Think that one or several major customer wins outside of mainland China to help us to achieve the target sooner rather than later.
Also note that our model doesn't include contribution from our two new product categories. We look to these products to provide another major driver of growth beyond the $1 billion target with the initial ramp expected into 2024 timeframe.
Yeah.
Operator, any any sign.
Connected with <unk>.
David Yes.
We have not connected with them yet.
Okay.
Keep but I'll keep going.
Let's keep trying to get them on the call.
Yeah.
Now, let's move to our 2020 to outlook on slide nine.
Our guidance represent reflects optimism better growth opportunities for 2022.
We have increased our revenue guidance to a range of 365 million to $405 million. This represents 48% projected annual growth at the midpoint.
Our outlook for 2022 was based on several key assumptions first stability regarding the global COVID-19 pandemic second stability in the U S. China trade situation third arrange of spending scenarios for the production ramps with key customers for management of ACM.
<unk> and finally, a range of timing of customer acceptances of first tools.
Our results and outlook demonstrates successful execution of our strategy. Our strong growth is supporting additional R&D spending on new products.
We are building, our global sales and marketing resources to penetrate new customers in new regions and we are scaling production capacity to support our long term growth plan.
We believe we are on track to achieve our mission to become a major equipment supplier to the global semiconductor industry too.
To conclude we are extremely proud of these results I want to thank our customers business partners and shareholders for their support and confidence in ACM research I also want to acknowledge our employees for an outstanding job and for staying focused and engaged with our customers.
I am now going to.
Move on to the CFO section to discuss the financial results here in more detail.
Okay.
We delivered record financial results in the fourth quarter and for the full year of 2021, unless I note otherwise I'll 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.
Please.
Yeah.
Okay.
Now the fourth quarter.
As shown on slide nine revenue for the fourth quarter of 2021 was $95 1 million up 108, 8% revenue for single wafer cleaning tools, which includes saps tebo and Tahoe has been a critical cleaning was $61 9 million up 68, 3% 38, $36 8 million.
Revenue for ECP furnace, and other technologies was $19 5 million up from $4 million revenue for advanced packaging, excluding ECP services and spares was $13 8 million of two eight times from $4 8 million.
Total shipments for the quarter were $117 million versus $67 million in the fourth quarter of 2020 and $99 million in the third quarter of 2023.
Allowing back go ahead.
It is.
Okay. Thanks, Yeah. We can we can hear you okay. David it's good to have you back.
I finished reading your introductory comments and among the CFO section so I'll keep moving on to John Yep.
Okay.
Great.
Yeah.
So total shipments for the quarter were $117 million versus $67 million in the fourth quarter of 2020, and 19 $99 million in the third quarter of 2021. This.
This 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, which we consider a marketable accomplishment by our production team given industry wide supply constraints.
Gross margin was 47, 9% in the fourth quarter versus 43, 3%. This was higher than our normal expected range of 40% to 45% reflective of a favorable product mix.
We expect gross margin to continue to vary on a quarterly basis due to a variety of factors.
Mix and manufacturing utilization.
Operating expenses were $25 million versus $13 million the increase in operating expenses reflected higher R&D and new products, our expanded U S sales team and other costs.
R&D expenses grew to 12.6 million or 13, 7% of sales more than double the level from the year ago quarter.
Doubling of our R&D spending reflects <unk> commitment to new products and innovation, we expect to continue to increase the intensity of our R&D spending to the 17% level in 2022.
Operating income was $20 4 million up from $6 $7 million operating margin was 21, 5% versus 14, 8%.
Unrealized losses on trading securities related to the change in market value of our <unk> investment was $1 2 million in the fourth quarter of 2021 versus an unrealized gain of $3 $6 million in the year ago quarter note that we exclude this noncash item from our non-GAAP results, we had a tax expense of $3 2 million.
Versus a tax benefit of $2 8 million in the year ago period net income attributable to ACM research was $18 1 million versus $6 2 million in.
In the year ago period.
Net income per diluted share was <unk> 81, compared to 29 <unk> in Q4 of 2020.
I'd like to point out a few below the line items equity income and net income of affiliates contributed $3 6 million in the fourth quarter of 2021 as compared to $1 million in 2020.
I referenced this item in this quarter's report as it was higher than normal due in part to an investment related gains from ACM Shanghai's participated participation in a limited partnership.
Tax related items compared to a normalized tax rate and the effects of foreign exchange fluctuations on operating results.
It provided a net headwind of $2 million or a penny per share.
And a net benefit of $1 9 million or <unk>.
<unk> per share in the fourth quarter of 2021 and 2020, respectively.
I will now review selected balance sheet items, our cash balance was $563 million at the end of the fourth quarter versus $65 million at the start of the third quarter.
This obviously included the net proceeds of our star market IPO of $545 million during the fourth quarter.
In addition to the cash balance we also had trading securities. The $29 5 million led to our SMIC investments, which includes an unrealized gain of approximately $14 $5 million versus our original purchase price.
Total inventory was $218 1 million at the end of the quarter up from $176 6 million at the end of the last quarter.
The 41 5 million quarter to quarter increase was driven by two items first finished goods inventory grew by $9 8 million to $91 7 million.
As you know this item represents the balance of first tools that have been delivered to customers for evaluation and are carried on our balance sheet at cost pending potential transfer of ownership.
The second item is work in process and raw materials, which in total grew by $31 7 million from the prior quarter. We are pleased to be able to secure the inventory for a plant shipment growth in 2022.
At quarter end short term borrowings, including the current portion of long term debt was $12 million down from $17 6 million at the end of the third quarter non current long term borrowings from $23 million essentially flat.
At the end of last quarter.
Cash flow used by operations was approximately 36 million for the fourth quarter and approximately $40 million for the full year.
Discussed above this just to support the growth of our finished goods inventory, which is a good form.
There are a good indicator of our value add evaluation tools at our customer and our future production needs.
In sum we are successfully executing our strategy we are participating in the growth of major new IC Fabs, we are ramping production and we are in <unk>.
<unk> and delivering new products to a growing list of customers. We are positive about our opportunities in mainland China and the expansion outside of China.
It's open the call for any questions that you may have operator. Please go ahead.
If you'd like to ask a question. Please press Star then one if your question has been answered and you'd like to remove yourself from the queue press the pound key.
Our first question comes from Patrick Ho with Stifel. Your line is open.
Thank you very much and congrats on the nice here.
First off for you Mark in terms of the supply chain you guys managed it very well based on the results and the outlook can you one describe some of the issues that you're facing in some of the challenges and secondly, what are you doing specifically to try and mitigate the situation.
So am I right.
Yes go ahead, David place you can start yet.
Sure well actually yes. This is a shortage you don't do something that Jim I think everybody is facing right now.
It's also right in last year.
Usually from long medium return and.
Every July is that used to be two months three months now pushing quite differently like five to six months. So all approaching green bond or are your last year isn't it.
Working with them very closely with our supply chain.
And also we gave them memorial I'm going to hand them, a long meeting item order right and also asking just the Q1 because they were.
And that's the way we're doing and secondly, we are also looking for a second there.
Vendor, which is.
Hopefully something happens remember you know another bank.
So that's what the.
We reduced our <unk> oh, they're normally the recurring so it comes to this year again, we'll do the same poaching and again, we're getting more over as much as we can given the long lead it rank in order and to the strategic or something greater than the same Brian . We're also actively looking for secondary.
Third on the plane right to real bad news or.
The constraints on furniture.
So.
Hopefully this year.
Does it matter, we also see on subprime TNMP another good job expanding there.
Honesty behind more people and reduce the amount of capacity increase.
So anyway hopefully it is this year, we're going to lose.
And it would be even better control and in Austria.
Great. That's helpful. Maybe as my follow up question.
It's very encouraging to hear about your $1 billion.
Annual revenue target can you discuss a little bit about your capacity needs and how you'll be able to flex capacity, depending on you know in kind of the product stream. So are you going to be able to flex from say you know your clean products to advanced packaging at that market grows like give me a.
Little bit of color I guess in terms of.
One the potential capacity increases and how you can flex from product to product depending on customer demand.
Great actually Pat do you want to turn to slide eight will have either been in our model kind of supporting what we were projecting here right.
Eight.
And basically I think or a broader.
<unk> coverage for Canadian tool and we'd be by end of this year, we'll have about 90% that college with additional <unk> tools will be critical and the month of July .
So with either broader technology, we have a covenant, but nobody can achieve 50% of the local made in China market and that was about there you can see that is or what kind of harp on that almost 25 billion.
And therefore that it will probably be right and things going again.
Broader pretty deep technology, including we measure monitor things seat.
Completely as soon as the Fitbit angst for us so we can handle.
Most of the Monster and I can only load we believe today, even notwithstanding who will cover I havent seen processing and also TSV and also at the most currently pool. So it does give us a lumpy instead of 50% of that so as it is about a basically a D are in China.
Great and then the bother.
It is about the close to a point 2 billion as our market here. So thanks for a firm that's a big one right. That's a huge market there too. So we're offering them a part of the country, 30% I'm going to go to market.
And it was done additional packaging with a couple of hundred million, so with a whole lot together. It goes to 1 billion. However, this.
This is really I think a conservative estimation when I see that as a we're actively looking market outside of mainland China as we progress nation with secure their one.
Pump you're familiar with U S base will continue as boring customer in Taiwan, and Singapore, South Asia, and even in Europe right. So we've got an additional global customer I mean honestly I mean in China you know.
As we progress and I think it must be done even there is as you know our.
Our steep reaching one being on revenue right.
So that's probably the major thing can produce our product, which is a different market as I mentioned also in our news release. We're also welcomed two additional and new content.
As a novel.
Our addressable market from a bit into a 60 bed and obviously those the Toronto, we're not again to revenue probably until 2024.
And even beyond right. So that's where the further adding additional driving force and two how do you see them growing to 60.
<unk> been.
And over that those strategies, we're talking right now.
Hum.
You want to add on that.
Yeah, you bet.
I think there is I think it sounded like Patrick had a little side question about our ability to produce it too and so Patrick one thing to be clear.
In our production facilities, it's pretty fungible between our different product lines, Patrick and so really our capacity is about the floor space. We have and you know we are giving you the plans on that it's our team and of course, it's in supply chain.
So those are kind of the the big the big.
Big drivers I mean, we of course, we've got plans in place to.
To support from a production standpoint to support those targets.
Great. Thank you very much and congrats again.
Yeah.
Thank you Patrick.
Our next question comes from Donnie King with Nomura Securities. Your line is open.
Yeah.
Hi, Marco.
Yes Bernie.
Well.
Great. Congrats on the good result, maybe my first question is regarding to your 2022 guidance.
So looks like will you revise off.
Olympias just from.
The guidance, we have given all the past one to two months.
So just curious what's the reason behind the better guidance is easier.
And also considering that we are expanding our life non wafer cleaning equipment are much quicker in the 2021 .
But there's a bunch of them frequently as buying processes that hull.
Can we grow these no wafer cleaning tools are much faster what kind of investment we have been doing in these new areas. This is my first question. Thank you.
Okay.
So actually.
I actually like you said in the January time line with either our first or over a year guidance rate and Suzanne until now almost like are you know almost like two months.
So we do see some more visibility.
Compared with the.
General timeline.
Neither more visible and also therefore without a reason so we made it there.
Slightly adjustment of tens of millions on a more or increase for the whole year guidance right.
So you look at this year with revenue growth I think we're still seeing very strong growth on me.
Couldn't be environment and also just recently announced we do have this oh, the bench will be the world economy, and we see that are also a very strong team in and also all the major trauma, which is more.
And on the single wafer.
Also I can see in China is thinking here and Grunenthal might see also there expanding you know 45 nano unlocked in this production line. So we see that the older bench will be real.
Critical and for those who are in.
Between energy are upon us.
So also as we've announced.
No pleasure to join the call.
Allergy and quantifying and that's really amazing Oh debenture prana is a real understanding in China with a domestic player. So we can almost congress most of their banking process obviously.
Saps.
People and the talent will continue to grow miles under Islam, Bruce <unk> will continue to go on too.
I think it's the driving force of continued major and more than that is that we see this year.
The combo Brady, we're pretty real Moreover, revenue.
The increase in men right, so they're going to see that that will continue to grow in their most recent peak.
Big order.
Creating tools and so I see that continue driving our remedies.
Another one on annuity.
From us right.
Last year, we didn't have robust send them to us.
Shimon Congress empty CBD.
I commend your meal and also you know a vacuum aneel and so its quite or are those two entities on a comparably well. So looking for this year would be the order and also a new customer base and all so where I see also the photos added revenue for our Florida.
Turning to our revenue growth and one thing that is again.
So wherever.
We're talking about is a amongst packaging right and still growing.
So we'll see this year will be another exciting year and I said you know.
Existing product on the market before the makeup of our revenue growth.
On the other franchisee or existing customer and also a second tier third tier customer and it was some packaging also levered manufacturer customers doing their multi expanded right. That's the way I would give the estimation for this year then.
Okay.
Yeah. Thank you David.
My second question is regarding to our shipments. So we have very strong shipment per quarter right now is like over a long to meet them.
Dollar.
Wondering if you could quickly comment on the shipment trend D. C. Abide by each quarter is like steel trading off of both of the fourth quarter level or there would be some seasonal drop in the first quarter and then reaccelerate into the rest of the quarters.
And also.
Wondering if you have seen like some.
For example, the heightening solar.
The run Capex to pick up more mainly 40 from D. C. Because previously it looks like all the momentum has been mainly driven by logic investments and those Chinese.
Chinese customers. Thank you.
Okay, Oh, well looking at last year quarter, Susan or Mike and this is a manufacturer based in China.
Some of them were opening in Korea, as well as the China and Korea.
I knew you were Chinese new year. So that's really all I can because our employees go back home and think it's one week, sometimes 10 day, that's really you know Ken over reduced Oh <expletive> in it. So we're not looking at last year Q1, Q2, Q3, because of the amount of movement or is Q1 is a law and again.
Now this is a scenario where PC because of manufacturing wise.
And also some customers deliver you know in the last year or so is the only reason behind you can see that we are always the two ones might be weak in Q2 Q3 strong into Q4 dependents sometime very strong to when they come out of school at a restaurant. So we'll probably see that are kind of assuming the pending what happens this year.
And that's our estimate.
Then looking to redo our product lines and he just mention Etsy Hynix, yes, there are capacity in Wuxi pretty much you know, it's kind of what I mean, not much planning spending.
We are looking they're looking really expanded.
I think so we're working.
We're trying to also you know working very close with them.
Customer tried to get into there a fat into there.
Criticized right and or otherwise.
And that is I can see either under or or memory.
Company in the mainland China is very strong and we see that continue to grow and also looking for on the international opportunity right and.
Logic and memory too.
Got it thank you so much David.
Thank you Tony.
Sure.
Our next question comes from <unk> Desilva with Roth Capital. Your line is open.
Hi, David Hi, Mark Congrats on the strong finish in 'twenty, one of the strong growth outlook. So the.
Yeah, I'm curious in the care of the 22 days, if if the a sense of your customer concentration will be similar to 'twenty. One would you expect fewer or more 10% customers as you grow here.
Across our customer base.
Yeah, Okay, well constantly monitoring them. All obviously this year, we don't we're not to pump or any customer you know you still have ongoing group and also when do you see it right.
The rest of the three you can see that.
He is a top five additionally, as M. A C and D. And also there are behind us and we see that there are probably this year, we see they're kind of are a.
Quite a bigger I called her plan increase and obviously for them. There you can see there is a messy and also we're expecting six empty you can do your message to them right. So we were hoping you know we'll.
We will see you know over there.
Our customer and probably one maybe two of them are getting into the more than 10%. This year, that's our expectation right.
So as I said are in top customer are there other small I mean on the second tier third tier was to continue their expansion of their capacity, but doesn't mean, because then I can see.
Okay. That's very helpful. David and then the the new product categories, you you've got to announce I'm curious are these addressing a similar size times to what you're offering now or are you going to target even larger more significant times these new product categories.
Yeah.
Moving to slide there you know were really down that are pretty clear right. We've been pronto.
Drafting off.
Right and they used to be with your plant 5 billion because they told the market and grow so that the company didn't you know verify the coupons on the widespread global headquarter in a market in our calculation and but we don't want to Miss the additional two new product and that's a theme.
We're thinking in the plan for another couple of years ago.
And also because of our customer.
Do you want us to get into the two new partner and working together address their you know process and on the mountain those routes. So the true new product we believe.
What will come out probably the second half of this year and so while we are running very well and the answer is again when do the new pronto with European.
<unk> idea and differentiate idea, we want to be building product and certain performance and should be close to the top here and I think global copier or even some are hoping some performance that we're doing awesome anything to pick at all you could give us.
It kind of is succeeding.
Product.
So anyway, we'll work on this right now and those are the two product is about the Alibaba cognizant right, but this is a billion dollar market and together. So again, we're more we're very excited about two new banner and went through the same way and did it before and we'll mention the Lady.
My Dear and providing a better solution and two customer to address their technology.
Next our next generation requirement right now just with the new self where we're kind of in the requirement, where just where their future requirements.
It sounds like great execution on the product roadmap congrats guys.
Thanks C J.
Our next question comes from Christian Schwab with Craig Hallum Group. Your line is open.
Hey, good morning, guys.
The USPS major global player congrats on the evaluation and production orders there.
When you guys talked about successful evaluation could lead to larger opportunities.
You quantify that like give us a range of potential outcomes versus.
No modest.
Success at that customer to great success at that customer.
Yeah actually you know what.
You can see that as a tool to it right, whether you deliver and you know where.
Well really I should say are excited about that and also as.
<unk> two will be qualifying where I'll be looking for more opportunity right and also I'm not looking for just this pool.
Actually we have addition on a product.
Quantifying.
Two they can bring to other new different process that it was a different application and also we have other plants right like a today cover breeding and also upon US I think we're looking for closer to the future with easy we're working with a leading supply a leading customer in the U S.
The desire to know more of upfront.
We have in our pocket, probably D and arguments drive through polishing and also sort of runners.
From this it would be Ikea CBD, but also this year, we're also hammer or a or B furnace come out right would you talk about a thermal EOD and plasma D. But if the vertical prototype not all become there I go to a big opportunity and can bring us to this as you know a pump your customer.
As the time ago, you know, we have a successfully getting the rent customer repeat order modern production really will bring <unk> to additional savings this year.
I'm going to talk to your customer in the USA to it wasn't more than that is really one of the secure success in the U S. The top tier customer, we will help us penetrate other regions, including Taiwan, including Europe .
We're excited about this and not the language on offer and a highly.
And the people and doing those sort of supporting and we needed probably of success. So far so good working vehicles and trying new project on the <unk>.
Like for like a success.
Thank you for that color.
Last question is just regarding the additional capacity, that's coming online and the $1 billion revenue target as we expand.
The customer basis, as well as expand the number of tools that we're able to sell as we just highlighted the different leading customers you know as we look out beyond middle of 'twenty three win some of that initial production is beginning to ramp.
I'm trying to determine.
The gross margin to the company or are your expectations for gross margins would be any different than they are today.
Oh, good and okay. That's it from a gross margin, Greg and I think they're so far our gross margins you know pretty kind of stable.
Stable between 40% to 45% or some thing quarter to quarter fluctuation, we can see that.
So it's really.
This gross margin really at the future, we're really dependent on food.
And number wise.
How do we divide it up a little bit more in the region product right and then those products the multi module.
And also how do we take care of this semi critical partner.
So what what kind of take a balance right in other words and their we won't see that as we more progress.
I'm going to let us know if we get them, we'll do you proud.
I come home and so those are the kind of the high margin and L. P CVD and ready to go market right. So it's really to try to balance all of the.
The lungs, leading technology and product on time, and therefore, you can ban there's also some quota semi critical tool and the module. So again I'll go steal and makes a few year, what's being located our margins would be $2 44 per cent. It's all adult and maybe after are high and the product.
<expletive> what do you find any customer that hopefully we can have a module.
I Hope you know 45%.
That's what I mean, even if a couple of years ago. A few years later that's all.
Great no other questions congrats on a good finish to the year. Thank you.
Thank you thanks Christian.
Our next question comes from Quinn Bolton with Needham <unk> Company. Your line is open.
Hey, guys congrats on the.
Results and outlook I, just wanted to start with a $1 billion.
Target longer term revenue target just a couple of questions. There in light of that target can you give us a sense with Lin Gong starting to ramp in the middle of 2023. When do you think you would get to a billion dollars of capacity.
Capacity I know long term lingo and gets you to one 5 billion but.
How quickly do you get to having the capacity in place to support that target model and then I've got a follow up question.
Great great.
Okay cream actually you know that there are times that area. We do have are too.
It really is about the almost 20000 square meter that's what will be totally car reservation here $675 million.
I caught or.
Revenue wise, maybe you can start to do more but that's what would be the problem.
So that's why we're kind of building a wound down a facility upon total 1 million square meter square feet I'm sorry.
We reached about their true manufacturing fab will be due there.
It's about the total probably close to a 50000.
Square meter was a half a million square feet on the area. That's two fab build out capacity wide space wise, we're talking about one point might be the right with one of the first three duty and are in or wherever.
<unk> for the logistic there you know a positive spare part of older pumps has been there. So we have we kind of feel like high efficiency. So that there will be a study using from EWC. The years was on train three and then gradually moving capacity from trends onto the lingo right. So eventually we'll probably.
Moreover, our final you folks on order to families in England in Atlanta.
Again, if we're using fully utilized $1 5 billion.
And of course, I ever more training more people anymore, and you were right to run out of fat. That's all these are aligned with our production capacity.
Capacity run through speed. So we see that would be you know it's been a good excision and with also made this happen and make sure our capacity can we will meet our requirements are sounds cool right.
But I guess just.
In terms of that $1 billion capacity is that something you think you could hit in 2024 or is that something that you might not get there until 2025 again just from a.
Duncan.
Production I think is perspective for sure.
I think that I'm talking about real capacity widening space right now.
We have to find happy with and then two five I think eventually we're finished or construction by 2020, you know actually this year and with premium audio construction and then you'll have the modeling side are there you know a range of other.
Ocean and require the gas system or other thing with although neither of them next year. So eventually what's gone <unk> fractures.
I was thinking of the fab so capacity wise as EDA space why there'd be 1.5 billion. However, you have to hire the people train the people right now it will be according to our sales plan.
What kind of pace and then eventually reaching back one five years. So that's what really rely on ourselves and also are you know R&D and new product qualification will depend on that.
Got it Okay, and then for Mark <unk>.
You've talked about a 17% target for R&D.
Set of sales I think in the fourth quarter R&D was below 10%.
So getting to 17% seems like a pretty big jump or is that happening in a step function can you just give us some sense. How do you how do you ramp up to that 78% with sales level and I guess related question SG&A came in pretty pretty heavy at 17% of sales where do you see SG&A as a percent of sales in 'twenty two.
Yeah.
Yeah. Thanks.
Quinn so.
<unk>.
Big picture.
The R&D, which was about $13 seven right in in Q4 Q4. So it was a we kind of we stepped up our R&D and it.
More than doubled year on year. So that's.
We're certainly have a lot of areas.
Opportunities for investment there.
I think Quinn.
But we would anticipate to ramp that up kind of gratulate direct throughout the year.
We've talked a little bit about the seasonality you know.
David mentioned Q1 is going to be probably in the low lowest quarter of the year.
And so we'll bring the R&D.
Throughout the year.
But.
So you know in general.
Think about our overall operating model for 2022.
Thinking about the gross margin would be the 40% to 45% range.
And.
Big difference is going to be in the uptick in the R&D intensity.
You might.
Expect a little bit of leverage.
For both the sales and marketing and G&A, but not dramatic.
So the bump.
I'll go down a little bit as a percentage of the overall sales and the R&D will tick up.
Okay. Thank you.
Yeah.
Yeah.
Hey, there.
Okay.
Okay.
Yeah.
Our next question comes from Edison Lee with Jefferies. Your line is open.
Okay. Thank you hi, congrats on the results I have two questions, mainly with respect to the 2022 vascular guidance.
I wonder out of the latest guidance how much of that is.
Come from overseas versus China.
Two is that what do you think will be the breakdown of these three major categories within the within the guidance that has a mouth P and M E C P.
Packaging than another.
Yeah Okay.
And then to kind of a first in market anymore, and so I think there are revenue. This year. Our projection is still major come from I called or you know maybe in China, maybe something from our you know.
So not a significant portion from the overseas right, even though we have this is revenue that was.
So to the top tier of U S customer and possibly by the two of them have gone according to plan and along with due to rate is normally much Bonnie.
So why do you still I said, our revenue base is still under a man in China base.
I don't see that.
Then in a product category you can see that you know I really couldn't tell you know what the number was this year I'm looking at lots of you can see that.
Oh, good evening has been found to 70, 73% right.
And we're seeing that as trying to continue because I said you know probably know what's going to play and also are you know in.
Thrown in front of me.
The Mount Todd are you getting close to so we'll see if I can put some people can do their job right and looking at mid 2020, and 83, 8% last year is at 72, 8%.
How do we see that cleaning, even supervalu will continue great, but they're relative value cause anybody job right. So we don't know yet really can number you gave me a number but I can just even trend wise and what are the more either pronto will grow right, that's where we can see that.
Okay can I ask a follow up about.
This new cleaning.
For couponing semi.
And I would assume that our cleaning protocols come public somebody is not one of the two new product categories that you're going to introduce this year right. So can I assume that you have not yet talked about these two new product categories that you are supposed to introduce this year.
Yeah, I think there are two new kind of your product is not is listening. So you've got it right receivables sitting wafer make sure it right it's reaffirmed each.
And that's at the airframe I sat in a few years ago, and we have put them on effort announced their two year and three years.
And it's really come to their Oh, right and when you think about their second half of this year, we can deliver a beta tool and if a customer for evaluation right and those two paid a new product as I mentioned about 8 billion of the addressable market and however, we believe will take about a year and a half it is.
The costs of the science.
So we're really looking for maybe contribution and will be there.
Come from maybe 2024 and the.
Timeline to get us to a new kind of run off of revenue wise.
But then the well regarding customer wise I should say what wasn't working very closely with Asia customer.
In Taiwan, and also the Singapore, and some south Asia to.
Including all the Europe . So I think this year, what kind of additional new customer wins.
The again over all sides of our remaining China, However come to revenue wise, probably one other country with too many remedies because the first tool you'll have together.
First with no.
Would you wait until there is accordingly, right. So they really have their secure new company. This year revenue will be next year so much.
Most of the revenue wise.
Okay, maybe just one last question. So all the cleaning equipment will come out that made you think it will contribute to revenue this year.
Oh, Yeah, and I, just you know come out with any really new emerging market rate and obviously the size of the lines are going to see the six inch right and we're working we have of our tool, especially are the most of any rule all went to weekend really using that to the Sydney.
If you can comment on this.
Nitrogen production and also we got a freedom to my last year with a qualifying a couple of really good sample.
Are there.
For the I call there.
<unk> got in nature, and who isn't.
So you can kind of application do so we have all that and there are a couple of pages, we're aiming for the city economy.
It was little come on semiconductor applications.
And these are all in mainland China, that's alright.
Ah well, we also see some easy class even from honestly I mean in China, right and we do have an international customer asking us even from a obligation almost one three D and also for the Codell developer stream went azure and NPL schrieber.
Right.
Okay. Okay. That's great Yeah. That's it for me. Thank you very much David.
Yep. Thanks.
That's all the time, we have today for questions I'd like to turn the call back over to David Wang for closing remarks.
Yeah.
Okay.
Right.
Okay. So again.
Thank you operator, and thank you all our principle based approach where all participating on today's call and for your support sorry, My phone, let's Robow equity together.
You know thinking and all the things that Mark will take the order a little companies before we close Gary is going to mention some upcoming investor day.
The addition of events Gary please.
Thanks, David on March 14, and 15, we will present at the 34th annual Roth Conference in Dana Point, California.
Then on the 'twenty through 'twenty four the March will present at the Morgan Stanley Virtual Hong Kong Summit.
Tendency at these conferences is by invitation only for clients of each firm. So interested investors. Please contact your respective sales representative to register.
For one on one meetings. This concludes the call everyone. You can now disconnect. Thank you.
This concludes the program you may now disconnect everyone have a great day.
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