Q4 2022 ACM Research Inc Earnings Call

February 24, 2023

Reconciliations between GAAP and non-GAAP amounts you should refer to our earnings release, which is posted on the IR section of our website and refer you to slide 12.

With that let me now turn the call over to David Wang who will begin with slide three David.

Thanks, Gary.

And welcome to ACM research fourth quarter, and the physical year 2022, earning conference call.

Starting with our fourth quarter results.

Revenue was one $8.5 million compared to $95 1 million last year.

Shipments were record $193 million upper 69% year over year.

Gross margin was 49, 6% and non-GAAP operating margin was 17, 7%.

Anticipated as a result of U S export restriction.

For our customers reduce their production and their advanced notes facility. We also experience some delay from our supplier due to supply chain constraints. Despite the impact to our fourth quarter revenue. We are pleased with our results.

For the full year 2022nd.

Market another year of progress on our mission to become a major supplier to the global semiconductor industry, we delivered a 50% year over year top line growth during the COVID-19 related restrictions.

Supply chain disruption and the increased trade regulations.

The results demonstrate we're.

Were driven in part by a multi product portfolio strategy.

Turn to slide four.

We are focused on deepening our positioning and cleaning all core product segments.

In 2022nd our Canadian product grew by 44% to.

$272 9 million, Jamie and buy one by our single wafer cleaning tools and continued penetration of our semi critical older bench tours with factor <unk> to play a key role Vermont for mature nodes development in China and going forward.

We still have several important new cleaning tools, including babble etch tool.

High temperature <unk> single wafer cleaning tools.

The high temperature dry tool and at the end of supercritical Cotwo dry tool for DRAM, which is important for our <unk>.

Financial efforts AAC.

<unk> now has one of the brothers cleaning product portfolio in the industry covering nearly 90% of all Canadian project staff.

The ECP and our furnace and other technologies.

<unk> more than doubled year over year to <unk>.

$77 5 million and represent 20% of our revenue mix.

This was driven by a significant contribution from our ECB, playing indoors with increased penetration of our top customer for both ECP map.

From an and ECB A&P for the backend.

We expect there.

Our strong product cycle in 2023 from our furniture products are.

Our higher temperature, Neil and <unk> partners, including <unk>, <unk> and our party the party.

<unk> expanded to multiple customers, we expanded our funds platform with the introduction of our thermal atomic layer separation a or b.

<unk> ultra and <unk> for this tool.

We delivered the first <unk> tool for customer in September and second one for another customer in November 2022.

At the Mount package not inquiries AP.

Service and spell and other process tool gross I believe year over year. This segment includes a range of packaging tools, including colder developers scrubber.

A fever and a wet <unk>.

And also our service and spare parts <unk> is the only company that offers both a full set of web tools and advanced plating tool. We believe advanced packaging will become a more important as the larger looks for packaging.

Innovation, such as two five D and three D in the polo and the fan out to drive the higher performance, particularly in China.

In Q4, we added two major product categories Ultra lethal track Codell developer tool and ultra P. Max P. CVD tools we.

We estimate this to new tool double our served.

Served available market or Sam two 6 billion.

This major new category reinforced acm's position as a multi product platform company.

Our ultra lethal track cooperative up tool.

Natural evolution of our expertise in Canadian coating and develop a system, which.

We have built over the past decade.

With our core competence in sulfur and robotics.

With our improving stand alone Coulters developer tool performance well.

We're positioned to competing in a $3 7 billion track market.

We believe many global logic memory manufacturer.

Seeking our second attract supply source.

<unk> proprietary architecture design enables ultra lethal track to process 400, or even more wafers per hour, which is required for the next generation of litho tool specifically.

Design.

For memory manufacturer customer.

The tool is the multiple feature that enhance performance across.

If activity.

And our cost of ownership.

We delivered our first ultra lethal track colder developer.

F tool towards domestic or Chinese customer in the fourth quarter 2019 second.

And plan to deliver online model later this year.

<unk> also begun development of our key IP model.

Our ultra Pemex, PCB pool must acm's intra into a new area for front end semiconductor manufacturing.

We believe our proprietary design provides better film uniformity re deal same stress and improved political performance.

We targeted this product for global logic and memory manufacturing.

Expect a good detection for 28, nano and above larger customer, which we view as a major expansion opportunity in China.

We believe there is a this is aligned with the China focus on adding manufacturing nodes capacity.

Adding mature node capacity to match domestic or consumption, we expect to deliver a FERC TSA medium tool to IC manufacturers soon.

We also expect our ultra P. Max piece of video tool to be used in critical process for memory fabrication.

We look to those two new product category provider, another lack of golf to ACM in 2024 and <unk>.

These <unk> are used by nearly all of the Chinese semiconductor manufacturers are sell and service team.

Constantly working gain better traction with each of our customer across each of our major product lines.

Our 2000 plenty.

Plenty to results demonstrated.

Impressive growth for our core Canadian tools.

And a good product cycle <unk> weeks.

We expect a similar product cycle four fronts in 2023, and our long term contribution from track on the piece of it.

I will now provide a detail in our 2022 customers turning to slide five.

For 2022, we had 310% customers are pharma group.

We remain our top customer at 18% of sales as MSC was a secondhand largest at 15% and <unk>. It was a third of 10%.

<unk> and SK Hynix also contributes but we're less than 10% and a 5% respectively.

We had a stronger contribution from second and third.

Here semiconductor manufacturer, including empower analog Cmos image sensor compound semiconductor and other devices.

Although none of them individually was a 10% customer.

This customer group represent about totaled 20% of our 40 year of sales.

For 2023, we expect that growth from our China based customer with a share gain in our core Canadian tool and ECB.

And the <unk> product cycle.

It also anticipated initial sell in the U S and the European market, where true comedian tool at a U S facility of a large U S based manufacturer.

Evaluation is going well and we are optimistic it will lead to additional order from them in 2023.

Today, we announced a order for our first evaluation tool to a top tier European customer.

Tore is planned for delivery in early Q4, this year and we are beginning to higher service team to support it.

We are optimistic this could lead to a repeat orders of this product.

For our other products and open the door for other potential major customer.

In the region.

Next.

I want to detail our planned investment in new facility.

Turn to slide six.

Construction of an inbound production the R&D center is nearly complete and remain on track for initial production in the second half of this year.

All in gun camera, or including 1 million square feet, including two R&D building two factory building.

<unk> accelerated factory.

Salary factory will be equipped with a clean room on the lap of the same grade as our customer IC production line.

See the R&D and product process verification.

Upon completion the link our campus is expected to have annual revenue production capacity over one 5 billion.

Dollar.

We are moving forward with a purchase of a new four own headquarter for ACM, Shanghai inbound young area of Shanghai.

The Silicon Valley of China.

We paid about $47 million or they're building in the fourth quarter or moving later this year.

This is an important addition for ACM underway I'll provide a stability for employees.

Attracting new tailored and allow us to invest in World class R&D center to speed up the development of our tools.

Support our international expansion, we have increased our investment in Korea.

As a second source of production capacity for business.

<unk>.

And we will provide additional access to a greater pool of R&D payments.

We already have a team of about 70, local R&D engineer who have co.

<unk> approach are further track and a piece of it the product with our Shanghai R&D team.

This facility will be in the proximity of several major semiconductor manufacturers, which we believe will help achieve greater traction.

For 2003, we expect to spend about 800 million capex.

<unk> project, including lingering facility.

Adding Korea, and new ACM, Shanghai headquarter or any of this important investment.

Our major spending project will be complete.

The next several years.

We remain committed to our 1 billion revenue target will present to slide eight.

We remain bullish on the domestic China semiconductor market.

Our China customer to continue to add or even speed.

Below capacity.

As in mature nodes and the made in China capacity is much lower than the local market consumption.

Domestic demand for semiconductor where following increased production, we like electrical vehicle and consumer electronics.

The majority of our customer demand has been for mature nodes production site, including plenty of nano and above largely devices power devices and Iot.

And we anticipate good growth for years to come.

We believe we can achieve a $1 billion revenue target in near future.

Mainland China alone our model is based on.

55% market share in cleaning, 50% <unk>.

35% in front us.

15% each for tracking piece of it.

You see up sight.

Sure Frank International markets, we're making good progress with Korea, U S and European customer and expanding our global itself and supporting him. We're also accelerating our R&D and <unk>.

Production facility in Korea to be close to several major semiconductor player and provide a second site for supporting worldwide customers.

I will now provide our outlook for the full year 2023.

Let's turn to slide nine.

We are re <unk>.

We reaffirm our 2023 revenue outlook to be in the range of 515 to $5 85 million.

The range of our outlook reflects among other things the potential impact from current U S. China trade policy.

And together with a variety.

We expect our spending a scenario of key customer supply chain constraints and the timing of acceptance or first tool evaluation in a field among other factors.

In conclusion, we're proud of the progress we have made in 2022 and excited for the opportunity.

Our lives have in 2023.

We remain committed to our mission to become a supplier to a major global semiconductor manufacturers and to deliver innovative solutions for our customers.

Now, let me turn the call over to our CFO , Marc work revealed detail our fourth quarter results.

Please.

Thank you David and good day, everyone. Please turn to slide 11, unless I note, otherwise I will refer to non-GAAP financial measures, which excludes stock based compensation unrealized loss of trading Securities reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release.

I will now provide financial highlights for the fourth quarter.

Revenue was $108 5 million versus $95 million last year total shipments were $197 million versus 117 million shipped in the year ago period.

Revenue for single wafer cleaning tools and semi critical cleaning was $74 6 million versus $61 9 million.

Revenue for ECP furnace, and other technologies was $20 2 million versus $19 5 million revenue for advanced packaging, excluding ECP services spares was $13 7 million approximately flat versus last year.

Gross margin was 49, 7% up from 47, 9% in the prior year.

This exceeded our normal expected range of 40% to 45% the increase gross margin versus the prior year period was primarily due to product mix and a positive impact due to the change in the remnant beat to U S dollar currency rate.

We expect gross margin to continue to vary from period to period due to a variety of factors such as sales volume product mix and currency impacts.

Operating expenses were $34 8 million versus $25 1 million, we incurred higher R&D costs due primarily to increased personnel sales and marketing expense was higher due to promotional tools and personnel cost.

Income was $19 2 million, representing 17, 7% operating margin versus $24 million.

Other expense net was $6 6 million. This was due primarily to the impact of exchange rate changes on our payables and receivables for the period.

Income tax expense was $2 7 million compared to $3 2 million in the year ago period, the effective tax rate for the full year 2022 has increased primarily due to the requirement for tax purposes to capitalize and amortize previously deductible research and experimental expenses under IRS code 174 that was affair.

As of January one 2022.

Tax provision and assumes the rule will not be overturned and is based on capitalization of all the R&D expenses for tax purposes.

Net income attributable to ACM research was $12 6 million versus net income of $18 1 million in the year ago period.

Net income per diluted share was <unk> 19, compared to net income per diluted share of <unk> 27. In Q4 of 2021 I will now review selective balance sheet items cash cash equivalents restricted cash and time deposits were $429 million at the end of the fourth quarter versus $4 $73 two.

At the end of the third quarter total inventory was $393 2 million at year end.

$327 8 million at the end of last quarter. This includes finished goods inventory of $146 9 million work in process is $79 1 million raw materials of $167 1 million net.

Net cash flow from operations was $1 3 million for the fourth quarter net cash flow used in operations was $62 2 million for the full year.

Capital expenditures for Q4 was $72 6 million, which included $47 2 million payment for a new headquarters building in zhenjiang and spending on our linked <unk> factory and other items.

Capital expenditures for the full year was $91 million.

That concludes our prepared remarks, let us open the call for any questions that you may have operator. Please go ahead.

Thank you.

Ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Please standby, while we compile the Q&A roster.

We have a question from Mark Miller with Benchmark Company. Your line is open.

Congrats on another strong year and outlook I had a question about the.

The regional distribution of sales it looks like China was down 20% sequentially, how much of that was due to the restrictions in China.

Just wondering what produced a 20% decline in sequential decline in China sales.

Yeah.

Mark and I think it's real hard to give you a precise number and obviously there is a.

Yeah.

Those are.

<unk>, obviously investment in advanced nodes.

And that percentage how much contribution I don't have a number right now however, I should say there also say there are still strong demand.

In there.

In the mature nodes right. So that's the way.

We think this year.

Revenue continue to grow of course auto class or new product deployment, and especially ECP in front us.

In terms of other regions that showed a nice uptick over.

Prior quarter and year over year.

Can you disclose that coming from the U S or Taiwan or I'm, just wondering where the other region increase in revenues is coming from.

Actually we do have we're expecting some revenue this year will come from outside <unk> in China, and some revenue, we expect from Korea, and some from the U S.

And also what we're expecting probably not reinvent remnant.

From there you know, Taiwan, but they're actually respecting customer I, probably a breakthrough in the <unk>.

Taiwan this year, but not revenue.

Thank you.

Yeah. Thanks Martin.

One moment our next question.

Our next question comes from Quinn Bolton with Needham <unk> Company. Your line is open.

Okay.

Sorry about that I was on mute hey.

Guys. Congratulations on the strong 2022 results in that very strong 23 outlook.

WP end market environment. This year I guess, a few questions one for David or Mark can you just give us some sense.

At the 23 guidance of 515 to 585 do you expect any.

Meaningful contribution from advanced nodes in China or review effectively zeroed out the advanced memory and logic nodes in that guidance.

Yeah, Let me, let me give a first shot and I think we'll still see some.

Property is steel purchase going out, but obviously quite a reduced rate compared to last year.

So thats another much counting.

Protection or this year or I call It protection and however, we do see.

And also there are some speed up and for the customer.

And even some new customer right in China of our mature nodes.

And also for their power devices, so that we see there.

Our.

Revenue growth and from major from those customers right and Plaza animation and also other product spread out by ECP continuing to gain market share and the furnace. This year with single game and are more rapidly when the market is here too. So that's probably a factor my next one.

And also including some international contribution.

Contribution cells from from outside mainland China.

Wanted to also ask just on the shipments.

Very impressive number the $197 million in.

In the fourth quarter I know I know you don't guide to ship.

Shipments on a go forward basis, but.

Can you just talk about.

Is there anything special going on in the December where that.

Was there any business sort of either pulled out of the September quarter or perhaps pulled in for March.

<unk>.

You talked in the prepared script about some supply constraints.

See the impact of supply constraints, when youre at nearly $200 million of shipments for the quarter. So just trying to get some sense on what's your outlook for shipments Jim perhaps qualitatively since I know you don't give guidance for that number.

You mean, the future from our last quarter.

Yes.

Maybe David just talked about the strength in shipments in the fourth quarter was there anything.

Unusual.

As such a strong number and then any comments you might be willing to make them out.

Do you expect shipments to trend.

For the next few quarters I see well at your last four quarter shipment and also impact by constraint right. If we have no supply.

Supply chain concerns, maybe it's even more.

Obviously, there in part because you know I called trade restriction or the NIM is that assume into it. So anyway I think next few quarter with steel can see that there continue.

I go there I'm, not saying that quarter higher than the fourth quarter rate I should say in next year than this year.

We'll see that continuing Chris argument right.

Yeah.

Excellent and then for you Mark obviously gross margin near 50% well above your target range of 40 to 45, how much of the strength in the fourth quarter was due to that.

Higher shipment level I assume you are getting pretty good factory utilization.

Is that kind of shipment level.

A big driver to gross margin or is it really more just a function of the mix of tools that you shipped in December that led to that.

Near 50% margin.

Yes, Glenn it's gonna be predominantly about the mix of products.

The absorption helps a bit but it's not a big portion, it's really about the mix and I said in the prepared remarks, we also had.

Some benefit.

From the.

Currency.

Rates, but.

Mainly about mixed Quinn.

Quantify the FX impact Mark I mean, my guess is your mix with Furnas in ECP driving a lot of the growth in 'twenty three it sounds like your mix is going to stay pretty healthy in 'twenty three.

We were not changing our 40% to 45%.

Gross margin target.

We are in it.

Uh huh.

It's a competitive industry in general and.

Certainly want to work well with our customers, but 40% to 45% is the right target.

Overtime.

Yes.

Understood. Thank you Mark Thank you David.

Thank you.

Thank you and we have a question from Christian Schwab with Craig Hallum. Your line is open.

Hey, guys congratulations on that.

Strong execution in guidance.

David.

You're not alone in seeing tremendous strength out of the Chinese.

Chinese domestic market.

Applied materials in their <unk> business spend half the call talking about it so when you look at.

China.

And in your commentary about adding you know mature node, the 28 nanometer Iot power sensors, probably a smaller market but.

And in saying that that it does not.

The capacity within China does not meet.

Domestic demand I think is the way you worded it.

How many years of.

Strong capital equipment spending do you think it would take for that to occur is that like a three to 456 year adventure.

So how long do you think that would take.

Okay. Good question I should say is still.

It was amazing.

If you're a vehicle other consumer electronics right, there's a lot of consumption rate in China for the time.

In the nominal Bob chips.

And I, you know I look at customer and customer or a new customer expansion plan I would say probably in this trial continue go another three years.

Alright.

I would say, they're probably three year timeline.

Again client growth depends on their real situation, but we see that trend going up.

Great.

We've also heard from some some different companies, who who we sell it to.

Domestic China market that.

There seems to be.

A reinvigorated effort.

To buy from domestic Chinese suppliers versus.

International providers into the capital equipment marketplace. If there is good in competitive markets.

And products available, which of course you have.

So do you see your growth potential.

Potentially benefiting.

From that over the next three years as well.

Actually I think for mature nodes with a previous name right. This moment you know that there are there.

Stricture and regulatory not anemic mature note, Brian So I see that as steel everybody can sell so we're now to specific let's say they don't have to know by domestic whatever we're doing.

Because last two year three year, you know the constrained supply and traveling and the people.

We will make or our R&D team in Shanghai.

Understanding Bryan with still can't go into just because customers maybe at that real give or custom kind of.

The vantage offer proximity R&D center manufacturer closing I'd say that is more big impact right. So I mean Ics the I'll say the.

The customer still consider the past the tool pricing and also the stability of our tour as a major consideration and not adjust after the snack domestic I think thats a real fair market. We want to also share that market with other clear in domestic and also outside China.

Really now finally really.

Solution gained rank your cost your service product quantity I look at that as a major.

Perfect and then Oh.

My last question regarding the initial sales too.

A large U.

The U S company.

And I think I.

I thought I heard you say you thought you would get acceptance of those two tools and additional orders from that customer.

This year is did I hear that correct, yes, I think that where did you quantify that door and hopefully you know where.

They're they're continuing expansion plan and we got a repeat order rate that we're expecting.

Great and is that you know with it with that customer is that as you know in some complex.

<unk> like gate, all around or something like that.

Or is there a is there a technology shift.

Where it's opening up an opportunity for your products with that customer that maybe didn't exist before.

Great I really cannot talk too much about that right. We do have NDA, we cannot talk about it.

The customer has a logic and memory kind of pocket, either but I really cannot comment your question sorry.

Okay. That's fair and then and then I think in a conference call or two ago.

And but this is my last question.

You would expect sales you know or shipments I should say.

Outside of of.

Ex China in calendar 'twenty three.

A target of about 10% of those shipments.

You know outside of that market is that still the number we should be thinking about or did I read the ICU stay a part of <unk>.

Hard to give you metrics remember now maybe by end of this year I give you more detail.

Okay. All right now 510 is that goal alright, south perfect great no other questions. Thank you.

Thanks Christian.

Yes.

Our next question comes from <unk> Singh with Credit Suisse. Your line is open.

Okay. This is Julian Thank you Debbie and Mark I had my first question is is that the revenue by region is that based on ship to location or the customer headquarter region.

And we're saying that is based on the answers.

By accurately quarter, we'll talk about either delivered to the China territory right final location were talking about.

Okay, So let's shift to the location of the fat.

Let me clear that and one less day of Hynix exclusive right to make sure we don't have or that extra detail there China location might consider as you know.

For the Hynix fab in China It wasn't in there.

Korea.

Well do that.

With your question.

Yes, so actually my last question is also relating to this important customers.

I am curious that how much capacity manufacturing capacity are we preparing for <unk> and any other international customers by end of this year next year.

Okay.

Production companies in Korea, because I'm just thinking that.

Yes.

Okay, I think let me clear Korean <unk>.

D or expansion and.

We're going to know.

Dwayne from now on this either you know, we're spending investment including increased capacity.

And that competitive moment, we can say that some of them is still using for China market. Because we know we have a co developer tool at between Korea, and India, Shanghai and also added capacity also will be prepared for a secondary manufacturing center and to supply customer outside China right. So that is a true function in there.

In Korea.

Sure.

Answer your question.

As I answer your question Tony.

Yes.

Yes, because I'm just thinking.

That list.

U S should ask if any of our potential I mean U S or non U S. SaaS customers color to explain you add what they have to only purchase any I mean Canadians burn needs at <unk> from our Korean.

Production science data from our Shanghai production site in the next few years.

Well, obviously every customer neither you know they call the business continuity right because you've been natural disaster.

Asking to a site in three sites manufacturing.

You know I've been customer they prefer they prefer to location.

And something happened that you have a second source can continue providing the tool. So that is exactly what designed here as I call the business continuity and to really make sure we can supply the auto customer in the world.

Okay. Thank you expand this question I'm not sure if I missed this earlier would you might give us an idea.

Here on the R&D ratio into 'twenty.

2023, after the major increase last year.

And then Marc answer a question he know more money I don't know how much money is better.

Yeah Italian.

2022, if you go through the numbers the non-GAAP basis. It was there's about 15, 3% up from 12, 7% in 2021.

We think that's about the level, we would expect in 2023.

10% or so.

Yeah.

Yes.

Understood. Okay. Thank you and maybe my very last question is that I know previously some other analysts also ask about the very exciting revenue growth in 2023, and David discussed earlier that a portion of that will come from the tier two or three.

SaaS customers in China, So I'm still quite curious here because.

Our if you look at the SaaS the fab customers in China tier two tier three is that how would you comment on your market share with these tier two pretty fast in China last year.

The market share outlook for this year.

Actually if you look at the remember, we just see there or in the script.

100% represent right now in the last year right and I continue to see that number will continue to increase.

And because we.

Either new customer come home and also some second tier.

And third tier customers like some of the expansion too. So it's a it's a we.

We see that a group aka occupational increase yes.

Mhm.

Okay.

Another question.

On the revenue recognition side inside our firm.

Kind of advanced nodes are rejected by the U S regulation.

The U S October Center Echinacea.

Population for any tools either repeated towards all the new tools that we ship to any of this fab customers.

Oh dose related revenues already also to eat in the first quarter.

Let me this way well and they're obviously in the fourth quarter. There was some revenue come from there right.

And.

I was expecting still some revenue contribution this year too.

Obviously, we're follow.

<unk> for the U S in a trade the regulation.

Which is the more you have their path.

Thank you Mark.

That's our baseline there I still see some from going out and obviously has been reduced.

The comparable last year.

Okay I understand thank you Debbie.

Yeah.

Okay.

One moment and the next question.

We have a question from <unk> Desilva from Ross Your line is open.

Hi, David Hi, Mark Congrats on the progress here.

I'm expecting growth from some of the newer products to show up materially in 'twenty three here, what what is maybe the competitive landscape on the.

Some of the newer product the furnace in the T map, how is that different from the traditional SaaS.

<unk> products.

Yeah, Okay, let's briefly so we're growing I think this year was still continue to see our new product and cleaning right I just mentioned in the script, we do have a bubble of azure.

And also new drawing technology, including supercritical field.

And also we see the opportunity.

<unk> or even a single wafer SPM so.

So it's still other expansion, our Canadian product, which is a cover almost 90% of our Canadian process that might also we see some of this will differentiate technology when she deals for their international customers right Korea, and the U S. Europe .

Well then that is also we have covered trading firms right and <unk> getting a lot of market share last year, we'll continue to see that trend continues going on also we're expecting our copper plating for getting into the market in Korea and in Taiwan, even beyond Europe .

Another way in the phone of prana and we do have are.

High temperature neo oxidation.

O'neill LTE CVD, including Nitride Party the party.

It was quite a there has been expanded multiple customers in China and also last year.

We also introduced right.

Our two new <unk> product for the market.

And that was also a proprietary design.

We see that they're also penetration to the market in China also in the outside China.

That will free product or the driving continuously our growth in 2023.

And then.

So, while we say, but that works with our two new into the product.

Piece of EDI and attract well take time when you I think when you that almost a year to evaluate at a customer site, maybe it wasn't putting at multiple customer sites.

And then that revenue contribution would be probably to 2024 and beyond.

Okay, Alright, thanks, David and then.

With the with the growth in China from the shipments can you distinguish what's happening in China in the foundry logic market versus the memory market to understand the different dynamics there in support of your 'twenty three forecast.

Okay, let's risk way I still say, where we're seeing a mature node grow obviously, mostly seen there.

Logic and power devices analog.

Maybe some of them.

Compound semiconductor right.

You can see that there is that a trend that total ratio or increase in China.

I still say a memory as you will see some growth there.

Relative ratio wise, probably not grow faster.

This is a mature notes at market right.

I think last year, we are about there are market, 15% right coming from memory costs Nimbler more I mean more than 50% come from memory market.

This year I should say probably might be in that range or maybe a little bit lower.

We're looking right now a mark anything you want to add on that.

Yeah, No I don't I don't think I'd add anything to add David I think you covered it well okay.

Okay, Great. That's really helpful color. Thank you. Thanks, guys. Thank you. Thanks Rajiv.

Okay.

Thank you and I'm showing no further questions in the queue I'd like to turn the call back to Mr. David Wang for closing remarks.

Okay.

Okay crushing so fast just give me one second let me get it okay.

Thank you operator, and thank you all.

Participating on today's call and for your support before we close Gary is going to mention our upcoming Investor relations events.

Events Gary please.

Hey, David Thank you on March 14th we're Gonna presented the 30 <unk> annual Roth Conference in Dana point, California attendance of the conference is by invitation only for clients abroad, if you're interested.

If youre interested investor contact Roth Representative to register for the conference and requests for one on one. This concludes the call you may all now disconnect.

Okay.

This concludes today's conference call. Thank you for participating you may now disconnect.

The conference will begin shortly to raise and lower Johan during Q&A you can dial one one.

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Yes.

Good day, ladies and gentlemen, thank you for standing by and welcome to the ACM Research fourth quarter 2022 earnings Conference call. Currently all participants are in a 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 I would now like to hand, the conference over to your speaker today, Gary <unk> managing director of the Blue shirt group. Please go ahead.

Thank you operator, and good morning, everyone. Thank you for joining us on today's call to discuss fourth quarter 2022 results. We release results before the U S market open today. The release is available on our website as well as from Newswire services. There's also a supplemental slide deck posted to the investor portion of our website.

Referenced during our prepared remarks on the call with me today are our CEO , Dr. David Wang our CFO , Mark Mckechnie and Lisa following 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.

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 acm's opinions only as the date of this call ACM is not obliged to update you on any revisions to these forward looking statements.

Certain of the financial results that we provide on this call will be on a non-GAAP basis, which excludes stock based compensation and an unrealized gain loss and trading securities for our GAAP results and reconciliations between GAAP and non-GAAP amount you should refer to our earnings release, which is posted on the IR section of our website and refer to slide 12.

With that let me now turn the call over to David Wang who will begin with slide three David.

Thanks, Gary Hello, everyone and welcome to ACM research fourth quarter, and the physical year 2022, earning conference call.

Starting with our fourth quarter results.

Revenue.

<unk> eight <unk> 5 million compared to $95 1 million last year.

Shipments were record $193 million upper 69% year over year.

Gross margin was 49, 6% and non-GAAP operating margin was 17, 7%.

As anticipated as a result of U S export extra friction several customers reduce production and their advanced notes facility. We also experience some delay from our supplier due to supply chain constraints. Despite the impact to our fourth quarter revenue we are pleased.

With our results.

For the full year 2022nd.

Market another year of progress on our mission to become a major supplier to the global semiconductor industry, we deliver the 20% year over year top line growth during the COVID-19 related restrictions.

Supply chain.

Option and the increased trade regulations.

The results demonstrate.

Our JV in part by a multi product portfolio strategy.

Turn to slide four.

We are focused on it.

Our positioning in cleaning our core product segment.

Second our Canadian product grew by 44% to.

$272 9 million, Jamie and buy one by our single wafer cleaning tools and continued penetration of our semi critical auto bench tours, we expect <unk> to play a key role.

From a mature node development in China and going forward.

Are you still with several important new cleaning tools, including babble etch tool high.

High temperature SDM single wafer Canadian tool.

The high temperature dry tool and as the and the supercritical cotwo dry tool for DRAM.

As important our.

International effort.

<unk> now has one of the broadest cleaning product portfolio in the industry covering nearly 90% of all Canadian projects.

The ECP and <unk> and other technologies.

Revenue more than doubled year over year to $77 5 million and represent 20% of our revenue mix.

This was driven by significant contribution from UCB playing into us with increased penetration at our top customer for both ECP map.

From an <unk> and ECB A&P for the backend.

We expect there.

Our strong product cycle in 2023 from our furniture products are.

Our higher temperature, Neal and LPL, CVD furnace, including Silicon Nitride and party the party.

<unk> expanded to multiple customers.

We expanded our funds platform with the introduction of our thermal atomic layer deposition.

Our shore and a further tool.

We delivered the first <unk> tool for customer in September and second one for another customer in November 2022.

At the Mount package not inquiries AP.

Let me spell and other profit tour growth slightly year over year.

Segment includes a range of packaging tools, including colder developer scrubber.

Pierre Fabre and West <unk>.

And also our service and spare parts.

<unk> is the only company that offers both a full stack of web tools and advanced plating tool, we believe advanced packaging what become a more important as industrial looks for packaging.

Innovation, such as <unk>, five D and three D in the polo and the fan out to drive the higher performance, particularly in China.

In Q4, we added two major product categories Ultra lethal track Codell developer tool and ultra P. Max <unk> CVD.

CBD tool.

We estimate this to neutral double our server.

<unk> available market or.

<unk> two <unk> billion.

This major new category.

ACM position as a multi product platform company.

Our ultra lethal track cooperative Artur.

Natural evolution of our expertise in Canadian coating and developer system.

We have built over the past decade.

With our core competence in software and robotics combined with our proving Standalone culture developer tool performance.

We are well positioned to competing in a $3 7 billion track market.

We believe many global logic memory manufacturer are seeking a second attack supply source.

Proprietary architecture and design.

Both ultra lethal would track to process 400, or even more wafer its power.

Which is required for the next generation of litho tool specifically.

Design.

For memory manufacturer customer pool.

<unk> as a multiple feature that enhance performance across the.

If activity.

And a cost of ownership.

Deliver their first ultra lethal track called the developer.

Tool towards domestic Chinese customers in our fourth quarter 2020.

And plan to deliver online model later this year, we have also begun development of our <unk> model.

Our ultra <unk> pool market ACM.

<unk> into a new area for front end semiconductor manufacturing.

We believe our proprietary design provide battlefield uniformed heat.

Sam stress and improve political performance.

We target this product for a global logic and memory manufacturing.

We expect a good attraction for 28, nano and above larger customer, which we view as a major expansion opportunity in China.

We believe there is a this is aligned with the China folks.

Adding manufacturing capacity.

Adding mature nodes.

The two matched domestic consumption, we expect to deliver our first deals immediate tool to IC manufacturer film.

We also expect our ultra <unk> tool to be used in creative process for memory fabrication.

We look to those two new product category provider, another lack of golf to ACM in 2024 and beyond.

Basically improve by nearly all of the Chinese semiconductor manufacturers are sell and service team.

Constantly working to gain better traction with each of our customer across each of our major product lines.

Our 2000 plenty.

Plenty to results demonstrated.

Impressive growth for our core Canadian tools.

And a good product cycle.

We expect a similar product cycle for <unk> in 2023, and our long term contribution from tracking the PCB.

I will now provide a detailed in our 2022 customers turning to slide five.

For 2002, we had 310% customers are pharma group.

We remain our top customer at 18% of itself.

MSC was a secondhand larger and a 15% <unk> was our third at 10%.

<unk> and SK Hynix also contributes but we're less than 10% and 5% respectively.

We had a stronger contribution from second and third.

Here semiconductor manufacturer, including empower analog Cmos image sensor compound semiconductor and other devices.

Although none of them individually was a 10% customer.

This customer group represent about total of 20% of our 40 year sales.

While 2023, we expect that growth from our China based customer with a share gain in our core cleaning tool and the ECB and the front of the product cycle.

We also anticipate initial sell the U S and the European market, where true Canadian tool at a U S facility of a large U S based manufacturer.

Evaluation is going well and we are optimistic.

It will lead to additional order from them in 2023.

Today, we announced a order for our first evaluation tool to a top tier European customer.

<unk> is planned for delivery in early Q4 this year.

We are beginning to hire a team to support it.

We are optimistic this could lead to a repeat orders of this product orders for our other products and open the door for other potential major customer.

In our region.

Next.

I want to detail our planned investment in new facility.

To slide six.

Construction of an income production and the R&D Center is nearly complete.

And they remain on track for initial production in the second half of this year.

All in GAAP, <unk>, while including 1 million square feet, including two R&D building through factory building and one accelerated factory.

Salary and factory will be equipped with a clean room on the lap of the same grade as our customer IC production line.

To speed up R&D and product process verification.

Upon completion leaned our campus is expected to have annual revenue.

<unk> capacity over one 5 billion.

Got it.

We are moving forward with a purchase of a new headquarter.

Headquarter for ACM, Shanghai inbound young area of Shanghai.

<unk> Valley of China, we paid about $47 million or Theyre building in the fourth quarter or moving later this year.

This is an important addition for ACM underway I'll provide a stability for employees have off attract new tailored and allow us to invest in world class R&D center to speed up the development of our tools.

Support our international expansion, we have increased our investment in Korea.

<unk> as a second source of production capacity for business.

<unk>.

<unk> will provide additional access to a greater core R&D payments.

We already have a team of about 70, local R&D engineer who have co.

Developers are further track NPS AED product with our Shanghai R&D team.

This facility will be in the proximity of several major semiconductor manufacturers, which we believe will help achieve greater traction.

For 2023, we expect to spend about.

About 800 million Capex.

Our main project, including an income facility capacity, adding Korea, and new ACM, Shanghai headquarter falling against the important investment.

Our major spending project will be complete over the next several years.

We remain committed to our one.

Revenue of pocket, where please turn to slide eight.

We remain bullish on the domestic China semiconductor market.

We expect our China customer to continue to add or even speed up capacity.

In mature nodes and the made in China capacity and the much lower than the local market consumption.

Domestic demand for semiconductor where following increased production of electrical vehicle and consumer electronics.

The majority of our customer demand has been for mature nodes production site, including in plenty of nano and above largely devices.

Power devices and Iot.

And we anticipate good growth for year for comp.

Believe we can achieve our $1 billion revenue target in near future from mainland China alone.

Model is based on.

55% market share in cleaning and <unk>.

ECP, 35% in furniture and.

And a 15% each for track and PCB.

C up sight.

Potential for our international markets, we are making good progress with the Korea U S and European customer and expanding our global itself and supporting him well.

We're also accelerating our R&D and <unk>.

Production facility in Korea to be close to several major semiconductor player and provider secondly sites supporting worldwide customers.

I will now provide our outlook for the full year 2023.

Turn to slide nine.

We are re <unk>.

We reaffirm our 2023 revenue outlook to be in a range of 515 to $5 $85 million.

The range of our outlook reflects among other things the potential impact from current U S. China trade policy.

And together with the variety.

We expect our spending a scenario of key customer supply chain strength and the timing of acceptance, but first of all on the evaluation in the field.

Other factors.

In conclusion, we are proud of the progress. We have made include 102 and excited for the opportunity that the line half in 2023.

We remain committed to our mission to become a supplier to a major global semiconductor manufacturers and to deliver innovative solutions for our customers now.

Now, let me turn the call over to our CFO Mark <unk> reveal details.

Detail, our fourth quarter results Mark please.

Thank you David and good day, everyone. Please turn to slide 11, unless I note, otherwise I will refer to non-GAAP financial measures, which exclude stock based compensation unrealized loss of trading Securities reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release.

I'll now provide financial highlights for the fourth quarter.

Revenue was $108 5 million versus $95 million last year total shipments were 197 million versus 117 million shipped in the year ago period.

Revenue for single wafer cleaning tools and semi critical cleaning was $74 6 million versus $61 9 million.

Gross margin was 49, 7% up from 47, 9% in the prior year.

This exceeded our normal expected range of 40% to 45% the increase gross margin versus the prior year period was primarily due to product mix and a positive impact to the change in the remnant beat to U S dollar currency rate.

We expect gross margin to continue to vary from period to period due to a variety of factors such as sales volume product mix and currency impacts.

Operating income was $19 2 million, representing 17, 7% operating margin versus $24 million.

Other expense net was $6 6 million. This was due primarily to the impact of the exchange rate changes on our payables and receivables for the period.

Effective January one 2022 companies' tax provision and assumes the rule will not be overturned and is based on capitalization of all the R&D expenses for tax purposes.

Net income attributable to ACM research was $12 6 million versus net income of $18 1 million in the year ago period net income per diluted share was <unk> 19, compared to net income per diluted share of <unk> 27 in Q4 of 2021.

Ill now review selective balance sheet items cash and cash equivalents restricted cash and time deposits were $429 million at the end of the fourth quarter versus $473 2 million at the end of the third quarter total inventory was $393 2 million at year end.

Up from $327 8 million at the end of last quarter. This includes finished goods inventory of $146 9 million work in process is $79 1 million raw materials of $167 1 million.

Net cash flow from operations was $1 3 million for the fourth quarter net cash flow used in operations was $62 2 million for the full year.

Capital expenditures for Q4 was $72 6 million, which included $47 2 million payment for our new headquarters building in Zhenjiang and spending on our linked <unk> factory and other items.

Capital expenditures for the full year was $91 million.

That concludes our prepared remarks, let us open the call for any questions that you may have operator. Please go ahead.

Thank you.

To ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.

We have a question from Mark Miller with Benchmark Company. Your line is open.

Congrats on another strong year and outlook I had a question about the.

Regional distribution of sales it looks like China was down 20% sequentially, how much of that was due to the restrictions in China.

I'm just wondering what produced a 20% decline in sequential decline in China sales.

Yes.

Mark and I think it's real hard to give you a precise number and obviously there is a.

They're there.

<unk>, obviously, you estimate in advanced nodes.

And that percentage how much contribution I don't have the number right now however, I should say there.

Also we say there are still strong demand in there.

Sure.

In the mature nodes right. So that's the way.

We think this year our revenue continue to grow of course, other products or new product deployment.

Especially EAP in front us.

In terms of other regions that showed a nice up tick over.

Prior quarter and year over year can you disclose that coming from the U S or Taiwan or I'm, just wondering where the other region increase in revenues is coming from.

Actually we do have we're expecting some revenue this year will come from outside of mainland China.

And some revenue we expect from Korea, and some from the U S and also expecting probably not real that revenue.

From the Taiwan, but theyre actually respecting customer right, probably a breakthrough in the <unk>.

Taiwan this year, but not revenue.

Thank you.

Thanks Martin.

One moment for our next question.

Our next.

Comes from Quinn Bolton with Needham <unk> Company. Your line is open.

Okay.

Oh, sorry about that I was on mute hey.

Guys. Congratulations on the strong 2022 results in that very strong 'twenty three outlook.

Tough WP end market environment. This year I guess, a few questions one for David or Mark can you just give us some sense.

At the 23 guidance of 515 to 585 do you expect any.

Meaningful contribution from advanced nodes in China or review effectively zeroed out the advanced memory and logic nodes in that guidance.

Yeah, Let me, let me give you a FERC shot and I think we'll still see some.

Property is steel.

Purchase going out, but obviously quite a re deal so compared last year.

So thats another much counting in our projection this year or I call. It protection and however, we do see.

And also there are some speed up and for the customer.

Some new customer in China for a mature notes.

And also for their power devices. So that's what we see there.

Our.

Our revenue growth and from major from those customers right and plus as I mentioned and also other products like ECP continuing to gain market share and the farmers. This year with single game and are more rapidly when the market share too. So that's probably a factor my next one.

And also including some international.

Contribution of sales from from outside mainland China.

Wanted to also ask just just on the shipments.

Very impressive number to $197 million in.

In the fourth quarter I know I know you don't guide to two shipments on a go forward basis, but can you just talk about it.

Was there anything special going on in the December where Doug.

Was there any business sort of either pulled out of the September quarter or perhaps pulled in for March.

You talked in the prepared script about some supply constraints hard to see the impact of supply constraints when youre at nearly $200 million of shipments for the quarter. So just trying to get some sense on what's your outlook for shipments Jim perhaps qualitatively since I know you don't give guidance for that number.

You mean, the future or talking about last quarter.

Yes.

Maybe David just talked about the strength in shipments in the fourth quarter was there anything.

Unusual.

Such a strong number and then any comments you might be willing to make about how you expect shipments to trend.

Over the next few quarters.

Well actually last four quarter shipment and also impact by constraint right. If we don't have no.

<unk>, maybe it's even more obviously there and positive.

I called trade restriction or the limit that is shipment to it. So anyway I think next few quarter with fuel can see that there continue.

Alright.

In a quarter higher than the fourth quarter right.

And next year and this year.

We'll see that continue to increase our human right.

Excellent and then for you Mark obviously gross margin near 50% well above your target range of 40 to 45, how much of the strength in the fourth quarter was due to that.

Higher shipment level I assume you are getting pretty good factory utilization at.

Is that kind of shipment level.

That a big driver to gross margin or is it really more just a function of the mix of tools that you shipped in December that led to that.

Near 50% margin.

Yes, Glenn it's going to be predominantly about the mix of products.

The absorption helps a bit but it's not a big portion, it's really about the mix and I said in the prepared remarks.

We also had.

Some benefit.

From the.

Currency.

Rates, but.

Mainly about mixed Quinn.

Quantify the FX impact Mark I mean, my guess is your mix with Furnas in ECP driving a lot of the growth in 'twenty three it sounds like your mix is going to stay pretty healthy in 'twenty three.

We're not changing our 40% to 45%.

Gross margin target.

We're in it.

Uh huh.

It's a competitive industry in general and.

Certainly want to work well with our customers, but $40 to 45% is the right target.

I'll return.

Okay.

Understood. Thank you Mark Thank you David.

Thank you.

Thank you and we have a question from Christian Schwab with Craig Hallum. Your line is open.

Hey, guys congratulations on that.

Strong execution in guidance.

David.

You're not alone in seeing tremendous strength out of the.

The Chinese domestic market.

Applied materials, our caps business spent half the call talking about it so would you look at.

China.

And in your commentary about adding mature nodes 28 nanometer Iot power to answer is probably a smaller market but.

And in saying that that it does not.

The capacity within China does not need.

Domestic demand I think is the way you worded it how many years of.

Strong capital equipment spending do you think it would take.

For for that to occur.

At like a three to 456 year adventure.

How long do you think that would take.

Okay. Good question I should say it still.

It was amazing luxury vehicle other consumer electronics as a lot of consumption rate in China for that.

In a nominal Bob chips.

And I look at customer.

Customer or a new customer expansion plan.

Our same property of this trend continue go another three years.

Alright.

I'd say, they're probably three year timeline.

Again client growth depends on their real situation, but we see that trend is going up.

Great.

And we've also heard from some.

Different companies, who sell it to them.

Domestic China market that.

There seems to be.

A reinvigorated effort.

To buy from domestic Chinese suppliers versus.

International providers into the capital equipment marketplace. If there is good in competitive markets.

Products available, which of course you have.

So do you see your growth potential.

Potentially benefiting.

From that over the next three years as well.

Actually I think from mature nodes with a previous theme right. This moment that other district.

Restriction regulatory not anemic mature note, Brian so I see that as steel everybody can sell so we're not a specific say there have been buying domestic whatever we're doing.

However, because of the last two year three year, you know the constrained supply and traveling and the people that we will make or our R&D team in Shanghai.

Brian We still cant go you would assume with customers, maybe that real give or custom kind of on the <unk>.

Vantage upper proximity R&D center manufacturer clothing, I see that as more big impact right. So I mean Ics the hour.

The customer still consider faster tool pricing and also the stability of our tool as a major consideration and non adults.

Select domestic I think that that would be a fair market. We want also sure that market with other <unk>.

They're in domestic and also outside China is really now finally is really.

Solution gains your cost your service.

Quantity.

Look at that as a major.

Perfect and then.

My last question regarding the initial sales to large.

On a U S company.

And I think I thought.

I heard you say you thought you would get acceptance of those two tools and additional orders from that customer.

This year is did I hear that correct, yes, I think that we're in.

Did you quantify that door and hopefully where.

Their continued expansion plan and we've got a repeat order rate that we were expecting.

Great and is that.

With that customer or is that as you know in some.

Flex stuff like gate, all around or something like that.

Or is there a is there a technology shift.

Where it's opening up an opportunity for your products with that customer that maybe didn't exist before.

Well great.

Too much about that right. We do have NDA, we cannot calculate as the customer has a logic and memory kind of target either by real kind of comment your question sorry.

Okay. That's fair and then and then I think in a conference call or two ago.

But this is my last question.

You would expect sales.

Shipments I should say.

Outside of.

<unk> of domestic China in calendar 'twenty three.

<unk> of about 10% of those shipments.

Outside of that market is that still the number we should be thinking about or did I read the ICU stay a part of FICO 10 real hard to give you metrics number now maybe at the end of this year I can give you more detail.

Right now a 510 is they'll go alright sounds perfect great no. Other questions. Thank you. Thank you. Thanks Christian.

Okay.

Our next question comes from Ken.

<unk> Singh with credit Suisse. Your line is open.

Okay. This is Julian Thank you Debbie and Mark I had my first question is.

The revenue by region or is that based on ship to location or the customer headquarter region.

Yeah.

And we're saying that is based on the.

Now by actually quarter, we'll talk about delivered with China territory right final location were talking about.

Alright, so thats <unk> shipped to the location of the asset.

Let me clear that and while let's say hynix exclusion I'd make sure Hynix with average that is actually through their kind of locations or considered as a.

For the Hynix and kind of have both fab in China. It was leaner.

Korea.

So.

Did I answer your question.

Yes, so actually my last question is also relating to this important customers.

I am curious that how much capacity manufacturing capacity are we preparing for delays and any other international customers by end of this year next year.

Okay.

The production company in Korea, because I'm just thinking that.

Yes.

Okay, I think let me clear Korean.

Our expansion in there.

We're going to know.

<unk> from now on as I further spending investment including increased capacity.

And that competitive moment, we can say and some of them is still using for China market. Because we have a co developer tool at between Korea, and India, Shanghai and also a better capacity also will be prepared for a secondary manufacturer center and to supply customer outside China right. So that the two functions in there.

In Korea.

Ill make sure ill.

Answer your question.

Does that answer your question Tony.

Yes, yes.

Yes, because I'm just thinking.

That list.

U S should ask if any of our potential I mean, you as our non U S. SaaS customers going into <unk>, you add what they have to only purchase any Canadian firm needs at <unk> from our Korean production size that at all from our Shanghai production site in the next.

Yes.

Well, obviously every customer and either they call the business continuity right because you've been natural disaster.

Asking two site, even three side of manufacturing.

<unk>.

European customer they prefer they prefer at least two locations.

And something happened that you have a second source can continue providing the tool Philadelphia rather were designed here as I call. The business continues.

And to really make sure we can supply to all the customer in the world.

Okay. Thank you expand this question I'm not sure if I missed this earlier would you might give us an idea on the R&D ratio into.

2023, after the major increase last year.

And let Mark answer the question he know more money I don't how much money he is better.

Yes.

2022, if you go through the numbers the non-GAAP basis. It was about 15, 3% from 12, 7% in 2021.

We think that's about the level, we would expect in 2023.

You know 15% or so.

Yeah.

Okay.

Understood. Thank you and maybe my very last question is that I know previously you saw other analysts also ask about the.

But a very exciting revenue growth in 2023, and David discussed earlier that a portion of that will come from the tier two or three.

SaaS customers in China, So I'm still quite curious here because.

Our if you look at the SaaS the.

The fab customers in China tier two tier three is that how would you comment on your market share with these tier two very fast in China last year.

The market outlook for this year.

Actually if you look at the number we just see there or in the script.

20%, representing right now in the last year right and I continue to see that number will continue to increase and because.

With either new customer come out and also some second tier and third tier customers like some of these expansion too so.

We see that group, Okay occupational increase yes.

Mhm.

And then another question more on the revenue recognition sire side.

<unk>.

Kind of advanced node Js.

<unk> regulation.

The U S October et cetera into Asia for any tools either repeated towards all the new tools that we ship to any of this fab customers.

<unk> related revenues already also to even the fourth quarter.

Yeah.

Let me do this way.

And they're obviously in the fourth quarter. There is some revenue come from there right.

And.

I mean, it was expecting still some revenue contribution this year too.

And obviously we're follow.

Particularly for the U S trade, the recreation and which is the <unk>.

Do you have their path.

And do you have to take already more right now.

Baseline there I still see some some going out but obviously.

Reduced.

As the comparable last year.

Okay understand thank you Debbie.

One moment for the next question.

We have a question from <unk> the silver.

Ross Your line is open hi.

Hi, David Hi, Mark Congrats on the progress here.

Expecting growth from some of the newer products to show up materially in 2003 here.

Maybe the competitive landscape on the.

Some of the newer product the furnace in the T map, how is that different from the traditional SaaS.

Saps Tebo products.

Yeah, Okay, let's break away. So we're grossly I think this year will still continue to see our new product and cleaning right I just mentioned in the script, we do have a bubble of azure.

And also new drawing technology, including Super critical field.

And also we see the.

Opportunity for even the single wafer SPM.

So we're still other expansion our Canadian product, which is a cover almost 90% of Canadian process that might also we see some of this will differentiate technology once deals for their international customers right Korea, and the U S. Europe .

Well then that is also we have recovered trading firms right and Cabo <unk> gained a lot of market share last year, we'll continue to see that trend continue going on also expecting I'll cover <unk>, we're getting into the market.

And in Taiwan, even beyond Europe .

And.

Another way in the furnace prana and we do have are.

High temperature neo oxidation.

Acumen, Neal LTE, CVD, including Nitride Party Dupont.

There has been.

Multiple customers in China, and also last year.

We also introduced right.

Our two new <unk> product for the market.

And with also a proprietary design our NDA upon us we see that they're also penetration to the market in China also in the outside China.

That would be a free product or the driving continuously our growth in 2023.

And then.

So far we say, but that works with our two new into the product.

G CBD and the track I think almost a year to evaluate at a customer site, maybe it wasn't put in multiple customer site.

And then that revenue contribution won't be a property to 2020.

For NPL.

Okay, Alright, thanks, David and then.

Okay, let's wait I still say, we are with the number of journal grow obviously, mostly seen there.

Logic and power devices analog.

Maybe some of us.

Compound semiconductor right you can see.

See that there is that a trend that total ratio will increase in China.

And I still say a memory I still see some growth there.

<unk>.

Relative ratio wise, probably not grow faster.

As.

Mature nodes.

Market right.

I think last year, we are.

There are market, 15% rate come from memory costs, namely more I mean more than 50% come from memory market.

This year I should say probably might be in that range or maybe a little bit slightly lower.

Looking right now Mark anything you want to add on that.

Yes, no I don't I don't think I would add anything to add David I think you covered it well.

Great. That's really helpful color, Dave. Thank you. Thanks, guys. Thank you. Thanks Rajiv.

Okay.

Thank you and I'm showing no further questions in the queue I'd like to turn the call back to Mr. David Wang for closing remarks.

Okay.

Okay crushing so fast with give me one second let me get it okay.

Thank you operator, and thank you all for.

Participating on today's call and for your support.

Before we close Gary is going to mention upcoming Investor relations events Gary Please.

Hey, David Thank you.

<unk>, 14th we're going to present at the 30 <unk> annual Roth Conference in Dana point, California tended to the conference is by invitation only for clients abroad, if you're interested.

If youre an interested investor contact Roth Representative to register for the conference and request for one on one. This concludes the call. So you may all now disconnect.

Okay.

This concludes today's conference call. Thank you for participating you may now disconnect.

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