Q3 2023 ACM Research Inc Earnings Call

November 7, 2023

As well as from Newswire services.

A supplemental slide deck posted in the investors section of our website that we will reference during our prepared remarks on the call with me today are our CEO, Dr. David Wang our CFO, Mark Mckechnie, and Lisa Feng the CFO of our operating subsidiary ACM Shanghai before we continue please turn to slide two let me.

Remarks made during this call may include predictions estimates or other information that might be considered forward. Looking these forward looking statements represent acm's current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results to differ materially. Those risks are described under risk factors and elsewhere in acm's filings.

With the Securities and Exchange Commission.

Do not place undue reliance on these forward looking statements, which reflect acm's opinions only as of the date of this call ACM is not obliged to update you on any revisions to these forward looking statements.

Certain of the financial results that we provide on this call will be on a non-GAAP basis, which excludes stock based compensation and an unrealized loss on short term investments for our GAAP results and reconciliations between GAAP and non-GAAP amounts you should refer to our earnings release, which is posted on the IR section of our website and the slide 12 with that let me now turn the call.

All over to David Wang who will begin with slide three David go ahead.

Thanks, Gary Hello, everyone and welcome to the ACM Research third quarter 2023, earning conference call.

Please turn to slide three.

For the third quarter revenue was $68 6 million offer with 26% from the same quarter last year Shimon.

A record $213 million up from 31% gross margin was.

52, 9% and operating margin was 26%.

For the first nine months, we grew revenue by 38%. This is in light of a decline in global public spending.

Spending we attribute our.

Performance through market share gain and their penetration of new products and new customers in general healthy market for mature nodes in China, Let me touch on each of this.

Beginning with the mature nodes investment in China.

China domestic and mature nodes.

Investment remains Saudis, we believe due to China's goal to reduce deals the gap between the domestic routes mature nodes capacity and end market consumption of semiconductor chips we.

We see continued investment in 28 nanometer 45 nanometer and power devices for EV market.

The ramp of EV production in China is a driver for capacity investments in power devices and other.

Trading edge devices.

This creates a <unk> for us and we believe we are still in the early stage of Chinas semiconductor capacity expansion plan.

We will continue to be a growth driver for us as China and densify effort to boost is domestic or semiconductor capability. We believe we are well positioned to benefit and further increase our market share due to our strong market position differentiated product.

Differentiated technology and multi product portfolio.

Moving to products, please turn to slide four.

Single wafer cleaning Powell and semi critical cleaning grow.

33% in Q3, and 42% year to date.

In the last few years will introduce and begin ramping our semi critical product lines, including auto bench and then last year introduced advanced in the high temperature SPM to us in Q2, we introduced our supercritical cotwo and a convenient tool.

This quarter, we introduced our onshore CV vacuum cleaning tool to meet their flax removal requirements for <unk> and other advanced three D packaging star.

Structures.

We have.

Already receive a purchase order for the new tool from a major Chinese manufacturer, which we expect will be deliver in the first quarter of 2024.

ACM is one of the broadest panini.

Product portfolio and industry covering early 90% of all Canadian process step in both memory and logic devices applications.

Believe this product portfolio will play a key role among mature nodes development in China and advanced notice our international effort going forward.

<unk> furnace and other technology grew 4% in Q3 and 24% year to date.

Growth in this category was driven primary by ECP product cycle with some contribution from furnace, all high temperature, Aneel and Lp's, CVD furnace, including sitting and I try and party are in production at our key customers and <unk> furnaces under evaluation on a multiple.

<unk> site.

Our advanced packaging exclude ECP, but including service and spares grew 12% in Q3, and a 40% year to date. This category includes a range of packaging tool, including colder developer scrubber, PR, Streeper and web <unk> and a service spare.

Potts ACM is only customer that offer both a full set of a web tool and advanced our plating tool. We believe that advanced packaging will become more important as industry looks for packaging innovations such as two five D and <unk> in the puzzle and fan out to drive a higher <unk>.

<unk> for new applications, such as AI and the GBT.

Finishing up on product, we continue to make good progress on sales effort with our new track on <unk> platforms.

We're in active discussion with our key customer and we plan to deliver more evaluation tools this year.

Turning to our <unk>, <unk> and <unk> product line or track and the <unk> platforms ever proprietary technology that we believe will make them. When there was a major customer both in China and outside China.

I'm pleased to report good progress with our track tool evaluation at a customer site. We believe our track tool with a new proprietary architecture design will meet the requirements of a higher throughput of the next generation Issaquah every tool.

Fully under customer please turn to slide five.

We continue to make progress on customer both inside China and internationally.

In China, It would be the ACM tool and now used by Neil order semiconductor manufacturers.

Ourselves and our service team our Walgreens expand.

The deployment of our each of our major product lines across our growing customer base.

<unk> to our current customers. We are also seeing a good number of our four funded a new entrance.

Our team has done a good job of getting traction for our products with this customers. This are the new customer.

This would be reflecting our shipment this year until some.

<unk> customer acceptance at a later date.

In the U S we announced.

This morning, a purchase order for another product from a large U S manufacturer the ultra C E backside cleaning and babble actual tool this tool combined backside cleaning and beveled edge function.

The tool is expected to be shipped to their U S facility in the second quarter of 2024.

<unk>.

As to this customers the ongoing evaluation of two steps Canadian to US. We believe this demonstrates our deepening relationship with we hope which is now the demand for additional ACM tools. Furthermore, we believe this will enhance acm's brand and it positions us to attract new.

Opportunities with other major global customers.

In Europe earlier, this year, we announced our order for our protein validation tool the ultra C. <unk> Canadian tool from a major European based global semiconductor manufacturer with deliver the tool about four weeks ago and our team have already started the installation process.

To support our growth initiatives, we continue to make good progress on our facility expansion in China other regime, but in turn to slide six.

In China construction of an income production and R&D Center is nearly complete and is expected to begin initial production in early 2024 in Korea is loaded in the prior calls we have.

<unk> increased our commitment to support our objective to address the global market. We now have more than 150 employees in Korea with a three facility, including itself and administration development labs small scale production and the clean room to support the wafer test for customer evaluation.

And we are making plans to build a new factory on the land. We purchased earlier this year, we believe our strong commitment to Korea when <unk>.

Through our relationships with our key customers key Korean customers.

Our resource in Korea will also offer another base of supporting international customers in the Us Europe and other parts of Asia.

In the U S.

Or at least their facility in Oregon earlier, this year to add to our service support.

And the demonstration capability for R&D and the customer activity in our region.

As a reminder for 2023, we expect to spend about $75 million. Capex. This includes continued investment in our income facility remodeling for new headquarter for ACM, Shanghai and all your investment in Korea, and the U S.

I will now provide our outlook for the full year 2023, please turn to slide nine.

We are updating our 2023 revenue outlook to be in the range of 500, 522 $5 million to $40 million versus our prior range of 515 to $5 85 million.

The range of our outlook reflects among other things management's current assessment of the continuing impact.

From International trade policy together with our Iris <unk>.

Expected spending.

Scenario of key customer supply chain constraints and the timing of acceptance for first tools on the evaluation in the field.

Now.

Let me turn the call over to our CFO, Mark who will review details of our third quarter results Mark. Please.

Thank you David Good day, everyone. Please turn to slide 10, unless I note, otherwise, our FERC to non-GAAP financial measures, which exclude stock based compensation and unrealized loss on short term investments reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release.

Unless otherwise noted the following figures refer to the third quarter of 2023 and comparisons are with the third quarter of 2022.

I will now provide financial highlights for the third quarter revenue was $168 6 million up 26, 1% total shipments for $213 million up 31% revenue for single wafer cleaning Tahoe in semi critical cleaning was $132 4 million up 32, 8% for the first nine months of 2002.

This category grew by 42, 8% versus the prior year period revenue for ECP furnace and other technologies was $25 5 million up four 8%.

For the first nine months of 2023.

This category grew by 24, 4% versus the prior year period revenue for advanced packaging, excluding ECP service spares was $10 6 million up 12, 4% for the first nine months of 2023. This category grew by 42% versus the prior year period gross margin was 50.

Two 9% up from 49, 4%.

Ceded our normal expected range of 40% to 45% the increase in gross margin was primarily due to a favorable product mix improved gross margins for specific product lines and a favorable impact from fluctuations in the remnant beat to U S. Dollar exchange rate, we expect gross margins 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 $45 3 million up from $32 6 million. The increase was due to higher R&D sales and marketing and G&A costs in support of new customer and new product activities and a boost in post COVID-19 travel activities operating income was $43 8 million up from $33 5 million.

Operating margin was 26, 8% up from 25, 1%, we recorded a realized gain of <unk> 7 million from the sale of short term investments for the quarter recall that realized gains are included in non-GAAP earnings.

Income tax expense was <unk> 7 million down from $10 5 million. This was driven by one time items for the third quarter, but we still expect the full year tax rate to be in the 20% range recall that as a result of a change in section 174 of the U S. Internal revenue code, our effective tax rate for the full year it remains elevated.

Net income attributable to ACM research was $37 6 million up from $28 2 million net income per diluted share was <unk> 57 up from 42.

I will now review selective balance sheet items cash cash equivalents restricted cash and time deposits were $3 $26 5 million versus $376 1 million at the end of the second quarter total inventory was $507 4 million versus $471 1 million at the end of the second quarter.

It was split between raw materials 202.8 million work in process $83 4 million finished goods inventory at $222 million.

Capital expenditures were $26 2 million for the quarter year to date capital expenditures were $49 5 million that concludes our prepared remarks now lets open the call for any questions that you may have operator. Please go ahead.

Thank you.

Just to ask a question you will need to press star one.

On your telephone and wait for your name to be announced.

To withdraw your question Please press star one.

One again.

We will take our first question.

Our first question comes from the line of Charles <unk> from Needham <unk> Company. Please go ahead. Your line is open.

Hi, good evening.

Mark.

Congrats on the strong occupancy results.

First question Akshay bad ship.

Shipments eager post and therefore Q3, it looks like Youre, making a record year.

I just really wanted to understand what you see in terms of shipments going into Q1.

Largely speaking the number going to be flat Q on Q4, Q4, or what's the Nymex behind the very strong ship that took us back. So that's my first question.

Yes, okay.

And there are actual shipment is really number indicated wherever.

Got a new customer and also have a product.

And with the cleaning cover trading and also <unk>.

<unk> new product furnace.

So.

I think.

As the reason driving is human.

Also we think or Q.

Q4 shipments continue.

And in our timeline.

<unk>.

Our say obviously their system.

Components right and also there.

They also saw maybe customer their production line.

<unk> be some I call. It a policy may impact our shipments, but anyway, we think or the whole year.

Human <unk> steel.

Very good number for our for supporting our growth.

Mark anything on add on this unit.

Yes, no. Thanks, David Yes, I mean.

Shipments I think as David noted, it's repeating it for revenue and it's also the first tools. So yes, we're certainly pleased with the shipments in the quarter, We don't guide specifically by quarter on shipments.

But we're not anticipating a big increase sequentially.

In Q4.

Thanks.

David I just wanted to.

I have a follow up.

I heard you mentioned certain customers, maybe pausing, which may have an impact on shipment did I hear correct.

Is that the Q3 comment on Q4 comments. Thanks.

Yeah, well I just said.

Specifically in a certain quarter.

Quarter and looking at a whole year, we do see some I mean.

Customer.

Their production line is not enough for C&I.

And it will have a face to face to deliver so that is something that we can feel there.

Alrighty and data costs are.

Delay right so.

Okay. So just want to make sure. So it's not anything related to export controls et cetera.

No actually this moment, our product will fall order.

I called Eczema control rule, there whatever we were all there.

To follow there.

They're iconic restriction and also with all the rules right both in the U S.

And that will also.

Components of action, so anyway, so far with another any.

Cause of our export control we cannot ship.

Got it thanks, maybe a second question from me.

Congrats on shipping receiving a P O.

The other front in the U S semiconductor manufacturer.

For another step up.

Valuation I believe.

Wonder can you remind us what was the first evaluation.

That you ship to this customer our application was that four hour sort of status of that the first evaluation.

Great actually we do have a 2% to receive order with delivery.

Last year actually you have made or we made quite a progress. Even this is our first two drill ships with new customer.

We made a lot of progress in there.

We're making there.

Paul.

And the customer happy with our performance and obviously, we're looking for the future.

You can order and because.

<unk> does offer measure requirement, especially using Microsoft and cleaning the offer a much better cutting efficiency.

So the chemistry AT&T TV consumption chemical so we're looking for them to meet their bigger contribution for their process.

Yeah, any expected timeline for the culture of the prestige valuation since you already shipped a second thanks.

Yes.

Well I think.

Close to.

There are two two or eight why Israel, R&D or evaluation to another way as well.

Peter or the tool so.

For the R&D, it two or three years.

Two year finish and by the second do I think we're very close to the final qualification and we call the sign offs.

For our revenue we're very close.

Thanks, Thanks, David I'll hop back to the law.

Alright, Thanks, Brian.

Thank you.

Mr asked good question Peter.

And then one on your telephone.

We will take our next question.

And the question comes from the line of facility for example.

Thank you.

Go ahead your line is open.

Yes.

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

Mark on the gross margin you said something about improving gross margin for specific product lines any color. There. It seems like you're trending above the target consistently just wanted to get any update there.

Yes, <unk>, we won't really break it out by.

By product line, but.

There were you kind of we had a good mix of differentiated products.

And some cost downs, we also got a little bit of tailwind.

Foreign exchange.

We were pleased with that level, but we're not changing our 40% to 45% target.

At this point.

Okay. Okay.

And then I noticed you mentioned.

AI GPT chips in the prepared remarks David.

Clearly there is import export controls on some of those products for U S. Semi vendors is there a burgeoning China AI chip market that the foundries are servicing there can you give us a sense of how big that might be versus the global AI chip market because that could be very exciting opportunity for you guys.

Yes.

I really mean that advanced packaging most of our club operating Ray I mean, this is a real product.

Talking about not only China market will also talk about in a global market too. So in general is that right.

And then China steel say most of them are tooling for a mature product.

And just a moment for the packaging so.

As I said.

We're looking for are to be spread out not only in China market, which is a more mature nodes also looking for are a couple other one sorry about Brady.

So in a global market is a more advanced AI and also GBT.

Okay I appreciate that color, Dave and the last question I have is on the.

The vacuum cleaning till you mentioned chip, let's it's the first time I've heard you guys talk about triplets is that a new growth driver area or is that really just an element of the advanced packaging functionality that you have.

So if that's an incremental opportunity.

We see this new product new requirement coming out right and you look at this the other advanced packaging audited chip lab when they have a package of finishing Theres also flag inside that gap. So those kind of gap how to clean and those are flags with our vacuum neighborhood.

You can really rather.

Nicole are there already are getting more gas because of vacuum status as really major.

Philosophy, very well, so we see that market grow.

And again, there's a lot of.

The geopolitical young in the whole industry.

A bolus or setting.

Our mature node or the advanced nodes. So we're looking for those products.

It will be at.

Add another.

<unk> recorded revenue booster for our.

If our product portfolio.

Okay, Great I appreciate the color thanks, guys.

Yes.

Thank you as a reminder, if you wish to ask a question. Please press star one and one on your telephone.

We will take our next question I have a question comes from the line of Christian Schwab from Craig Hallum Capital. Please go ahead. Your line is open.

Great Hey, Mark can you can you just walk us through the puts and takes on.

On your original topline revenue guidance on why your guidance for the year was near the low end versus the high end.

Yeah actually David do you want to you want to take that.

First you have to take it first I'll answer that.

Okay.

Yes, I'll go ahead and take that then.

So Christian thanks for the question.

I think there's a couple of things here kind of from the beginning of the year.

I'd say first is if you.

Just thinking about the overall, China market, we're not necessarily market readers, but based on some third party data that does sound like the China market as a whole is down year on year versus our expected flat still great spending on mature nodes, but.

The market may be a little little less strong than we had anticipated.

Would say despite that our year to date revenue was up 37% in our midpoint of our outlook is up 36%. So we're.

Our product cycles, and our new customer activity is contributing.

The third point is we did I think David talked about a little bit certain customers.

We saw maybe a slight delay one to two quarter delay either due to bear.

Facilities, just kind of a timing thing for them to get their tools are installed.

Or just.

Almost a digestion where.

Some of our bigger customers may have seen a large number of tools shipped and they're just kind of working to get those deployed.

The last thing I'd say on that is.

Also Christian.

A lot of our shipments this year have been first tools to new customers or newer products and so for those wounds will get more revenue next year, so kind of a combination of things there I mean, we're still pleased with the with the growth.

We would have.

We would have liked obviously to be at the higher end, but this is where things stand right now David anything to add.

That's perfect I don't have anything to add on it.

Yep.

And then as you guys look to calendar 2024.

Would you expect.

The aggregate <unk> in China.

Flat to be ought to be down and what specifically would cause you to outperform.

The Tam growth.

Inside of China once again.

Okay. Good question, so actually Youre looking at third party data and next year, China is right.

And we also feel there.

Good year next year for China, and because I think China market is still in their early on middle stage of the capacity.

Spansion, especially this mature 28 45 also EV market right for their power devices and unit growth.

And they also have a new product.

As I mentioned end of last year, when we have a three customer end of this year were part of a 10 customer so expanding quite rapidly with a customer in the front of this product right. We have are all.

<unk> CBD, Neil plus our new OLED products, so well see the revenue contribution right and for the year 2024 and plus other.

Are the new Canadian product you mentioned land.

<unk> <unk> and also our powerful product we mentioned that we.

We see next year.

Our.

Multiple repeat order will come in for our travel dual also Carlo as often.

40, probably those 70% so break our CV compared to their single SPM door, and we see the big interaction from <unk>.

Not only logic customer also from there.

Memory customer, although not only domestic only.

And China also we see the customers outside China interest for this.

Power products, we view this as a real revolutionaries meetings.

Offer real environment, they're friendly process for saving the sulfuric acid.

Next one I would see that 2024, we see the international market penetration become Moreover, icon materialized and we see they're probably pick up in the international itself and for our Canadian cooperating and those were approving and also advanced product right.

As I mentioned, you mean, the Canadian when mentioned one more it was a bubble on the backside cleaning, we just announced today and to the same customer we have in the U S of another indication are backside babble convenient or another.

Another booster.

Clean product right.

For the 2024 lots of as Bill mentioned that it will still continue to grow.

Any ultra.

<unk>, formerly <unk>.

It has been growing rapidly and therefore, there are a lot of mature products in China. They are using you know this or.

The bench tool right. So thats another a growing factor.

Other than that is I should say of next year, we see our track system will probably go to market customer and also <unk>, but getting into their evaluation with a customer to buy those two will fall where it made the contribution for 2025 revenue.

Maybe thats the general my.

In 2024.

Mark anything want to add on that.

Yes.

You hit it pretty good David I mean, one thing.

It is interesting to talk about Christian is we actually had our international sales conference last week.

Here and.

Post Covid it was our first face to face conference in a while we had the teams from Korea U S. Europe, even Taiwan in here meeting for three to four days and David.

David you might say a few more things about it but.

It's pretty clear to us that the international markets.

Theres good opportunity.

There is a lot of customer activity in these regions and.

Next year, we do think international can be more meaningful.

But we would see next year as a building year.

Yeah, that's it thanks.

Okay.

Thanks for that it sounds like we have a lot of things going on.

Both the product and the customer front, but if we could just ask one more question about the customer front.

You know.

As you've made a couple of tools with the.

New customer in the United States.

And Oregon.

Can you give us an idea of how substantial that could be over time, not 'twenty four 'twenty five but over time and then in addition to that.

I think you mentioned that.

Selling out.

Out of the credit facility to international customers, but also expanding opportunities with inside Korea now.

Do you think you can expand the customer base inside of Korea or are you just talking about the expansion of opportunities with.

The year historical customer in Korea, and that's my last question. Thanks.

Thank you.

Actually.

Our customer U S.

And including.

A recent issue that caused them to Europe, Ryan there's really any.

Customer base and for international customer and as we said we got an order from the same customer is Neil Shah our relationship comes that it was the customer plus where we offer a different.

I call them product product for the customer and as we will be a major attraction to the customer.

And regarding to the.

Korean customer again, we have a historic customer.

However, fully collaborations with them.

Not only you talk about convenience, but work on our <unk>.

On new product right to the collaboration with them with also wherever.

Almost 90% the process of staff, we can covering Canadian site. So we have a lot of other amongst and also our only ACM made if any product we kind of working with the customer.

Historical customer obviously, we're also looking for other customers in Korea.

Not only for.

Our Canadian pool, including Carboplatin Israel.

And other product development.

<unk> right now so we're aware of.

Plus I want to add more value within our in the script and we are.

We're also active in working with customers in Singapore, right. So again.

Our goal is still long run goal and still remain.

There are.

Our 50% of our revenue come from.

In China, and also 50% of revenue come from most eminent China right, that's our future.

Global.

Strategy.

Great. Thank you guys.

Thanks Christian.

Thank you once again, if you wish to ask a question. Please press star one on your telephone.

We will take our next question.

Please standby on the.

Question comes from the line of Charlie Chan from Morgan Stanley. Please go ahead. Your line is open.

Thank you Hi, David and Mark.

Great Good evening and good morning so.

First of all.

My question is about your.

Potential exposure to the.

The high end memory.

Hi, Ben with memory.

No youll have some memory customers. So can you explain to those first of all.

What kind of tool.

Potentially you can.

Supply to the memory customers towards the HBM and secondly, what is the.

Progress for data adoption for <unk>.

For SPN.

Thanks.

Yes, Okay Tony.

<unk> two <unk>, but we have multiple products.

Working for this customer for the <unk> right.

Rio new growing market.

<unk>.

As I said, we have are more than two products in the walk in with them also what sort of spreading also other products are.

Portfolio and working more closely with their.

Our R&D group and qualify our advanced technology for the economy.

So I would say.

We have put all the effort in Korea, and we are now 150 engineers R&D into Korea.

And we're really become local support for the customer and the kind of closer and faster response to the customer so well beauty of continuously building our.

Production capacity and to meet the requirement and not only for the Korean customer probably also for their own customer internationally. So that's the effort, we're putting right now.

Okay.

Thanks, David.

Next question is.

For rock.

I know you explained the.

OPEC trend.

<unk>.

But it's still a very big chunk, even this year.

R&D.

Expanse.

Customer activity is still pretty pretty.

Big jump versus the previous quarter.

So how.

How much of those are increases like one off.

Post Covid travel.

And should we use that.

<unk> $45 million.

Quarter as the new.

<unk> for the future Opex.

Yes.

Thanks for that on the Opex question. So.

We're obviously investing in the R&D side, and our sales and marketing.

Got public companies to public.

Stocks so.

I think the quick answer to the new level, Yeah, I mean, I would actually expect.

The opex to be maybe even up a little bit next quarter.

There is.

As you know a lot of our expenses are in remnant b, so third quarter remnant be actually strengthened in the quarter, so that move things a little bit but.

In general.

We would anticipate.

The opex to.

That's about the right run rate Charlie.

Okay.

So.

Can we justify that.

Increased co presidents are very strong.

Shipments because.

And when you calculate the opex ratio.

Opex by revenue, but it seems like.

Pretty pretty pretty high Opex ratio.

So he said more like.

Correlates with the shipment because since I actually meant into.

Third quarter to fourth quarter, a pretty pretty strong.

Okay.

There is a correlation there Charlie.

We don't break it out specifically, but of course, there is a correlation to our shipment level in our opex.

Okay, Yes.

Associated to the.

R&D do you think that the.

The peak spending of your R&D I know you're.

Already introduced your new.

Paul lives so how.

How much more acreage or R&D you need to.

Investing for the future Paul line or current <unk> lives.

Yes, let me cover that maybe you're marking at a mill and then R&D is deal.

Major spending rate and you look in the two.

Years ago or three years ago.

General R&D spending of about 12% right actually, especially after IPO in China Star.

The market is.

And so we have started boosting on after we have study goodwill investment into new product right in front of US is number one for us.

In Plaza <unk> CVD and also drive.

So and we look at the next two or three year, a very big opportunity for us to grabbing the market in China, and plus with our new innovation or.

Proprietary tech a liability into their one.

<unk> on track and we are also getting into the market in international right, especially I want to mention that track in Texas and doing very well.

In a customer qualification and plus our new architecture really aiming for ICU.

All of this.

Next generation you saw go over to Ray.

So.

Goodbye or even 401.

Yes.

Phe.

High throughput, so where are we now.

I'm, Patrick <unk> aiming for that market.

And we're planning to be the second player right.

Ray.

The compounded market.

And I see that is so I think probably <unk> 15, 16% that's a range we're BTB.

With us in percentage wise, probably not much changing but then we have the revenue alright, you can see that we still maintain a lot of room.

Through their R&D money into into there.

Sure.

We've seen product and also the new product.

Specialty even for existing products <unk> and also their cleaning.

Cleaning right.

So do put every there a reason the years, we see the.

Canadian product become more and more important for their new new and advanced technology plus.

I should say there are couple of rating market more rapidly I mean this is a <unk>.

Maybe magazine.

That's become a couple of variants will become very important.

So we're also.

R&D into both existing product production rate.

Yeah, Hey, one last thing.

Charlie we've said.

If you look at.

It kind of brass tacks behind what David said.

R&D expected around 15% of sales, but we should see some operating leverage on the G&A and the sales and marketing side.

We got a little bit this year in general that's the way our operating models built.

Okay. Okay. So the R&D intensity will keep at the 15%.

Over the coming couple of years, okay. Okay.

Fair enough. Thanks centrally.

Okay.

How much thank you.

Thank you.

Thank you once again, if you do wish to ask a question. Please press star one.

And youre kind of site.

Okay.

Thanks.

That seems to be no further questions I apologize we have a question. Please.

Please.

And you have a follow up question from the line of Charles <unk> from Needham <unk> Company. Please go ahead. Your line is open.

Hi, Thanks for taking my follow up question. So Mark just wanted to go back to your comment.

The overall, China market I know you said you are not the market leader here, but.

But can you kind of explain why youre seeing China market down year on year as a whole.

What about quarter on quarter, what are you see there.

I'm just looking at the data.

Commentary from your U S peers. It seems like they are probably expecting Q4 overall, China market to be holding relatively strong I don't exactly know, where we'll land Q on Q and year on year, but up.

It was kind of curious why you think the overall, China market was down year on year.

Thanks.

Well, let me add on that maybe.

Charles is actually.

We don't have whole data rate.

Like the holders the marketing data. However, you look at the order rates as you report with a semi and other.

<unk> banka palm publish.

People talk about property.

Our field personnel I should say less than 10% down if you will see a whole year, while the broader debate right and we see.

This year, we see almost like flat year over.

I don't know yet.

Probably flat is what we say here, but the real number was probably.

And over there this year, but if all these real result.

But I won't say, even this year flat.

We see our customer expansion in the.

Next year, it's still another good year.

Everybody expecting probably to be acquired in the global market.

Mark in the bag, but I think in China as time, even downturn globally.

Is there a margin in general.

Within the bank and our say no.

Next year, we see another good year.

I'll also Newport news.

Yes.

David If you don't mind, maybe I'll add a little bit on to that.

Again, it's hard for us to kind of agreed the overall market. So we look at third parties and we look at some of the same public companies you probably look at as well right. If you look at some of the semi cap names.

Investor Relations team pulled together some data where Q3 a lot of companies had a pretty big uptick sequentially.

To know exactly what that was driven by but.

We were encouraged by.

Kind of a big lithography.

Rapid Q3 for one of the players.

We look at that hopefully has some kind of a leading indicator, but David I don't know if you wanted to add anything on about that as well that's it.

There's a lot of tea leaves that we try to pay attention to and we look at our own business and this is kind of how we see it.

Yes.

I think that Youre right that is sagar with two companies in our space. They are this year's revenue China owns double re look at that that's really.

Vacations say normally December two is advanced buying right.

Sure.

Got it writing first.

So let's see the other those two are definitely driving.

Another demand for the semiconductor capital spending in China.

Thanks.

Right.

Thank you that seems to be no further questions I would like to turn back to David Wang for closing remarks.

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 our.

Opera coming Investor Relations events, Gary Please.

Thanks, Steven before we conclude I just wanted to give everyone. A quick reminder, on our upcoming investor conferences on November 15th will presented the 12 brought the 12th annual Roth Technology Conference in New York City on November 16th will present at the 14th annual Craig Hallum Alpha Select Conference also in New York City from November 29 to the 30th.

The UBS Global Technology conference in Scottsdale, Arizona, and finally on December 12, we presented the annual CEO Summit in New York City attendance at the conferences is by invitation only for interested investors. Please contact your respective sales representative to registered and schedule. One on one meetings with their management team. This concludes the call you may now disconnect.

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

[music].

Okay.

Yes.

[music].

Okay.

Hum.

Okay.

[music].

Yes.

Okay.

[music].

Yes.

Okay.

[music].

Okay.

[music].

Good day, and thank you system Goodbye walking to the AUC and the research third quarter 2023 earnings Conference call.

At this time, all participants solving the listen only mode.

After the Speakers' presentation, there will be a question and answer session.

To ask a question Jobin. This session you will need to press star one and one on your telephone you would then have an automated message advised and Johan is raised.

To withdraw your question. Please press star one and one again piece.

Please be advised that today's conference is being recorded I would now.

I like to hand, the conference so virtual speaker today, Gary Wojciech. Please go ahead.

Thank you operator, and good day, everyone. Thank you for joining us to discuss third quarter 2023 results, which we released before the U S market open today. The release is available on our website as well as from Newswire services.

A supplemental slide deck posted to the Investor section of our website that we will reference during our prepared remarks on the call with me today are our CEO, Dr. David Wang our CFO, Mark Mckechnie, and Lisa <unk>, the CFO of our operating subsidiary ACM Shanghai before we continue please turn to slide two let me.

Remarks made during this call may include predictions estimates or other information that might be considered forward looking these.

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

<unk> only as of the date of this call ACM is not obliged to update you on any revisions to these forward looking statements certain of the financial results that we provide on this call will be on a non-GAAP basis, which excludes stock based compensation and an unrealized loss on short term investments for our GAAP results and reconciliations between GAAP and non-GAAP amounts.

You should refer to our earnings release, which is posted on the IR section of our web site and as slide 12 with that let me now turn the call over to David Wang who will begin with slide three David go ahead.

Thanks, Gary Hello, everyone and welcome to ACM research.

Third quarter 2023 earnings conference call.

Please turn to slide three.

For the third quarter revenue was $68 6 million opera, 26% from the same quarter last year shipments were a record 213 million upper 31% gross margin was 50.

<unk>, 2.9% and operating margin was 26%.

For the first nine months with Grill revenue by 38%. This is in light of a decline in global W. B spending we attribute our performance through market share gain and the penetration of new products and new customers in general healthy.

Market won't mature nodes in China, Let me touch on each of this.

Anyways, the mature nodes, you've asked me in China, China domestic and mature nodes.

<unk> investment remains solid we believe due to China's goal to reduce <unk>.

The gap would be is the domestic or mature nodes capacity and end market consumption of semiconductor chips. We see continue investment in 28 nanometer 45 nanometer and empower devices for EV market.

The ramp of EV production in China is that driver for capacity investment in power devices and other <unk>.

Treaty edge devices.

This creates a tailwind for us and we believe we are still in the early stage of Chinas semiconductor capacity expansion plan with.

Which we believe will continue to be a growth driver for us and China and densify effort to boost domestic or semiconductor capability. We believe we are well positioned to benefit and further increase our market share due to our strong market position differentiated product differentiated.

<unk> and maritime product portfolio.

Moving to products, please turn to slide four.

Single wafer Konini Powell and semi critical cleaning grow 33% in Q3, and 42% year to date.

In the last few years, when she deals and begin ramping our semi critical product lines, including auto bench and then last year introduced advanced and high temperature S. P. M to us in Q2, we introduced our supercritical Cotwo eye and a convenient tool this quarter we introduced.

Our outdoor CV vacuum cleaning tool to meet their flags removal requirements for cheap labs and other advanced three D packaging a.

Structures.

We have.

Our <unk> receive a purchase order for the new tool from a major Chinese manufacturer, which we expect to be deliver in the first quarter 2024.

HCN has allowed their broadest panini.

Product portfolio and industry Curry early 90% of all Canadian process step in both memory and logic devices applications.

This product portfolio, what play a key role among mature nodes development in China and advanced notice our international effort going forward.

C P furnace and other technology grew 4% in Q3, and 24% year to date growth. In this category was driven primary by ECP product cycle with some contribution from furnace, our high temperature Aneel and L. P CVD furnace, including sitting and I try and.

E. R E production at key customers and AAD, a furnace is under evaluation at a multiple customer site.

Advanced packaging exclude ECB, but including service in Israel grew 12% in Q3 and 40% year to date. This category includes our range out for packaging tool, including colder developer scrubber, PR steeper and wet etch yours and a service spare.

Parts.

C. M is only customer that offer a both a full set of wetzel and advanced up leading tool. We believe advanced packaging will become more important as the industry looks for packaging innovations such as two five D and three D. In the Pozo and fan out to drive a higher performance.

For new applications, such as AI and GBT.

Finishing up on product, we continue to make good progress on sales effort with our new track on P. S. CBD platforms. We're in active discussion with our key customer and we plan to deliver more evaluation tools. This year similar to our Konini Brady and have shown as a product line or track.

P S Abd platforms ever proprietary technology that we believe will make them. When there is a major customer both in China and outside China.

Pleased to report good progress with our track tool evaluation at a customer site. We believe our track tool with a new proprietary architecture design will meet the requirements of a higher throughput of the next generation Issaquah Vipul.

Fully under customer please turn to slide five.

We continue to make progress on customer both inside China and internationally.

In China would be deep ACM tool and now used by Neil order semiconductor manufacturers.

Ourselves and our service team our Walgreens expand.

The deployment of our each of our major product lines across our growing customer base.

<unk> to our current customers. We are also seeing a good number of our four founded the new entrance.

Our team has done a good job of getting traction for our products with this customers.

This are the new customer.

This would be reflecting our shipment this year until some fuel.

<unk> customer acceptance at a later date.

In the U S we announced.

This morning, a purchase order for another product from our large U S manufacturer out Youll see E backside cleaning and babble agile tool this tool combined backside cleaning and babble edge function.

<unk> is expected to be shipped to their U S facility.

Second quarter up 2024 and <unk>.

As to this customers the ongoing evaluation of two SaaS Canadian to US. We believe this demonstrates a deepening relationship which we hope will use all the demand for additional ACM tools. Furthermore, we believe this is the in house Acm's brand and it positions us to attract new.

Opportunities with other major global customers.

Europe early this year, we announced our order for our throats evaluation tool the ultra C. <unk> five cleaning tool from a major European based global semiconductor manufacturer with deliver the tool about four weeks ago and our team have already started the integration process.

To support our growth each Ats, we continue making progress on our facility expansion in China. Other regime. Please turn to slide six in China construction, Abilene gum production and R&D Center is nearly complete and is expected to begin initial production early it was Anthony for.

In Korea as level in the prior cost we havent increased our commitment to support our objective to address global market. We now have more than 150 employees in Korea with the three facility, including itself and then and administration development labs small scale production and the clean room.

To support the wafer test for customer evaluation, and we are making plans to build a new factory on the land. We purchased earlier. This year, we believe our strong commitment to Korea, we improve our relationships with our key customers key Korean customers.

Our resource in Korea will also offer another base the supporting international customers in U S Europe and other parts of Asia.

In the U S released their facility, Oregon early this year to add to our service support and their demonstration capability for R&D and the customer activity in our region.

As a reminder, if it goes on 'twenty three we expect to spend about 75 million. Capex. This includes continued investment in the Arlington facility be modeling for a new head of Gorder for ACM, Shanghai and all your investment in Korea, and the U S.

I will now provide our outlook for the full year 2023, please turn to slide nine.

We are updating our 2023 revenue outlook to be in the range of 500 520 to find a $40 million versus our prior range of 515 to $5 85 million the range of outlook reflects among other things monuments.

Current assessment of the continuing impact.

From International trade policy together with the <unk>.

As expected the Spendy.

Scenario of key customer supply chain constraints and the timing of acceptance for first tools on the valuation in the field.

Now.

Let me turn the call over to our CFO, Mark who will review details of our third quarter results Mark. Please.

Thank you David Good day, everyone. Please turn to slide 10, unless I note otherwise our first two non-GAAP financial measures, which exclude stock based compensation and unrealized loss on short term investments reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release.

Unless otherwise noted the following figures refer to the third quarter of 2023 and comparisons are with the third quarter of 2022.

23, this category grew by 42.8% versus the prior year period revenue for ECP furnace and other technologies was $25 5 million up 4.8%.

For the first nine months of 2023 <unk>.

Two 9% up from 49, 4% this exceeded our normal expected range of 40% to 45%. The increase in gross margin was primarily due to a favorable product mix improved gross margins for specific product lines and a favorable impact from fluctuations in the remnant to U S. Dollar exchange rate, we expect gross.

Margins 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 $45 3 million up from $32 6 million. The increase was due to higher R&D sales and marketing and G&A costs in support of new customer and new product activities and a boost.

Host Covid travel activities operating income was $43 8 million up from $33 5 million operating margin was 26, 8% up from 25, 1%. We recorded a realized gain of <unk> 7 million from the sale of short term investments for the quarter recall that realized gains are included in that.

GAAP earnings.

Income tax expense was <unk> 7 million down from $10 5 million.

Driven by one time items for the third quarter, but we still expect the full year tax rate to be in the 20% range recall that as a result of a change in section 174 of the U S. Internal revenue code, our effective tax rate for the full year remains elevated.

Net income attributable to ACM research was $37 6 million up from $28 2 million net income per diluted share was <unk> 57 up from 42.

I will now review selective balance sheet items cash cash equivalents restricted cash and time deposits were at $326 5 million versus $376 1 million at the end of the second quarter total inventory was $507 4 million versus $471 1 million at the end of the second quarter.

Split between raw materials 202.8 million work in process $83 4 million finished goods inventory at $222 million.

Thank you.

Just to ask a question you will need to press star.

One on your telephone and wait.

Q&A to BMO.

To withdraw your question Please press star one.

Glenn again.

Yes.

We will take our first question.

Your first question comes from the line of Charles <unk> from Needham <unk> Company. Please go ahead. Your line is open.

Hi, good evening, Dave embark.

Congrats on the strong Q3 results I have a first question akshay.

Shipment figure you posted for Q3, it looks like Youre, making a record year.

Just really wanted to understand what you see in terms of shipments going into Q or the loss lease fleet number going to be flat Q on Q on Q4, or what's the bias that Mexican high to very strong shipments I guess, that's my first question.

Yes, okay.

So she and Theyre actually.

Shipment days really remember indicated the web.

Get a new customer and also have a product.

And with the cleaning cooperating and also our latest new product phone us and so.

I think.

That's the reason driving as humans and also we think or.

Q4 human congenial.

In our timeline.

Yeah.

Our say obviously there is certain.

Components right and also there.

They also saw maybe customer their production line and they would be some I call. It the policy may impact us human but anyway, we think or the whole year.

Human why this deal.

Very good number for our for some plenty of glass.

Mark anything you want add on the human.

Yes, no. Thanks, David Yes, I mean shipments I think as David noted that it's repeatable revenue and it's also the first tools. So yes, we're certainly pleased with the shipments in the quarter, We don't guide specifically.

By quarter on shipments.

But we're not anticipating a big increase sequentially.

In Q4.

Thanks Asaf.

I just want to.

A follow up.

I heard you mention second customers, maybe pausing, which may have an impact on shipment did I hear correct.

Okay, Great comment Q4 comp thanks.

Yes, well I just said.

Specific Jonathan echoed a quarter and then looking at whole year right. We do see some you know.

Customer.

Their production lie is not enough for C&I or EDI.

And it will have a phase II phase III.

Oliver So that is something we can't feel there for us in already.

Data costs are.

Human DNA right. So.

Okay. So just want to make sure so it's not anything.

It relates to the export controls et cetera.

No actually this moment.

We have a fall order.

I called excellent control rule there.

We are aware of is that while they're getting order flow there.

Are there quite a distinction there oswald for the rule right both in the U S.

And that way also.

Components that action, so anyway, so far.

We do not have any <unk>.

Cause of extra.

Extra control we cannot ship.

Got it thanks, maybe a second question from me.

Congrats on shipping receiving a PEO.

From the other.

From the U S semiconductor manufacturer.

Another steps.

Evaluation I believe.

I Wonder can you remind us.

What was the first evaluation.

You ship to this customer our application was that four hour the status of that the first evaluation.

Actually we do have a tier two alright received order that we deliver.

Last year actually you've made a we made a quite a progress. Even this is our first two door ship with this new customer and we make a lot of progress in there.

We are making there.

Recall and the customer happy with our performance and obviously, we're looking for the future.

You can order and because of <unk>.

<unk> does offer.

Sure requirement, especially those using them Exxon and cleaning the offer a much better cutting efficiency.

So the chemistry.

TV consumption chemical.

We're looking forward to meet their bigger contribution for their process.

Any expected timeline for the Coke zero Kristine valuation since you already have satcom. Thanks.

Yes.

Well I think you were close to zero.

There are two two or a why Israel R&D or your valuation to another way is it just like it.

Peter or the tool so.

For the R&D it was two years.

Full year finish and by the second do I think we're very close to the final qualification and we call. The sale of four four our revenue were very close.

Hi, Thanks, Thanks, David.

Ill hop back to die.

Alright, Thanks, Brian.

Thank you.

Mr asked the question Peter.

And then one on your telephone.

We will take our next question.

And the question comes from the line of.

Hello, Patrick.

Okay.

Go ahead your line is open.

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

Yes, so <unk>, we won't really break it out.

By product line, but.

Where you kind of we had a good mix of differentiated products.

Awesome cost Downs, we also got a little bit of tailwind.

Foreign exchange.

Obviously, we're pleased with that level, but we're not changing our 40% to 45% target.

At this point.

Okay, great. Thanks, and then.

I noticed you mentioned.

AI GPT chips in the prepared remarks David.

There is import export controls on some of those products for U S semi vendors as theyre burgeoning China AI chip market that the foundries are servicing there can you give us a sense of how big.

That might be versus the global AI chip market, because that could be very exciting opportunity for you guys.

Yes.

I really mean that.

Amongst packaging most of our cover Brady right I mean, this is a real product.

Talking about not only China market will also talk about in a global market too so in general the speed at right in there.

And in China at the <unk> most of them are to oil for a mature product.

And they're just moment for the packaging so.

As I said, where we're looking for are too spread out not only in China market, which is a more mature nodes. While they are looking for a couple of other ones talking about Brady.

Sales in our global markets is it more about AI and also GBT.

Okay I appreciate that color, Dave and the last question I have is on the on.

The vacuum cleaning tool you mentioned chip, let's first time I've heard you guys talk about chip is that a new growth driver area or is that really just an element of the advanced packaging functionality that you have I was curious there if that's an incremental opportunity.

We see this new product new requirement coming out and you look at this the other advanced packaging audited chip lab when they have a pet package of finishing Theres also flag inside that gap, so those kind of gap.

And those are flags with our vacuum neighborhood.

You can really rather.

The nickel or they are all they are getting into it as well.

Again because of vacuum status as really.

Flat screen very well, so we see that market grow and again there is a lot of.

<unk> in the whole industry.

For Bolivar setting.

Our mature nodes or the advanced nodes. So we're looking for those products.

To be.

Add another.

<unk> recorded revenue booster for our.

If our product portfolio.

Okay, Great I appreciate the color thanks, guys.

Thanks Lee.

Thank you as a reminder, if you wish to ask a question. Please press star one and one on your telephone.

We will take our next question and the question comes from the line of Christian Schwab from Craig Hallum Capital. Please go ahead. Your line is open.

Great Hey, Mark could you can you just walk us through the puts and takes on.

And your original top line revenue guidance.

Your guidance for the year was near the low end versus the high end.

Yeah actually David do you want to you want to take that.

The IPO first you have to take it first I'll answer that.

Okay.

I'll go ahead and take that then.

Christian Thanks for the question.

I think there's a couple of things here kind of from the beginning of the year.

I'd say first is if you just think about the overall, China market, we're not necessarily market readers, but based on some third party data. It does sound like the China market as a whole is down year on year versus our expected flat still great spending on mature nodes, but the.

The market may be a little little less strong than we had anticipated.

I would say despite that our year to date revenue was up 37% in our midpoint of our outlook is up 36%. So.

Our product cycles, and our new customer activity is contributing.

The third point is.

We did I think David talked about a little bit certain customers.

We saw it may be a slight delay one to two quarter delay either due to bear.

Facilities, just kind of a timing thing for them to get their tools are installed.

Or just.

Almost a digestion, where some of our bigger customers may have seen a large number of tools shipped and they're just kind of working to get those deployed.

Then the last thing I'd say on that is.

Also Christian.

Now we would have.

We would have liked obviously to be at the higher end, but this is where things stand right now David anything to add.

That's fine I mean, perfect I don't have anything to add on that.

Yep.

And then as you guys look to calendar 2024.

Would you expect.

The aggregate.

And in China.

The flat to be ought to be down and what specifically would cause you to outperform.

The Tam growth.

Inside of China, Walter yet.

Okay. Good question, so actually Youre looking at third party data next year, China operate.

And we also feel there.

The good year next year for China, and because they're at the China market is still in their early or middle stage of the capacity.

Spansion, especially this mature 28, 45 or the EV market right for their power devices and unit growth.

And then also we have a new product a.

Furnace animation end of last year. When you have a three customer end of this year were part of a 10 customer so expanding quite rapidly with a customer in a front end product right. We have are all <unk>.

<unk> CBD Hydramine Aneel, plus our new <unk> product.

With the revenue contribution right and for the year 2024 and plus other.

Are the new Canadian product you mentioned that.

So liquidity with <unk> and also our powerful product we mentioned that we see next year.

Our.

Multiple repeat order coming for our Tahoe tool also tahoe as often.

<unk> 40, probably those 70% so break our CV compared to their single SPM door, and we see the big and traction from <unk>.

Not only logic customer also from there.

Memory customer, although not only domestic on.

China also we see the customers outside China interest for this.

Power products, we view this as a real revolutionaries meetings.

Offer a real environment, they're friendly process for Suez saving those will break asset.

Next one I would see that 2010 before we see the international market penetration become Moreover, icon materialized and we see their poverty pick up in the international cell and for our can any cooperating and those were approving and also advanced product and as I am.

You mean, the Canadian when measured one more it was a bubble on the backside cleaning, we just announced today and to the same customer we have in the U S of another indication are backside babble and Ito will be also another booster for clean product right.

For the 2024 lots of as Darryl mentioned that it will still continue to grow while Canadian.

Ultra advanced squamous.

<unk>.

Has been growing rapidly.

And therefore, there are a lot of virtual product in China. They are using.

Our bench tool right. So thats another a growing factor and further than that is that as youll see in next year. We see our tracks is then we'll probably go to model the customer and also <unk> CBD, but getting into their evaluation with the customer to buy those two will tell all of them made a contribution for 2025 revenue.

Maybe that's the general.

Hi.

In 2024.

Mark anything want to add on that.

Yes.

Yes, no I think you hit it pretty good David I mean, one thing.

It is interesting to talk about Christian is we actually had our international sales conference last week.

Here.

And post Covid. It was our first face to face conference in a while we had teams from Korea U S. Europe, even Taiwan in here meeting for three to four days.

David you might say a few more things about it but.

It's pretty clear to us that the international markets.

There is good opportunity.

There is a lot of customer activity in these regions and.

Next year, we do think international can be more meaningful.

But we would see next year as a building year.

Yeah, that's it thanks.

Okay.

Thanks for that and it sounds like we have a lot of things going on.

Both the product and the customer, but if we could just ask one more question about the customer experience.

You know.

As you've made a couple of tools.

A new customer in the United States.

And Oregon.

Can you give us an idea of how substantial that could be over time, not 'twenty four 'twenty five but over time and then in addition to that.

I think you mentioned that.

Selling out.

Out of the credit facility to international customers, but also expanding opportunities with inside Korea now.

Do you think you can expand the customer base inside of Korea or are you just talking about expansion of opportunities with.

Your historical customer in Korea, and that's my last question. Thanks.

Thank you.

Actually.

Less customer in U S.

And including.

Recently assumed the CASM in the Europe, Ryan there's really any.

Our customer base and international customer and as we said we got an order from the same customer is Neil Shah.

Our relationship closer with the customer class were real offer.

Nicole there product product for the customer and as we can be a major attraction to the customer.

And regarding to their.

Korean customer again, we have a historic customer.

However, fully collaborations with them.

Not only will talk about convenience Wolfgang <unk>.

Additional new product right to the collaboration with them with also wherever.

Almost 90% the process of staff, we can covering Canadian site. So we have a lot of other amongst and also our only ACM made if any product which have been working with a customer in this.

Historical customer obviously, we're also looking for other customer in Korea.

Not only have more.

Our Canadian pool, including copper plating tool.

And the other product developer.

<unk> right now so we're aware of.

Plus I want to add more value, we didn't mention in the script and we are.

We're also actively working on custom in Singapore, right. So again.

Our goal is still long run goal is still remain.

There are.

Our 50% of our revenue come from mainland China, and also 50% of revenue come from most eminent China right that's our future.

Our global strategy.

Strategy.

Great. Thank you guys.

Thanks Christian.

Thank you once again, if you wish to ask a question. Please press star one on your telephone.

We will take our next question.

Please standby and the question comes from the line of Charlie Chan from Morgan Stanley. Please go ahead. Your line is open.

Thank you Hi, David and Mark.

Good evening and good morning.

First of all Mike My question is that value or.

Potential exposure to the.

The high end memory mini hi, Ben with memory.

No you'll have some memory customers. So can you explain to us first of all.

What kind of tool.

Potentially you can.

Supply to the memory customers for the HBM and secondly, what is the.

Progress.

For data.

Jim for you or tool.

For SPN.

Joe Thanks.

Yes, Tony I really cannot tell to DPR ray, but we have multiple products.

Working for this customer for the ACB and Ray and his real new growing market.

<unk>.

As I said we.

However, more than two products and the welcoming them also what try this Friday also other products are.

Portfolio and.

Working more closely with their R&D group and quantify our advanced technology for the economy.

So I would say.

We have put all the effort in Korea, and we're now highly engineered R&D into Korea, and will really become local support for the customer.

And it kind of closer and faster response to the customer so well beauty also continuously.

D R.

Production capacity and to meet the requirement and not only for the Korean customer probably also for their own customer internationally. So that's the effort liquidity right now.

Okay understood.

Thanks, David.

Next question is.

<unk>.

For rock.

I know you explained the.

OPEC trend.

So it is still a very big job even this year.

R&D.

Alright expands the customer activity is still pretty pretty big.

Big jump versus the previous quarter.

So.

How much of those are increases like one off.

Post Covid travel.

And should we use that.

$45 million.

Quarter as the new <unk>.

<unk> for the future Opex.

Yes.

Thanks for that on the Opex question. So.

We're obviously investing in the R&D side, and our sales and marketing.

Got that public companies to public.

Stocks so.

I think the quick answer to the new level, Yeah, I mean, I would actually expect.

The opex to be maybe even up a little bit next quarter.

There is as you know a lot of our expenses are in remnant b.

Third quarter revenue would be actually strengthened in the quarter, so that move things a little bit but.

In general.

Right.

We would anticipate.

The opex to.

That's about the right run rate Charlie.

Okay.

So.

Can we justify that.

Increase that <unk> has a very strong.

Shipments because.

When you calculate the opex ratio.

Opec's by revenue it seems like.

Pretty pretty pretty high Opex ratio.

So you said more like.

Quarter to date with the shipment because seems like cement into.

Third quarter to fourth quarter, a pretty pretty strong.

Okay.

Correlation there Charlie I don't we don't.

Break it out specifically, but of course, there is a correlation to our shipment level in our opex.

Okay, Yes.

Also associated to the <unk>.

R&D do you think that.

The peak spending of your R&D I know you're already introduced your new.

Paul lives so.

How much more acreage or R&D you need to.

Investing for the future Paul line or current policy.

Yes, let me cover that maybe you're marking at a mill and then R&D is steel.

Major anyway, you look at the two.

Years ago the goal.

General R&D spending of about 12% right actually, especially after IPO in China.

Market and so we have started boosting on after we have study with more investment into new product ramps run us as number one first.

<unk> is also true.

So and we look at their next two to three year.

A very big opportunity for us to grabbing the market in China, and plus with our new innovation.

Proprietary tech a liability into there.

Yes.

PL CBD and also shrunk and we are also getting into the market in international right, especially I want to mention that track in Texas and going very well.

Qualification and for Us our new architecture.

Amy.

Newport.

<unk>.

Next generation you saw go over too right.

So.

I'll talk about even 440 <unk>.

W Phe.

High throughput, so where our Apache.

<unk> is the Ria aiming for that market.

And we're planning to be the second player right.

Ray.

Other companion market.

And I see that is so I think probably 15, 16% that's a range we're BBB.

With that as a percentage wise, probably not changing but then we have the revenues what rate you can see that we still maintain a lot of room.

Through their R&D money into into there.

Our existing product and also the new product, especially even for existing products.

<unk> and also their cleaning right.

Also do put effort. There are reason, yes, we see there is <unk>.

Canadian product become more and more important whether new new advanced technology plus.

I should say the Cabo Brady market rapidly this is chip.

The montney the package.

And as those become Cabo gradients will become very important.

So we're also.

R&D into both existing product production rate.

Yeah, Hey, one last thing.

Charlie we said.

If you look at.

It kind of brass tacks behind what David said.

Do you expect it around 15% of sales, but we should see some operating leverage on the G&A and sales and marketing side.

We got a little bit this year in general.

Our operating model is built.

Sure.

Okay. Okay. So the R&D intensity will keep at that 15%.

Over the coming couple of years, Okay. Okay fair.

Fair enough.

Okay.

How much thank you.

Yes.

You.

Thank you once again, if you do wish to ask a question. Please press star one.

On your side.

And you have a follow up question from the line of Charles <unk> from Needham <unk> Company. Please go ahead. Your line is open.

Hi, Thanks for taking my follow up question.

Dave and Mark just wanted to go back to your comment.

The overall, China market I know you said you are not the market leader here, but.

But can you kind of explain why youre seeing China market down year on year as a whole.

What about quarter on quarter, what do you see there.

I'm, just looking at the data and commentary.

U S peers. It seems like they are probably expecting Q4 overall, China market to be holding relatively strong.

We know where we will land at <unk>.

Just kind of curious why you think the overall, China market was down year on year.

Thanks.

Well, let me add on that maybe.

Charles is actually.

We don't have whole data rate.

I feel like the holders the marketing data. However, you look at the order rates as you report with.

With the semi and other.

<unk> banka palm publish.

I will talk about property.

Our field personnel I should say less than 10% down when people see a whole year, while the broader debate right.

We see.

This year, we see almost flat over.

I don't know yet.

I'll be flat is that a wheelie say here, but the real number was probably <unk>.

And over there this year.

But if all these real result.

But I won't say, even this year flat.

We see our customer expansion and we think next year is still another good year.

And.

Everybody is expecting it probably be Wi Fi six global.

In the bag, but I think in China's time, even downturn globally.

Our marketing general scale within the bank and our Se.

Next year, we see it now.

Good evening.

I'll also Newport news.

Yes.

David If you don't mind, maybe I'll add a little bit on to that.

Mr Relations team pulled together some data.

Q3, a lot of companies had a pretty big uptick sequentially hard to know exactly what that was driven by but.

We were encouraged by.

Kind of a big lithography.

Rapid Q3 for up for one of the players.

We look at that.

Some kind of a leading indicator, but David I don't know if you wanted to add anything on about that as well.

There's a lot of tea leaves that we try to pay attention to.

We look at our own business and this is kind of how we see it yes.

Yes.

I think you are right that that is sagar with two companies space. There. This year's revenue China double re look at that that's really indications say normally to as advanced buying right.

So there for that gathered writing first.

So we see that there those two are definitely driving another demand for the semiconductor capital spending in China.

Thanks.

Okay.

Thank you that seems to be no further questions I would like to turn back to David Wang for closing remarks.

Thank you operator, and thank you all for participating on today's call.

For U S support before we close Gary is going to mention our.

Opera coming Investor Relations events, Gary Please.

Thanks, Steven before we conclude I just wanted to give everyone. A quick reminder, on our upcoming investor conferences on November 15th will presented the 12 brought the 12 annual Roth Technology Conference in New York City on November 16th will presented the 14th annual Craig Hallum Alpha Select Conference also in New York City from November 29 to the 30th.

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

Q3 2023 ACM Research Inc Earnings Call

Request a DemoDemo

ACMR

ACM Research

Earnings