Q3 2024 ACM Research Inc Earnings Call
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Speaker Change: Good day, everyone. Thank you for joining us to discuss third quarter 2024 results, which we released before the U S market open today the releases.
Speaker Change: <unk> on our website as well as from these wire services. There's also a supplemental deck slide deck posted to the investors section of our website that we will reference during our prepared remarks on the call with me today are are our CEO, Dr. David Wang our CFO, Mark Mckechnie, and Lisa Feng the CFO of our operating subsidiary ACM Shanghai.
Speaker Change: Hi, <unk>.
Speaker Change: We continue please turn to slide two let me remind you that remarks made during this call may include predictions estimates or other information that might be considered forward. Looking these forward looking statements represent acm's current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results to differ materially.
Speaker Change: Those risks are described under risk factors and elsewhere in Acm's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward looking statements, which reflect acm's opinions only as of the date of this call ACM is not obliged to update you on any revisions to these forward looking statements certain of.
Speaker Change: 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 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 on slide 13.
Speaker Change: Refer to slide 13, let me now turn the call over to David Wang who will begin with slide three David.
Speaker Change: Gary Hello, everyone and welcome to the ACM research before earlier conference call.
David Wang: Please turn to slide three.
Speaker Change: For the third quarter revenue was $204 million upward tiny 1% shipment were.
Speaker Change: $261 million upper 23%.
Speaker Change: <unk> was good with a gross margin of 51, 6% and our premium margin of 27, 5%.
Speaker Change: We ended the quarter with approximately <unk> $369 million of cash and time deposits with a positive cash flow from operations for the quarter.
Speaker Change: Revenue for the first nine months of the year was 558.
Speaker Change: <unk> M upper 44% year to date shipments were $709 7 million or 56% we believe.
Speaker Change: This growth is a significant demonstrated market share gains for ACM and the contribution from new product cycle now.
Speaker Change: Now I will provide the detail on products, please turn to slide four.
Speaker Change: Revenue from single wafer cleaning Tahoe and semi critical cleaning product growth, 22% in Q3 and represented 79% of total revenue.
Speaker Change: ACM offer a comprehensive top to bottom cleaning portfolio, we estimate that global a total available market.
Speaker Change: Ken for the <unk> and close to $6 billion in ACM products up 40, more than 90% of all Canadian process steps in both memory and logic additive manufacturing.
Speaker Change: All factor.
Speaker Change: And so bigger proxy mixing our SPM have led to increased confidence towards our target for continued market share gain in Canadian.
Speaker Change: As a reminder, we estimate as SPM process, representing about 25% of total.
Speaker Change: From and Canadian market, but so far it has been a small contributor to our business.
Speaker Change: Helium prior report, we announced a technical progress our high temperature STM solution recall that only one other major continuing pool.
Speaker Change: Supplier.
Speaker Change: Service the high temperature market for SDN during our first quarter call I reported a technical break.
Speaker Change: Could it enable us to be the second player.
Speaker Change: Now he latest stage evaluation in a number of a key customer and we are.
Speaker Change: Immediately become the secondary supplier in their award supporting commercial high temperature SPM cleaning.
Speaker Change: That's not all today, we issued a press release, making.
Speaker Change: Marking a major performance breakthrough for Tahoe.
Speaker Change: <unk> environment, a solution for the <unk> and a low temperature SPM segment.
Speaker Change: Ultra C. Tahoe now achieved the performance of our Standalone single wafer cleaning tool on low to high temperature CPM process.
Speaker Change: The power platform advanced Canadian capability have achieved average <unk> polyglot com of less than six particle.
Speaker Change: <unk> thousand six nano.
Speaker Change: Right.
Speaker Change: Meeting the stringent requirement for the advanced node manufacturing. The truly is also capable of removing <unk> nanoparticle for the most advanced <unk> memory applications with additional of our smaller particle filtering system.
Speaker Change: Half of the.
Speaker Change: Pat in the hybrid architecture is among the first in the industry to combine batch wafer process on a single wafer Canadian chamber.
Speaker Change: Same SCM tool.
Speaker Change: The hybrid architecture deliver enhance cleaning performance high throughput and process flexibility with up to 75% reduction in chemical consumption.
Speaker Change: ACM estimate cost of up to $500000 per year from so big asset alone.
Speaker Change: With the additional environment and the cost benefit from reduced so big asset in treatment and disposal.
Speaker Change: With the rise of AI to their front.
Speaker Change: For a full front of the consumer mine, we expect to increase public attention on the environment the impact of a semiconductor chip manufacturing.
Speaker Change: Believe ACM Ultra C. Tahoe is well positioned to help customer increased production of advanced AI chips.
Speaker Change: Reduced footprint on the environment.
Speaker Change: Put another way how is it good for customer and include the planet. We believe Ultra C. Tahoe is another example of Excellency from ECM innovation in the world across R&D team.
Speaker Change: <unk> demonstrated how innovation kind of achieved the information economy, and a <unk> environment.
Speaker Change: Also announced today that the upgrade ultra C. Tahoe is now in mass production with several high volume customer facility in China and under evaluation.
Speaker Change: Additional logic and memory customers.
Speaker Change: We expected to deliver more units by end of the year.
Speaker Change: The market opportunity of Apollo is a quite a large as the middle and low temperature is more than 80% of their SDN market and thus above the 20% of the overall Canadian total a tourist market.
Speaker Change: We believe ACM cleaning portfolio, including SaaS Tebo, and Tahoe semi critical together with SDN and Super critical seal to join to ACM in water costs.
Speaker Change: We see good opportunity for continued market share gain in mainland China and we are confident we have.
Speaker Change: What would it take to scare major customer in international markets.
Speaker Change: Revenue from ECB photos, and other technology grow 36% in Q3.
Speaker Change: <unk>, 17% of total revenue.
Speaker Change: Momentum for our trading tools remains solid for both front end and backend to us I am pleased with our revenue performance.
Speaker Change: Performance I'll also note that of that shipment for the ECP fitness category growth by a 67% year to date.
Speaker Change: Our frontlist product.
Speaker Change: Cycle is also gaining traction with other memory and logic customers overall, we now anticipate.
Speaker Change: Having 17 furnace customer by the end of this year upper from nine at the end of last year, we expect contribution to revenue from furloughs to activate the <unk> 75.
Speaker Change: Revenue from advanced packaging, which.
Speaker Change: As crude ECP, but includes the service and the spill declined by 21% for Q3 and was up 3% year to date and represented 4% of revenue.
Speaker Change: This category, including a range of the packaging tools, including colder developer scrubber <unk> cheaper than a web actress and also service and spare parts and we are exploring new product and technology to participate in the next generation of advanced packaging.
Speaker Change: ACM is allowing the only company that offers a full set of web tool cover plating tool and then punish tool for the advanced packaging.
Speaker Change: Year to date growth of advanced packaging was low.
Speaker Change: <unk>.
Speaker Change: Chip.
Speaker Change: This too slower growth.
Speaker Change: Growth for China based packaging firm, who are more exposed to a broader end.
Speaker Change: Market. The trend. We are also in all of this category are not including our ECP tool for advanced packaging.
Speaker Change: In early September we are now purchasing others for wafer level packaging tools from U S customer in the U S. R&D Center. This tools are scheduled for delivery in the first half of 2025.
Speaker Change: We are up.
Speaker Change: Domestic about our fan out panel level packaging tourists, we have recently announced three panel level packaging tools, including vacuum flask clean tool for chip, let the horizontal plating tool and a favorable etch tool.
Speaker Change: <unk> New panel tool makes a strong offer by Acm's address advanced panel level packaging market. We have been developing this technology for years and they believe the market is now coming to US all technology up a particular boat to Michael order Peach high temperature high density.
Speaker Change: Packaging.
Speaker Change: This is especially relevant to AI packaging of a GPU at a high density high bandwidth memory Hbf, we see a large global opportunity is several major academic leaders have choosing panel for their AI chip packaging solution.
Speaker Change: Finishing up on the product, we are making good progress with our truck and <unk> platforms.
Speaker Change: Both of this product innovation or differentiated platform design and allow for possibly the flexibility and high throughput we have a solid list of ongoing demonstration and evaluation for both <unk> and <unk>.
Speaker Change: We expect here.
Speaker Change: The progress for both PCB and track over the next year as the revenue likely latest was on <unk> and <unk>.
Speaker Change: More and more contribution it was on 26 and the deal.
Speaker Change: Moving on to the customer putting tend to slide seven in Q3, we saw broader demand for foundry logic.
Speaker Change: And the memory, we had a full 10% customer for the period represented 63% of the revenue in China, we have a leading position in cleaning and have targeted additional market share gains. We believe we have or it become award cost multi product company.
Speaker Change: With a competitive product in the market for <unk>.
Speaker Change: And we have a saudi the validation pipeline for tracking and PSAT in.
Speaker Change: In the U S will continue to make are steady progress I already mentioned the order for fourth of VIP tours scheduled for delivery in 2025. In addition activity with our major U S customer continues to progress.
Speaker Change: Both of our SaaS tool have already achieved.
Speaker Change: Supply.
Speaker Change: Playa qualification and we have moved to their production qualification process.
Speaker Change: And the back side of their babble etch tool.
Speaker Change: We did this year is in the latest stage of our supplier qualification.
Speaker Change: In Europe. We are also in the latest state of qualification of <unk>, continuing tool, which we deliver to a major global semiconductor manufacturer in Q3 of 2023.
Speaker Change: In Korea, we remain engaged with the customer for a range of tools to.
Speaker Change: To support the growth we made a progress on our facility expansion in China and other regions. Please turn to slide eight.
Speaker Change: In China.
Speaker Change: On October 20th our subsidiary ACM, Shanghai Hoster opening ceremony for the lean down production and R&D center that are gathering employees customers.
Speaker Change: Supplier and local fishers, there first off to more of them.
Speaker Change: Manufacturing floor, including the ops of op.
Speaker Change: Automation system and FSP initial operation.
Speaker Change: During the third quarter, we also move into the new ACM Shanghai adequate orders.
Speaker Change: <unk> also in the Shanghai High Tech Dungannon Science Park and offer a great work environment for our engineering team.
Speaker Change: In the U S October one we completed the purchasing of our new Oregon facility, which include the 5200 square feet.
Speaker Change: Thank you.
Speaker Change: We plan to moving early next year, we plan to deliver several tours in 2025 provider either access to major customers for advanced tools evaluation.
Speaker Change: The duty is strong footprint in the U S including.
Speaker Change: One clean room on the lab and the growing service team and see this a great opportunity to participate in the market growth of U S semiconductor.
Speaker Change: I will now provide our outlook please turn to slide 10.
Speaker Change: We haven't reached our 2020 for revenue outlook to be in the range of $775 million to $745 million versus prior range, our six <unk> to $735 million.
Speaker Change: In the Middle point, our revised outlook represented 32% year over year growth compared to the 2008% previously Shimon activity remains strong and we continue to expect our full year shipment growth rate to outpace revenue growth rates.
Speaker Change: Our visibility for their.
Speaker Change: Reminder of the year is largely driven by our current order book and the qualification and customer acceptance of previously shipped evaluation tools for a range of customers.
Speaker Change: From our perspective, we believe <unk> spending in the mainland China remain at a high level as the country continues to.
Speaker Change: Go to match the production capacity with end market consumption.
Speaker Change: We continue to focus on market share gain new product and the increased localization to drive our growth objectives.
Speaker Change: Jackie in China market.
Jackie: We're expanding our business to new customer in the U S Korea, Taiwan, Europe, and other Asian markets.
Speaker Change: Long term targets to have generated half of our revenue from outside of China.
Speaker Change: Now, let me turn the call over to our CFO Mark <unk>.
Mark Mckechnie: Ill review details of our fourth.
Speaker Change: Quarter results Mark.
Mark Mckechnie: Thank you David Good day, everyone. Please turn to slide 11.
Mark Mckechnie: Unless I note, otherwise I will refer to non-GAAP financial measures, which exclude stock based compensation and unrealized gain loss on short term investments reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release.
Speaker Change: Also unless otherwise noted the following figures refer to the third quarter of 2024.
Mark Mckechnie: Comparisons are with the third quarter of 2023.
Mark Mckechnie: I will now provide financial highlights revenue was $204 1 million up 21%.
Mark Mckechnie: Revenue for single wafer cleaning Tahoe in semi critical cleaning was 161 zero million up 21, 6% revenue for ECP protect packaging furnace.
Speaker Change: Technologies was $34 6 million up 35, 6%.
Speaker Change: Revenue for advanced packaging, excluding ECP services, and spares was $8 4 million for the third quarter down 21, 8%.
Speaker Change: First nine months of the year grew by 2.9%.
Speaker Change: Total shipments for the quarter with $261 million up 23%.
Speaker Change: Gross margin was 51, 6% versus 52, 9%.
Speaker Change: This exceeded our long term gross margin target of 40% to 45% for the full year, we expect our gross margins above the high end of the range. This is due to year to date gross margins are about 50% and our expectation for gross margin in the upper end of our 40% to 45% target range for Q4.
Speaker Change: Continue to expect gross margin to vary from period to period due to a variety of factors such as sales volume product mix and currency impacts.
Speaker Change: Operating expenses were $49 2 million up from $45 3 million.
Speaker Change: R&D was $24 5 million versus $22 7 million sales and marketing was $13 2 million versus $14 3 million in G&A was $11 6 million versus $8 4 million for 2020 for the full year, we plan for R&D in the 12%, 13% range sales and marketing in the 7% to 8%.
Speaker Change: On the G&A and the 5% to 6% range.
Speaker Change: Operating income was $56 1 million versus $43 8 billion operating margin was 27, 5% versus 26 zero percent.
Speaker Change: Realized gains from the sale of short term investments with zero point $2 million versus Europe was seven months recall that unrealized gain is not included.
Speaker Change: GAAP earnings.
Speaker Change: Income tax expense was $4 million.
Speaker Change: Versus zero point $7 million for the full year and our plan for an effective tax rate on non-GAAP pre tax income in the 12% to 14% range.
Speaker Change: Net income attributable to ACM research was $42 4 million versus $37 6 million.
Speaker Change: Net income per diluted share was <unk> 63 versus <unk> 57.
Speaker Change: Our non-GAAP net including our non-GAAP net income excluded $11 9 million.
Speaker Change: <unk> per share stock based compensation expense.
Speaker Change: Stock based compensation expense declined sequentially in Q3 due to the accelerated amortization for the Shanghai stock option grants.
Speaker Change: SBC to decline again in the fourth quarter.
Speaker Change: I will now review of selected balance sheet and cash flow items cash cash equivalents restricted cash and.
Speaker Change: Time deposits ended the third quarter at $369 1 million versus $366 8 million at the end of last quarter inventory was 62, $628 7 million versus $602 9 million at the end of last quarter. This included raw materials and work in process of $329 8 million.
Speaker Change: Good inventory of $298 9 million.
Speaker Change: Finished goods inventory mainly includes first 200 evaluations at our customers, but it also includes finished goods in acm's facilities cash.
Speaker Change: <unk> from operations was $11 99 for the third quarter and $63 9 million for the first nine months of the year capital expenditures were $33 4 million for the third quarter $73 million for the first nine months of the year.
Speaker Change: For the full year 2024, we expect to spend about $100 million in capital expenditures.
Speaker Change: That concludes our prepared remarks, let's open the call for any questions that you may have operator. Please go ahead.
Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on one on your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question. Please press star one again.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Charles <unk> Needham <unk> Company. Your line is now open.
Speaker Change: Hi.
Charles: David Mark maybe the first question I think I heard you talking about the.
Speaker Change: Wet cleaning product portfolio, you have right now covers 90% of the.
Speaker Change: But the overall worldwide were clean market, which includes all kinds of devices.
Speaker Change: I wanted to ask specifically on <unk> NAND.
Speaker Change: What's that coverage percentage number look like are you able to cover 100% of all of the <unk> NAND applications.
Speaker Change: Okay, Charles very good question.
Speaker Change: Actually.
Speaker Change: We're as I said.
Speaker Change: Typical process could ETE will cover almost 90%.
Speaker Change: In this moment I want to say is the only single wafer fast-break asset.
Speaker Change: Another putting the marketing yet so basically the rest of the.
Speaker Change: Tool and we are either in R&D with the customer all the way and then putting in production.
Speaker Change: And even.
Speaker Change: Including <unk> <unk> for the year.
Speaker Change: But within that and also high temperature.
Speaker Change: Our SPM process right and the most of those other tmall process. So we're pretty.
Speaker Change: Fully engage and regarding this.
Speaker Change: <unk>, neither a wet process.
Speaker Change: I call there.
Speaker Change: Good evening.
Speaker Change: Got it so basically there is still some gaps but that but youre engaged.
Speaker Change: This common applied to <unk> NAND as well.
Speaker Change: Yes, I'd just say it probably by end of this year, we should be quantify all of the process.
Speaker Change: And the <unk>, we already are putting production existing process right.
Speaker Change: <unk>.
Speaker Change: Where we are.
Speaker Change: The other part of us.
Speaker Change: Thanks. This is very helpful.
Speaker Change: The second question I have I think that you said the China, probably a fee you think it will remain at the high level next year, but the.
Speaker Change: Two parts, there's a two part question so number one.
Speaker Change: In terms of the change from this year's level.
Speaker Change: It will remain at this year's already at a pretty high level right, but the one I understand.
Speaker Change: When you say remain at a high level, you are expecting flat to up or what's what's the what's the expected range here. That's that's one part but the other part.
Speaker Change: The question obviously.
Speaker Change: With the with the U S election that happened a couple of days ago there.
Speaker Change: Obviously, it's pretty uncertain at this point to where the.
Speaker Change: Trade policy of the New U S administration can go about that.
Speaker Change: Does that comment.
Speaker Change: <unk> or any of the potential impact of any of the new tightening or you are assuming.
Speaker Change: Or the international.
Speaker Change: We will control new also remain the same as of today.
Speaker Change: Okay, let's come to the first question right.
Speaker Change: I should say last full year, you can see the chatting with China revenue market growing quite there.
Speaker Change: Saturday an hour.
Speaker Change: I will say probably the next few year, we still have received a strong demand in China market why that's still out of a memory and also logic or foundry IGT market steel.
Speaker Change: There is still the building process for their fab. So we'll come to the next year and.
Speaker Change: Now the real give you.
Speaker Change: Number one.
Speaker Change: The match and there might be a little below maybe they were up really hard to really predict at this moment, but I want to say the other strong steel and next few year.
Speaker Change: Rhodium processing capability right, we're looking at all other foundry.
Speaker Change: This is there are oftentimes you'll.
Speaker Change: Utilization of the lines are pretty heavy so I won't say, we're still kind of are positive about the growing China market.
Speaker Change: And second.
Speaker Change: Yes.
Speaker Change: Any questions My first one.
Speaker Change: To your second question, Yes. Please please continue okay.
Speaker Change: There is only one day array is hard to predict.
Speaker Change: We're really whatever.
Speaker Change: All of the route of the order of countries, all deregulation and come out of the new or are changing.
Speaker Change: And basically we're going to radio support all production of R&D of a key customer in the Utica.
Speaker Change: <unk>.
Speaker Change: Thanks, David.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of bark Miller of the benchmark Company. Your line is now open.
bark Miller: Congratulations on another strong quarter.
bark Miller: Just wondering.
bark Miller: <unk> been consistently posting gross margins above your targeted range for this year.
Speaker Change: Sounds like they were expecting the margins to come back down to the high end of the range in December quarter.
bark Miller: Im sure Youre backhaul.
Speaker Change: We're going to go back to your target range in 2025 for gross margins.
bark Miller: David Let me, let me take that.
bark Miller: Yes, yes.
bark Miller: I appreciate it mark.
bark Miller: I think you did yes Q3, another good quarter.
bark Miller: Year to date, just about 50% I mean, it really has to do with our product mix.
bark Miller: We've been we have a lot of differentiation.
bark Miller: We've done well on that foreign.
bark Miller: Foreign exchange has helped.
bark Miller: I think.
bark Miller: But longer term, we're not going to give guidance, obviously for next year, but.
bark Miller: General longer term, our target remains $40 to 45%.
Speaker Change: And.
Speaker Change: The Mexican.
Speaker Change: That can change that given our broad product line.
Speaker Change: Our backlog.
Speaker Change: Margins for that.
Speaker Change: I've given too much.
Speaker Change: Pretty good pretty healthy.
Speaker Change: So we see that they're both true and working the market in China, also outside China.
Speaker Change: As everybody, you know, so big ask of the process, they're actually.
Unknown Attendee
Unknown Attendee
Unknown Attendee
Okay. Thank you, David. Thanks.
Thank you.
Unknown Attendee
Thank you.
Speaker Change: Our next question comes from the line of Edison Lee of Jeffries. Your line is now open.
Unknown Speaker
Edison Lee: Hi, David and Mark here, congrats on the great results in 3Q. I just have a quick question because you did mention that the advanced packaging market in China is slowing down. And I think...
Speaker Change: Maybe you can actually help us understand whether that should be a leading indicator for front-end spending in China, whether we should be worried about front-end spending in China as a result of the slowdown in advanced packaging in China. So, yeah, how should we think about it?
Speaker Change: Yeah, well, I want to say that is really looking at last year, right, and also in the first half of this year, it gets kind of a slow. However, we see that a gradual pickup, right, you know, Q3, Q4.
Speaker Change: and we do have other orders coming in. So, you know, you look at all their market, you know, in the foundry business, they pick up. I think from now on, they're going to pick up on their, you know, this month's packaging, you know, WAB spending.
Speaker Change: So we are positive, you know, I should say Q4 in the next year. But I'm talking about path, right? Our revenue is really represented last, you know, four months and last year, you know, all the tools we're shipping.
That's our view about this advanced packaging status.
Unknown Attendee
Speaker Change: Do you think that the Chinese packaging companies are actually doing?
Speaker Change: something different versus the past? Are they moving into HBM or are they moving into like more coerced type of packaging that requires different equipment? What is happening there?
Unknown Attendee
Speaker Change: So it's a lot of people and work on this advanced packaging, you know, I call the technology and also their process development.
Unknown Attendee
Unknown Attendee
Okay, that's great. Thanks a lot, David.
Unknown Attendee
Speaker Change: As a reminder, to ask a question, you will need to press star one, one, one moment, please.
Unknown Attendee
Unknown Attendee
Unknown Attendee
Speaker Change: Thank you. Seeing no more questions in the queue, let me turn the call back to David Wang for closing remarks.
David Wang: 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 our upcoming investor relations event. Gary, please.
Gary: Thanks, David. Before we conclude, I just want to give everyone a quick reminder on our upcoming investor conferences.
Excuse me.
Gary: On November 19th, we will present at Craig Hallam Capital's 15th Annual Alpha Select Conference in New York. On November 20th, we will present at the Roth 13th Annual Technology Conference also in New York.
Speaker Change: Unknown Speaker And on December 4th, we'll present at the UBS Global Technology and AI Conference.
Speaker Change: in Scottsdale, Arizona. Finally, on December 17th, we'll present at the 13th Annual New York City NYC Summit in New York.
Speaker Change: Attendance of the conferences are by invitation only. For interested investors, please contact your respective sales representative to register and schedule one-on-one meetings with the manager team.
This concludes our calls. You may all now disconnect.
Have a good day.
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and Mark McKechnie. Thank you. Thank you.
Speaker Change: Good day, ladies and gentlemen, thank you for standing by and welcome to the ACM Research fiscal third quarter 2024 earnings Conference call.
Speaker Change: Good day, ladies and gentlemen. Thank you for standing by and welcome to the ACM Research Fiscal Third Quarter 2024 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.
Speaker Change: 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.
Speaker Change: As a reminder, we are recording today's call. If you have any objections you may disconnect at this time.
Speaker Change: As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time.
Speaker Change: Now I'll turn the call over to Mr. Kerry Devor check managing director of the Blue Blue shirt group Gary. Please go ahead.
Speaker Change: Now I'll turn the call over to Mr. Gary Dvorak, Managing Director of the Blue Shirt Group. Gary, please go ahead.
Gary Dvorak: Good day, everyone. Thank you for joining us to discuss third quarter 2024 results, which we released before the U S market open today. The releases are available on our website as well as release wire services. There's also a supplemental deck slide deck posted to the investors section of our website that we will reference during our prepared remarks.
Unknown Attendee
Gary Dvorak: Good day everyone. Thank you for joining us to discuss third quarter 2024 results which we released before the US market opened today. The release is available on our website as well as from Newswire Services.
Speaker Change: There's also a supplemental deck, slide deck posted in the investor section of our website that we'll reference during our prepared remarks.
Speaker Change: <unk>.
Speaker Change: 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.
Speaker Change: On the call with me today are our CEO Dr. David Wong, our CFO Mark McKechnie, and Lisa Fung, the CFO of our operating subsidiary ACM Shanghai.
Speaker Change: Before we continue please turn to slide two let me remind you that remarks made during this call may include predictions estimates or other information that might be considered forward. Looking these forward looking statements represent acm's current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results to differ materially.
Unknown Attendee
Speaker Change: Before we continue, please turn to slide 2. Let me remind you that remarks made during this call may include predictions, estimates, or other information 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.
Speaker Change: Those risks are described under risk factors and elsewhere in Acm's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward looking statements, which reflect acm's opinions only as of the date of this call ACM is not obliged to update you on any revisions to these forward looking statements Sir.
Speaker Change: Those risks are described under risk factors and elsewhere in ACM's filings with the Securities and Exchange Commission
Speaker Change: Please do not place undue reliance on these forward-looking statements which reflect ACM's opinion only as of the date of this call. ACM is not obliged to update you on any revisions to these forward-looking statements.
Speaker Change: 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 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 on slide 13.
Unknown Attendee
Speaker Change: Certain of the financial results we provide on this call will be on a non-GAAP basis, which excludes stock-based compensation, and an unrealized gain loss in short-term investments.
Speaker Change: 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 on slide 13.
Speaker Change: And we refer you to slide 13, let me.
Speaker Change: I'll now turn the call over to David Wang who will begin with slide three David.
and refer to slide 13.
Speaker Change: Let me now turn the call over to David Wong who will begin with slide three. David. Thanks, Gary. Hello, everyone, and welcome to ACM Research, third quarter 2024, early conference call.
David Wang: Thanks, Gary.
Speaker Change: And welcome to ACM Research third quarter 2024 earlier conference call.
Speaker Change: Please turn to slide three.
Speaker Change: For the third quarter revenue was $204 million upward of 21% shipment were.
Please turn to slide 3.
Speaker Change: For the third quarter, revenue was $204 million, up 21%. Shipments were $261 million, up 23%.
Speaker Change: $261 million upper 23%.
Speaker Change: <unk> was good with a gross margin in our 51, 6% and operating margin of 27, 5%.
Speaker Change: Profitability was good, with a growth margin of 51.6% and an operating margin of 27.5%.
Speaker Change: <unk> ended the quarter with approximately <unk> <unk>.
Speaker Change: and we are ending the quarter with approximately $369 million of cash and time deposit with a positive cash flow from operations for the quarter.
Speaker Change: $369 million of cash and time deposits with a positive cash flow from operations for the quarter.
Speaker Change: Revenue for the first nine months of the year was $558 6 million in upper 44% year to date shipments were $709 7 million or 56%.
Speaker Change: We believe.
Speaker Change: This growth is a significant demonstrated market share gain or ACM.
Speaker Change: <unk> contribution from new product cycle.
Speaker Change: Now I will provide the detail on product please turn to slide four.
Speaker Change: Revenue from single wafer cleaning Tahoe and semi critical cleaning product grew 22% in Q3 and represented 79% of total revenue.
Speaker Change: ACM offer a comprehensive top to bottom cleaning portfolio, we estimate that global total available market Tam for the community and close to $6 billion in ACM product supporting more than 90% of all Canadian process steps in both memory and logic additive manufacturing.
Speaker Change: All factor.
Speaker Change: So bigger proxy mixing our SPM have led to increased confidence towards our target for continued market share gain in Canadian.
Speaker Change: As a reminder, estimates as Dan SPM process represent about 25% of total.
Speaker Change: And Canadian market, but so far it has been a small contributor to our business Julian.
Speaker Change: Helium prior report, we announced a technical progress our high temperature SPM solution recall that only one other major cleaning tool.
Speaker Change: Playa.
Speaker Change: Service the high temperature market for SDN during our first quarter call I reported a technical break.
Speaker Change: Could it enable us to be the second player.
Speaker Change: Now the latest stage validation and a number of a key customer and we are committed.
Speaker Change: Immediately become the secondary supplier in their award supporting commercial high temperature SPM cleaning.
Speaker Change: That's not all today, we issued a press release, making up.
Speaker Change: Marking a major performance breakthrough for example.
Speaker Change: <unk> environment, a solution for the middle and the low temperature SPM segment.
Speaker Change: What youll see our hope now achieved the performance of our Standalone single wafer cleaning meaningful on low to high temperature CPM process.
Speaker Change: The power platform advanced Canadian capability have achieved average particle account of less than six particle.
Speaker Change: Plenty of six nano.
Speaker Change: Slide <unk>.
Speaker Change: Meeting the.
Speaker Change: Strategic requirement for the advanced node manufacturing that truly is also capable of removing why F. Nanoparticle for the most advanced logic memory applications with additional of our smaller particle filtering system.
Speaker Change: Pablo.
Speaker Change: Pat in the hybrid architecture is among the first in the industry to combine batch wafer process and our single wafer cleaning chamber.
Speaker Change: Same SCM tool.
Speaker Change: The hybrid architecture deliver enhance cleaning for.
Speaker Change: High throughput and process flexibility with up to 75% reduction in chemical consumption.
Speaker Change: ACM estimate cost of up to $500000 per year from so big asset alone.
Speaker Change: With the additional environment and the cost benefit from reduced so big asset in treatment and disposal.
Speaker Change: With the rise of AI to their farm.
Speaker Change: To the forefront of the consumer mine, we expect to increase public attention on the environmental impact of our semiconductor chip manufacturing.
Speaker Change: Believe ACM Ultra C. Tahoe is well positioned to help customer increase production of advanced AI chips.
Speaker Change: Reduced footprint on the environment.
Speaker Change: Put another way how is a good if a customer and the planet. We believe ultra C. Tahoe is another example.
Speaker Change: Excellency from ECM innovation in the World Class R&D team.
Speaker Change: <unk> demonstrated how innovation kind of achieve the information economy, and a <unk> environment, where.
Speaker Change: Also announced today that the upgrade ultra C. Tahoe is now in mass production of several high volume customer facility in China, and under evaluation and the additional logic and memory customers.
Speaker Change: Factor to deliver more units by end of the year.
Speaker Change: The market opportunity of Apollo is a quite a large as the middle and low temperature is more than 80% of their <unk>.
Speaker Change: <unk> market and thus above the 20% of the overall Canadian total a tourist market.
Speaker Change: We believe ACM cleaning portfolio, including SaaS, Tebo, and Tahoe semi critical together with SDN and silver critical seal to join to the ACF in water cost others. We see good opportunity for continued market share gain in mainland China and we are confident we have what.
Speaker Change: It would take to scare major customer in the international markets.
Speaker Change: Revenue from ECB Furloughs, and other technology grow 36% in Q3 and represented 17% of total revenue.
Speaker Change: Momentum for our planning tool it remains solid for both front end and backend tools.
Speaker Change: This is the revenue.
Speaker Change: I'll also note that of that shipment for the ECP fitness category grow by 67% year to date.
Speaker Change: Our frontlist product.
Speaker Change: Cycle is also gaining traction with other memory and logic customers overall, we now anticipate.
Speaker Change: Having 17 furnace customer by the end of this year upper from nine at the end of last year, we expect.
Speaker Change: Fusion two of revenue from furloughs, so accelerated in 2025.
Speaker Change: Revenue from advanced packaging, which.
Speaker Change: As crude ECP, but includes the service and the spill declined by 21% for Q3, and it was up 3% year to date and represented 4% of revenue.
Speaker Change: This category, including a range of the packaging tools, including colder developer squad <unk> cheaper than where the actress and also service and spare parts and we are exploring new product and technology to participate in the next generation of advanced packaging.
Speaker Change: ACM is aligned with the only company that offers a full set of where to cover <unk> tool and the Polish tool for the advanced packaging.
Speaker Change: Year to date growth of advanced packaging was low.
Speaker Change: We are cheap.
Speaker Change: This too slower growth.
Speaker Change: Growth for China based packaging firm, who are more exposed to a broader end.
Mark Mckechnie: Mark is a trend. We are also now this category does not including our ECP tool for advanced packaging.
Mark Mckechnie: In early September we are now producing others for wafer level packaging tools on U S customer in the U S. R&D centers. This tools are scheduled for delivery in the first half of <unk>.
Mark Mckechnie: We are.
Speaker Change: Domestic above our fan out panel level packaging to us we have recently announced three panel level packaging tools, including vacuum flask cleaning tool for chip, let the horizontal plating tool and a favorable etch tool Esther.
Speaker Change: <unk> New panel tool makes a strong offer by Acm's address advanced panel level packaging market. We have been developing this technology for years and I believe the market now coming to US all technology up a predictable to Michael order Peach high temperature high density.
Speaker Change: Packaging.
Speaker Change: This is especially relevant to AI packaging of a GPU at a high density high bandwidth memory Hbf, we see a large global opportunity is several major.
Speaker Change: Leaders have choosing panel for their AI chip packaging solution.
Speaker Change: Finishing up on the product, we are making good progress with our truck and <unk> platforms.
Speaker Change: Both of this product innovation or differentiated platform design and allow for possibly the flexibility and high throughput we have a solid list of ongoing demonstration and evaluation for both track on it.
Speaker Change: We expect here.
Speaker Change: Further progress for both DSW and track over the next year as the revenue likely latest was on <unk> and more and more contribution it was in 2006 and the B L.
Speaker Change: Moving on to the customer putting tend to slide seven in Q3, we saw broader demand for <unk>.
Speaker Change: Foundry logic.
Speaker Change: And the memory, we had a full 10% customer for the period represented 63% of the revenue in China, we have a leading position in Canadian dollars and have targeted additional market share gains. We believe we have it become award cost multi product company.
Speaker Change: With a competitive product in the market for <unk>.
Speaker Change: And we have a saudi the validation pipeline for tracking piece Abd.
Speaker Change: In the U S will continue to make are steady progress I already mentioned the order for fourth of JMP <unk> scheduled for delivery in 2035.
Speaker Change: <unk> activity with our major U S customer continues to progress both of our SaaS tool have already achieved.
Speaker Change: Supply.
Speaker Change: Playa qualification and we have moved through their production qualification process.
Speaker Change: And the back side of their babble etch tool.
Speaker Change: We did this year is in the latest stage of our supplier qualification.
Speaker Change: In Europe. We are also in the latest state of qualification of <unk>, continuing through which we deliver to a major global semiconductor manufacturer in Q3 of 2033.
Speaker Change: In Korea, we remain engaged with the customer for a range of tools to.
Speaker Change: To support the Gulf, we made a progress on our facility expansion in China and other regions. Please turn to slide eight.
Speaker Change: In China.
Speaker Change: On October 20th our subsidiary ACM, Shanghai Holster opening ceremony for the lean gas production and R&D center, the other gathering employees customers.
Speaker Change: Supplier and local fishers, there first off to more of them.
Speaker Change: Manufacturing floor, including the ops of.
Speaker Change: Automation system and FSP initial operation.
Speaker Change: During the third quarter, we also move into the new ACM Shanghai adequate orders that facility is also in the Shanghai High Tech <unk> Science Park and offer a great work environment for our engineering team.
Speaker Change: In the U S October one we completed the purchasing of our new Oregon facility, which include the 5200 square feet selenium.
Speaker Change: We plan to moving early next year, we plan to deliver several tours in 2025 provider either access to major customers for advanced tools evaluation.
Speaker Change: And the beauty is strong footprint in the U S, including our.
Speaker Change: Okay.
Speaker Change: And the growing service team and see this a great opportunity to participate in the market growth.
Speaker Change: The us semiconductor.
Speaker Change: I will now provide our outlook please turn to slide 10.
Speaker Change: We haven't reached our 2020 for revenue outlook to be in the range of $775 million to $745 million versus prior range, our $6 $95 million to $735 million.
Speaker Change: Valuation on the product on a different process steps and also we see other interest in the body and actually in Asia.
Speaker Change: So we'll engage with those customer and.
Speaker Change: Next year, we see that our Capex and.
Speaker Change: Kind of going on.
Speaker Change: And with their projections are there for and so we're really excited and engaged with us there.
Speaker Change: And a J.
Speaker Change: China really tried to penetrate.
Speaker Change: The pension product in our production line.
Speaker Change: And a lot of virtual wear off of the market and get a yield improve and also gather big assets EV at the same time, providing excellent during the particle removing performance. So we'll see that either.
Speaker Change: As said, our defense product and getting ready for the market.
Speaker Change: Okay.
Speaker Change: And then.
Speaker Change: The high temperature SPM solutions. It sounds like you have technical advantage there what are the specific.
Speaker Change: That you can come in to compete with the incumbent there is it throughput or.
Speaker Change: Less less more efficient any color there would be helpful.
Speaker Change: Yes, well actually let me put this way.
Speaker Change: Our SPM product I have to write these lines the high temperature SDM single wafer tool, which is the handle.
Speaker Change: And Yosemite degree higher Suffolk asset right.
Speaker Change: And then just two actually we did a breakthrough as I mentioned before.
Speaker Change: We can much control or chemical splash outside chamber. So therefore were however, better clean environment and.
Speaker Change: With our Canadian number with me as much time spending on their convenient clean.
Speaker Change: Clean the tumor itself.
Speaker Change: So that will give you all the time better and also give them the product.
Speaker Change: Particle performance are second only to be the Tahoe tool right as you're targeting lower and middle level.
Speaker Change: Temperature of SPN and this is has been our flagship tool and there.
Speaker Change: Buying batch in a single and the real pro formed breakthrough. This year is we have an excellent <unk> efficiency.
Speaker Change: <unk>.
Speaker Change: <unk> nano particle, adding about six six months only so thats.
Speaker Change: That would be equivalent to the single wafer process.
Speaker Change: <unk>.
Speaker Change: So with the continuing no.
Speaker Change: Is that improving in the filtering system and this tool it can be a further you will see into their removing one X nano particle which is really demand ramp up all the violence node memory and DRAM. So and also logic. So we see that either both tool and work in the market in China also.
Speaker Change: Outside China.
Speaker Change: As everybody so big asset process.
Speaker Change: They are actually.
Speaker Change: Having about there.
Speaker Change: With treatment also handle there.
Speaker Change: Rather the material in the fab environment, So thats really what giving good there.
Speaker Change: Performance and also the environment.
Speaker Change: I quoted protection saving for the.
Speaker Change: Other fab in the world. So we see that the bigger opportunity for our Tahoe tool.
Dave: Okay. Thank you Dave.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Edison Lee of Jefferies. Your line is now open.
Speaker Change: Hi, David Good luck, congrats on to take themselves infrequently.
Speaker Change: I just have a quick question.
Speaker Change: You did mentioned that advanced packaging market in China is slowing down and.
Speaker Change: Okay.
Speaker Change: Maybe you can actually help us understand what would that be.
Speaker Change: Indicator for front end spending in China.
Speaker Change: What are we should be worried about front end spending in China as a result of the slowdown in advanced packaging in China.
Speaker Change: So how should we think about it.
Speaker Change: Well I wanted to see and that is really looking at last year and also in the first half of this year.
Speaker Change: It's kind of a slow however, we see that a gradual pick up in Q3 Q4, and we do have other order coming so.
Speaker Change: If you look at the other.
Speaker Change: Market.
Speaker Change: The Venus that pick up I think from now on the graduate pick up on there.
Speaker Change: This.
Speaker Change: Packaging.
Speaker Change: We have been spending so we are positive.
Speaker Change: As you would say Q4 in the next year.
Speaker Change: Until the pathway our revenue is really presented last.
Speaker Change: For months and last year are there fewer with shipping.
Speaker Change: <unk>.
Speaker Change: Our view about this advanced packaging status.
Speaker Change: Do you think that the Chinese are packaging companies.
Speaker Change: Inc.
Speaker Change: Something different versus the past.
Speaker Change: Moving into HBM or are they moving into that type of packaging that requires different equipment.
Speaker Change: What's happening there.
Speaker Change: Well I mean, obviously it does have quite different company right.
Speaker Change: The Southern company movie produced.
Speaker Change: High density packaging and obviously also we see the company moving the panel.
Speaker Change: It's a lot of both <unk> and whats.
Speaker Change: Advanced packaging.
Speaker Change: I call that technology and also there that profit development.
Speaker Change: Okay, that's great.
Speaker Change: David.
Speaker Change: Thanks Allison.
Speaker Change: As a reminder.
Speaker Change: To ask a question you will need to press star one on one.
Speaker Change: One moment please.
Speaker Change: Thank you seeing no more questions in the queue, Let me turn the call back to David Wang for closing remarks.
David Wang: 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 our upcoming investor relation events Gary Please.
Gary Dvorak: Thanks, David before we conclude I just wanted to give everyone. A quick reminder, on our upcoming investor conferences.
Gary Dvorak: Excuse me on November 19th we will present at Craig Hallum Capital 15th annual Alpha Select conference in New York on November 20th we will present at the Roth 13th Annual Technology Conference also in New York and on December four it will presented the UBS Global Technology Conference in Scottsdale, Arizona.
Gary Dvorak: Finally on December 17th will presented the 13th annual.
Gary Dvorak: New York City NYSE Summit in New York attended.