Q4 2024 ACM Research Inc Earnings Call
GARY DVORCHAK GARY DVORCHAK
Speaker Change: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the ACM Research Fiscal Fourth Quarter and Fiscal Year 2024 Earnings Conference Call.
Currently all participants on a listen-only mode.
Speaker Change: Later we will conduct a question and answer session. Instructions will follow that time.
As a reminder, we are recording today's call.
Speaker Change: If you have any objections, you may disconnect at this time.
Steven Pelayo: Now I will now turn the call to Mr. Steven Pelayo.
Managing Director of the Blue Shirt Club.
Group. Steven, please go ahead.
Great, good day everyone. Thank you for joining us to discuss fourth quarter and fiscal year 2024 results, which we released before the US market opened today. The release is available on our website as well as from Newswire Services.
There's also a supplemental slide deck posted to the investor section of our website that we will reference during our prepared remarks.
Speaker Change: On the call with me today are our CEO, David Wong.
Speaker Change: Our CFO, Mark McKechnie, and Lisa Fang, our CFO of our operating subsidiary, ACM Shanghai. Before we continue, please turn to slide two. Let me remind you that remarks made during this call may include predictions, estimates, or other information that might be considered forward-looking.
Speaker Change: These forward-looking statements represent ECM's current judgment on the cost, sales, and electric risk of these third-party products, as well as the results of the materials.
Those risks are described under risk factors and elsewhere in ACM's filings with the Securities and Exchange Commission.
Steven Pelayo: 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.
Steven Pelayo: Certain of the financial results that we provide on this call will be on a non-GAAP basis, which excludes stock-based compensation and an unrealized gain and loss on short-term investment.
For our GAAP results and reconciliations between GAAP and non-GAAP amounts, you should refer to our earnings release.
Steven Pelayo: which is posted on the IR section of our website, and the slides 14 and 15. Also, unless otherwise noted, the following figures refer to the fourth quarter and full year of 2024, and comparisons are with the fourth quarter and full year of 2023.
Speaker Change: With that, I'll now turn the call over to David Wang. David?
David Wang: Thanks, Steven. Hello, everyone, and welcome to ACM Research, fourth quarter and fiscal year 2024, earnings conference call.
Speaker Change: On December 2nd, the U.S. Department of Commerce added 140 companies to its entity list. Two of our subsidiaries, ACM Shanghai and ACM Korea, and other entities under their structure were added to the entity list.
Speaker Change: As we have noted, we are one of many that were added and we are not notified of any specific wrongdoing.
Speaker Change: To be clear, ACM Research, Inc. is a U.S. company. We were founded in California in 1998. It is our subsidiary that were added to the ended list and now ACM Research, Inc.
Steven Pelayo: move on regarding the operation of ACM Shanghai in Mainland China. The new regulation will make it difficult, if not impossible, to ACM Shanghai to obtain components from the U.S.
Steven Pelayo: On that note, we have been working to localize our supply chain for some time. Events of the past few years, including the U.S. restriction of 2022, have made it even more important for ACM Shanghai to localize its supply chain.
Steven Pelayo: We think the impact to our production is manageable and we do not expect a significant interruption of our business.
Steven Pelayo: Regarding our global customers outside of mainland China, the new Department of Commerce rule may restrict the U.S. export to China.
Steven Pelayo: to ACM Shanghai and ACM Korea. They do not have a direct effect.
Steven Pelayo: U.S. company buying tools from us. We are therefore confident we can continue our effort to expand our business to global customers. Now on to our business results. Please turn to slide three.
Steven Pelayo: I'm pleased with our fourth quarter results, which capped with a strong year.
Steven Pelayo: For the first quarter of 2024, we delivered $223 million in revenue of 31%. For the 2024 fiscal year, we delivered $782 million in revenue of 40%.
Steven Pelayo: Gross Margin was 49.8% for the 4th quarter and 50.4% for the full year. Operating Profit increased 46% in the 4th quarter and 63% for the full year.
Steven Pelayo: We end the year with $259 million of net cash and time deposits.
compared to the $212 million at the end of 2023.
Steven Pelayo: for shipments. Shipments for their first quarter was $264 million, up 88%. Shipments for their full year were $973 million, up 63%.
Steven Pelayo: We believe this strong growth reflects ACM's expanding market presence and momentum gained from the new product cycle. Now I will discuss the key growth drivers, both for the market and specific to ACM research.
Turn to slide 4 for our product sample.
Steven Pelayo: We now estimate our product portfolio address 18 billion global market opportunities. Our current business is primarily driven by three major product groups, cleaning, plating, and advanced packaging.
Steven Pelayo: We anticipate continued growth in this category and look to incremental revenue contributions from our newer products, starting with Tahoe, SBM, Furnace, followed by Trac and PECBD.
Steven Pelayo: Third-party sources estimate that global semiconductor WFE grow by 4% in 2024 to $107 billion. Based on this global WFE, we now estimate that our product address
Steven Pelayo: serve the available market or send about 18 billion in total.
Steven Pelayo: For Mainland China, WFE industry analysts estimate the market growth by 12% to 38 billion.
Steven Pelayo: Our growth rate, 40% revenue and a 63% shipment, was much higher than China WFP growth.
Steven Pelayo: Our success starts with our customers. Please turn to slide 6.
Speaker Change: account for 10% or more of their revenue. The Hua Hong Group was our top customer at 15% of the sales. SMIC was second at 14% and 1MTC and PXW were third and fourth at 12%.
Steven Pelayo: Our growth was driven by a significant increase in Ultra-C-B backside cleaning tools and good growth from our SAF D-bolt tools. We also had a contribution from our Tahoe and Bevel-Etch tools.
Steven Pelayo: Look ahead, including we expect to see several significant product cycles including high-temperature SEM, Tahoe, and other tools from continued growth in the mainland China.
Steven Pelayo: We offer a comprehensive top-to-bottom cleaning portfolio. We estimate the global total available market or 10 for the cleaning is close to 6.5 billion and our product support more than 90% of all cleaning process steps.
Steven Pelayo: If we take $6.5 billion, 10, and the ACM $579 million in cleaning revenue for 2024, it puts ACM global market share of cleaning at about 9%.
Steven Pelayo: We believe that our completed portfolio of Canadian tools, including SAP, Debo, Tahoe, Semicritical, SDM, Bever Etcher, and others, put us in a strong position to take more share in China and the global market.
Steven Pelayo: Revenue from ECP, furnace, and other technology grew 46% in 2024, and we present 90% of the total revenue.
Steven Pelayo: We continue to see momentum for our plating tool for both front-end and back-end applications. We are excited about the initial response to our new horizontal plating tool for panel-level packaging.
Steven Pelayo: where we believe our unique approach is opening the door to more global customers.
Steven Pelayo: In Q4, we announced that our Thermal and Plasma Encounters ARD furnace tools have achieved process quantification at two mainland China semi-conductor customers. Chipmakers are increasingly
rely on their
Steven Pelayo: The production of the high-quality ultra-thin film with excellent staff coverage.
Steven Pelayo: Our phone's product cycle is also gaining traction with both memory and logic customers.
Steven Pelayo: Overall, we had 17 furnace customers in 2024, up from 9 at the end of 2023.
Steven Pelayo: We expect the revenue continual contribution from furnace to accelerator in 2025 versus small amount for 2024.
Steven Pelayo: Revenue from advanced packages which exclude ECP but include service and spare parts grew 3% in 2024 and represent 7% of revenue.
Steven Pelayo: Coder, Developer, Scrubber, DRSweeper, and WebEdger, and also Service and Spare Parts.
Steven Pelayo: We believe ACM is one of the only companies that offers a full set of web tools, cover plating tool, and polishing tool for advanced packaging.
Steven Pelayo: We had a new notable development for this category in 2024, including orders for the four wafer-level packing tools, which are on track to ship to USA in the first half of 2025.
Steven Pelayo: We announced three panel-level packaging tools, including vacuum flux cleaning tool, or Chiflad, horizontal plating tool, and bevel edge tool, which we see as essentially especially relevant for packaging of GPU and high bandwidth memory HDF.
Steven Pelayo: We are making good progress with our new track and GCPT platform. Both of these products come with the ACM innovative and differentiated platform.
Steven Pelayo: We have a solid list of ongoing demonstration and evaluation for both TRAC and GCVD. For TRAC, we plan to deliver our 30mm WPH inline CAF beta tool in the middle of 2025.
Next, let me provide an update on our production facility.
Steven Pelayo: site to play a key role in production development and efficiency.
Steven Pelayo: High-Volume Manufacturing. We expect most of our production to shift from our Chuan Sa Leased Facility to our company-owned Dinggang Facility at the end of Q2.
Steven Pelayo: We are proud of our 2,300 square meter class 100 clean room, which we expect will accelerate our product development speed and in-house demonstration capability.
Next, our Oregon facility. Please turn to slide 9.
Steven Pelayo: In October 2024, we complete the purchasing of a new 40,000-square-foot Oregon facility. It includes a 5,200-square-foot cleaning room.
Steven Pelayo: which will support advanced tool demonstration and R&D. The rest of this space will be for manufacturing for our global customers. We see this as a great opportunity to further expand our customer base in the U.S.
Speaker Change: Before I review our others, I want to share some thoughts regarding our ownership in ACM Shanghai Stock.
Steven Pelayo: We are very pleased by the success of the ACM Shanghai team, which has now become a key supplier to the Asia Semiconductor Industry.
Steven Pelayo: ACM Shanghai has also proven to be a greater source of capital to us in the form of dividends.
Steven Pelayo: In 2023 and 2024, as a major shareholder of ACM Shanghai, we received a dividend net uptax of $19.2 million and $28.5 million, respectively.
Steven Pelayo: and we expect the dividend to continue. In fact, ACM Shanghai has formally announced its intention to pay a dividend of 25 to 30% of net earnings over the next three years, subject to normal shareholder approval.
We are using dividends to accelerate our global business development.
Steven Pelayo: ACM Shanghai Stock, which is now traded at $6.3 billion market cap on the Shanghai Stock market.
Steven Pelayo: is also a key strategic asset for us and our global shareholders.
Steven Pelayo: Scared our business and expand our product portfolio ACM Shanghai is now in the process of another raising of up to 600 Million U.S. dollars to make the company to the next level.
Steven Pelayo: We're very comfortable that ACM can sell some share of ACM Shanghai stock and repatriate the cash back to US.
Steven Pelayo: We believe the combination of ACM's world-class technology and customer support and access to their substantial capital market make us unique positions to become a world-class global WFG supplier.
Steven Pelayo: Now I will provide our outlook for the full year 2025. Please turn to slide 10.
Steven Pelayo: In early January, we introduced our 2025 revenue outlook in a range of 850 to 950 million. This implies 15% of year-over-year growth at the middle point. We are re-irritating this outlook today.
Steven Pelayo: I'm pleased to announce today that we have adjusted our gross margin target upward. We now target a range of 42% to 48% versus the prior range of 40% to 45%.
Steven Pelayo: Our success has been built on innovation and differential technology, particularly in cleaning and electroplating, addressing evolving needs of semiconductor manufacturing.
Steven Pelayo: From this foundation, we have expanded our market reach and gained international traction. We're building...
Steven Pelayo: Strong partnership with a key industrial player. In China, ACM is recognized as a leader in advanced wafer cleaning and front-end electroplating solutions.
Steven Pelayo: and is preparing for a new product, Ramp in a Furnace, Track and PCB. Outside China, we are engaging with multiple customers with operations in the US and Europe.
Steven Pelayo: and Korea, Taiwan, and Singapore. The global interest is a broader base.
Steven Pelayo: Now, let me turn the call over to the CFO, Mark, who will reveal details of our 4th quarter
which excludes stock-based compensation unrealized gain lost on short-term investments.
Steven Pelayo: Also, unless otherwise noted, the following figures refer to the fourth quarter and full year of 2024.
Steven Pelayo: Comparisons are with the fourth quarter and full year of 2023.
Steven Pelayo: I'll now provide financial highlights. Revenue is $223.5 million for the fourth quarter, up 31.2%. For the full year 2024, revenue was $782.1 million.
Steven Pelayo: Up 40.2%. Revenue for single wafer cleaning, Tahoe, and semi-critical cleaning was $155.2 million, up 26.9%. For the full year 2024, this category grew by 43.3%.
Steven Pelayo: Revenue for ECP fronted packaging, furnace, and other technologies is $51.7 million, up 60.9%. For the full year 2024, this category grew by 46.2%. And revenue for advanced packaging, excluding ECP, services, and spares was $16.6 million, up 4.2%.
Steven Pelayo: Total shipments for $264 million for the fourth quarter versus $140 million in Q4 of 2023. For the full year 2024, shipments were $973 million, up 63.1%.
Steven Pelayo: Operating expenses were $58.4 million for the fourth quarter, up 34%.
Steven Pelayo: Revenue grew faster than OPEX for the year, demonstrating a solid operating leverage in our model. We invested in research and development to expand our product line, and we invested in sales and marketing to reach new customers around the world.
Steven Pelayo: For 2025, we plan for research and development in the 12-13% range, sales and marketing in the 7-8% range, and G&A in the 5-6% range. Operating income was $52.8 million for the fourth quarter, up 46.4%.
Steven Pelayo: Operating Margin increased to 23.6% from 21.2%. For the full year 2024, Operating Margin increased to 25.6% from 22.1%.
Steven Pelayo: Income tax expense was $17.3 million for the fourth quarter versus $8.1 million. For the full year 2024, income tax expense was $35 million versus $19.4 million in 2023.
Steven Pelayo: For 2025, we expect their effective tax rate in the 12 to 15 percent range.
Steven Pelayo: Net income attributable to ACM Research was $37.7 million for the fourth quarter versus $28.7 million. For the full year 2024, net income attributable to ACM Research was $152.2 million versus $107.4 million in 2023.
Steven Pelayo: for the fourth quarter and 49.6 million for the full year.
Steven Pelayo: For the full year 2025, we expect stock-based compensation to be in the $35 million range.
Steven Pelayo: Cash equivalents restricted cash and time deposits for 441.9 million at year-end versus 369 point
Speaker Change: Unknown Speaker 1.1 million at the end of the third quarter 2024. Net cash, which excludes the short-term and long-term debt, was $259.1 million versus $198.5 million at the end of the third quarter 2024.
Speaker Change: Total inventory at year-end was $598.0 million versus $628.7 million at the end of the third quarter of 2024. This included raw materials and work in process, $304.9 million, and finished goods inventory of $293.1 million.
Steven Pelayo: Finished goods inventory primarily consists of first tools under evaluation at our customer sites together with finished goods located at ACM's facilities.
Steven Pelayo: Cash flow from operations was $88 million for the fourth quarter and $152 million for the full year 2024.
Speaker Change: Capital expenditures are $12.3 million for the fourth quarter, $85.3 million for the full year 2024. For the full year 2025, we expect to spend about $65 to $75 million in capital expenditures.
Speaker Change: That does conclude our prepared remarks. Now let's open up the call for any questions that you may have. Operator, please open up the floor for questions.
Speaker Change: Ladies and gentlemen, to ask a question at this time, you will need to press star 1-1 on your telephone and wait for your name to be announced.
Operator: Now first question coming from the lineup, Chelsea with Needham and Company, your line is now open.
Hello.
Morning.
Speaker Change: Yeah, morning. The line cut off a little bit, just want to make sure it's my turn. So maybe the first question that you guys reiterated, the fiscal 25 revenue outlook, it's the same outlook you provided.
Steven Pelayo: In January, at the low end, 9% young year growth, at the high end, 21% young year growth.
Steven Pelayo: Can you provide a little bit of color, what goes into the assumptions to the low end versus the high end and what are the scenarios. I think the press release you did
Speaker Change: mentioned that various spending scenarios by your customers this year are baked into the range of the guidance. I want to get a little bit more color on that. Thanks.
Obviously, we can see there.
Probably just a moment, I can say about Q2, Q3.
Steven Pelayo: Unknown Attendee, Hui Wang, Gary Dvorchak, Steven Pelayo, Unknown Attendee, Hui Wang,
Steven Pelayo: Assumption there, I cannot elaborate too much detail, but anyway there's a range of reports there.
Steven Pelayo: So maybe the time goes to the Q2, we're looking for Q4, and that moment may be more clear in Q4 we can readjust to our revenue projection.
Steven Pelayo: So, you know, that's a typical process, you know, we did every year.
Steven Pelayo: Got it. Maybe a quick follow-up. Sounds like you're saying you have good visibility at least through the third quarter.
Steven Pelayo: this year. It's only like Q4, a little bit unclear at this point. Is that correct?
Steven Pelayo: Yeah, what you say is some Q3 we're still, you know, maybe add more, right? There's moments the early of the year, but definitely we see the PLQ3, but Q4 was still, you know, as I said, not clear, right? So that will be waiting to say maybe Q2 timeline.
Steven Pelayo: End of the Q2, we can see that more clearly in the Q4 timeline.
Steven Pelayo: Yeah, Charles, and that's that's pretty normal visibility at this time of the year, we go through our year and planning process and then come back early in the year and and kind of, you know, test that. And of course, we.
David Wang: We took a look at it before we reported here on the quarter, so it's pretty standard visibility going into the year. As David noted, it's based on the POs that we have in hand.
Steven Pelayo: It's based on also kind of the forecast of POs that we still would probably get as we move through the year And then the timing of some of the customer acceptances from first tools last year. Yeah
Speaker Change: Got it. The other question, I think, usually before Chinese New Year, there's a little bit of
Unknown Attendee, Hui Wang, Gary Dvorchak, Steven Pelayo
Unknown Attendee, Hui Wang, Gary Dvorchak, Steven Pelayo
would be the impact of expert control because
Unknown Speaker We did see.
Unknown Speaker
Speaker Change: Wow, I mean, this is a very broad question. You know, real customers and customers are different, right?
and some customer, you know, we still see that expansion.
Speaker Change: So, it's really hard to give you the, you know, general description, right? This moment, we're also working with the customer to figure out how much impact, you know, we're still on the process to assess and evaluation this kind of impact.
Speaker Change: Got it. So maybe the last question looks like the plating, furnace, product line. You have three segments, you know, reporting that particular segment.
Speaker Change: I think you just mentioned plating, you become a leading supplier.
in China and
Speaker Change: What do you what do you see the market share of a plating and especially in the front end and versus packaging?
Speaker Change: Can you give a little bit of color on that front end versus back end for plating and where the shear is?
Thank you.
Speaker Change: Yeah, I think our market share is about 30% by 30 to 35 and it's actually both in the front and the back end, right? It's almost like the same.
Speaker Change: So, we're still in the, you know, one third, 35, 30, 35% of the market share in China.
Got it. Thank you.
Okay, thank you, Charles. Thanks, Charles.
Speaker Change: Thank you. And as a reminder, if you'd like to ask a question, please press star 11 and wait for your name to be announced.
Speaker Change: Our next question, coming from the line of Mark Miller with the Benchmark Company, the line is now open.
Speaker Change: Oh, the advanced packaging. You're talking about the packaging, right? Yes.
Speaker Change: There are certain, you know, other, I want to say, you know,
Unknown Attendee, Hui Wang, Gary Dvorchak, Steven Pelayo
Speaker Change: and I think this year probably will be better than last year in terms of advanced packaging.
Speaker Change: Yeah, Mark, one thing I'd point out, it's a little tricky because some of our ECP group includes both the front end and the back end packaging, right? So.
Speaker Change: And then, you know, then our advanced packaging group is everything but the ECP. So, at some point, we can give some more detail when that becomes a bigger, you know, a bigger percentage of overall revenue. But at this point, it's hard to kind of see that our backend packaging group.
So that's another
Speaker Change: you know, new field or new part of the technology will work out.
Speaker Change: I was just wondering if you could give us some sort of estimate of how your sales breakdown related to, say, memory, logic, and electric vehicles. What percentage of your sales are related to each of those three areas?
Unknown Attendee, Hui Wang, Gary Dvorchak, Steven Pelayo
Speaker Change: I think that's right. Yeah, it's over 52% for the four customers.
Thank you.
Yep.
Speaker Change: Thank you. Again, if you have a question please press star 1 1.
Speaker Change: Okay, thank you, operator. Thank you all for participating on today's call and for your support. Before we close.
Steven is going to mention our upcoming investor.
Relation Events, Steven, please.
Speaker Change: Great. Thanks, David. Before we conclude, I just want to give everyone a quick reminder on our upcoming investor conferences. On March 17th, we will present at the 37th Annual Roth Conference in Dana Point, California. Attendance at the conference is by invitation only. For interested investors, please contact your respective sales representative to register and schedule one-on-one meetings with the management team.