ACM Research (NASDAQ:ACMR) Q1 2026 Earnings Call

0:00 Good day, ladies and gentlemen. Thank you for standing by, and welcome to the ACM Research First Quarter twenty twenty six Earnings Conference Call. Currently, all participants are in listen only mode. Later, we'll conduct a question and answer session and instructions will follow at that time. As a reminder, we're recording today's call. If you have any objections, you may disconnect at this time. Now I'll turn the call over to Mr. Steven Pallejo, Managing Director of the Blue Shirt Group. Steven, please go ahead. Thank you. Good day, ladies and gentlemen. Thank you for standing by, and welcome to ACM Research's first quarter twenty twenty six earnings conference call. Currently, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, we are recording today's call.

0:51 If you have any objections, you may disconnect at this time. Oops, sorry, I'm repeating there. We released first quarter twenty twenty six results 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 Investors section of our website that we will reference during our prepared remarks. On the call with me today are our CEO, Doctor. David Wong 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. These forward looking statements represent ACM's current judgment for the future.

1:40 However, they are subject to risks and uncertainties that could cause actual results to differ materially. Those risks are described under Risk Factors and elsewhere in ACM's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward looking statements, which reflect ACM's opinions only as of the date of this call. ACM is not obliged to update you on any revisions to these forward looking statements. Certain financial results that we provide on this call will be on a non GAAP basis, which is on short term investments. For our GAAP results and reconciliation 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. Also, unless otherwise noted, the following figures refer to the first quarter of twenty twenty six and the comparisons are to the first quarter of twenty twenty five. So with that, I'm going now turn the call over to David Wang. David? Thanks, Stephen. Hello, everyone, and welcome to ACM's first quarter twenty twenty six earnings conference call.

2:40 We started the year with a solid Q1 report with revenue up 34% and a gross margin above the middle point of our long term target range. Revenue growth for the quarter was driven by the continuous trends in our ECP and advanced packaging business. With a global boom in AI, the market is demanding solution for enabling high speed, high density and low power consumption semiconductor devices manufacturing. Many have not yet been invented. It is clear that ACM focused on world class differentiated tool based on our own IP, a right strategy to win in global market. We are happy to see 2006 as a big year for new product.

3:28 Our investment in our proprietary R and D over the past five years, together with our fully functioning at Lingang is beginning to deliver significant benefit. For instance, we now have industrial leading offering across multiple product category that enable our global customer to effectively solving their evolving production challenges. As we progress through 2026, we expect to see an increased impact to our financials from new product. With regard to revenue, we anticipate incremental contribution from new product cycle from Tahoe, single wafer SPM and our vertical furnace product.

4:15 With regard to the shipment, we expect to increase shipment of our evaluation tool across a range of customer for our panel level horizontal plating, panel low pressure flask cleaning, high throughput track and PECVD tools. This quarter at Semicon China, we announced the ACM Planetary Family. This organized ACM tool portfolio into a product family, aligned with the key step in the semiconductor manufacturing process. This represents ACM's comprehensive world class multi product offering and the global reach of our company. We encourage you to view the video on our IR website. Now on to our business results.

5:03 Please turn to slide three. First quarter revenue was $231,000,000 upper 34%. The ECP category was a primary growing driver with revenue up more than three times year over year. Next, advanced packaging services spare parts category was growing 62%. This was a positive offset by cleaning which declined by 6%. We had a little contribution from new cleaning product in our Q1 twenty twenty six revenue, but as I will discuss later in the call, we have a significant ramp ahead for our single wafer SPM tools, which we delivered in Q1. Shipments for the first quarter were $241,000,000 up 54%.

5:54 The solid growth reflects strong customer demand and execution across our product portfolio. And it also includes contribution from the initial ramp of a single wafer SPM tools for reference shipment of the cleaning category grow by 32% for the quarter. I also know that about 15% of Q1 shipment were from catch up of a product that had been rescheduled from Q4 of last year. For 2026, we continue to expect the shipment growing to outpace revenue growth. Gross margin was 46.5% for the first quarter, above the middle point of our long term range, 42% to 48%.

6:42 We ended the first quarter with gross cash of $1,300,000,000 and net cash $924,000,000 This balance including $110,000,000 of gross proceeds from February sale of ACM Research, the capital providing a solid foundation for continued investment in our global operations. Now I will provide a detail on product. Please turn to Slide four. Revenue from single wafer cleaning Tahoe semi critical cleaning tool was down 6%. We continue to believe ACM's full product offering in cleaning is amongst the best in the world. As noted in the prior course, we believe cleaning technology becomes even more important as the industry is moving to more advanced production technology.

7:31 This trend plays directly to ACM's strengths, particularly in differentiated technology such as N2 bubbling, wet ash, single wafer SPM cleaning, Tahoe and others. I'm pleased to announce today that we expect significant production ramping of our single SPM production product line. With more than 15 to 20 units to be delivered by year end across our customer base. This is a result of many years of R and D by our team to develop a better solution than their current market leader. As I noted for the past several investor call, ACM's proprietary approach delivered excellent particle performance with a few than 15 particles at 15 nanometer.

8:20 Much better than market leader. While other players need a periodical DI water cleaning of the process chamber and the surrounding environment to remove residue generated by the hot SPM films, our system does not. Instead, our unique nozzle design providing a maintenance free solution as the chamber does not need to be taken offline for a periodical DI water cleaning. This not only improves tool uptime, but also enhance particle cleaning performance at a certain nano particle and beyond. Such fine particle removal is very critical for manufacture advanced node, GA logic devices and memory devices such as HPM.

9:08 It is no surprise that we're also seeing strong interest in our SPM tool from multiple global customers. SPM cleaning process tool has occupied 30% of the cleaning market. We believe our innovative hot SPM tool will take a significant market share in the next few years. Revenue for ECP, furnace and other technology grow 205%. Growing was driven by strong momentum in electroplating, supported by our leading position and expanding engagement across both front end and advanced packaging applications. In advanced packaging, our panel level, Colorado Premium solution is gaining additional traction in Asia and with global customers.

10:00 We began development of our panel level horizontal electroplating platform in 2022. We're ahead of the industrial. And deliver their first horizontal plating tool, five fifteen by five ten millimeter to a customer in the fourth quarter last year. Since then, we will continue to expand customer engagements and build a backlog, supporting both five fifteen by five ten millimeter and the three ten by three ten millimeter format panels. In April, we present a keynote at the Taiwan Electronic Equipment Forum on three d IC packaging technology, highlighting our role in enabling next generation AI driving packaging solutions.

10:47 We are confident that a successful customer evaluation will lead to volume production order for five fifty by five ten and additional evaluation of three ten by three ten later this year. For our vertical furnace business, tools are under evaluation at multiple customer sites. And we continue to expect a more meaningful revenue contribution later this year. We continue to see solid demand across key applications including LPCVD, oxidation, thermal ALD, PLD, and ultra high temperature support by our ongoing technology development. Revenue from advanced packaging, which excludes ECP but including service and spell, was up 62%.

11:37 This category including coders, developer, archer, stripper, scrubber, and vacuum clean flux tools, supporting a broad range of advanced packaging applications. We're also providing back end plating tool, including in the ECP category. Last quarter, we announced multiple advanced packaging equipment orders from leading global customers. In Q1, we shipped our panel level vacuum cleaning system to a leading global semiconductor packaging manufacturer outside Mainland China. We also completed shipment of multiple wafer level advanced packaging system to a leading offset customer in Singapore. ACM is uniquely positioned with a comprehensive set of wet process solution and plating technology to address key process step in advanced packaging.

12:34 Our integrated process capability provide valuable insight into next generation packaging challenges. As industry evolved towards 2.5D and three d integration, including TSV based architecture and heterogeneous integration, we believe our capability position us to supporting this increasingly complex requirements. We are making good progress with our new track and PECVD platforms. In April, we shipped our first PECVD silicon carbon nitride system to a semiconductor manufacturer, now in customer evaluation process. This is a big deal. We achieved a greater results in our media line and the tool is now being evaluated at the customer site.

13:25 The system incorporated ACM proprietary three station rotating architecture and One Station One IF technology enabling strong field uniformity, interface control, process stability and small footprint. We believe this position us for growth in back end of line and advanced packaging. For our high throughput 300 WPH track tool, we delivered our first tool evaluation last September and are progressing towards mass production qualification this year. And we continue to see growing interest from multiple customers for both standalone and their configuration integrated with the scanner. ACM culture is deeply rooted in differentiated R and D. We bring innovative solutions to the ever evolving challenges faced by major global semiconductor manufacturers.

14:25 Our current success is driven by good decision making and the future of success depends on today's innovation. We are committed to our strategy to providing a long term roadmap of world class tool across our growing product portfolio. We remain confident in our $4,000,000,000 revenue target and our longer term goal of becoming a top tier supplier of capital equipment to the global semiconductor industry. Next, let me provide an update on our production facility. First on Mingang, please turn to Slide 8. The first building is in volume production and we plan to open the second building later this year. Together, two facilities, we can support up to $3,000,000,000 in annual output.

15:18 On strategic note, I will now discuss our Lindau mini line, which went into full operation in the second half of last year. We now have a fully experiment R and D line in a class 100 environment, running our own tool and those of other vendors. This is a big deal. It is accelerating our own R and D effort and it will also speed up our joint R and D collaboration with our customer in Asia. We expect this to have a meaningful impact on our operating model. For new product, rather than delivering multiple tool for extended customer evaluation, we now process custom wafer on our new product in a lean GAN mini line to validate the tool to meet the customer specific requirement before shipment.

16:10 We expect this approach to shorten qualification cycle of a new product at the customer site, shorten the time of conversion to revenue, and enhance overall capital efficiency. We now already see early benefit across multiple products. I will give a few examples. Our first shipment of the PCVD silicon carbide nitride system completed customer specific validation at Lindau to shipment. We expect this to reduce on-site qualification time and enable faster ramp to production. We tested and improved our single wafer SPM pool for several months, hand in hand with our leading customer and confirm 50 nano particle performance.

17:01 This leads to volume orders from numerous different customers. We are confident that we can produce each customer specific production environment in our lab, resulting in shorter qualification and order a few quarters rather than more than a year. Next, our Oregon facility, please turn to slide nine. We continue to advance investment in Oregon. We remain on track for in house demo lab with multiple tools and the capability to produce US made tool in Oregon by year end of twenty twenty six. This is important for our global customer and we believe it will strengthen our position as a key local partner as they scale production.

17:50 Our global initiatives are beginning to come off. By the end of twenty twenty six, we expect to have more than 20 tools installed outside of our Mainland China market. This including about 10 customers in five countries. Although still early days for our global deployment, Our are growing and we remain confident that our investment in global sales and the service team will deliver good results. ACM Shanghai continues to play a critical role in our overall strategy, serving as a leading supplier to the semiconductor industry in Asia and as a key source of capital to support our global expansion. We completed a minority share sale last February, generating approximately 110,000,000 in gross proceeds and enable the strong U.

18:46 S. Account. We intend to deploy this capital to supporting our U. S. Expansion and a broader global growth initiatives. In April, ACM Shanghai announced a proposed eight year secondary listing in Hong Kong. Now turning to our outlook for the full year 2026. Please turn to slide 10. In middle of January, we introduced our 2026 revenue outlook in the range of 1,080,000,000 to $1,175,000,000 This implies 25% year over year growth at midpoint. We reiterate this outlook today. We are not expecting our annual shipment growth will outpace our revenue growth in 2026.

19:36 Now let me turn the call over to our CFO, Mark, who will review details of our first quarter results. Mark, please. Thank you, David, and good day, everyone. Please turn to Slide 11. Unless I note otherwise, I will refer to non GAAP financial measures, which exclude stock based compensation and unrealized gainloss on short term investments. Reconciliation of these non GAAP measures to comparable GAAP measures is included in our earnings release. Also, unless otherwise noted, the following figures refer to the first quarter of twenty twenty six and comparisons are with the first quarter of twenty twenty five. I will now provide the financial highlights. Revenue was $231,300,000 up 34.2%. Revenue for single wafer cleaning Tahoe and semi critical cleaning was $122,500,000 down 5.5% and it represented about 53 of sales for the quarter. As David noted, this included very little contribution from new products. We expect significant shipments of SPM to ramp through the year followed by revenue contribution in later quarters.

20:42 For the full year 2026, we do anticipate the mix in Cleaning will normalize towards the 65% level similar to the mix in 2025. Revenue for ECP front end packaging, furnace and other technologies was $84,200,000 up 204.9% and represented 36.4% of sales for the quarter. The majority was ECP front end and we had very little contribution from furnace. Revenue from Advanced Packaging excluding ECP Services and Spares was $24,500,000 up 62% and represented 10.6% of sales for the quarter. Total shipments were $240,700,000 up 53.6%. As David noted, this was driven by solid demand and good execution and also cleaning shipments grew by 32%.

21:33 Approximately 15% of the shipments were catch up from tools that were originally scheduled for Q4 delivery. For 2026, we continue to expect shipment growth to outpace revenue growth. Gross margin was 46.5% versus 48.2%. Q1 gross margin was above the midpoint of our long term target model of 42% to 48 and a good recovery from the low 40% range in Q3 and Q4 of twenty twenty five. Favorable product mix and a slightly lower impact from the inventory provision led to the recovery. We maintain our 42% to 48% target range and note that product mix can cause fluctuations on a quarterly basis. Operating expenses were $65,800,000 up 38.5%. R and D was 15% of sales, sales and marketing was 8.3% of sales and G and A was 5.1 of sales.

22:25 For 2026, we plan for R and D in the 16% to 18%, sales and marketing in the 8% to 9% range and G and A in the 5% to 6% range. Operating income was $41,800,000 versus $35,600,000 Operating margin was 18.1% as compared to 20.7%. Long term, we look to grow our R and D spending in line with revenue, but to show operating leverage in SG and A. Income tax expense was $3,800,000 versus $2,200,000 For 2026, we expect our effective tax rate in the 8% to 10% range. Net income attributable to ACM Research was $24,300,000 versus $31,300,000 Net income was $24,300,000 versus $31,300,000 I just said that. Okay. Our non GAAP net income excluded $5,600,000 in stock based compensation expense for the first quarter. We anticipate SPC will increase in Q2 due to option grants related to ACM Shanghai stock that were granted in Q1.

23:28 Net income per diluted share was $0.34 versus $0.46 Now on to the balance sheet and cash flow items. Cash and cash equivalents, restricted cash and time deposits were 1,250,000,000 at the end of the first quarter twenty twenty six versus $1,130,000,000 at the end of 2025. Net cash, which excludes short term and long term debt was $924,200,000 at quarter end versus $844,500,000 at year end 2025. Total inventory was $738,000,000 versus $702,600,000 at year end 2025. Raw materials were $377,900,000 up $28,300,000 quarter over quarter. We made additional strategic purchases to support production plans and to mitigate potential supply chain risk. Work in process was $81,600,000 up $22,200,000 quarter over quarter. Finished goods inventory was 278,400,000 down $13,100,000 quarter over quarter. Finished goods inventory primarily consists of first tools under evaluation at our customer sites along with finished goods located at ACM's facilities.

24:36 Cash used by operations was 29,500,000 Capital expenditures were $22,000,000 For the full year 2026, we now expect to spend about $175,000,000 in capital expenditures. That includes our prepared remarks. Let's open the call for any questions that you may have. Operator, please go ahead. Thank you. At this time, we'll conduct a question and answer session as mentioned. As a reminder, you'll need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by while we compile our question. Your first question comes from the line Thomas Su with ROTH Capital. Your line is now open.

25:30 Hi, David. Hi, Mark. Can you talk about the cleaning segment and what drove the decline year over year in 1Q and then how it's going to ramp up? What caused that pause? It'd be helpful to understand that. Okay, thanks Suji. Actually, let's put it this way. And the 2025, we started to see our cleaning products has been go through their many applications including those mature nodes and all the advanced nodes. So the 2025, we're still facing some difficulty and also problem for those new applications. And with their twelve months, our problem solving with customer, especially most important Lingang production start using.

26:23 So those kind of problem actually we're mostly solving already. And that really show that is, I want to say last whole year progress also are difficult. That's why you can see impact our Q1 revenue. However, as I said, since we're solving most of the issue, even today our performance, some poor performance even outpace our leading supplier from global. So we see that they're really growing for our revenue. They can see that their first quarter, our shipment from their Canadian product is a 32% increase year over year. I'll give you another picture of probably backlog increase from this first six months versus last one year, first six months.

27:16 Well almost like a 50% increase too for the PO receiving. So that really show the momentum continually. And also in my script, specifically mentioned about this SPM process. It's really our proprietary technology really gaining customer interest, especially reach excellent result at the 50 nanoparticle size. That's really show our technology is better than the leading supplier. So we have a confidence it can take a significant market share in the SPM business. We're expecting 15 to 20 tool will deliver to the customer in Asia or in China too.

28:06 So anyway, that's I think the answer for you. Very helpful color. And then David, just kind of following through on that, with shipments expected to outpace revenue in 'twenty six, would we think that 2027 should be an above trend year? I mean, obviously not guiding, but just trying to understand if the implications of that. Well, I mean, '27 is still a little bit far away, right? But I want to see that our, let me put this way, 2026 we're a lot of share, I mean appeal or the customer interest for our cleaning tool, obviously cover plating tool, right? Cover plating can see the growth a lot. And also we see the interest, people were interested in furnace and the PCVD and the track system. So I want to see that in 2027 we see our new product including horizontal copper plating for panel two. We'll get into the revenue and the shipment picture in 2027.

29:04 So as I mentioned in a couple of our earnings calls, with our new product sort of playing into product line, we see a lot of bigger growth in the next few years. And we will supporting ACM's multi product strategy and continue to grow our long term revenue. Thanks David. That helps. I'll it on. Thanks Suji. Thank you. Next question, operator, please. Yes. Thank you. Your next question comes from the line of Dennis Pitatchen with Needham and Company. Your line is now open. Much appreciated. Just one question from us today.

29:53 So it looks like the ECP, the Front End Packaging, Furnace and Other Technologies segment has been seeing pretty sustained strength, up very significantly both year over year and quarter over quarter. Can you tell us more about what's doing well in that segment? What kind of customers are adopting? Which tools? Just some more color would be great. Thank you. Yeah, I want to see that pleating business has been growing a lot, right? Obviously, front end growing and also can see HPM is also driving. And obviously advanced packaging for all the 2.5D application was growing and driving too. So that's really driving factor for their copper plating and also our advanced packaging wet process tool, including coater developer, wet etcher, PR stripper, and cleaning.

30:47 I much appreciate it. Thank you. Thank you. Great. Thanks, Dennis. Yeah. Okay. Thank you. Seeing no more questions in the queue, let me turn the call back to Stephen Pallejo for closing remarks. Great. Thank you. Before we conclude, I just want to give everyone a quick reminder on our upcoming investor conferences. On June 17, we will present at the sixteenth Annual ROTH London Conference at the 4 Seasons Park Lane in London. 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. This concludes the call, and you may now disconnect. Take care.