ACM Research (Shanghai), Inc. (688082) Earnings Call Transcript

Good day, ladies and gentlemen, thank you for standing by. Welcome to the ACM Research Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now I will turn the call over to Mr. Steven Pelayo, Managing Director of the Blueshirt Group. Steven, please go ahead.

Good day, everyone. Thank you for joining us to discuss second quarter 2026 results which we released before the U.S. market opening today. The release is available on our website as well as from Newswire services. There is 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, Dr. David Wang; our CFO, Mark McKechnie; and Lisa Feng, our CFO of our operating subsidiary, ACM Shanghai. 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. 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 excludes stock-based compensation and unrealized gains and losses on short-term investments. For our GAAP results and reconciliations between GAAP and non-GAAP amounts, you should refer to our earnings release, which is posted on the IR section of our website and to Slide 32. Also, unless otherwise noted, the following figures refer to second quarter 2026 and comparisons are with the second quarter of 2025. So with that, I will now turn the call over to David Wang. Dave?

Thanks, Steven. Hello, everyone, and welcome to ACM Second Quarter 2026 Earnings Conference Call. The June quarter marked another period of strong execution for ACM research. Revenue and shipment increased 36% year-over-year. Revenue growth was led by our ECP and Advanced Packaging Product category, both of which increased more than 150% year-over-year. This strong performance reflects the progress we are making in transforming ACM into a broader multiproduct semiconductor equipment company. In June of this year, third-party research Frost & Sullivan published a report called the Global and China semiconductor equipment market research. They now estimate the global semiconductor equipment market exceeded $140 billion in 2025 and will grow to more than $200 billion by 2029. We also estimate that Mainland China market exceeds $50 billion in 2025 and will grow to more than $80 billion in 2029. To fund our global operations, we have recently strengthened our balance sheet. ACM now has more than $1 billion of net cash globally. This includes approximately USD 300 million following our USD 150 million reduced direct offering completed this past May. This financial strength provides a solid foundation to support our mission to become a key supplier of world-class capital equipment to the top major product of semiconductors. We believe AI is driving one of the most significant technology transition. The semiconductor industry has experienced in many years. As chip complexity and chip size continue to increase traditional wafer level packaging approaching are reaching practical limit, creating demand for entire new manufacturing technology across advanced packaging. ACM predicted shift from wafer-level to panel-level packaging more than 5 years ago and began investing early in horizontal panel-level plating and other panel-level wet process technology. We believe the market is now coming to us and has begun to validate those investments. Today, I'm pleased to announce that we have received order from 2 advanced packaging customers for our panel-level horizontal plating tool, addressing both 510?515 millimeter and 310?310 millimeter panel size. One is a production order from existing customers in Mainland China and the second one is the evaluation system for a new customer in Asia. We believe ACM will be among the first company to deliver horizontal panel-level plating system to multiple customers across multiple regions. Our proprietary horizontal plating architecture is a key differentiator delivering strong superior plating uniformity while addressing the demand process requirement of next-generation AI packaging. This order are important milestone for what we believe could become a significant long-term growth opportunity. I'm pleased to report today that our order book has been quite strong. For the first half of 2026, orders increased 100% -- 105% year-over-year. This is a mix across all product category with a heavier emphasis on some of our new products. As with the prior years, ACM Shanghai plans to release backlog figure as of September 30, in early October. Thanks to good execution by our operations team. We continue to expect a shipment across each of our category to grow faster than revenue. We remain confident in our growth target for 2026 and beyond. For 2026, we see a healthy backdrop for China WFE as our customers continue to scale their production capacity. We expect an actual boost for our business from a few product cycle, including our SPM and further to enable us to outgrow the China WFE. Beyond this year, we estimate that our newer platform, including Track, PECVD, and horizontal panel-level plating will proceed for evaluating phase into a commercialization phase, resulting in our production orders and drive our growth for years to come. In summary, we see 2026 as a big year for new product and another year of solid growth for ACM. Now on to our business results. Please turn to Slide 3. Revenue for the second quarter was $293 million, up 36%. Shipments for the second quarter was $282 million, up 36%. Gross margin was 46% and operating profit margin was about 19%. And we ended the quarter with gross cash of $1.4 billion and a net cash of $1.0 billion. Now I will provide detail on product. Please turn to Slide 4. Revenue from single-wafer cleaning, Tahoe and semi-critical cleaning tool was $133 million, down 14% and represent 45% of revenue. We believe ACM has built industrial broader cleaning product portfolio. Our product in this category, including SAPS, TEBO, Tahoe, Batch Clean, Solvent Clean, TEBO Clean, Scrubber, and Wet Etcher, and our proprietary single-wafer hot SPM technology. In May, we present our proprietary hot SPM clean technology in 2026 surface preparation and cleaning conference. This system demonstrates fill them 15 particles performance at a 15 nano particle size. Our proprietary nozzle design prevents acid mist and the chemical splashing outside chamber during the hot SPM process. And this, therefore, does not require periodical DI water chamber outside cleaning. For customers, this means less maintenance, better uptime and a more stable particle performance. We believe this represents the best performance in the industry. Our SPM platform is well suited for their advanced logic and memory, where cleaning requirements are becoming more demanding. Today, we also announced new capability for Ultra C Tahoe, expanding it into a broader wet process platform. Tahoe is built on our patented hybrid architecture that combines batch SPM process and a single-wafer cleaning. We have added a wet etching and monitor wafer reclaim application to the Tahoe platform. This integrates multiple process that had previously required a separate stand-alone tool into one Tahoe platform. The expanded platform has been adopted by multiple leading semiconductor manufacturers. ACM will continue to drive world-class process performance with a focus on ESG benefit to helping make advanced semiconductor manufacturer, more efficient and more stable, sustainable. We have shipped a handful of single-wafer SPM tool in the first half of this year. And we are on track to ship more than in the second half of this year for more than 20 by end of this year. As a reminder, we estimate that SPM represent about 1/3 of the total cleaning market. We have had very little revenue today for the SPM tool. And with this major product cycle, we expect our overall cleaning revenue to rebound as our customers qualify the first tool, and we grow our repeated shipment. Revenue from ECP, furnace, and other technology grew 168% and represent 44% of the revenue mix. Growth was driven by momentum on both from and back-end plating tool. In logic device, we have benefited from larger die size and a steady increase from higher interconnector layer counts. In memory device, we have benefit as HBM packaging demands higher level of DRAM stacking and there -- and thus more than -- more copper process steps. During the quarter, we shipped our 2,000th electroplating chamber. This follows our 500th chamber shipment in 2022 and our 1,500th chamber shipment in 2025. This shows how quickly our installed base has grown and how broadly customers are adopting our technology in volume production. We had a larger contribution from furnace in the quarter, but it's still just a small part of our overall revenue mix. We continue to improve the technology breakthrough across key applications, including LPCVD, oxidation, thermal ALD, PLD and ultra-high temperature anneal. Revenue from advanced packaging, which excludes ECP, but including service and parts was up 153%. This including coaters, developer, etcher, sweeper, scrubber and the vacuum cleaning tool, supporting a broader range of our advanced packaging applications. We are particularly pleased with our global progress here with active deployment in Singapore and North America across a range of these tools. We are making good progress with our new Track and PECVD platform. We remain confident that we have the right approach for our PECVD and Track platform, and we have made a significant progress in 2026. Our proprietary 1-chamber 3 tracks architecture for PECVD performed well in our Lingang Mini Lab early this year. We shipped the secondary tool to our new customer in Q1, and we anticipate this qualification by year-end. The story is similar to our Track platform. Indeed, our high-throughput KIF Track tool is progressing through customer evaluation, and we anticipate production qualification by year-end. We see strong interest in both stand-alone tools and configure to integrate with the scanners. For both PECVD and Track, we are hard at work with the development efforts with several key customers. We are optimistic that our tool performance can meet or exceed our customer requirements and result in production order in the near future. Please turn to Slide 5. The quarter, we have updated our market assumption with the latest WFE data from the report 1, report I mentioned earlier. This resulted in a $1 billion increase to ACM, the global SAM of about $22 billion. Please turn to Slide 6. There are no changing to our long-term revenue target of $4 billion. This Is still based on market share assumption for each of our product category, which gets us to about $2.5 billion from Mainland China and $1.5 billion from the global market. We adjusted some of our assumption based on China WFE now and about $50 billion. We continue to assuming robust WFE environment over the next several years for the global market. The magnitude and timing of our growth will be impacted by the overall spending trajectory of our customer and our market share gains. Next, let me provide an update on our production facility. First on Lingang, we turn to Slide 8. The first building is in volume production, and we plan to open the second building later this year. Together, the 2 facility can support up to $3 billion in annual output. With our strong order book, we are fortunately to be ready to scale the second facility. Next, our Oregon facility, please turn to Slide 9. In Oregon, we remain on track for U.S.-based demo center with a multiple tool in world-class cleaning room environment starting later this year. This is important for our global customer, and we believe it will help us to secure production orders. Our global business is beginning to scale. As we said last quarter, we expect to have more than 20 tools installed at customer sites outside Mainland China by the end of 2026. This included about 10 customers in 5 countries. It is clear that leading global chip makers can benefit from our innovative product. Although it is still early days for our global deployment our engagements are growing, and we are confident that our global sales and the service team will deliver good results. Now I will providing our outlook for full year 2026. Please turn to Slide 10. Based on our first half performance and improved visibility, we have raised the midpoint of our full year revenue guidance. We now expect full year 2026 revenue of $1.125 billion to $1.175 billion versus the prior range of $1.08 billion to $1.175 billion. This new range implies 25% to 30% year-over-year growth. We also expect shipment growing growth to outpace revenue growth in 2026. Now let me turn the call over to our CFO, Mark, who will review details of our second quarter results.

Thank you, David, and good day, everyone. Please turn to Slide 11. Unless I note otherwise, I will refer to non-GAAP financial measures, which excludes stock-based compensation, unrealized gain loss 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 second quarter of 2026 and comparisons are with the second quarter of 2025. I'll now provide financial highlights. Revenue was $292.9 million, up 36%. Revenue for single-wafer cleaning, Tahoe and semi-critical cleaning was $133.0 million, down 14.2% and represented 45.4% of sales. As David noted this included very little contribution from some of our newer products. As normal, SPM will be reflected first in our shipments, followed by revenue contribution in later quarters. Revenue for ECP front end and packaging, furnace and other technologies was $128.5 million, up 167.7% and represented 43.9% of sales. Revenue for advanced packaging, excluding ECP, services and spares was $31.4 million, up 153.3% and represented 10.7% of sales. We saw a good improvement in our customer concentration. During the first half of 2026, our 10% customer mix has improved to just 1 customer at 12.7% of our revenue mix. This compares to three 10% customers representing 49.9% of our mix for the first half of 2025. While this can vary by period, we consider the reduced concentration is positive as it represents a broadening of our customer base. Total shipments were $281.5 million, up 36.4%. 2026, we expect shipment growth to outpace revenue growth. Gross margin was 46.0% versus 48.7%. Gross margin was above the midpoint of our long-term target model, we maintain our 42% to 48% long-term target range and product mix can cause fluctuations on a quarterly basis. Operating expenses were $78.5 million, up 23.9%. R&D was 13.9% of sales. Sales and marketing was 7.7% and G&A was 5.2%. For 2026, we plan for R&D in the 16% to 18% range, sales and marketing in the 8% range and G&A in the 5% to 6% range. Operating income was $56.3 million versus $41.5 million. Operating margin was 19.2% as compared to 19.3%. Income tax expense was $13.5 million versus $1.9 million. For 2026, we expect our effective tax range in the 10% to 12% range. Net income attributable to ACM Research was $44.5 million versus $37.3 million. Non-GAAP net income excluded $6.6 million in stock-based compensation expense and the $69.6 million of unrealized gains on short-term investments and its effect on non-controlling interest. Net income per diluted share was $0.61 versus $0.55. Now on to the balance sheet and cash flow items. Cash, cash equivalents, restricted cash and time deposits were $1.36 billion at the end of the second quarter. Net cash, which excludes short-term and long-term debt was $1.0 billion. This includes about $300 million of net cash on our U.S. balance sheet. Total inventory net was $783.1 million. This consisted of raw materials net at $406.1 million, work in progress net at $89.0 million, finished goods inventory net at $287.9 million, which primarily consists of first tools under evaluation at our customer sites along with finished goods located at ACM's facilities. Cash used by operations was $6.4 million and capital expenditures were $65.4 million. For the full year 2026, we continue to expect capital expenditures of about $175 million. That concludes our prepared remarks. Now let's open the call for any questions that you may have. Operator, please go ahead.

[Operator Instructions] Our first question coming from the line of Suji Desilva with ROTH Capital.

David, Mark, Lisa, congratulations on the progress here, a great diversification going on. So it's really good to see. You got it. Yes. So David, I mean the global tools shipped to 200 is a great number. What geographies are you seeing the larger shipments today in? And maybe what geographies do you expect the best growth opportunity near term and as you scale out beyond China?

Yes. Actually, we see there, especially, I want to say first half of this year, we have almost like close to dozen tools go to Singapore, right? One of their packaging house there. Also have a tool and running one of their foundry in Singapore too. So we do see Singapore as an opportunity for front-end tool and also packaging tool there. Of course, we do have a customer continue in the U.S. And as I mentioned, we're going to finish the building of our demo lab in Oregon. With that demo lab started using, we can attract more of interest and also attention into our differentiated technology. So this way, we can provide more of a demo capability for customers in a global.

Great. And then my second question is given that you now have a significant amount of cash in the U.S. $300 million. Maybe for David or perhaps for Mark, what are the some of the planned use of those proceeds? Is it like expanding capacity, which regions and perhaps even inorganic activity? Any color would be helpful there.

Yes. Obviously, with this cash preparation, it show our determination, also our confidence, right, expanding the sales activity outside Mainland China. As I mentioned, our long-term goal is still $1.5 billion for the revenue outside China. That's exactly for that goal, we prepare our funding and also our activity. So those funding basically is supporting our activity definitely U.S. and also Taiwan and Singapore, Asia, also the Europe. It's bigger opportunity. We see a lot of demand come out for those -- especially for our differential technology, cleaning, plating and also where R&D for the even new PCB and the furnace. So it's really exciting. As I mentioned, AI really driving a lot of new demand for the innovation technology. So we believe whatever developer in Shanghai can be really spread out to benefit for all the customer globally, right? It's our goal here.

Okay. That's very helpful. And then my last question. I know you guys are diversifying your customer base and you have 110% customer focusing on global, but I'm curious in China, how levered are you to what's going on with CXMT in the DRAM market? Understanding AI is a plating play for you in other areas where you're very strong, but the DRAM effort there is growing very strongly. I'm curious how much leverage you have to that opportunity.

Well, I really cannot comment too much detail with each customer, right? But looking at overall, you look at the Frost & Sullivan their report, right, showed a very strong demand and WFE market growth in China, right? First of all, I want to say, China is a bigger market, right, for the orders application, AI, including. So it's a huge market there, and therefore, they can support a lot of cheap manufacturer here. In the same way, they demand a lot of WFE equipment, right? So that's what we see opportunity here. And with the ACM, I say we have a real multiple products in the time line, especially this year, we call our in 2026 as a big year for product -- new product come out of the market. And all our PECVD furnace and Track system we started a development from 2000 or 2001 or 2019. In those time lines, we are really focused on their technology, focus on differentiation. So through the 4-, 5-year R&D team hard work, we've got some real exciting result. And some of them, obviously, very approaching to the top-tier performance and something we see better than top tier performance, right? So that's really our confidence. We can -- with this new product come out we can further sustaining or increase our high growth rate. And for our revenue in the market in China, of course, those new products after qualify in the China market would also eventually will sell to the global market. So it's a lot of exciting for next few years. So our revenue where we not only come from cleaning and copper plating anymore, new product will join our revenue growth. So this will be a very exciting year for the next few years.

That's very helpful color, David. And congratulations to you and the team on the strong execution here.

Our next question in queue coming from the line of Charles Shi with Needham & Company.

Maybe the first one, I know it's -- you don't really guide the quarter, but can you kind of walk us through how the Q3, Q4 is shaking up? You have probably a very big beat in Q1 and then now in Q2. And I think if I look at the consensus estimates for Q3, Q4, those numbers probably need to come down a little bit. So wondering if the revenue timing or shipment timing has some change over the course of the last 90 days? And maybe I have a follow-up on the P&L-related items.

Yes, as I mentioned in our script, right, we do have -- the first half year, our PO receiving and there has been increased 100%, more than 100%, right? It's real indications have real demand and also a large backlog. So -- and some of those tools, obviously, we try to deliver Q3, Q4, and some of the tools probably we're waiting for probably deliver later. So now we really try to increase our capacity and obviously, now the components has been, I want to say, everybody demand for components, right? So there's a little bit constrained for supply there. So we're kind of looking at Q3, Q4 revenue. I think really how we execution our order manufacturing and also how we qualify, ship the deferred revenue or the tool. So I want to say we're still very positive about our projection for whole year, right? That's why we increased our low site. And now we're expecting our whole year revenue 25% to 30% range. I think we're pretty confident for this forecast.

Maybe another question for Mark. Mark, I noticed that the range for SG&A as a percent of revenue kind of revised down a little bit, compared with the last quarter. So I guess -- I mean, based on your midpoint of your guidance, your overall OpEx may actually come in a little bit lighter than you previously expected. I'm wondering what is the reason for the slight OpEx cut for this year? Because I if I recall correctly, one of the reasons you raised the OpEx range, I think, at the beginning of the year was related to the build-out of the R&D lab, R&D center in Lingang and wondering the OpEx savings relative to what you previously thought. Is it related to some of the timing of that R&D center? And any color would be great.

Yes, Charles, there's not a lot to read into that. I mean R&D, we're looking at 16% to 18% G&A. I said 5% to 6% in sales and marketing around 8%. So it's really just tighten it up by the estimates now that we're halfway through the year, but not a meaningful change from where we were at the beginning of the year.

Our next question coming from the line of Jimmy Huang with JPMorgan.

David, Lisa and Mark, congrats for the results. Can you hear me?

Yes, Jimmy. We can hear you.

So obviously, China's advanced packaging capacity build is robust and structural. You also have a solid product portfolio for WLP and PLP. Do we have any guidance or expectations for advanced packaging equipment shipment growth rate for this year and next year? Yes.

Okay. Well, we do not put a number, right, for the shipment of this year. But definitely, we also -- because of a strong, I want to say the backlog, and our shipment and definitely will grow -- outgrow our revenue, right? So it's very -- will be a very strong shipment this year. Again, as I mentioned, also were kind of a short -- we see the shortage in all industry for some components. It used to be you can buy 4 months, sometimes you have to get probably longer deliver. Anyway, we're try to managing those supply chain and make sure those components coming on time. That's maybe the one thing I want to say, might be impact our whole year shipment. But I still feel this year shipment is still pretty good.

Yes, I see. So do you have any like order intake guidance, order intake expectation for your advanced packaging equipment for this year? And another question is that for OSA every 10,000 wafer capacity build for 2.5D wafer-level packaging, what's ACMR content value based on your product offerings at this moment? I think some like equipment companies, they could have this kind of sharing for investors to understand your progress. Yes.

Yes. I don't quite understand the -- yes, maybe ask that again.

Can you say your question again? I'm not going to lost, can you repeat again?

Yes, sure. I mean -- I mean, OSA for the wafer capacity -- I mean, for the advanced packaging capacity bill such as 2.5D. I mean, on a every 10,000 capacity build what's the potential contribution to ACMR based on your product offering? Do we have any sharing on that?

Yes. And he's just looking at kind of our -- the intensity of -- when our customers spend on 10,000 wafers per month, how much will that drive our equipment sales? I don't think we're really -- yes, go ahead.

I couldn't say there -- depending on which line you build, right? Maybe let's put this way, the cleaning market, right? You can see that -- I want to say the -- cover SAM -- cleaning market today, probably in the whole fab spending occupy 5% to 7%, depends on advanced lab or in a mature lab, right, a fab. But you're looking really for the future, I want to say, advanced lab fab going on, coning become more and more important. And some people even projecting continue to -- continued market growth. It might be even come to 10% eventually. Because cleaning becomes more and more difficult and more of a material loss control, particle size, get more smaller. So also the drying method become maybe from the IPA to their supercritical CO2 dry. So anyway, I see that market grow, number one. Second one is copper plating. It's clearly actually 4, 5 years ago, we set a copper plating to be the $1.5 billion. That time, nobody will believe it, right? Now it's almost $1.5 billion already. With all the future backside of the power and HBM in layer of their DRAM stacking going on. So there's a lot of planting tool demand come out, right? And more important, this panel market also demand a lot of plating tool too. So ACM is really pioneer in the panel-level electroplating right? So this is probably, I want to say, this is the first time ACM really stand in the top. And for the horizontal plating technology and market, I want to say, offering. So that's really gives us a bigger growth potential for this existing market. And further than that is the furnace and PECVD, Track, we see also a big potential there too. So that's why I want to say ACM is a real good exciting period, and we're expecting continued growth for cleaning and copper plating and also with our new product, furnace, PECVD Track come out will further reinforce our revenue growth, right? So that's why I said in the next few years, really very exciting year for our growth.

Yes. Thank you, Dr. Wang. So I think for China, I think they are building a lot of CoWoS like 2.5D manufacturing capacity. As far as I know, they are probably use a lot of TSMC baseline tool vendors, including wet processing tools and other stuff. Are we trying to get more market shares, more qualifications here? And how is our progress in China like CoWoS like 2.5D capacity build?

Yes. I mean, if you look at our actually plating growth, right, 156% and also our packaging tool growth also, right? It's really should indication a lot of new demand for 3D packaging, right? And the 3D packaging become more and more important for all the devices, right? So we see that growth potential here. ACM well positioned for that with our cleaning and with our coater developer with orders the PR steeper, and also a couple of lari? Right? It's really good, I want to say, growth for the 2.5D or 3D packaging. Also, I want to say panel also go to, right? Panel-level packaging is another big one. So it's very exciting for -- I see, the 3D packaging going up, which is a good for product.

Yes. I think it's quite exciting that we just announced that we had the third PLP/ECP tool evaluation system shipped to a customer in Asia. And regarding the progress, when could evaluation results come out any probability that we could receive the first purchase order from these customers in the next maybe few quarters or the next 6 to 12 months?