ACMR earnings call analysis

NASDAQ:ACMR Q1 2026 Earnings Call Transcript Generated on 6/8/2026 Operator | Conference Operator: Good day, ladies and gentlemen. Thank you for standing by and welcome to the ACM Research first quarter 2026 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 Palayo, Managing Director of the Blue Shirt Group. Steven, please go ahead.

Steven Palayo | Managing Director, Blue Shirt Group

Thank you. Good day, ladies and gentlemen. Thank you for standing by, and welcome to ACM Research's first quarter 2026 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. If you have any objections, you may disconnect at this time. Oops, sorry, I'm repeating there. We released first quarter 2026 results before the U.S. 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. On the call with me today are our CEO, Dr. 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. 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 2026, and the comparisons are to the first quarter of 2025. So with that, I'm going to now turn the call over to David Wang. David?

Dr. David Wong | CEO, ACM Research

Thanks, Stephen. Hello, everyone, and welcome to ACM's first quarter 2026 earnings conference call. We started the year with a solid Q1 report with a revenue of 34% and a gross margin above the middle point of our long-term target range. Revenue growth for the quarter was driven by the continual strength in our ECP and advanced packaging business. With a global boom in AI, the market demands solutions for enabling high-speed, high-density, and low-power consumption semiconductor devices manufacturing. Many of these have not yet been invented. It is clear that ACM focuses on world-class differentiated tool based on our own IP is the right strategy to win in global market. We are happy to see 2026 as a big year for new product. Our investment in our proprietary R&D over the past five years, together with our fully functioning line at Lingong, is beginning to deliver significant benefit. For instance, we now have an 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 for our new product. With regard to revenue, we anticipate incremental contribution from new product cycle from Tahoe, single wafer SPM, and our vertical furnace product. With regard to the shipment, we expect to increase shipment of our evaluation tool across a range of customers 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 eight product families. aligned with the key steps 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 onto our business results. Please turn to slide three. First quarter revenue was $231 million, upwards 34%. The ECP category was the primary growing driver, with revenue up more than three times year over year. Next, advanced packaging services fail path category was growth 62%. This was a positive offset by cleaning, which declined by 6%. We had a little contribution from new cleaning product in our Q1 2026 revenue, but as I will discuss later in the call, we have a significant ramp ahead to our single wafer SPM tools, which we're delivering in Q1. Shipments for the first quarter were $241 million, upper 54%. The solid growth reflects strong customer demand and execution across our product portfolio. And it also includes contribution from the initial ramp of single wafer SPM tools. For reference, shipment of the cleaning category grew 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. Growth margin was 46.5% for the first quarter, above the middle point of our long-term range, 42 to 48%. We ended the first quarter with a gross cash of $1.3 billion and net cash $924 million. This balance including $110 million of gross proceeds from February sale of ACM Shanghai shares. The capital providing a solid foundation for continual 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 a prior course, we believe cleaning technology becomes even more important as the industry moving to more advanced production technology. This trend play directly to ACM's strengths, particularly in differentiated technology such as N2 bubbling, Single Wafer SPM Clinic, Tahoe, and others. I'm pleased to announce today that we expect a 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&D by our team to develop a better solution than their current market leaders. As noted for the past several investor calls, ACM proprietary approach delivered excellent particle performance with fewer than 15 particles at 15 nanometers, 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 improved tool uptime, but also enhanced particle cleaning performance at the 13 nanoparticle and beyond. Such fine particle removal is very critical for manufacturer-advanced node GAA logic devices and memory devices such as HPM. 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 horizontal plating solution is gaining additional traction in Asia and with global customers. We began development of our panel-level horizontal electroplating platform in 2022. well ahead of the industrial, and delivered the world's first horizontal plating tool, 515 by 510 millimeter, to a customer in the fourth quarter last year. Since then, we have continued to expand customer engagement and build a backlog, supporting both 515 by 510 millimeter and the 310 by 310 millimeter format panels. In April, we present a keynote at the Taiwan Electronic Equipment Forum on 3D IC Packaging Technology, highlighting our role in enabling next-generation AI-driving packaging solutions. We are confident that a successful customer evaluation will lead to volume production order for 515 by 510 and additional evaluation of 310 by 310 later this year. For 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 a solid advance across key applications, including LPCVD, oxidation, thermal ALD, P-ALD, and ultra-high temperature anneal, supported by our ongoing technology development. Revenue from advanced packaging, which is called ECP, but including service and spell, was up 62%. This category including coders, developer, etcher, stripper, scrubber, and vacuum cleaning flux tools, supporting a broad range of advanced packaging applications. We're also providing backend 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 a multiple wafer-level advanced packaging system to a leading offset customer in Singapore. ACM is unique. is uniquely positioned with a comprehensive set of wide-process solution and plating technology to address key process steps in advanced packaging. Our integrated process capability provides valuable insight into next-generation packaging challenges. As industry evolves towards 2.5D and 3D 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 PCVD platforms. In April, we ship our first PCVD 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 million line and the tool is now being evaluated at the customer side. The system incorporates ACM proprietary three-station rotating architecture and one-station, one RF technology, enabling strong film uniformity, interface control, process stability, and a small full printer. We believe this positions us for growth in back-end of line and advanced packaging. For high throughput, 300 WPH KF track tool. We deliver our first tool evaluation last September and are progressing toward mass production qualification this year. And we continue to see growing interest from multiple customer for both standalone and their configuration integrate with the scanner. ACM culture is deeply rooted in differentiated R&D. We bring innovative solution to the ever-evolving challenges. faced by major global semiconductor manufacturers. Our current success is driven by good decision-making and the future success depends on today's innovation. We are committed to our strategy to providing a long-term roadmap of a world-class tool across our growing product portfolio. We remain confident in our $4 billion 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 Ninggao, please turn to slide eight. The first building is in volume production, and we plan to open the second building later this year. Together, the two facilities, we can support up to $3 billion in annual output on strategic note i will now discuss our linda mini line which went into full operation in the second half of last year we now have a fully experiment r 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 d effort and it will also speed up our joint r 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 tools for extended customer evaluation, we now process custom wafer or new product in a link on mini line to validate the tool to meet the customer's specific requirement before shipment. We expect this approach to shorten qualification cycle of a new product at a 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 PECVD silicon carbon nitride system completes the customer-specific validation and link-down to shipment. expect this to reduce on-site quantification time and enable faster ramp to production. We tested and improved our single-wafer SPM tool for several months, hand-in-hand with our leading customer and confirmed 50-nano particle performance. 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, an order of few quarter, rather than more than a year. Next, our Oregon facility, present to slide nine. We continue to advance investment in Oregon. We remain on track for in-house demo lab with the multiple tools and the capability to produce US-made tool in Oregon by year end of 2026. This is important for our global customer, and we believe it will strengthen our position as a key local partner in Z-scale production. Our global initiatives are beginning to take off. By the end of 2026, we expect to have more than 20 tools installed outside of our mainland China market. This includes about 10 customers in five countries, although it's still an early day for our global deployment. are growing and we remain confident that our investment in global sales and 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 million in gross proceeds. And in April, this fund was transferred to our U.S. account. We intend to deploy this capital to support our U.S. expansion and broader global growth initiatives. In April, ACM Shanghai announced a proposed eight-year secondary listing in Hong Kong. Now let's look at our outlook for the full year 2026. Please turn to slide 10. In mid-January, we introduced our 2026 revenue outlook in the range of 1.08 to 1.175 billion. This implies 25% year-over-year growth at this point. We iterate this outlook today. We are expecting our annual shipment growth will outpace our revenue growth in 2026. Now let me turn the call over to our CFO, Mark, who will reveal details of our first quarter results. Mark, please.

Mark McKechnie | CFO, ACM Research

Thank you, David. 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 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 first quarter of 2026, and comparisons are with the first quarter of 2025. I will now provide the financial highlights. Revenue was $231.3 million, up 34.2%. Revenue for single-way for cleaning, Tahoe, and semi-critical cleaning was $122.5 million, 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. For the full year 2026, we do anticipate the mix and cleaning will normalize towards the 65% level, similar to the mix in 2025. Revenue for ECP front-end packaging, furnace, and other technologies was $84.2 million, 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 $24.5 million, up 62%, and represented 10.6% of sales for the quarter. Total shipments were $240.7 million, up 53.6%. As David noted, this was driven by solid demand and good execution, and also cleaning shipments grew by 32%. 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 2025. 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 $65.8 million, up 38.5%. R&D was 15% of sales, sales and marketing was 8.3% of sales, and G&A was 5.1% of sales. 2026, we planned for R&D in the 16% to 18%, sales and marketing in the 8% to 9% range, and G&A in the 5% to 6% range. Operating income was $41.8 million versus $35.6 million. Operating margin was 18.1% as compared to 20.7%. Long-term, we look to grow our R&D spending in line with revenue, but to show operating leverage in SG&A. Income tax expense was $3.8 million versus $2.2 million. For 2026, we expect our effective tax rate in the 8% to 10% range. Net income attributable to ACM Research was $24.3 million versus $31.3 million. Net income was $24.3 million versus $31.3 million. I just said that. Okay. Our non-GAAP net income excluded $5.6 million in stock-based compensation expense for the first quarter. We anticipate SBC will increase in Q2 due to option grants related to ACM Shanghai stock that were granted in Q1. Net income for the diluted share was $0.34 versus $0.46. Now onto the balance sheet and cash flow items. Cash and cash equivalents, restricted cash, and time deposits were $1.25 billion at the end of the first quarter of 2026 versus $1.13 billion at the end of 2025. Net cash, which includes short-term and long-term debt, was $924.2 million at quarter end versus $844.5 million at year end 2025. Total inventory was $738 million versus $702.6 million at year end 2025. Raw materials were $377.9 million, up $28.3 million quarter over quarter. We made additional strategic purchases to support production plans and to mitigate potential supply chain risk. Work in process was $81.6 million, up $22.2 million quarter over quarter. Finished goods inventory was $278.4 million, down $13.1 million 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. Cash used by operations was $29.5 million. Capital expenditures were $22 million. For the full year 2026, we now expect to spend about $175 million in capital expenditures. That includes our prepared remarks. Let's open the call for any questions that you may have. Operator, please go ahead.

Operator | Conference Operator

Thank you. At this time, we'll conduct the question and answer session, as mentioned. As a reminder, you'll need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile our question. Your first question comes to the line. With Roth Capital, your line is now open.

Suji | Analyst, Roth Capital

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 would be helpful to understand that.

Dr. David Wong | CEO, ACM Research

Okay, thanks, Suji. Actually, let's put it this way. In 2025, we started to see our cleaning product has been going through many applications, including those mature nodes and all the advanced nodes. So in 2025, we're facing some difficulty and also problem for those new applications. And with the 12 months, our problem solving with customer, especially most important in Lingang production started using. So those kind of problem actually were mostly solving already. And that really show that is, I want to say, last whole year progress also are difficult. That's what I can see impact our Q1 revenue. However, as I said, since we're solving most of the issue, even today, our performance, you know, some two performance, even out of pace of leading supplier in foreign global. So we see that they're really growing for our revenue. They can see that their first quarter, our revenue, I mean, our shipment from the Canadian product is at 32%. increase year over year, right? I'll give another picture of probably backlog increase from this first six months versus last one year, first six months. Well, almost like a 50% increase too for the POC. So that's really show the momentum continually. And also in my script, I specifically mentioned about this SPM process. It's really Our proprietary technology is really gaining customer interest, especially reaching excellent results at a 15 nanoparticle size. That really shows our technology is better than the leading supplier. So we have confidence you can take care of significant market share in the SPM business. We're expecting 15 to 20 tools will deliver to the customer you know, in Asia or in China too.

Unknown | Conference Moderator

So anyway, that's, I think, you know, the answer for you. Very helpful, Color.

Suji | Analyst, Roth Capital

And then David, just kind of following through on that, with shipments expected to outpace revenue in 26, would we think that 27 should be an above-trend year? I mean, obviously not guiding, but just trying to understand if the implications of that.

Dr. David Wong | CEO, ACM Research

Well, I mean, 27 is a little bit far away, right? But I want to see that our length of this way. In 2026, we gained a lot of PO or the customer interest for our cleaning tool, obviously, the copper plating tool. Copper plating, you can see it grows a lot. Also, we see the interest, people were interested in our furnace and the PCBD and the track system. I want to say that in 2027, we see our new product, including horizontal copper plating for panel two. we're getting to the revenue and achievement picture in 2027. So as I mentioned in a couple of earnings calls, with our new product sort of playing into the product line, we see a lot of bigger growth in the next few years.

Unknown | Conference Moderator

And we're supporting ACM's multi-product strategy and continue to grow our long-term revenue. Thanks, David. That helps paint a picture.

I'll pass it on. Unknown | Conference Moderator

Thanks, Suji. Thank you. Oh, next question, operator, please.

Yes. Operator | Conference Operator

Yes, thank you. Your next question comes in the line of Dennis Patachin with Needham & Company. Your line is now open.

Dennis Patachin | Analyst, Needham & Company

Much appreciated. Just one question from us today. So it looks like the ECP, the front-end packaging, Ernest and other technology segments have been seeing pretty sustained strength, you know, up very significantly both year over year and quarter over quarter. Can you tell us more about, you know, what's doing well in that segment? What kind of customers are adopting which tools? Just a similar code would be great.

Thank you. Dr. David Wong | CEO, ACM Research

Yeah, I want to say that this, you know, pleading business has been growing a lot, right? Obviously, front end growing and also can see HBM is also driving. And obviously, advanced packaging for all the 2.5D and application also growing and driving too. So that's really driving factor for the copper plating and also our advanced packaging wet process tool, including code developer, wet etcher, PR stripper, and cleaning.

Dennis Patachin | Analyst, Needham & Company

I much appreciate it. Thank you. Thank you. Great. Thanks, Thomas.

Yeah. Operator | Conference Operator

Okay, thank you. Seeing no more questions in the queue, let me turn the call back to Stephen Paleo for closing remarks.

Steven Palayo | Managing Director, Blue Shirt Group

Great, thank you. Before we conclude, I just want to give everyone a quick reminder on our upcoming investor conferences. On June 17th, we will present at the 16th Annual Roth London Conference at the Four 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. jsPDF 3.0.3 D:20260608224334-00'00'

NASDAQ:ACMR Q4 2025 Earnings Call Transcript Generated on 6/8/2026 Operator: Good day, ladies and gentlemen. Thank you for standing by, and welcome to the ACM Research Fourth Quarter and Fiscal Year 2025 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. If you have any objections, you may disconnect at this time. Now I will turn the call over to Mr. Steven Palaio, Managing Director of Blue Shirt Group. Steven, please go ahead.

Steven Palaio | Managing Director, Blue Shirt Group

Good day, everyone. Thank you for joining us to discuss fourth quarter and fiscal year 2025 results, which we released before the U.S. market opened today. The release is available on our website as well as from Newswire Services. There is also a supplemental slide deck posted to the investor relations section of our website that we will reference during our prepared remarks. On the call with me today are our CEO, Dr. 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. However, they are subject to risks and uncertainties that could cause actual results to differ materially. Those risks are described under the 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 gain or loss on short-term investments. For our GAAP results and reconciliations between GAAP and non-GAAP amounts, you should refer to our earnings release, which is posted on the IR section of our website, and to slides 14 and 15. Also, unless otherwise noted, the following figures refer to the fourth quarter and fiscal year 2025, and comparisons are going to be with the fourth quarter and fiscal year 2024. I will now turn the call over to David Wang. David?

Dr. David Wong | CEO, ACM Research

Thanks, Stephen, and hello, everyone, and welcome to ACM's fourth quarter and the fiscal year 2025 earning conference call. I'm pleased with our first quarter results, which kept off a solid year of execution. Revenue grow 9% in the first quarter and 15% for the full year. We continue to execute well across our core business. We made a lot of progress with new product platforms, and we strengthen our position in China and globally. Investment in AI and data center infrastructure is reshaping the global semiconductor demand, shifting capital toward advanced logic, memory, and advanced packaging. The industry is looking to key supplier for new technology, many of which have not yet been invented. ACM differential technology portfolio has been aligned well with this high value process steps. and the market is how now the market is coming for us for solutions. A good demonstration is recent momentum with several key global customer outside the mainland China market that we announced in today's press release. First, we announced that we have delivered multiple single wafer cleaning tools to Singapore facility of our Asia-based foundries customer. This marks HCM's first tool in relation to Singapore, a key milestone for HCM. Second, we announced that we're receiving multiple orders for our advanced packaging tool from three global customers. This included orders for multiple wafer-level advanced packaging systems from our leading global OSEP customer base in Singapore. Deliver schedule for the first quarter of 2026. A panel-level advanced packaging vacuum cleaning tool from a leading global semiconductor packaging manufacturer based outside mainland China. Also scheduled for delivery in the first quarter of 2026. And multiple wafer-level packaging system from a leading North America-based technology customer with a delivery schedule later this year. Long on to our business result, please turn to slide three. For the fourth quarter of 2025, we delivered $244 million in revenue, upper 9%. For the year 2025, we delivered $901 million in revenue, upper 15%. Top line growth of 15% was a better than growth for the overall China WFC market, which Third party estimate as January flat for 2025. We consider this good result, especially since our 2025 revenue includes very little contribution from our new products. We expect a strong product cycle in 2026 from SPM cleaning and our furnace product as we made a very good technical progress for this new product across our customer base. We also made a good progress with our supercritical CO2 joint, track, panel level plating, and PCVD, which we expected to contribute some more in 2026, but more in 2027 and beyond. Shearman for 2025 were 854 million versus 973 million. Remember, 2024, Shearman increased 63% over the year So we had a tough compare. We also had some shipment for new product pushing to the 2026. Importantly, we expected 2026 shipment growth to be higher than our 2026 revenue growth. Growth margin was 41% for the fourth quarter and 44.5% for the full year. Q4 growth margin was slightly below our long-term target range of 42%. to 48 percent. We attribute the Q4 level to product mixing, including a few semi-critical product with a lower margin due to the competitive pressure, and also higher seasonal inventory provisions. We expect a lower gross margin to be temporary. We believe our new product ramp, combined with the product design and the supply chain will enable us to deliver the best product at a low cost. There's no changing to our long-term target model range of 42 to 48%. Moving on, we ended the year with a net cash of 845 million versus 259 million at the year end of 2024. This balance sheet provides the foundation to continue our effort to develop world-class tools for the leading global semiconductor manufacturers. Before I review our product, I will provide a view on competitive dynamics in China and how we will win in this environment. We have recently seen a flood of new local entrants to the China capital equipment industry. In many cases, there are five or more players going after a single point product, all with very similar design and performance. We believe we will compete and win in China market because number one, we have a differential technology with many product, almost the best in the world. Two, we have a deep portfolio of IP with strong protection in China. And three, our local customer demand the best technology in world to compete in a global market. Now I will provide detail on product. Please turn to slide four. Revenue from single wafer cleaning, Tahoe, and the semi-critical cleaning tool was $626 million, up 8% in 2025, and represented 69% of the total revenue. We now estimate our cleaning portfolio addresses 95% of the application and process step. And we are working on developing the remaining solution that will bring us to 100% in 2026. We believe ACM now has the widest coverage Canadian tool far more extensive as compared to all competitors their 8% year-over-year growth in 2025 include a very little contribution from our newer Canadian line we expected this new product including single waiver SPM power and into bubbling wet edge to contribute more meaningfully to our 2026 revenue as industry moves forward To more advanced nodes, we expect to increase demand for high-performance cleaning tools. The increased adoption of multiple patterning is driving higher layer counts, potentially impact use, and it demands more cleaning steps with a higher cleaning efficiency. We believe this plays right into ACM's strengths. For example, our proprietary end-tool bubbling etching technology is unique uniquely positioned in the market. We are seeing growth interest for advanced 3D NAT application where larger bubble size and the uniformity control would become more critical as industry moves to 300 layer and above. In SPM cleaning, customer recognize the advantage of our proprietary nozzle and the chamber design. We believe our platform outperforming leading competitors in small particle cleaning performance. We made a significant technical progress at the end of 2025 with our new SPM nozzle design. We achieved a 15 nanoparticle size count of under 20, which we believe is the best-in-class performance for the industry. Our unique nozzle design does not require any routine chambered-air water cleaning. This is a big deal for customer because you not only deliver the better cleaning environment for the chamber, but it also increase uptime of our equipment. As a result, I'm pleased to report today that we have received a strong repeat order for our SPM cleaning tools from major customer for delivering to Model 5 in 2026. We are also seeing very strong interest for our unique SPM technology for numerous global customer because they are not satisfied with the performance of their current plan of the record tool. Our super critical CO2 Joy tool integrate ACM proprietary cleaning IP while reducing CO2 consumption by approximately 40% as compared to their competitors. This result in process efficiency with low operation cost. We made a successful in-house demo for the multiple logic and memory customer at the end of 2025. We have already received a demo PO for evaluation tools from two customers for delivery in the middle of 2026. And we expect to deliver additional tools to multiple customers later this year. In mainland China alone, we estimate the incremental market opportunity for this next generation cleaning product is nearly $1 billion. We remain confident in our long-term objective to achieve approximately 60% of the market share in China cleaning market, and we expect cleaning to alter growth in China WFE this year and in the year ahead. We estimate our market share for ECP in China is now more than 40%. and we remain confident in our long-term goal to achieve 60% or more. Front-end tool represent about 70% of the mixing per year, including our MAP, MAP+, ECP3D, ECPG3 products. ECP back-end tool were about 30% of the mix, including our ECP8P product line. In Q4, we deliver our first ultra-ECP8PP horizontal panel-level electroplating tool to an industry-leading large panel fabrication customer. Our customer, ACM, prefers horizontal plating solution versus competitive vertical plating approach due to the much better plating film uniformity and much less cross-contamination between multiple plating chemicals. We expect a growing customer interest in our panel-level solution as industry looks for higher throughput and low cost to support advanced packaging solution for multiple large die size and HBM AI chips. As discussed earlier, we received order from three global customer for both wafer-level and panel-level packaging tools. Our first tool under various stage of evaluation of many customer. Revenue from furnace was relatively small in 2025, and we expect a more meaningful contribution in 2026. We made several technical breakthroughs for LPCVD and ALD and PALD in 2025. We see good demand across multiple applications, including high-temperature NEO, especially 1350-degree version LPCVD. ALD and PLD. We believe ACM differential design position us to capture meaningful market share. Revenue from advanced packaging, which is good ECP, but including service and the spell was up 45% in 2025 to 76 million and represent 8% of revenue. This includes coder, developer, etcher, stripper, scrubber, and vacuum cleaning tools. We believe ACM is the only company to offer a full portfolio of wet process tools and world-class plating products for the advanced packaging. We think the combination is very powerful. It provides ACM with valuable insight into the challenges of next-generation packaging as AI drives industry towards 2.5D and 3D integration. We are making solid progress with our new track and PCVD platforms. Last September, we delivered our high-throughput 300 WPH KIF track tool for evaluation at the key customer. We expect mass production qualification in 2026 for the tool. And we anticipate this will lead to demand from additional customers, including both standalone and full integrated systems in line with the ESR graphic tool. We believe our high throughput design positions this platform to compete effectively with the current supplier. In Q4, we delivered our first ultra lethal BK system. This milestone represents the first customer deploy of our tracker series following early demonstration and evaluation. It also marked our entry into the display panel market, a new segment that requires high-volume manufacturing and strong performance stability. We anticipate to develop our proprietary PECVD platform. Our design has three chucks per chamber, which we believe is the only one in the world. This provides flexibility for a wide range of our process with the same hardware. We feel good about our positioning as the team works through the technical detail with a field tool in our Lingang mini lab, running wafer tasks and a custom demo wafer. We expect to ship multiple EVA tools in the near term. In summary, we innovation, our innovation engine contribute to drive a differentiated solution across a broader growing portfolio. As AI drives a more complex semiconductor process, customers are turning into ACM as a trusted partner to help solving their increasing challenges. Next, let me provide update on our production facility. First, on Lingang, please turn to slide eight. Our Lingang production and R&D center is now our primary production center. The first building is in volume production, and the second provides capacity for the future expansion. Together, the two facilities can support up to $3 billion in annual output. During 2025, we made good progress on our mini-line and lingo. We have enhanced our process development capability and now support on-site customer evaluation in fab-like conditions. Our mini line including ACM tools and tools from other player and metrology tools. We believe the mini line will accelerate our internal product validation, shorten R&D and qualification cycle, and strengthen collaboration with the key customer as we introduce next generation platforms. Next, our Oregon facility, please turn to slide nine. We are accelerating investment in Oregon. with the operation expected beginning in the second half of 2026. This facility will allow customers to evaluate our technology and to test their wafer locally, and it will serve as our initial base for production in the United States. Our global customers are encouraging by our commitment, which we believe will help them to choose ACM as a key supplier to scare production. We remain very pleased by the success of ACM Shanghai team, which continues to be a key supplier to the semiconductor industry in Asia. ACM Shanghai has also proven to be a great source of capital and financial flexibility for ACM. In September 2025, ACM Shanghai completed a private offering of an ordinary share, generating approximately $623 million in net proceeds. In February 2026, we complete the sale of approximately 4.8 million ACM Shanghai shares at 160 RMB per share, generating approximately $111 million in gross proceeds. ACM Shanghai also has been a good source of dividends in 2023, 2024, and 2025. We received dividends, net of tax of $19.2 million, $28.5 million, and $29 million, respectively. Our major ownership in Shanghai remains a strategic asset. It enhanced our financial flexibility and supported disciplined execution as we continue expanding globally. Taken together, our expanding product portfolio increased manufacturing capacity and the strength in capital position give us confidence in our long-term strategy. Now turn to our outlook for the full year 2026. Please turn to slide 10. In middle January, we introduced our 2026 revenue outlook in a range of $1.08 to $1.175 billion. This implies 25% year-over-year growth at the middle point. iterate this outlook today since our from founding in california in 1998 and the establishment of acm shanghai in 2005 we're building a globally competitive semiconductor equipment company grounded in innovation and differential technology our leadership in cleaning and electroplating created a strong foundation and we are now expanding across furnace track and pcbd as we broaden our multiple product portfolio in asia we are recognized as a leader in waiver cleaning and plating and we are in engaging with a global customer across us and europe with continual progress across spm tahoe supercritical seal to dry furnace track pcbd and the panel level packaging we believe we are entering a new phase of a product cycle that we are driving for standard growth We have the customer, the product, the capacity, and the capital to execute our global business plan, and we remain committed to our long-term target of $4 billion in revenue. Now let me turn the call over to our CFO, Mark, who will reveal details of our first quarter and full year result. Mark, please.

Mark McKechnie | CFO, ACM Research

Thank you, David. Good day, everyone. Please turn to slide 11 and 12. Unless I note otherwise, I'll refer to non-GAAP financial measures which exclude 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 fourth quarter and full year of 2025, and comparisons are with the fourth quarter and full year of 2024. I will now provide financial highlights. Revenue was $244 million for the fourth quarter, up 9.4%. For the full year, revenue was $901.3 million, up 15.2%. Full year revenue was in line with our original guidance set a year ago and slightly above the updated range announced on January 22nd. Fourth quarter revenue for single wafer cleaning, Tahoe, and semi-critical cleaning was $159.9 million, up 3%. For the year, this category grew by 8.1%. Fourth quarter revenue for ECP, front-end packaging, furnace, and other technologies was $64.1 million, up 23.9%. For the year, this category grew by 32.1%. Fourth quarter revenue for advanced packaging, excluding ECP, services, and spares was $20.5 million, up 23.8%. For the year, this category grew by 45.3%. I will now provide revenue mixed by customer type for 2025. Starting this year, rather than disclosing specific customer names, we are now disclosing revenue by customer type once a year. For each customer type, this includes product, services, and spare parts. We've included the mix table on slide seven of our presentation. For 2025, our revenue mix by customer type was split among Foundry, Logic, and other, 59%. Memory, 27%. Packaging and wafer processing, 14%. 2025, we had four 10-plus percent customers, including our top customer was 16.9%, next was 13.5%, then 11.6%, and 10.2% for an aggregate total of four customers representing 52.2% of total sales. For 2024, we had four 10% customer, also for a total of 52.2%. Total shipments were $228 million for the fourth quarter, down 13.5%, and $854 million for the full year of 2025, down 12.2%. David noted we had a tough compare versus a strong 2024 when shipments increased 63% year-over-year. We also did have some shipments for new products pushed into 2026. We expect 2026 shipment growth rate to be higher than our 2026 revenue growth rate. Gross margin was 41.0% for the fourth quarter and 49.8%. For the full year, gross margin was 44.5% versus 54.4% in 2024. Q4 gross margin was slightly below our long-term target model. Adding to David's earlier remarks, gross margins were down 8.8 percentage points year-over-year on a quarterly basis. This was due to product mix and margin pressure concentrated in a few semi-critical products, which contributed about five points to the headwind, and a higher level of inventory provisions that contributed about four points negative impact. As David noted, we expect the lower gross margins to be temporary. We believe our new product ramp, combined with supply chain initiatives, will enable us to deliver the best products at a low cost. and there is no change to our long-term target model range of 42% to 48%. For modeling purposes, we expect gross margins to be at the lower end of this longer-term target range for the first half of 2026, with an anticipated lift in the second half due in part to contribution from newer products, which generally have higher gross margins. Operating expenses were $70.6 million for the fourth quarter of 21%. For the full year, operating expenses were $258.4 million, up 34%. For 2025, R&D was 15.1% of sales, sales and marketing was 7.8% of sales, and G&A was 5.8% of sales. For 2026, we planned for R&D in the 16% to 18% range, sales and marketing in the 7% to 8% range, and G&A in the 6% range. Operating income was $29.5 million for the fourth quarter versus $52.8 million. Operating margin for Q4-25 was 12.1% as compared to 23.6%. For the full year, operating margin was 15.9% as compared to 25.6%. Long-term, we look to grow our R&D spending in line with revenue, but we expect to show operating leverage in SG&A with spending growth below our revenue growth level. Income tax expense was $6.6 million for the fourth quarter versus $17.3 million. For the full year, income tax expense was $13.3 million versus $35 million in 2024. For 2026, we expect our effective tax rate in the 8% to 10% range. Net income attributable to ACM Research was $17.3 million for the fourth quarter versus $37.7 million. For the full year, net income attributable to ACM Research was $110.2 million versus $152.2 million. Net income for diluted share was $0.25 for the fourth quarter versus $0.56. For the full year, net income for diluted share was $1.61 versus $2.26. Our non-GAAP net income excluded $6.4 million of stock-based compensation expense for the fourth quarter and $33.6 million for the full year. I will now review selected balance sheet and cash flow items. Cash-to-cash equivalents restricted cash and time deposits were $1.13 billion versus $441 million at the year-end 2024. Net cash, which excludes short-term and long-term debt, was $845.5 million versus $259.1 million at year-end 2024. $585.4 million increase in net cash for 2025 included $623 million net raised in the private offering by ACM Shanghai in 2025. Total inventory at year-end was $702.6 million versus $676.4 million at the end of the third quarter. Raw materials were $349.7 million, up $23.5 million quarter-over-quarter. We made additional strategic purchases to support production plans and to mitigate any potential supply chain risk. Work in process was $61.4 million, up $1.9 million quarter over quarter. Finished goods inventory was $291.6 million, up $0.9 million 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. Cash provided by operations was $33.9 million for the fourth quarter. For the full year cash 2025, cash used by operations was about $10 million. Capital expenditures were $58 million for the full year 2025. For the full year 2026, we expect to spend about $200 million in capital expenditures. This includes continued investments in Lingong, including the mini-line and the second production facility, fixed assets for the business, and investments in Oregon, along with other items. That concludes our prepared remarks. Now let's open the call for any questions that you may have. Operator, please go ahead.

Operator

Thank you. To ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment while we compile our Q&A roster. Our first question will come from the line of Charles Shive with Needham & Company. Your line is open.

Please go ahead. Charles Shive | Analyst, Needham & Company

Hi, thanks for taking my question. I believe you gave a pretty good color shipment versus revenue growth this year. So I have a question since you mentioned about new products probably going to be a bigger driver this year for growth. And I wonder if you can give some color, let's say excluding the new products, what's the growth, either shipment or revenue is expected to be, excluding all the new products. Maybe I'm talking about the existing product lines in cleans, plating, et cetera.

Thank you. Dr. David Wong | CEO, ACM Research

Okay. Thank you, Zhao. Actually, you know that, as we said, we made quite a big progress in the SPM process. General speaking, SPM, Carter SPM, represent 25, 30% of the Canadian market. And this market, you know, last couple of years, we're not in much touch so much. As I said, last 2025, we made a very good progress, both into their special nozzle design for the high temperature and also a powerful product. So we're getting to very aggressively into this market. And again, this is a very high margin product. and also a lot of our customers, both in mainland China, also outside China, they have suffered their particle issue with this high temperature SPM process. And we think with our proprietary design model, we can control a very good environment, so therefore can be, you know, really reduce particle size. So that can really enhance our market growth in Kunini. Secondly, I want to say that is our End-to-bubbling proprietary bubbling wet etching technology is really critical for the 3D net sitting nitrate etching process, which we believe our proprietary technology not only cover today's demand for 300 layer, we believe as people moving to 400 or even 500 layer will suffer this kind of an uniformity of the top or bottom. So we're using large bubble. and size, also with our proprietary technology, we can make a very uniform large bubble distribution in a tank. That will be really enhance the etching uniformity from the top to the bottom for the via. So we believe that's not only demand in the market in China, we also see that demand outside the global market too. And third one, I also mentioned that is our supercritical CO2 dry. we also made a lot of progress, right? And which is, you know, past customer demo. We have two tools, you know, scheduled to deliver, you know, in the first or second quarter of this year. We have additional interest in coming. Again, since the supercritical CO2 with our provider design, we got a capacity or cavity, our CO2 chamber is about 40% smaller. So we believe that we're really providing customer a 40% reduction of the consumer cost. And that really also, again, driving this product out in the local, I call it, China market, but also getting to the outside China market. So with all this cleaning, I call it, together, we believe also expansion in the future, this will probably represent, even in China, almost a billion-dollar market potential for us to get in. So we're very exciting about our continuing expanding our Canadian product in the China market, plus also give us a really strong differential technology exposure to the global market. So that's for Canadian. And again, for copper plating, as I mentioned, we have a full set of their Canadian product, front-end, TSV, back-end, advanced packaging. including also, you know, this I call the compound semiconductor. Plus, recently we just, you know, announced our panel horizontal plating, which we believe very, very key technology to driving for the panel size plating. This moment, everybody using vertical and cover plating for panel. We're the first one in the world so far doing horizontal plating, right? With our differential technology, we believe probably most likely only one in the market to drive another horizontal copper plating. So this also we see the bigger interest, not only in the China market, we see also a lot of interest coming in for us to deliver this tool. So with that, all new products in our existing Canadian copper plating can drive a lot of revenue this year, including next year. Right. And then plus, as I said, our other foreigners and the PCVD and also track business we're developing for last four or five year really made a lot of technology breakthrough too. So believe those technology getting this year started in market and were real sustaining our next three to five year growth. And which, you know, that last three, four year, our major growth comes from Canadian copper trading. And next few year, we see this new product coming, what that is strengthening our high growth profile in next few year. So we're very, you know, exciting, very, you know, try to, I was executing our strategy to continue to grow our revenue.

Charles. Charles Shive | Analyst, Needham & Company

Thanks, David. Maybe a question on profitability. So you reported the last year. You gave some color about this year. But I believe if my math is right, your operating margin will compress the last year from maybe close to 26% in 24 to 16% in 25. But this year, based on what you guided about growth margin, what you guided about R&D, SG&A, doesn't look like operating margin can rebound, feels like operating margin probably more or less the same or even coming down a little bit depending on how the gross margin trends for the remainder of the year. So I want to get some sense, what's the reason for operating margin being under pressure for almost two years and And how do you plan to address this and maybe try to expand the operating margin from here?

Thank you. Dr. David Wong | CEO, ACM Research

Yeah, actually, let's do it this way. You know, looking at growth margin, right, we're probably the top of the company in China, right, for growth margin, right, for the last few years. And as you said, Q4, our expected Q4 last year, we do see our, you know, first time growth margin is, you know, lower than our range, 40 to 48%, right? As we're explaining maybe three factors, one is the product mixing. We have, you know, one or two products, which is a semi-critical tool. Do have, you know, pressure from the competitor for pricing, you know, there. The next one is really our, you know, this inventory provision. But we think this year, as we are new product coming, as I mentioned, this, you know, three Canadian product coming, we're definitely encountering margin. And also our inventory provision, we believe will be also greatly reduced too. So with that, we still have a confidence we're in a 42, 48, you know, gross margin in this year or beyond. And more than that is, as you said, we put quite a bit R&D last year, right? It used to be R&D 13, 14%. Last year, we're getting to 16%. We'll probably keep that number in the wake. Why? You know, the next few years, AI is driving a lot of demand for the new technology, and everybody else, you know, first-tier company, you know, outside China, all people put a lot of R&D, and so we'll continue to invest that, which we know will impact a little bit, you know, our operation margin, but it's worth spending money now. Why? I said opportunity is there, right? And a lot of customers, real demand for the new technology, which I believe, A lot of AI technology today is not invented yet. So it really gives ACM a good opportunity with our innovation power, our technology development capability, we can use this AI as a trend. We'll catch a lot of new technology and also catch the customer. This is a good example. So again, it's worth to spend more R&D. and even get a few percent of the operation margin lower, which is real long-run, and we're working for the investor interest and also the growth ACM market into the next few years.

Mark McKechnie | CFO, ACM Research

Yeah. Hey, David, I might add a few things. I think that was a good overview. But, Charlie, I think kind of summarizing it up, we're spending into the $4 billion market opportunity. There's a number of products that – areas that – We've been investing in that haven't scaled yet, but we expect them to scale over the next few years. It's the right thing to do to spend into that. You're right about the operating margin for 2026 kind of comes in at the mid-teen level, similar to what it was here in 2025. You move out a few years. Our target is to keep those gross margins at that target range and then move you know, grow our top line faster than our optics. I think you can see some leverage in the out years.

Charles Shive | Analyst, Needham & Company

Okay, thank you.

Mark McKechnie | CFO, ACM Research

Yeah, thanks, Charles.

Dr. David Wong | CEO, ACM Research

Thank you, Charles.

Operator

Thank you. One moment for our next question. Our next question will come from the line of Edison Lee with Jefferies. Your line is open.

Please go ahead. Edison Lee | Analyst, Jefferies

Oh, hi, David and Mark. Congratulations on the results. I just have two quick questions. Number one is that For the fourth quarter, the margin is a little bit low and the revenue growth also is a little bit slow. And then your shipment, I think, declined on a year-on-year basis. So how much of that is just product mix and seasonality? And when do you think these numbers will actually start improving in 2026? And then the second question is about the $111 billion you raised about selling down ACMS. Can you shed some light as to how you would actually utilize that proceeds?

Dr. David Wong | CEO, ACM Research

Okay. So let's answer your first question, right? I think that you look in there, I guess I mentioned last couple years, our major growth engine from cleaning and also cover plating, right? Even the cleaning, I said, there's one important product, which is SPM process. We're not touching too much. As I mentioned last year, you know, end of last year, you know, Q4 last year, we made a significant progress with this, you know, special nozzle design. We believe our performance is outperforming and, you know, top tier as a tool. So we see that a grow continuously, right? And so then I would say our cleaning, copper plating, you know, also horizontal panel can, you know, expand too. So that keeps momentum. Our cleaning market, you know, probably today in China, about 35 range, we're expanding to 50, 60%, you know, next few years. And the copper right now, the 40, I still say we're trying to catch 60 in the beyond mark in China. More than that is those are, product defensive product we see a very high interest from global you know top tier customer so that's what we also reinforce ourselves outside china so that's what i see that you know um impact our all boost our revenue you know uh for our existing product and but and also i want to see that in through the last five years we are really working the differential you know pcbd and track and also furnace technology which is we believe a lot of our new technology we are putting in and nobody had it before, right? So that's what really reinforced our, I call it the market position. And plus, those tools, it really, with our differential technology, we put a lot of time to develop IP, develop the roadmap. It cost a little bit of a long time than, you know, the other guys. So, and now it's come the moment for the market. And plus, I want to say another bigger impact is, I call it, improvement is the last Q3, we start using Ningang or MiniLine, which we did not have before. That was really helping our internal demonstration, internal R&D speed. We see the bigger impact already. So that will be helping our tool mature before shipping to the customer. So with all together, I want to say this is a new growth from the existing and also our new product coming in. We're driving ACM in real high growth profile in a year, this year, and in the next few years. So we're very confident. Plus, even I say, you know, WFE market in China is flat. We can get a high growth rate because of new product coming. And plus, also, as you say, we have made a lot of progress in a global customer, you know, this news announced, you know, today. We also see a lot of interesting coming into our differential technology from top-tier customers. Because we have a patent that has been locked with technology already. They almost have no choice. They have to come to us. Anyway, so that's really exciting for all technology. We're really trying to push all technology real benefit to the international global customer for their AI challenges. Mark, anything you want to add on that?

Mark McKechnie | CFO, ACM Research

Yeah, let me add on to something before you answer his question about our Shanghai stock sales. So Edison, for Q4, you probably remember last call, we mentioned that Q4 in the year, the overall year came in at the midpoint of where we started the year, maybe a little bit better. And don't forget, we had two things. Our newer products didn't kick in very little in 2025. And then we did have a customer push out from Q4 into 2026. And so that was kind of those two things that hit 2024. I'm sorry, the Q4. When you look out to 2025, you know, we're expecting linearity pretty similar to, I'm sorry, 2026. We're expecting our linearity to be pretty similar. So the first half will be about 42%, 43% of revenue. Second half will be, you know, 57% to 58%. But, you know, I would kind of anticipate Q1 at about 18% to 20% of the full year mix. Maybe David, uh, if you wanted to take his question, what are we going to do with the cash that we raised in, um, or that we sold, you know, the cash that we sold.

Edison Lee | Analyst, Jefferies

Sorry, sorry, Mark, Mark, Mark. Can you hear me?

Mark McKechnie | CFO, ACM Research

Yes.

Yeah. Edison Lee | Analyst, Jefferies

Hey, before, before we move on to the use of process, can you also comment a little bit on what you said about, I think some products have been some pricing pressure, uh, which I think partially account for lower margin in the fourth quarter.

Mark McKechnie | CFO, ACM Research

Yeah, and there's not much to add to what I said there, you know, or what David and I both said. You know, there were a couple of semi-critical products that had particularly low margins that hit us in Q3 and Q4. And we, you know, David mentioned in the prepared remarks, he talked about the competitive situation in China. You know, we are very focused on developing world-class tools. We think that... There was also a bigger provision in the back half of the year, so we think that'll be the overall provision for 2026. Probably be smaller than it was in 2025, and it'll probably be more balanced throughout the year.

Edison Lee | Analyst, Jefferies

Okay.

Dr. David Wong | CEO, ACM Research

So you want me to talk to you there how we use and proceed, right?

Edison Lee | Analyst, Jefferies

Yes.

Dr. David Wong | CEO, ACM Research

Okay, well, obviously, we have a second offering in China, right? Those are Money will be real focusing on R&D again, our expansion for their manufacturing. We have a second building. We'll start the decoration this year. So with that add together, probably we can manufacture 3 billion annually, which will really give us a lot of room for manufacturing. And plus, we'll also put the money in the mini line, as I mentioned. This mini line really speed up our internal R&D and debugging tool, and also even can do the joint development with the customer process too. So it's really worth spending for those money. And the proceeds we got from there, so the 1.3% from Shanghai here, definitely the major purpose for that was spending global customer, global market itself. So we see that opportunity really big in a global market. As I mentioned, we do have some differential technology might be the only solution for their, you know, AI challenging. So those products, we think, will really gather attention from the global customer. So we have to spend money and, you know, building the international strongly self-channel. And also, you know, we already had a career manufacturer base already. And however, you know, with this geographic... tariff going on, we have to minimize the tariff impact, right? So that's why we started assembly tool in the USA. So that will be real, reduce our concern or any dynamic changing for those tariff will impact our revenue. So anyway, that's really what work on. And our goal is very simple. We try to work in with, you know, with satisfy all regulation and requirement and maximize the investor interest We're building a global sales, global company.

That's our goal. Edison Lee | Analyst, Jefferies

Okay.

Thank you. Mark McKechnie | CFO, ACM Research

Thanks, Edison. Yeah, I appreciate it. Next question, please, operator.

Operator

One moment. Our next question comes from the line of Jimmy Hong with JP Morgan. Your line is open.

Please go ahead. Jimmy Hong | Analyst, JPMorgan

Hi. Hi, Debbie. Can you hear me? Yes, please. Yeah. Yeah. Thank you. Congrats for the good results. I want to ask about, we deliver single-way for cleaning tools to a Singapore-based foundry. What would be the potential size of treatments in terms of units or dollars this year or next year? And next year, yeah.

Dr. David Wong | CEO, ACM Research

This is my first question. Yeah. Very good question. Actually, you know, we're a field tool, or we're in an inspiration process right now, right? This tool, you know, this tool will be qualified and go in production, you know, this year. And with that, we definitely will introduce more of a community tool. And also, we do have a cover play team in the behind. So that's really what gives us exposure of product in the Asian market. And so this will be real making more of a confidence and also get a high interest from other players in Asia and the market too. So this is a really bigger milestone for us. And plus, you know, we're not only looking at a customer only in Singapore, and we do have a customer in Korea, and also we have a customer, you know, potentially in Taiwan. So we have really confidence, you know, we should have expanding quickly in the Asia market. And plus, again, you know, we're also very focusing on our U.S. market, too. We do have an advanced packaging tool, PO, and receiving, which will deliver by end of this year. And we saw a lot of potential going on in the U.S. market, too. Again, because today all the memory, all logic, they're AI-driven for their advanced technology. ACM, I won't say I feel good technology is really needed for their production line. We believe that's really beneficial for the customer and also can help expansion our market to global. So it's a great opportunity because, again, innovation is the key. And every customer and every key customer, they all demand for innovation technology, which will probably fit our, you know, strategy.

Jimmy Hong | Analyst, JPMorgan

Yeah. Yeah, thank you. Dr. Wang, yeah. So for Singapore business, how's the chance that we penetrate to Singapore-based memory makers in the next few years? And my second question is for advanced packaging. We are making great process, but you know for Taiwan, Taiwan needs foundries and also leading the panel level packaging for AI GPUs. Can we talk about our POP problems with potential Taiwanese players? Do we have any, like, other forecasts or purchase orders from these Taiwanese potential customers?

Dr. David Wong | CEO, ACM Research

Yeah. Yeah, actually, you know, we are talking to a few key customers, right? Even a panel, large size, 515 by 510. And also, we're talking about their 310 by 310, right? Which is a true vision right now people are trying to push in. So we have very good exposure to those customers. By the way, April 7, 8, we're attending the panel conference in Taiwan. And in that conference, we'll do the keynote speaker about the horizontal plating and also our vacuum cleaning technology. So it's really a lot of exciting, I want to say, interest coming in. And also, you know, I said, I heard everybody say panel product or equipment. they probably satisfy all other products except their plating. So plating becomes a bottleneck for their production expansion. So with that, you know, demand, I said we are the only one supplying horizontal plating. You probably heard that is the one key player in Taiwan. They said they only want horizontal plating. They don't want vertical. So our horizontal plating perfect fit their strategy or their demand. So, as I said, it's really a big opportunity with our panel product. Actually, we're not only trying to introduce the SuperFar 3 product, right? Panel plating, vacuum cleaning, and also the bevel. We're going to develop also additional, you know, and code the developer, wet etcher, and cleaning all kind of wet tools we're putting in, too. So that's really what we catch this wave of the panel I call it a shift, right, for the advanced packaging. So we're in a very good position for those coming panel advanced packaging expanding. We're very excited about this opportunity, right.

Jimmy Hong | Analyst, JPMorgan

Yeah, but do you know like in which kind of periods, quarters, it will be more clear that whether we'll have any other forecasts or purchase orders for this POP equipment, yeah, Dr.

David Wong | CEO, ACM Research

Well, you know, let's put it this way. We announced that we do have also a PO from outside mainland China, right? I mean, we said already. So you know what I mean here. And then we're continually expanding more, right? So, again, I want to say this year we have confidence to catch additional PO for our, you know, for our vacuum cleaning and also for the horizontal copper plating. Not only in Taiwan market, we also see the opportunity in Korea, also in Singapore, by the way.

So it's very exciting. Jimmy Hong | Analyst, JPMorgan

Yeah, thank you. Maybe I can squeeze in my last question in that FAQ. Like ACM has disposed a small portion of that in ACM Shanghai. How do we think about more further stock disposal in the future? You mentioned that U.S. international capacity bills will require more funding. Will we dispose of more staff of ACM Shanghai in the future?

Dr. David Wong | CEO, ACM Research

Yeah. Repeat the question again. I'm sorry. Can you repeat again?

Mark McKechnie | CFO, ACM Research

He's asking, are we going to sell more of our ACM?

Dr. David Wong | CEO, ACM Research

Ah, I see, I see. Okay. You know, we sold 1.3% already, right? And we're going to proceed, you know, about 111 million. And, you know, we do have both arms to, I could raise money. We can raise the U.S., we can raise the Shanghai. We're very flexible for what way we're choosing, number one. And this moment, I want to say, our Shanghai stock is still know we think it's still undervalued okay with all growth so we maybe consider what's the money demand and the timeline also what's the stock pricing in shanghai what decider you know where or when or we should sell additional or not and plus as it will have silver arm you know we can raise the money in usa so it's quite flexible for us to reach the phone and this moment you know i want to say well obviously we'll continue invest more in global market, and we have no concern for those, you know, money, where it comes from, right? We're very confident. We also have another knob, another tool. We can get the money anyway.

Jimmy Hong | Analyst, JPMorgan

Yeah. Thank you for all my questions. Thank you, Dr. Wong. I'll be back to the queue.

Thank you. Dr. David Wong | CEO, ACM Research

Great.

Thank you. Thank you. Operator

Thank you. Seeing no more questions in the queue, let me turn the call back over to Steven Palau for closing remarks.

Steven Palaio | Managing Director, Blue Shirt Group

Okay, great. Before we conclude, I just want to give everyone a quick reminder on our upcoming investor conferences. On March 9th, we will participate virtually in Loop Capital Markets' 7th Annual Investor Conference for one-on-one meetings. On March 23rd and 24th, we will present at the 38th 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. This concludes the call, and you may now disconnect.

Take care. Operator

This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone have a great day. jsPDF 3.0.3 D:20260608224548-00'00'

NASDAQ:ACMR Q3 2025 Earnings Call Transcript Generated on 6/8/2026 Operator | Conference Operator: Good day, ladies and gentlemen. Thank you for standing by, and welcome to the ACM Research Third Quarter 2025 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. If you have any objections, you may disconnect at this time. Now, I'd like to turn the call over to Stephen Paleo, Managing Director of the Blue Shirt Group. Stephen, please go ahead.

Stephen Paleo | Managing Director, Blue Shirt Group

Good day, everyone. Thank you for joining us to discuss third quarter 2025 results, which we released before the U.S. market opened today. The release is available on our website as well as from Newswire Services. There is also a supplemental slide deck posted to the investor section of our website that we will reference during our prepared remarks. On the call with me today are CEO Dr. 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 the 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 reconciliation between GAAP and non-GAAP amounts, you should refer to our earnings releases which is posted on the IR section of our website and on slide 13. Also, unless otherwise noted, the following figures refer to the third quarter of 2025, and comparisons are with the third quarter of 2024. With that, I will now turn the call over to David Wang. David?

Dr. David Wong | Chief Executive Officer

Thanks, Stephen. Hello, everyone, and welcome to ACM's third quarter early conference call. I'm very pleased to report another strong quarter for ACM. Revenue grew 32% year-over-year to a new quarterly record, reflecting broader demand across our innovation product portfolio. Across industry, AI and data center investment are accelerating semiconductor and wafer fab equipment spending. AI is also demanding new innovations, many of which have yet to be developed. We believe these trends are driving the market toward us. ACM's strategy remains focused on building a multi-product portfolio of world-class tools that expand our service market and play a critical role in enabling the next generation of chipmaking. Our differential technology continues to raise the performance bar across both front-end and advanced packaging applications. For example, In advanced packaging, we are seeing strong global customer engagement in our proprietary horizontal plating technology for panel-level packaging. And we plan to ship our first system in the fourth quarter. In cleaning, our high-temperature SPM platform is reaching industrial leading performance as our proprietary nozzle design achieving performance at a 19 nanoparticle size. down to single-digit particle counts. We believe this will lead to higher product yield for our customers. Further, with no need to clean the outer chamber, the tool requires significant lower maintenance. This is a truly world-class tool, and our team has a roadmap to even lower particle size down to 70 nano, 50 nano, and 30 nano to support the next few generation technology nodes. In Trac, we shipped our first KIF high-throughput Trac platform this quarter, further broadening our reach into lithography adjacent applications, which demonstrate ACM's ability to grow into new product categories. Together with innovations such as nitrogen bubbling cleaning and etchers and a high-temperature furnace discussed last quarter, this advancement reflect ACM commitment to continuous innovation and the tangible performance improvement we are delivering to customers. In September, our ACM Shanghai subsidiary completed its second capital raising on Star Market. Raising net proceeds approximately 623 million. ACM has the technology the customers, the capacity, and the global reach, and now additional capital to pursue our mission to become a key supplier to major global semiconductor producers. This fund strengthens our balance sheet and will be used for additional investment in our Lingam Media Line and to expand our global production capacity. We also plan to accelerate our R&D investment This will advance our existing cleaning and electroplating tool for next generation process. It will also speed up the development for our new product categories, including furnace, PCVD, track, and panel-level packaging tools. And we're also investing in new product that we have not announced yet. ACM is committed to world-class product. for both China and global customers. Our tools enable next-generation devices, architecture, and help solve our customer complex process, challenging across front and back-end applications. We have a world-class technology and a strong IT position. Customers around the world come to us for our technology rather for a low price. We believe this is the right combination to grow our business and maintain our gross margin targets. We feel that ACM is now an infraction point in which innovation will win the game and drive significant shifts in the market share. Now onto our business results. Please turn to slide three. For the third quarter of 2025, we delivered a revenue of $269 million, upwards 32% year over year. Sheetments were $263 million, up 1% year over year. Gross margin was 42.1%. This was at the low end of our target due in part to product mixing, inventory provision, and other adjustment. There is no change to our target model range of 42% to 48%. We ended the quarter with a net cash, $811 million versus $206 million last quarter and $259 million at the year end of 2024. Now I will provide detail on product. Please turn to slide four. Revenue from single wafer cleaning, Tahoe, and semi-critical cleaning tool grew 13% and represent 68% of total revenue. We believe our top bottom cleaning portfolio is world class. and put us in a strong position to gain additional share, both in China to expand it to a global market. The 13% year-over-year growth was mainly from our traditional cleaning product. Their contribution from our newer cleaning line, including single-wafer STM, pothole, and supercritical CO2 is still fairly small. We expect this new platform, especially STM, to contribute more revenue in 2026 and beyond. we estimate an incremental opportunity of more than $1 billion for those new cleaning products from the mainland China market alone. We remain confident in our target for 60% market share in China market, and we expect higher growth rates for cleaning next year and beyond. Revenue for ECP, furnace, and other technology grow 73% and represent 22% of total revenue. We had a record revenue quarter for ECP front-end tool, which represent about 60% of the mix for this group. This group, including our MAP, MAP+, ECP 3D, and ECP G3 product, all of which grow from last year, ECP back-end tools were about 40% of the mix for their quarter. Revenue from furnace was small for their quarter, and year-to-date. That said, we are making good technical progress across a range of customers and multiple product offerings. This includes our ultra-high-temperature new furnace, which operates at more than 1,250 degrees C, our LPCVD oxidation, and ALD for both thermal and plasma. We continue to focus on qualification of the key customers, and we anticipate incremental revenue contribution from foreigners in 2026. And as I noted earlier, we are seeing very strong interest in our panel-level plating tool for advanced packaging from both China and the global customers. We will ship our first panel-level packaging tool in Q4. Revenue for advanced packaging, which exclude ECP, but including service and spell, was upper 231%. and represent 10% of revenue. About two-thirds of this group for this quarter is small tools for advanced packaging. This includes coder, developer, etcher, stripper, and wafer-level packaging tools that run around $500K to $1 million each. We had a good contribution this quarter from a handful of different customers. Although we include plating products, for advanced packaging in the ECP group, and the combination is very powerful. It provides ACM a valuable insight into the challenges of next-generation packaging as AI drives industry towards 2.5D and 3D integration, stacking data through silicon via PSV and integrated memory and logic in a single packaging. We also shipped advanced packaging tool in Q3 to two new customers in the U.S. And we expect installation and then tool acceptance in next couple of quarter. We are making good progress with our new track and PCVD platforms. I already mentioned the shipment of our first KF track tool. We believe our high throughput design position this platform to complete effectively with incubator suppliers. Our proprietary PCVD platform with three trucks per chamber gives the flexibility to support a wide range of processes with the same hardware. We feel good about our positioning as the team continues to work through the technical detail with a few tools in our Lingang mini lab running wafer test and the EVA tools planned to ship in the near term. To close on product, ACM's culture of innovation continues to deliver industrial leading performance across the broader portfolio. Customer engagement is deepening as the chain makers look for partners that can enable their next generation processes. Please turn to slide six. Global WFE depends, continues to be fueled by investment in AI and data center infrastructure, particularly in advanced logic and memory, while China market, in our view, remains stable. Last quarter, we increased our long-term revenue target to $4 billion, supported by an estimated $2.5 billion US dollar contributed from China and $1.5 billion from global markets. Next, let me provide an update on our production facility. First is Lingam. Please turn to slide eight. Our new Lingam production and R&D center is now fully up and running. The site's first building is already in volume production, while the second is providing additional room for future expansion. Together, the two buildings can support up to $3 billion in annual output. position ACM to meet growing customer demand and support our long-term growth plans. We plan to allocate part of the proceeds from ACM Shanghai's secondary capital raising to expand our mini-line at Lingang to strengthen our process development capability and enable on-site customer evaluation under FAB-like conditions. This will accelerate product validation, shorten development cycle, and enhance collaboration with our key customer as we expanding our portfolio of next generation tools. Turn to our Oregon site. Please turn to slide nine. This facility will allow customers to test wafer locally on ACM tool and will serve as our initial base for production and technology development in the United States. Our global customers are encouraging by our commitment which we believe will help them to choose ACM as a key supplier to scale production. Now, I will provide our outlook for the full year 2025. Please turn to slide 10. We have narrowed our 2025 revenue outlook to a range of $875 million to $925 million versus prior range of $850 million to $950 million. This implies 15% year-over-year growth at the middle point. We made greater progress with several major product lines this year, including single-wafer SPM, townhome, panel-level plating, furnace, track, PCVD. We believe this new product providing a solid foundation for multiple major new product cycles for the continued growth in the coming years. Now let me turn the call over to our CFO, Mark. who will review detail of our third quarter results. Mark, please.

Mark McKechnie | Chief Financial Officer

Thank you, David. 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, unrealized gain loss on short-term investments. The reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release. Unless otherwise noted, the following figures refer to the third quarter of 2025 and comparisons are with the third quarter of 2024. I'll now provide financial highlights. Revenue was $269.2 million, up 32%. Total shipments were $263.1 million, up 28% sequentially and up 0.7% year-over-year. Gross margin was 42.1% versus 51.6%. This is the low end of our target model. Adding color to David's earlier remarks, we attribute this to two key factors. First, product mix. Our Q3 sales included a high number of smaller front-end tools, which had forced margins, and that contributed about 200 basis points of the headwind to the gross margin. Second, we had a higher level of inventory provisions and other adjustments, which hit our COGS for the quarter, contributed about 300 basis points negative impact. I want to reiterate, there's no change to our target model of 42% to 48%. ACM is fully committed to developing world-class tools that enable our customers to scale production of leading-edge semiconductor devices. We believe this creates a healthy pricing environment for our tools, which, combined with an efficient cost structure, results in good profitability. Operating expenses were $76.9 million, up 56.3%. R&D was 14% of sales. Sales and marketing was 7.7% of sales, and G&A was 6.9% of sales. For 2025, we continue to plan for R&D in the 14% to 16% range, sales and marketing in the 8% range, and G&A in the 6% range. Operating income was $36.5 million, down 34.9%. Operating margin was 13.6% versus 27.5%. Income tax expense was $2.9 million versus $4 million. For 2025, we now expect our effective tax range in the 7% to 8% range. Net income attributable to ACM research was $24.8 million versus $42.4 million. Net income for diluted share was $0.36 versus $0.63. Our non-GAAP net income excluded $7.6 million in stock-based compensation expense for the third quarter and $18.7 million in unrealized gain on short-term investments. I remind the analysts that as a result of the second capital raise of $632 million, net by our subsidiary ACM. ACM's ownership in ACM Shanghai is now 74.6% versus 81.1% at the end of last quarter. I will now review selected balance sheet and cash flow items. Cash and cash equivalents, restricted cash, and time deposits were $1.1 billion at the end of third quarter versus $483.9 million at the end of the second quarter. Net cash, which excludes the short-term and long-term debt, was $811 million, or about $12 per share, versus $205.8 million at the end of the second quarter. Total inventory net was $676.4 million versus $648.3 million at the end of the second quarter. Raw materials were $326.2 million, up $40.6 million quarter over quarter. We made additional strategic purchases to support production plans and to mitigate any potential supply chain risk. Work in progress was $59.5 million, down $1.2 million quarter on quarter. Finished goods inventory was $290.7 million, down $11.3 million 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. Cash flow used by operations was $4.6 million for the third quarter and $44.4 million year-to-date. Capital expenditures were $43.2 million. For the full year, we expect to spend about $60 to $70 million in capital expenditures. That concludes our prepared remarks. Let's open the call for any questions that you may have. Operator, please open up the call for questions.

Operator | Conference Operator

Certainly. Ladies and gentlemen, if you have a question at this time, please press star 1-1 on your telephone. If your question has been answered and would like to remove yourself from the queue, simply press star 1-1 again. Our first question comes from the line of Suji De Silva from Roth Capital. Your question, please.

Suji De Silva | Analyst, Roth Capital

Good morning, David Mark. Congrats on the progress here. Can you talk about the shipments and the growth there? Are there any factors, puts and takes in terms of what we should expect from in terms of your visibility in the next four quarters?

Dr. David Wong | Chief Executive Officer

Yeah. As a shipment, we see there are some customers asking for delay for maybe the Q1 next year. And also, there are certain parts with shortage, right? We cannot fully complete the order as a manufacturer final testing. But those products probably will still get into the Q1 shipment. We're still expecting next year's shipments to continue to grow.

Suji De Silva | Analyst, Roth Capital

These part shortages, David, how long do you expect that to persist? Is that a multi-quarter effect, or is that short-term?

Dr. David Wong | Chief Executive Officer

It's not really. I think there's certain parts we're using right now, and we're kind of replacing some parts. We're kind of looking for new suppliers. And those things have been qualified, you know, in their customer process. And so those parts qualify finished. They can use more of their, I want to say, domestic-made in China parts. So that's probably a portion of the fact there.

I see. Mark McKechnie | Chief Financial Officer

Yeah. Hey, Suji, one other thing. Yeah. One other thing I'd add to the shipments for the quarter and even for the year. We talked about this before, but... Some of the newer products that we would be shipping, you know, that David talked about in his prepared remarks, some of those, you know, probably a little more fell into, it's going to fall into next year versus this year. Okay. Helps, Mark.

Suji De Silva | Analyst, Roth Capital

Thanks. And then my final question is on the panel tools. Can you talk about the opportunity as you ramp maybe into the HBM memory or AI memory opportunity, how much that can grow as a percent of revenues and you know, how quickly that can ramp.

Thanks. Dr. David Wong | Chief Executive Officer

Wow. Okay. So you've got panel packaging, right?

Yes. Charles | Analyst, Needham & Company

Okay.

Dr. David Wong | Chief Executive Officer

Well, and the panel has been real hot, right? In there, you know, you know, this year, especially major customer in Taiwan, real promoting the panel business. We believe panel is a way to solving as large area AI chip, right? Packaging with the HBM together. So all the way for a level, cut a lot of, you know, I call it the area. So it wastes the efficiency of using the area. So panel packaging, one key is plating technology, right? I should say a lot of people in the copper plating for panel is a vertical style. And we are probably the first one to propose the horizontal and the copper plating for the panel, which is also we got the 3D inside the Award, Innovation Technology Award from USA. We are really have a good solution and they can play their panel uniformly and there will be a few requirements of all this either 310 by 310 or 515 by 510. By the way, we're going to ship one of the panel plating tool in the fourth quarter and also we're engaging with multiple customer for the panel packaging business in Taiwan, in the U.S., and also, you know, in China, in China.

Suji De Silva | Analyst, Roth Capital

Okay. Sounds very exciting. Thanks, guys.

I'll pass it on. Operator | Conference Operator

Yeah, thanks, Suji. Thank you. And our next question comes from the line of Charles from Needham & Company. Your question, please.

Charles | Analyst, Needham & Company

Hey, good evening, David, Mark. couple questions here. The first one, a follow-up to Suji's question on shipment. So sounds like it's more of a customer push-out and partly due to parts shortage. And sounds like the implied message seems like it's not a reflection of the ad market demand. But wonder, can you kind of Quantify a little bit. What's the expectation for Q4 shipment? And maybe on a four-year basis as well. Looks like a shipment probably is going to be down this year. This is probably the first time in many years your shipment is down on a four-year basis.

Thank you. Mark McKechnie | Chief Financial Officer

David, do you want to take that or do you want me to start on that?

Dr. David Wong | Chief Executive Officer

Go ahead, Mark. You go ahead and do it.

Mark McKechnie | Chief Financial Officer

Yeah. Hey, Charles. So I think your read's good. We're not really making a call on the end markets here. You know, it's hard to say a company specific versus end market. But yeah, in terms of our shipments, the Q4 will probably be down from Q3. So, you know, you could have the full year would be down year on year. And that is different than what we had expected. I think I would point out that Shipments were pretty heavy last year, as we know, and some of the reasons that we talked about for the deferments and shipments, we should start seeing those pick back up in the first half of next year. I think David, in his prepared remarks, talked about an inflection point. where, you know, we're still shipping a lot of our current products and a lot of newer products we expect to really start kicking in and contributing more next year. You know, the SPM, the furnace, and this panel-level packaging product line.

Dr. David Wong | Chief Executive Officer

Yeah, actually, including we're probably shipping a few PCV tools, and we see that will be, you know, definitely contributing revenue in the next year. So, I think it's kind of a we're in the time of infection point right and their new product come out and also we're expecting some new convenient tool come out too to contributing on their um our shipment and revenue especially to mention this uh proprietary design and spm special nozzle and reach a very excellent result and which is a you know we think we're going to gain a lot of market share for spm process um Charles | Analyst, Needham & Company: Got it. I do have a question a little bit later around innovation, some of the comments you made, David, around, I mean, also proprietary design, et cetera. Before that, maybe a question on the 300 bps impact from inventory write-down. Mark, it wasn't clear to me what's the reason for writing down, if my math is right, around $8 million-ish of the inventory. And may I ask if the write-down is related to inventory you have at your own facility, or this is about some of the write-down of the evaluation tools at your customer sites, and if the latter, what's the reason for that?

Thank you. Mark McKechnie | Chief Financial Officer

Yeah, no, thanks for the question, Charles, on that. So, you know, inventory, you always have a pretty thorough process internally to kind of value the inventory on your books. And so, A big piece of it is related to the aging of some of our raw materials. And it's interesting. We think that, and so it's just kind of a formula you apply to the age profile of your raw materials. And on the other side, you know, there were some finished goods that we took a write-down on. And these were, I think these were mostly at our own internal. See, these were tools that I'm pretty sure were used Charles | Analyst, Needham & Company: we had internally uh and so we're not really disclosing it internal versus um uh end customers yeah uh great thanks um um so david my last question um i think you you spoke you we probably have uh discussed about this along the same line before but uh but you you talk a lot about innovation but uh that develop better products than your global competitors' wing market share. But I think what I am hearing is that domestic customers are probably more looking for simply matching the global baseline, like matching what the global tools they already have given restrictions, given self-sufficiency, all kinds of reasons. At this point of time, like trying to do a lot of product innovation, do you think you may be missing out some near-term opportunities? I understand you said that you're going to win in the long term, but do you think that you're going to, I mean, because your tool, even though it's performing better, maybe it will perform differently from their global baseline, your customer's global baseline. Could that cost you some business in the near term?

Thank you. Dr. David Wong | Chief Executive Officer

Yeah, actually, we are waiting a short time. In other words, I gave this example, this high-temperature SPM process, right? And with our special proprietary design, we can really control all the high-temperature SPM splash out of the chamber and also the vapor into that environment. So therefore, we control the environment very well. That's why I said there are 90 nanoparticles down to a single digit number, you know, basically less than, you know, five. So it's way better than even top tier player, you know, today in SPM process. Also, because we control the environment, we think about even 70 nano, 50 nano, even 30 nano, we can control better. So answer your question is, yeah, there's a certain domestic player going there, or there's other first-tier tool vendor still sell in China, but as I said, we're in the best performance. And also, we think they're either custom in China or outside China, they still desire best performance. As go to small geometry, those are 99 or 70 nanoparticles, real matter their yield loss. So that's why we think that we really gain our market share. both in China or outside China. We still strongly believe our innovation product has been heavily bad patented in inner China, also in global semiconductor country and area. We have our confidence. Nobody will copy our proprietary technology or patent the technology. So that's why we have the confidence to maintain, continue to increase our market share, maintain our gross margin. And I still think AI driving a lot of innovation and the customer desire new technology. Those customer maybe prefer more technology other than low price, right? So that's really, I think, a strong point. And also I want to say a lot of our existing product cannot meet customer future requirement. And so that's another reason we have companies on our tool.

Suji De Silva | Analyst, Roth Capital

Thank you.

Operator | Conference Operator

Once again, ladies and gentlemen, if you have a question at this time, please press star 11 on your telephone. Our next question comes from the line of Mark Miller from the benchmark company. Your question, please.

Mark Miller | Analyst, Benchmark Company

Thank you for the question. I just wonder if you give us some color on what you expect for mo CVD next year and also give us an update on what's going on with SK hynix.

Dr. David Wong | Chief Executive Officer

Okay, well, actually, maybe, Peter, Mark, I want to make sure this is not, we're not going to make a MOCVD, we'll make a PCVD. Okay. So, anyway, you know, PCVD has been, you know, big in the market, a lot of, you know, market size. We developed, you know, the PCVD almost from five years ago, right? And we're choosing, again, innovation approach. And we're differential from major player in the PCVD to big player now. And for example, like our chamber has three chucks. Other people has four or even two. So we believe three chucks in one chamber can do almost all the process. And therefore, customer buy one platform, we can do almost every PCVD process. And for other reasons, we also have a lot of control a chamber power supply or other differentiation come here. So we believe our PCVD will be, uh, we're shipping, you know, you know, probably to this quarter or continue shipping more next quarter. And we'll see that the PCVDs are getting into their, uh, market. And also expecting those PCVD will be, you know, generate revenue next year. And also we have a really high expectation. And those PCVD are not only services in China, you know, we're expecting to go Korea and also, you know, go to global market.

Mark Miller | Analyst, Benchmark Company

If you can comment, please, on Hynix and any developments there.

Dr. David Wong | Chief Executive Officer

Hynix is our customer, right, is a long-run customer, and we're engaged with the multi-tool, you know, cleaning, obviously. and also other products. We're still thinking Hynix is a real innovator, leading customer, and we're continuing to engage with them on multi-product right now. And as I said, again, a lot of our new stuff were developed right now, and they are very interested, right? And because they're also leading all the HPM, leading everything, right? Even the DRAM and the field. So they're desire more of advanced technology. Also, we have a Korean team and Shanghai team together. So it's working very well. And a lot of technology actually was invented and developed in Korea, too. So that's really fitting, you know, the requirement locally, you know, manufactured locally R&D. So we still see a lot of potential. We can provide good technology to our customers in Korea.

Mark Miller | Analyst, Benchmark Company

So is your panel... Packaging tool is that of interest to Hynix?

Dr. David Wong | Chief Executive Officer

Yeah, not only packaging, right? Also, talk about front-end too, right? Okay. And, you know, in all level of the engagement and including, you know, we talk about our foreigners, PCVD, track, and all other even, you know, product unit developers.

Mark Miller | Analyst, Benchmark Company

What about your cleaning tools? Have you been able to penetrate Hynex with the cleaning tools, Tahoe and SAPS?

Dr. David Wong | Chief Executive Officer

Well, we're, you know, we have a SAPS tool has been sold, the main tool, right, in Hynex already. And now, obviously, we have a new cleaning tool engaging with them. And one is probably, you know, end-to-bubbling tool, and which really take care, you know, probably more than a final layer of 3D net. And all this is one of the major applications, you know, we think will be contributing to their customers in the future 3D nano technology.

Thank you. Thank you. Operator | Conference Operator

Thanks, Mark. Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Stephen Paleo for any further remarks.

Stephen Paleo | Managing Director, Blue Shirt Group

Great, thank you. Before we conclude, I just want to give everyone a quick reminder on our upcoming investor conferences. On November 19th, we'll present at the 14th Annual Roth Technology Conference in New York City. On December 3rd, we will present at the UBS Global Technology and AI Conference in Scottsdale, Arizona. On December 16th, we will present at the 14th Annual New York City Summit in New York City. And then on January 15th, we will join... the 28th Annual Needham Growth Conference, virtually for our presentation and one-on-one meetings. Attendance at the conferences are by invitation only. For interested investors, please contact your respective sales representative to register and schedule one-on-one meetings with management. This concludes the call. You may now disconnect.

Take care. Operator | Conference Operator

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day. jsPDF 3.0.3 D:20260608224805-00'00'