Good day, ladies and gentlemen. Thank you for standing by and welcome to the ACM Research Fiscal Third Quarter 2024 Earnings Conference Call. Currently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now I'll turn the call over to Mr. Gary Dvorchak, Managing Director of The Blueshirt Group. Gary, please go ahead.

Good day, everyone. Thank you for joining us to discuss third quarter 2024 results, which we released before the US market opened today. The release is available on our website as well as from Newswire services. There is also a supplemental slide deck posted to the Investors section of our website that we will reference during our prepared remarks. On the call with me today are our CEO, David Wang; our CFO, Mark McKechnie; and Lisa Feng, our CFO of our operating subsidiary, ACM Shanghai. Before we continue, please turn to slide 2. Let me remind you that remarks made during this call may include predictions estimates or other information that might be considered forward-looking. These forward-looking statements represent ACM's current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results to differ materially. Those risks are described under Risk Factors and elsewhere in ACM's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward-looking statements, which reflect ACM's opinions only as of the date of this call. ACM is not obliged to update you on any revisions to these forward-looking statements. Certain of the financial results that we provide on this call will be on a non-GAAP basis, which excludes stock-based compensation and an unrealized gain 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 slide 13 – and refer to slide 13. Let me now turn the call over to David Wang, who will begin with slide 3. David?

Thanks, Gary. Hello, everyone. And welcome to ACM Research third quarter 2024 earnings conference call. Please turn to slide 3. For the third quarter, revenue was $204 million, up 21%. Shipments were $261 million, up 23%. Profitability was good with a gross margin of 51.6% and operating margin of 27.5%. And we are ending the quarter with approximately $369 million of cash and time deposit with a positive cash flow from operations for the quarter. Revenue for the first nine months of the year was $558.6 million, up 44%. Year-to-date shipments were $709.7 million, up 56%. We believe this growth is significant, demonstrate market share gain for ACM and their contribution from new product cycle. Now I will provide the detail on product. Please turn to slide 4. Revenue from single wafer cleaning, Tahoe and semi-critical cleaning product grew 22% in Q3 and represented 79% of total revenue. ACM offer comprehensive top to bottom cleaning portfolio. We estimate the global total available market, or TAM, for the cleaning is close to $6 billion, and ACM products are probably more than 90% of all cleaning process steps in both memory and their logical manufacturing. [indiscernible] in sulfuric acid peroxide mixing, or SPM, have led to increased confidence toward our target for continued market share gain in cleaning. As a reminder, we estimate SPM process represent about 25% of total front-end cleaning market, but so far it has been a small contributor to our business. During prior report, we announced a technical progress in our high temperature SPM solution. Recall that only one other major cleaning tool supplier services the high temperature market for SPM. During our first quarter call, I reported a technical break that could enable us to be the second player. We are now in later stage evaluation at…

Thank you, David. Good day, everyone. Please turn to slide 11. Unless stated otherwise, I'll 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 third quarter of 2024 comparisons or with the third quarter of 2023. I'll now provide financial highlights. Revenue was $204.0 million, up 21%. Revenue for single-wafer cleaning, Tahoe, and semi-critical cleaning was $161.0 million, up 21.6%. Revenue for ECP, front-end packaging, furnace, and other technologies was $34.6 million, up 35.6%. Revenue for advanced packaging, excluding ECP, services and spares, was $8.4 million for the third quarter, down 21.0%. But for the first nine months of the year, it grew by 2.9%. Total shipments for the quarter were $261 million, up 23%. Gross margin was 51.6% versus 52.9%. This exceeded our long-term gross margin target of 40% to 45%. For the full year, we expect our gross margins above the high end of the range. This is due to year-to-date gross margins of about 50% and our expectation for gross margin in the upper end of our 40% to 45% target range for Q4. We continue to expect gross margin to vary from period to period due to a variety of factors such as sales volume, product mix, and currency impact. Operating expenses were $49.2 million, up from $45.3 million. R&D was $24.5 million versus $22.7 million. Sales and marketing was $13.2 million versus $14.3 million. And G&A was $11.6 million versus $8.4 million. For 2024, the full year, we plan for R&D in the 12% to 13% range, sales and marketing in the 7% to 8% range, and G&A in the 5% to 6% range.…

[Operator Instructions]. Our first question comes from the line of Charles Shi of Needham & Company.

Maybe the first question, I think I heard you talking about the wet clean product portfolio you have right now covers 90% of the overall worldwide wet clean market, which includes all kinds of devices. But I want to ask specifically on 3D NAND, what's that coverage percentage number look like? Are you able to cover 100% of all the 3D NAND applications?

Very good question. Well, actually, as I said, our typical process cleaning will cover almost 90%. And this moment, I want to say, is the only single wafer for sulfuric acid. We're not fully in the market yet. So, basically, the rest of the tool – and we are either in R&D with the customer. Also, we're putting in production, right? And even including all this sulfuric acid [indiscernible] of the 3D NAND and also high temperature of the SPM process and also other [indiscernible] process. So we're pretty fully engaged and regarding this 3D NAND wet process [indiscernible] cleaning.

So, basically, there's still some gaps, but you're engaged. This comment would apply to 3D NAND as well.

Yeah, I should say probably by end of this year, we should be qualifying all the process and including – we already put in production existing process, right? So we've made a lot of progress.

The second question I have, I think you said China WFE, you think it will remain at the high level next year, but this is a two part question. So number one, in terms of the change from this year's level, you will remain at – this year's already at a pretty high level, right? But I want to understand, when you say remain at a high level, you're expecting flat to up or what's the expected range here? That's one part. But the other part of the question, obviously, with the US election that happened a couple of days ago, obviously, it's pretty uncertain at this point where the trade policy of the new US administration can go. But does that comment include any of the potential new impact of any of the new tightening or you are assuming the international export control rules remain the same as of today?

Okay, let's come to the first question, right? I should say, last four years, you can see the China WFE market growing quite steadily, and I would say probably next few years, we still have a strong demand in China market. Why? There's still a lot of memory and also logic and foundry, the IGBT market, They're still building process for the fab. So real comes next year and it's hard to give you a number. We're thinking of something like that and maybe a little bit low, maybe a little bit up. Really hard to really predict at this moment. But I want to say that they're strong still. In the next few years, the building process can keep going, right? You're looking at all other foundry business. They're over time – their utilization of the line is pretty heavy. So I want to say we're still kind of very positive, right, about growing in the China market. This is only one day, right? It's hard to predict. We're reading whatever – we have to follow the rules of all the countries, all the regulations come out new or changing. And basically, we're going to need your support. All production ramping [indiscernible] customer in a global.

Our next question comes from the line of Mark Miller of The Benchmark Company.

Congratulations, another strong quarter. I'm just wondering, you've been consistently posting gross margins above your target range for this year. Sounds like they were expecting the margins to come back down to the high end of the range of December quarter. Your backlog, are we going to go back to your target range in 2025 for gross margins?

David, let me take that if you don't mind. I think you did – yeah, Q3, another good quarter. Year to date, just above 50%. It really has to do with our product mix and we've been – we have a lot of differentiation and we've done well on that front. Foreign exchange has helped. But longer term, and we're not going to give guidance, obviously, for next year, but the general longer-term target remains 40% to 45%. And the mix can change given a broad product line. Our backlog, the margins for that, without giving too much, they're pretty good. They're pretty healthy. And so, we'll leave it at that, Mark. I think we're sticking to our 40% to 45% target.

You announced the orders from a US customer for delivery in the second, first half of next year. Any thoughts of where we can expect in terms of your sales outside of China? Is that going to be significantly increasing next year?

I think our business outside of China, obviously, it's a corporate focus. We believe that we've really scaled up our business in mainland China. The model is scale it up near some of these larger customers, these activities that have been going on. And this is where the spending has been and then expand that into the global markets. And we're planning for good growth in China alone next year. International, really depends on our customers and the evaluation status. It's kind of see where they are with their projects and what have you. We've got a few demos in later stage, a lot of focus from the company. I think this clean room in Oregon is a good commitment. So I think when we give our 2025 outlook range, when we give that early next year, we'll probably include some, but right now we don't want to say exactly how much, but we'd expect some contribution next year from the non-China markets. Anything to add, David?

Actually, I do see some customer obviously interesting to our cleaning and also a [indiscernible]. And we see that a big potential, especially our SAPS and megasonic and also this Tahoe tool, right, which can saving sulfuric acid up to 75%. So we see a lot of opportunity for our differential product in getting to the global market, right? So we're expecting those differential product will be more of – in a state of accelerating, right, getting to their customer outside China.

I would add, Mark, just the activity means is good. I know we're all looking for orders, but we're getting with our – we've got a pretty good sized team, US, Europe, other areas. So we're pretty heavily engaged with a number of other customers that we haven't spoken about here.

[Operator Instructions]. Our next question comes from the line of Suji Desilva of ROTH Capital.

Congratulations on the progress here. Maybe following up on Mark's question there, the global customers that you expect to contribute in 2025, what geography do you think is the nearer term opportunity across Europe, US, Korea, and Taiwan?

Yeah, it's hard to give you that precisely right now. Obviously, we see the opportunity in the US as we have a full advanced packaging tool. With regard to this year, we're shipping first half of next year. We continue to see that opportunity. We already have a three tool in one of the key logic customer, their evaluation of the product on a different process step. And also, we see other interest [indiscernible] actually in Asia. So we'll engage with those customer. And next year, we see that [indiscernible] continue, kind of going on with their projection or their plan. So we're really excited and engaged with this big guy outside China really tried to penetrate our differential product in the production line. As I said, a lot of our tools were offered to the market and get the yield improved and also get the big asset saving, at the same time providing excellent during the particle removing performance. So we'll see that as our differential product get accelerated to the market.

On the high temperature SPM solutions, it sounds like you have technical advantage there. What are the specific specs that you can come in to compete with the incumbent there? Is it throughput or the more efficient, any color there would be helpful?

Actually, let me put it this way. Our SPM product, I have two, right? One is the high temperature SPM single wafer tool which is 170 degrees higher, so big asset, right? And then, this tool actually, we did a breakthrough, as I mentioned before. We can much control our chemical splash outside chamber, so therefore we have a better cleaning environment. And with our cleaning chamber, we don't need much time spending on the cleaning the chamber itself. So that will give you uptime better, right? And also give the good particle performance. Second one is really Tahoe tool, right? They're actually targeting lower and middle level temperature of SPM. And this has been our flagship tool and they're combined batch and single. And the real performance breakthrough this year is we have excellent particle removal efficiency, right? As I said, 26 nano particle, adding about six particles only. So that's definitely equivalent to the single-wafer process capability. So with the continuum as improving the filtering system, this tool can be further used into removing one external particle, which is really demand [indiscernible] nodes, memory and DRAM, and also logic. So we see that both tools work in the market in China, also outside China. And everybody – sulfuric acid process, they're actually very happy about their – with treatment, right? Also handle this level of material in the fab environment. So that's really what giving a good performance and also the environment, I call it, protection saving for the other fab in the world. So we see that they're a bigger opportunity for our Tahoe tool.

Our next question comes from the line of Edison Lee of Jefferies.

Congratulations on the great results in 3Q. I just have a quick question because you did mention that the advanced packaging market in China is slowing down. And I think maybe you can actually help us understand whether that should be a leading indicator for finance spending in China? Should we be worried about finance spending in China as a result of the slowdown in advanced packaging in China? So, yeah, how should we think about it?

I want to say that is – really, looking at last year, right, and also in the first half of this year, it's kind of slow. However, we see that a gradual takeoff, right, in Q3, Q4. And we do have other order coming. So you look in other market, in the foundry business, they pick up. I think from now on, they gradually pick up on their – this advanced packaging WFE spending. So we're a positive, I should say, Q4 and the next year. But I'm talking about past, right? Our revenue we presented last four months and last year, all the tool was shipping. So that's our view about this advanced packaging status.

Do you think that the Chinese packaging companies are actually doing something different versus the past? Are they moving into HBM or are they moving into more [indiscernible] type of packaging that requires different equipment? What is happening there?

Obviously, that's quite a different company, right, and there are certain company moving to this high density packaging. And obviously, also, we see the company also moving the panel too. So it's a lot of people and work on this advanced packaging. I call it the technology and also their process development.

[Operator Instructions]. Seeing no more questions in the queue, let me turn the call back to David Wang for closing remarks.

Okay. Thank you, operator, and thank you all for participating on today's call and for your support. Before we close, Gary is going to mention our upcoming investor relations event. Gary, please.

Thanks, David. Before we conclude, I just want to give everyone a quick reminder on our upcoming investor conferences. On November 19th, we will present at Craig-Hallum Capital's 15th Annual Alpha Select Conference in New York. On November 20th, we will present at the ROTH 13th Annual Technology Conference, also in New York. And on December 4th, we'll present at the UBS Global Technology and AI Conference in Scottsdale, Arizona. Finally, on December 17th, we'll present at the 13th Annual New York City NYC Summit in New York. Attendance of the conferences are by invitation only. For interested investors, please contact your respective sales representative to register and schedule one-on-one meetings with the management team. This concludes our call. You may all now disconnect. Have a good day.