ACM Research, Inc. (ACMR) Q3 2026 Earnings Call Transcript

Operator: Good day, ladies and gentlemen. Thank you for standing by, and welcome to the ACM Research third 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. I would now like to hand the conference over to your speaker today, Steven Pelayo. Please go ahead.

Steven Pelayo: Good day, everyone. Thank you for joining us to discuss third quarter 2026 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 David Wang, our CFO Mark McKechnie, and Lisa Feng, 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, and 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, and beginning in the second quarter of 2026, its impact to net income attributable to non-controlling interests. 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. Also, unless otherwise noted, the following figures refer to the third quarter of 2026, and comparisons are to the third quarter of 2025. I will now turn the call over to David Wang. David?

David Wang: Thanks, Steven. Hello, everyone, and welcome to ACM third quarter 2026 earnings conference call. We delivered strong results for the September quarter, with revenue up 37% and shipment up 31%. We attribute the growth to one, market share gain and product cycle, and two, good execution by our production and supply chain team. Growth was led by our ECP and advanced packaging categories. I am especially pleased with the return to our growth for our cleaning categories. One, we are gaining market share with more cleaning steps and technology improvements. Two, our Lingang mini line has helped our engineers to duplicate our customer production environment and deliver technology improvements to the market much faster. And three, broader adoption of our single-wafer SPM solution across multiple customers. We are making good progress with our proprietary panel-level horizontal electroplating technology. In October, we announced the shipment to a customer in Asia of a 310 by 310 millimeter panel-level horizontal plating tool. We believe this is the world's first shipment of its kind, and it truly marks a significant milestone in our commercialization efforts. This follows earlier shipment of a larger 515 by 510 millimeter system to a mainland China customer. I will provide more detail on this later. I will now provide an update on our backlog. As reported by ACM Shanghai about a month ago, total backlog as of September 29, 2026, was $2.5 billion, an 88% year-over-year increase. The backlog includes orders across all product categories, with a heavier emphasis on our new products. Year-to-date orders through September 30 were up 147%. Thanks to good execution by our sales, production, and operation team, we continue to expect shipment to grow faster than revenue for 2026. We remain confident in our growth profile. For 2026, we see a healthy backdrop for China WFE as our customers continue to scale their production capacity. We expect an extra boost for our business from several product cycles, including SPM and furnace. Market share gains, together with strong execution, enable us to outgrow the China WFE market. We are optimistic that our newer platform will provide another source for growing, as we expect the track PVD and the panel-level horizontal plating to proceed from evaluation phase into commercialization phase beginning next year. Now, onto our third quarter results. Please turn to slide three. Revenue was $368 million, up 37%. Shipments were $343 million, up 31%. Gross margin was 41.6%, and operating margin was 18%. And we ended the quarter with gross cash of $1.3 billion and net cash $0.9 billion. 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 $211 million, up 16%, and represents 27% of revenue. ACM has developed one of the industry's broadest cleaning product portfolio, spanning a full range of critical cleaning and wet processing steps. Our product, including SAPS/TEBO, Megasonic, Tahoe, backside cleaning, solvent cleaning, bevel cleaning, scrubber, wet etcher, and our proprietary sulfuric peroxide mixture of SPM technology. Semiconductor devices are becoming more complex with additional process steps and more demanding cleaning requirements. We believe our broad portfolio of differentiated technology positions ACM to capture those growing opportunities. We are fully committed to our long-term target for 60% market share in China's cleaning equipment market. Our SPM product line is a key part of the target. As a reminder, we estimate that SPM tools represent about one-third of the total cleaning equipment market, and our product cycle is just now beginning to contribute. We recently introduced our enhanced version of our 170-degree Celsius single-wafer Hot SPM system, incorporating sulfuric acid recycling. The system achieves a 70% sulfuric acid recycle rate with reasonable particle performance. This innovation is expected to reduce sulfuric acid consumption by approximately 400 tons per tool annually, delivering meaningful environment and operating cost benefits. In October at China International Industry Fair, ACM Shanghai was presented with China International Industry Fair Innovation Achievements Awards for its single-wafer high-temperature SPM cleaning system. This is yet another award from prestigious organization, which further highlights the innovation and technology capability of our SPM platform. I am pleased to repeat today that we are on track to ship more than 20 single-wafer SPM tools across multiple customers for the full year of 2026. Beyond SPM, we continue to expand the capability and application of other differentiated cleaning technologies. Our Ultra C Tahoe now supporting additional wet etcher and monitor wafer reclaim applications, providing customers with a greater process flexibility and expanding the range of addressable applications, especially in the reduction for fine particles less than 19 nanometers. We are also getting more traction with our supercritical CO₂ cleaning technology. Our differentiated technology with a much smaller CO₂ chamber reduces CO₂ usage by 30% as compared with other market solutions. At the same time, we deliver better drying performance. This is a strong combination, and we are confident we can take a share with this product line and expanding application from DRAM to 3D NAND and analog application. Revenue from ECP, furnace, and other technology grow 83% and represents 30% of total revenue. Growing growth was driven primarily by strong momentum in both front-end wafer level and back-end advanced packaging electroplating applications, with the furnace contribute to a relatively small portion. We see increased demand for electroplating for both logic and memory applications as semiconductor manufacturing and packaging become more complex. Our proprietary panel-level horizontal plating technology is a game changer for the industry. We began development for panel-level plating for more than five years ago, and the market is now coming to us. Our patented horizontal design enables highly uniform plating across panel, including increasingly larger dimension substrate formats. Our 310 by 310 millimeter system supports copper, nickel, tin, silver, gold plating processes, incorporates high-speed plating paddle technology, and supports tall copper pillars exceeding 300 microns with a good within-die uniformity. We have engaged with multiple customers across different regions and panel size configurations. We also offer comprehensive set of wet processing tool for panel-level packaging, including Ultra C vac-p Flux Cleaning and Ultra C bev-p Panel Bevel Etcher and Cleaning Tool. We are confident that ACM differentiated technology positions us to enable next-generation solutions as driven by the increasingly complex 2.5D and 3D packaging roadmap for the global AI. Turning to our furnace business, we continue to make progress in expanding customer adoption. We are advancing our capability across key applications, including silicon nitride LPCVD, polysilicon LPCVD, oxidation, thermal ALD, and plasma-enhanced ALD, addressing opportunity across both memory and logic applications. We also supply high-temperature, 1,150-degree-Celsius, and ultra-high-temperature, 1,250-degree-Celsius, annealing furnaces, especially address IGBT applications. As this system complete customer acceptance and the transition into production, we expect the furnace to making more meaningful contribution to our revenue in 2027. Revenue from advanced packaging, which exclude ECP, but include service and spare parts, was up 71% and represents 13% of the revenue mix. This including coater, developer, etcher, stripper, scrubber, and vacuum cleaning tools, supporting a broader range of advanced packaging applications. We are particularly pleased with our global progress here, with active deployment in Singapore and North America across a range of those tools. We believe our broader product portfolio and expanding global customer relationships position us well to capture additional opportunity as we continue to grow this business. Turning to our track and PECVD platform, we have made a progress with customer evaluation and initial deployment of our next generation system. For track, our focus remain on delivering industry-leading throughput and competitive process performance, addressing opportunity in KrF lithography, across the standalone system and configuration integrated with lithography scanners. For PECVD, we believe our differentiated chamber architecture, electrostatic chuck design, and RF power source technology provide important advantages in throughput and process performance. We are working closely with a key customer to demonstrate the performance and capability of both platforms. Looking ahead, we expect additional shipment in 2027, with revenue contribution and expected as customer qualification and production adoption progress through 2027 and into 2028. Next, I will provide the update on global manufacturing and operation infrastructure. First, Lingang. Please turn to slide eight. Our first Lingang building continue to operate in a volume production, and we are currently ramping up our second building. Together, the two building can support up to $3 billion in annual output, providing a significant capacity to scale our business over time. I am pleased to report that we expect shipment in the fourth quarter of 2026 to increase from third quarter levels, and we also plan for good growth in shipment for 2027 and beyond. Next, our Oregon facility. Please turn to slide nine. We are preparing for the official opening of our Oregon operation very soon. This is an important milestone to support customer outside mainland China. The facility including Class 100 cleaning room to product demonstration and customer evaluation, along with the clean room for storage, pre-assembly, manufacturing, and technical support capability. We believe U.S.-based demo lab and production facility will support our effort to scale our global business. In addition, we continue to strengthen our operation across Asia. In Korea, we are expanding the capability of Hanguk ACM, including manufacturing, engineering, and technical supporting resource to serve our growing international customer base. In Singapore, we are adding local resource to support customer installation, service, and ongoing technical engagement. Our global business continue to gain momentum. As we discussed last quarter, we expect to have more than 20 tools installed at a customer site outside mainland China by year-end 2026, represent approximately 10 customer across five countries. We are particularly encouraged by our progress in North America, Singapore, and other part of Asia, where our global sales and service team expanding customer relationships and supporting deployment across a growing range of product and applications. This engagement are helping us establish a stronger foundation for future business as customer gain experience with our technology and evaluate the opportunity for broader adoption. The progress we are making demonstrate the competitiveness of our technology and position ACM for meaningful long-term growth outside mainland China. Now I'll provide our outlook for the full year 2026. Please turn to slide 10. as a result of good execution by our sales and operation team, significant backlog, and several major product cycle, we are raising our outlook as follows. We now expect 2026 revenue to be $1.24 billion-$1.28 billion, up 38%-42% year-over-year. This compares to our previous range of $1.125 billion-$1.175 billion. We continue to expect full year shipment growth to outpace revenue growth. We believe our expanding differentiated product portfolio, global infrastructure, and global customer relationships position ACM to capture new market opportunity and advance toward our long-term revenue target of $4 billion. With that, let me turn the call over to Mark to review our financial results in more detail.

Mark McKechnie: 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. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release. Also, unless otherwise noted, following figures refer to the third quarter of 2026, and comparisons are with the third quarter of 2025. We'll now provide the financial highlights. Revenue was $367.7 million, up 36.6%. Revenue for single-wafer cleaning, Tahoe, and semi-critical cleaning was $210.7 million, up 16.1%, and represented 57.3% of sales. Revenue for ECP, front-end packaging, furnace, and other technologies was $109.5 million, up 82.9%, and represented 29.8% of sales. Revenue for advanced packaging, excluding ECP, services, and spares, was $47.5 million, up 71.2%, and represented 12.9% of sales. Total shipments were $343.5 million, up 30.6%. 2026, we continue to expect shipment growth to outpace revenue growth. Gross margin was 41.6% versus 42.1%. Gross margin was slightly below our long-term target model. This was due in part to product mix, foreign exchange, and the inventory provision for the quarter. We maintain our 42%-48% long-term target range, and product mix can cause fluctuations on a quarterly basis. For the fourth quarter, we expect gross margin to improve modestly from the third quarter level. Operating expenses were $86.7 million, up 12.7%. R&D was 12.8% of sales and marketing was 6.7%, and G&A was 4%. For 2026, we plan for R&D in the 15%-17% range, sales and marketing in the 7%-8% range, and G&A in the 5% range. Operating income was $66.2 million versus $36.5 million. Operating margin was 18.0% as compared to 13.6%. Income tax expense was $1.9 million versus $2.7 million. 2026, we expect our effective tax rate in the 10% range. Net income attributable to ACM Research was $40.5 million versus $28.4 million. Non-GAAP net income excluded $10.7 million in stock-based compensation expense and the unrealized loss on short-term investments, together with its effect on non-controlling interest. Net income per diluted share was $0.55 versus $0.41. Now, under the balance sheet and cash flow items. Cash, cash equivalents, restricted cash, and time deposits were $1.28 billion at the end of the third quarter. Net cash, which excludes short-term and long-term debt, was $0.9 billion. Total inventory net was $851.2 million. This consisted of raw materials net at $465.5 million, work in progress net at $122.7 million, finished goods inventory net at $263.1 million. This 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 $70.4 million. Capital expenditures were $25.2 million. For the full year 2026, we continue to expect capital expenditures of about $175 million. That concludes our prepared remarks. Now let's open the call for any questions that you may have. Operator, please go ahead.

Operator: As a reminder, to ask a question, you will need to press star, one, and one on your telephone and wait for your name to be announced. To withdraw your question, please press star, one, and one again. Please stand by as we compile a Q&A roster. Our first question comes from the line of Suji Desilva of Roth Capital. Please go ahead. Your line is open.

Suji Desilva: Hi, David. Hi, Mark, Lisa. Congratulations on the progress here. Very strong.

Mark McKechnie: Yeah.

Suji Desilva: Great job.

Mark McKechnie: Thanks, Suji.

Suji Desilva: The new products seem to be growing nicely here. What do you think the mix of those will be a year or two out versus where they are now? Because I think that will help drive some of the growth and the margin opportunity for you guys.

Mark McKechnie: David, you are muted. Hey, David, I think you are muted.

David Wang: One second. Let me get it.

Mark McKechnie: There we go. We can hear you now, David. We can hear you.

David Wang: Sure. Well, actually, you mean the new product, right?

Mark McKechnie: Yes

David Wang: Track, PECVD, right? And the-

Mark McKechnie: Correct

David Wang: Horizontal electroplating. Yes, I think the Well, again, this new product will be also where we emphasize differentiated technology, and when it come out, it will be also, we think, the good margin for our product, especially this horizontal electroplating, right? It got a good recognition from customer. Our Track system started getting to their pre-production together with scanner. All the PECVD made a progress too. As this new product, joining, or including furnace too, right, joining to our revenue stream, we think we still give us maintain and even some product increase our gross margin.

Mark McKechnie: Yeah. Hey, Suji, maybe I will answer to that. I mean, the mix of the new products next year, one thing is in the backlog, I think David mentioned that the mix was skewed a bit towards some of our newer products.

David Wang: Right.

Mark McKechnie: I mean, we have got a lot teed up for new products next year that they will contribute in different Some shipments first then to revenue. Our SPM product cycle is just starting to kick in pretty nicely. I think furnace, we have got a lot of tools that are under evaluation, and so that is really small, and we expect that to kick in pretty nice next year. Then, of course, Track PECVD and this panel level plating tools are really early stage, so a lot of growth potential from all those starting next year.

Suji Desilva: Yeah, that sounds great. Then, same question in terms of mix and how that trends next year or two for the global customers versus the China customers, because it seems both are growing, but it seems like you are landing in more regions and geographies globally. So, curious how the global customer mix increases over the next year or two.

David Wang: Yeah. Actually, we see there are more of our international customer interest into our technology, right? This year, we have more of an advanced packaging tool in store in the Singapore region. Also, we do have other customer interest to our technology in the U.S., in Korea, and also in Taiwan region, right? We see that there are also customers even in Europe. By end of this year, we'll have 20 tools being installed in the region outside mainland China. I should say next year, we'll be have a much better outcome, right, for the global customer.

Mark McKechnie: Yeah. Hey, Suji, the one thing I'd add, we'll, of course, give our guidance like we always do in January of next year. But for the global customers to hit 10% of our revenue, at these levels, it's $120 million plus.

David Wang: Yeah.

Mark McKechnie: We're not really ready to talk about the mix that'll hit. I guess the challenge is our business in China with our product cycles is growing at a pretty good clip. But we expect the global customers to really grow in terms of revenue this year, of course, next year, and for many years to come as we scale that up.

Suji Desilva: Yeah, and I understand China's growing strong as well. Last quick question. Supply chain, are you guys seeing any constraints? What's the timing to Lingang second building being up and running? How long do you think that'll take?

David Wang: I think the second building already finished decoration, and we start moving the people and start using that right now. With that, the second building being put into the manufacturing, our space almost double, right? Of course, we're going to hire more people, train the other technicians and workers, and to really get a double of the capacity. Next one is really, I want to say, this supply chain constraint, right? Probably everybody has the same problem, since this increasing too fast. But we're still doing very well and working with our vendor supplier. Basically, we give them six months and even longer, one-year forecast. Then we give those primary, I want to say, their supplier forecast. We want them to increase the capacity. But some people, some can do, maybe some cannot meeting our requirement. Therefore, I'm looking for a second source, third source, and to meet those our requirements. Our team with this working very well. Again, it's a lot of challenging, and our team made a lot of progress for this supply chain management and control.

Mark McKechnie: Yeah. Suji, David, if you don't mind, I'll just add a few things. I mean, our supply chain team is really critical, right? I mean, they've helped us drive the growth over the past years. We've been through some interesting market conditions. In this case, we think we're doing ACM is not going to be the one to hold up our customers, right? David was pretty clear. Q3 shipments were pretty strong. We expect Q4 shipments to be even higher, right? You go back and look at some of our past years, a lot of times you have kind of a flat to down Q4, but I think the execution from the team, the Lingang facility comes on at exactly the right time. We used our balance sheet to grow our raw materials this quarter, so we used a little bit of cash, but I think that was the right thing to do to scale up for our production.

Suji Desilva: Understood. Thanks. I will pass it along, guys. Congrats to you.

Mark McKechnie: Yeah. Thanks, Suji.

David Wang: Thank you, Suji.

Operator: We will now take our next question. Please stand by. Our next question comes from the line of Bintuo Ni of Daiwa Securities. Please go ahead. Your line is open.

Bintuo Ni: Great. Thank you, David, Mark. Thanks for letting me on. First question is that we had a pretty volatile gross margin. Now it's back to 41% in the quarter. You mentioned product mix and also the inventory provisions. Can I hear more about the inventory provisions? Is it also happening in fourth quarter as well?

Mark McKechnie: Yeah. Let me hit on that, and then I'll kind of hit that one, and I'll let David talk a little bit about our strategies here. The inventory provision, it wasn't particularly high here in the third quarter. Second half of last year, we had some challenges there, but this time it was kind of within a normal range. So, we feel like we've got that managed, and so it'll be in kind of similar levels next quarter, and even quarterly for next year, the provision. The bigger impact was really, I think, on the product mix and even the foreign exchange on the quarter. David, you might want to say something about kind of how we focus on world-class products, right? The kind of the longer-term strategy for our gross margins.

David Wang: Yeah, I would say that real gross margin long run, and it's really we rely on our differentiated product, right? With all our cleaning, ECP, even also furnace, we're developing PECVD also Track. We all rely on our differentiated technology. So our product in the market, even China, sell a lot. We cannot see anybody can copy our differentiated technology with all well patent and also trade secret protection. So with our product, if we're succeeding, become the number one performance, I mean, succeed in the top tier of the global player, and that product will be really have a good margin in China market. If anybody, as I said, cannot copy ACM tool, right? Even some of similar to come out with the top tiers guys tool, their performance is still below us. That's our confidence. We can maintain long term and gross margin in the market China. Of course, those differentiated patent protected technology also can sell outside mainland China, and also outside mainland China pricing also good too. So for that long run with consideration, we have a confidence we can maintain our gross margin in the 42%-48%.

Bintuo Ni: That's great. Thank you. My second question is about orders. If I hear correctly, you had 147% order growth in nine months of 2026. I think your first half order growth was 100%. The third quarter was very strong. How much is driven by volume and how much is driven by share gains? Thank you.

David Wang: Mark, you want to touch that?

Mark McKechnie: Yeah, let me hit on that, and I think, David, I'll help you with that. The market in China has been pretty solid, right? We think it's still pretty early in the investment days in China. Growing our shipments 30% and the orders at the level we're growing, we think we're growing a lot faster than the market, both in terms of orders, revenue, and shipments. I don't know how to break it out between the market, the China WFE market, but it's always our goal to grow faster than the China WFE market.

David Wang: Yeah, I want to say that is China market still in their, I want to say their growing stage. A lot of logic fab and also their memory fab continue and increase their capacity. Also, I want to say their demand and also the orders, the data center and automobile and also robotics will continue driving China market growth. Also, I want to say there probably, you want to say the building space and also space is probably about two year, a few year, compared with the outside growth, right, in terms of also technology. We see that even peak, reach, so far people talk about global 2028 maybe is a peak or 2029 peak. We think China peak will be behind that year or two year. That's why we have a real strong confidence to the revenue long run, next five year for China WFE market.

Bintuo Ni: Great. Thank you very much, and congratulations on the good development lately. Thanks a lot.

Mark McKechnie: Great. Thank you, sir.

Operator: As a reminder, to ask a question, you will need to press star, one, and one on your telephone and wait for your name to be announced. Please stand by as we compile a Q&A roster. There are no further questions. Speakers, please continue.

Steven Pelayo: Okay, thanks, everyone. Before we conclude, I do want to give everyone a quick reminder of our upcoming investor conferences. On November 18th, we will participate in the 15th Annual Roth Technology Conference at the Hard Rock Hotel in New York City. On November 19th, we will participate with the Daiwa Miami Corporate Day at the Mondrian South Beach in Miami. December 2nd and 3rd, we will present at the UBS Global Technology and AI Conference in Scottsdale, Arizona. On December 15th, we will present at the 15th Annual New York City Summit at Mastro's in New York City. Attendance at the conference is by invitation only. For interested investors, please contact your respective sales representatives to register and schedule one-on-one meetings with the management team. This concludes our call, and you may now disconnect. Take care.