Acm Research, Inc. (ACMR) SEC Filing 10-Q Quarterly Report for the period ending Friday, September 30, 2022

Exhibit 99.01

 

ACM Research Reports Third Quarter 2022 Results

 

FREMONT, Calif., Nov. 04, 2022 (Globe Newswire) – ACM Research, Inc. (“ACM” or the “Company”) (NASDAQ: ACMR), a leading supplier of wafer processing solutions for semiconductor and advanced wafer-level packaging applications, today reported financial results for its third fiscal quarter ended September 30, 2022.

 

“Third quarter results represent another solid performance, with record revenue as operations largely returned to normal following the COVID-related restrictions in the first half,” said Dr. David Wang, ACM’s President and Chief Executive Officer. “Revenue nearly doubled and shipments grew by 64% year-over-year, with strong performance from our flagship cleaning tools and incremental contribution from our new ECP and furnace products.”

 

Dr. Wang continued, “We saw good progress at major semiconductor manufacturers outside of China. The evaluation is going well of two cleaning tools at the U.S. facility of a large U.S.-based manufacturer, and we are gaining traction with potential new customers in Europe and other regions. Construction of our Lingang production and R&D center is on track, and we are in the final stages of selecting a site to expand ou r R&D and production facilities in South Korea.”

 

 

 

 

 

 

On October 7, 2022, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) imposed additional controls on exports to and transfers within the PRC relating to advanced integrated circuit (“IC”) products, certain IC manufacturing equipment and technology, and supercomputers. Several of the relevant controls, which consist of export license requirements with a presumption of denial, focus on exports of specified products from the U.S. when destined to PRC-based fabrication facilities producing chips meeting certain advanced node criteria or destined to the PRC for the production of items meeting the parameters of certain export control classification numbers (“ECCNs”) on the Commerce Control List (“CCL”) (and support by U.S. persons of the supply of such products that are not subject to U.S. export controls).

As of now, our subsidiary ACM Research (Shanghai), Inc. (“ACM Shanghai”) has determined that several of its customers have PRC-based facilities that meet the specified criteria, and has also determined that several of its products may be items meeting the parameters of the identified ECCNs. Accordingly, ACM may not be able to import parts from the U.S. to support tool shipments to such facilities, or to import parts to be embedded into tools defined by such ECCN’s, if a license is required for, and the presumption of denial applies to, such imports. ACM Shanghai is working with its various suppliers to continue to source tool components that we and our suppliers assess are not impacted by the new controls, to enable shipments to its customer base.

ACM is continuing to evaluate the effects of the new restrictions, including those imposed on U.S. persons. In the interest of ensuring compliance with the new regulations, ACM has adjusted the activities of some of its U.S. persons and its supply chain during these efforts.

 

 

•

Launched and Shipped First New Furnace Tool to China-Based Foundry Customer. In the third quarter, ACM expanded its 300mm Ultra Fn furnace dry processing platform with the introduction of its Ultra Fn A furnace tool. The Ultra Fn A system adds thermal atomic layer deposition to ACM’s extensive list of supported furnace applications. The first Ultra Fn A furnace tool has been shipped to a top-tier China-based foundry manufacturer, and is expected to be qualified in 2023.

 

Unless otherwise noted, the following figures refer to the third quarter of 2022 and comparisons are with the third quarter of 2021.

 

•

Gross margin was 49.3%, up from 44.3%. Non-GAAP gross margin, which excludes stock-based compensation, was 49.4%, up from 44.5%. Gross margin exceeded the range of 40% to 45% reflected in the Company’s long-term business model. The Company expects gross margin to vary from period to period due to a variety of factors, such as sales volume, product mix and favorable currency impacts from a stronger dollar versus the Chinese RMB.

 

•

Operating expenses were $34.3 million, an increase of 91.9%. Non-GAAP operating expenses, which exclude the effect of stock-based compensation, were $32.6 million, up 94.8%.  Operating expenses as a percent of revenue decreased to 25.7% from 26.7%.  Non-GAAP operating expenses as a percent of revenue decreased to 24.4% from 25.0%.

 

•	Operating income was $31.6 million, up from $11.8 million.  Non-GAAP operating income, which excludes the effect of stock-based compensation, was $33.5 million, up from $13.1 million.

 

•

Unrealized loss on trading securities was $5.3 million. The loss reflects the change in market value of the indirect investment by ACM Shanghai in the STAR Market IPO shares of Semiconductor Manufacturing International Corporation (“SMIC”). The value is marked-to-market quarterly and is excluded in the non-GAAP financial metrics.

 

•	Realized gain from sale of trading securities was $1.1 million due to the sale of a portion of ACM Shanghai’s shares of SMIC, and which generated net proceeds of $4.5 million.

 

•	Other income (expense), net was $7.2 million, which reflects $6.4 million due to gains recognized from the impact of exchange rates on foreign currency-denominated working capital transactions, versus ($0.3) million.

 

•

Income tax expense was $10.5 million, compared to a benefit of $0.3 million. As a result of a change in Section 174 of the U.S. Internal Revenue Code of 1986 that became effective on January 1, 2022, the effective tax rate for 2022 has increased, primarily due to a new requirement to capitalize and amortize previously deductible research and experimental expenses.  The Company’s tax provision for the nine months ended September 30, 2022 assumes the rule will not be overturned and is based on capitalization of all of its R&D expenses for tax purposes.

 

•

Net income attributable to ACM Research, Inc. was $21.0 million, compared to net income of $10.2 million.  Non-GAAP net income attributable to ACM Research, Inc., which excludes the effect of stock-based compensation and unrealized loss on trading securities, was $28.2 million, as compared to non-GAAP net income of $12.4 million.

 

•	Net income per diluted share attributable to ACM Research, Inc. was $0.32, compared to $0.15.  Non-GAAP net income per diluted share, which excludes the effect of stock-based compensation and unrealized loss on trading securities, was $0.42, compared to $0.19.

 

•	Cash and cash equivalents were $336.3 million at September 30, 2022, versus $323.7 million at June 30, 2022. Cash and cash equivalents, plus restricted cash and time deposits were $473.2 million at September 30, 2022, versus $468.9 million at June 30, 2022.

 

A conference call to discuss results will be held on Friday, November 4, 2022, at 8:00 a.m. Eastern Time (8:00 p.m. China Time). To join the conference call via telephone, participants must use the following link to complete an online registration process. Upon registering, each participant will receive email instructions to access the conference call, including dial-in information and a PIN number allowing access to the conference call. This pre-registration process is designed by the operator to reduce delays due to operator congestion when accessing the live call.

Participants who have not pre-registered may join the webcast by accessing the link at ir.acmrcsh.com/events.

A live and archived webcast will be available on the Investors section of the ACM website at www.acmrcsh.com.

 

 

ACM presents non-GAAP gross margin, operating expenses, operating income, net income (loss) attributable to ACM Research, Inc. and basic and diluted earnings per share as supplemental measures to GAAP financial measures regarding ACM’s operational performance. These supplemental measures exclude the impact of stock-based compensation, which ACM does not believe is indicative of its core operating results. In addition, non-GAAP net income attributable to ACM Research, Inc. and basic and diluted earnings per share exclude non-cash change in fair value of financial assets and liabilities and unrealized gain on trading securities, which ACM also believes are not indicative of its core operating results. A reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure is provided below under “Reconciliation of GAAP to non-GAAP Financial Measures.”

 

ACM believes these non-GAAP financial measures are useful to investors in assessing its operating performance. ACM uses these financial measures internally to evaluate its operating performance and for planning and forecasting of future periods. Financial analysts may focus on and publish both historical results and future projections based on the non-GAAP financial measures. ACM also believes it is in the best interests of investors for ACM to provide this non-GAAP information.

 

While ACM believes these non-GAAP financial measures provide useful supplemental information to investors, there are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures may not be reported by competitors, and they may not be directly comparable to similarly titled measures of other companies due to differences in calculation methodologies. The non-GAAP financial measures are not an alternative to GAAP information and are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures. They should be used only as a supplement to GAAP information and should be considered only in conjunction with ACM’s consolidated financial statements prepared in accordance with GAAP.

 

 

Certain statements contained in the third and fourth paragraphs of this press release, and under the heading “Outlook” and in the bullet “Launched and Shipped First New Furnace Tool to China-Based Foundry Customer” under the heading “Operating Highlights and Recent Announcements” above are not historical facts and may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding the intent, belief and current expectations with respect to: the Company’s assessment of opportunities with potential customers in the U.S., Europe and other regions; construction and selection of the Company’s Lingang and South Korea production and R&D facilities; the Company’s expectations with respect to a renewed focus of investments in mature nodes and power devices; the Company’s assumptions with respect to the COVID-19 pandemic, customer demand, supply chain stability, and acceptances of tools; and the impact of the new U.S. Department of Commerce trade regulations on the Company’s business.  Forward-looking statements are based on ACM management’s current expectations and beliefs, and involve a number of risks and uncertainties that are difficult to predict and that could cause actual results to differ materially from those stated or implied by the forward-looking statements. Those risks and uncertainties include, but are not limited to, the following, any of which could be exacerbated even further by the continuing COVID-19 outbreak in China and globally: anticipated customer orders or identified market opportunities may not grow or develop as anticipated; customer orders already received may be postponed or canceled; ACM may be unable to obtain the qualification and acceptance of its delivered tools when anticipated or at all, which would delay or preclude ACM’s recognition of revenue from the sale of those tools; suppliers may not be able to meet ACM’s demands on a timely basis; ACM’s technologies and tools may not gain market acceptance; ACM may be unable to compete effectively by, among other things, enhancing its existing tools, adding additional production capacity and engaging additional major customers; ACM may incur significant expenses long before it can recognize revenue from new products, if at all, due to the costs and length of research, development, manufacturing and customer evaluation process cycles; volatile global economic, market, industry and other conditions could result in sharply lower demand for products containing semiconductors and for ACM’s products and in disruption of capital and credit markets; ACM’s failure to successfully manage its operations, including its inability to hire, train, integrate and manage additional qualified engineers for research and development activities; and trade regulations, including those recently published by the U.S. Department of Commerce imposing certain restrictions on equipment shipments and business practices with China-based semiconductor manufacturers, currency fluctuations, political instability and war, all of which may materially and adversely affect ACM due to its substantial non-U.S. customer and supplier base and its substantial non-U.S. manufacturing operations. A further description of these risks, uncertainties and other matters can be found in filings ACM makes with the U.S. Securities and Exchange Commission. Because forward-looking statements involve risks and uncertainties, actual results and events may differ materially from results and events currently expected by ACM. ACM undertakes no obligation to publicly update these forward-looking statements to reflect events or circumstances that occur after the date hereof or to reflect any change in its expectations with regard to these forward-looking statements or the occurrence of unanticipated events.

 

 

The Company develops, manufactures and sells semiconductor process equipment for single-wafer or batch wet cleaning, electroplating, stress-free polishing and thermal processes that are critical to advanced semiconductor device manufacturing, as well as wafer-level packaging. The Company is committed to delivering customized, high performance, cost-effective process solutions that semiconductor manufacturers can use in numerous manufacturing steps to improve productivity and product yield.

 

© ACM Research, Inc. ULTRA C and the ACM Research logo are trademarks of ACM Research, Inc. For convenience, these trademarks appear in this press release without ™ symbols, but that practice does not mean that ACM will not assert, to the fullest extent under applicable law, its rights to the trademarks.

 

For investor and media inquiries, please contact:

 

ACM RESEARCH, INC.

Condensed Consolidated Balance Sheets

(unaudited)

		September 30, 2022				December 31, 2021
		(Unaudited)
		(In thousands, except for par value)
Assets
Current assets:
Cash and cash equivalents		$	336,275			$	562,548
Restricted cash			367				519
Short-term time deposits			66,176				-
Trading securities			14,164				29,498
Accounts receivable			188,341				105,553
Income tax receivable			63				1,082
Other receivables			15,135				18,979
Inventories			327,792				218,116
Advances to related party			5,158				2,383
Prepaid expenses			17,771				14,256
Total current assets			971,242				952,934
Property, plant and equipment, net			66,470				14,042
Land use right, net			8,547				9,667
Operating lease right-of-use assets, net			2,647				4,182
Intangible assets, net			873				477
Long-term time deposits			70,400				-
Deferred tax assets			6,576				13,166
Long-term investments			18,538				12,694
Other long-term assets			2,373				45,017
Total assets			1,147,666				1,052,179
Liabilities and Equity
Current liabilities:
Short-term borrowings			50,688				9,591
Current portion of long-term borrowings			2,260				2,410
Related party accounts payable			6,589				7,899
Accounts payable			92,325				93,451
Advances from customers			136,610				52,824
Deferred revenue			4,911				3,180
Income taxes payable			8,564				254
FIN-48 payable			2,054				2,282
Other payables and accrued expenses			40,281				31,735
Current portion of operating lease liability			1,320				2,313
Total current liabilities			345,602				205,939
Long-term borrowings			18,810				22,957
Long-term operating lease liability			1,327				1,869
Deferred tax liability			1,169				1,302
Other long-term liabilities			6,660				8,447
Total liabilities			373,568				240,514
Commitments and contingencies
Equity:
Stockholders’ equity:
Class A Common Stock			5				5
Class B Common Stock			1				1
Additional paid in capital			601,431				595,045
Retained earnings			91,186				63,732
Statutory surplus reserve			8,312				8,312
Accumulated other comprehensive income (loss)			(57,920	)			9,109
Total ACM Research, Inc. stockholders’ equity			643,015				676,204
Non-controlling interests			131,083				135,461
Total equity			774,098				811,665
Total liabilities and equity		$	1,147,666			$	1,052,179

ACM RESEARCH, INC.

 

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
		(Unaudited)								(Unaudited)
		( In thousands, except share and per share data)								( In thousands, except share and per share data)
Revenue		$	133,709			$	67,013			$	280,290			$	164,609
Cost of revenue			67,742				37,328				150,480				95,199
Gross profit			65,967				29,685				129,810				69,410
Operating expenses:
Sales and marketing			13,133				6,363				27,494				17,460
Research and development			15,678				7,856				44,391				21,293
General and administrative			5,520				3,671				15,560				11,081
Total operating expenses,			34,331				17,890				87,445				49,834
Income from operations			31,636				11,795				42,365				19,576
Interest income			2,016				33				5,965				113
Interest expense			(419	)			(191	)			(986	)			(574	)
Realized gain from sale of trading securities			1,136				-				1,136				-
Unrealized gain (loss) on trading securities			(5,281	)			(919	)			(9,562	)			1,817
Other income (expense), net			7,207				(255	)			9,949				(683	)
Equity income in net income of affiliates			1,251				421				1,652				1,036
Income before income taxes			37,546				10,884				50,519				21,285
Income tax benefit (expense)			(10,470	)			266				(14,138	)			3,021
Net income			27,076				11,150				36,381				24,306
Less: Net income attributable to non-controlling interests			6,072				995				8,927				2,114
Net income attributable to ACM Research, Inc.		$	21,004			$	10,155			$	27,454			$	22,192
Comprehensive income:
Net income			27,076				11,150				36,381				24,306
Foreign currency translation adjustment			(42,416	)			(409	)			(80,334	)			1,259
Comprehensive Income (loss)			(15,340	)			10,741				(43,953	)			25,565
Less: Comprehensive income (loss) attributable to non-controlling interests and redeemable non-controlling interests			(1,057	)			757				(4,378	)			2,471
Comprehensive income (loss) attributable to ACM Research, Inc.		$	(14,283	)		$	9,984			$	(39,575	)		$	23,094
Net income attributable to ACM Research, Inc. per common share:
Basic		$	0.35			$	0.17			$	0.46			$	0.39
Diluted		$	0.32			$	0.15			$	0.41			$	0.34
Weighted average common shares outstanding used in computing per share amounts:
Basic			59,360,790				58,267,638				59,123,895				57,340,059
Diluted			65,612,665				66,127,548				65,629,273				65,191,020

 

ACM RESEARCH, INC.

Total Revenue by Product Category, by Equipment Type and by Region

 

`		Three Months Ended September 30,								Nine Months Ended September 30,
( In thousands)		2022				2021				2022				2021
Single wafer cleaning, Tahoe and semi-critical cleaning equipment		$	99,720			$	49,448			$	198,336			$	127,322
ECP (front-end and packaging), furnace and other technologies			24,521				8,200				57,269				13,750
Advanced packaging (excluding ECP), services & spares			9,468				9,365				24,685				23,537
Total Revenue By Product Category		$	133,709			$	67,013			$	280,290			$	164,609
Wet cleaning and other front-end processing tools		$	117,941			$	49,448			$	229,195			$	127,322
Advanced packaging, other processing tools, services and spares			15,768				17,565				51,095				37,287
Total Revenue Front-end and Back-End		$	133,709			$	67,013			$	280,290			$	164,609

		Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
Mainland China		$	131,180			$	66,887			$	273,585			$	164,319
Other Regions			2,529				126				6,705				290
		$	133,709			$	67,013			$	280,290			$	164,609

ACM RESEARCH, INC.

Reconciliation of GAAP to Non-GAAP Financial Measures

 

As described under “Use of Non-GAAP Financial Measures” above, ACM presents non-GAAP gross margin, operating expenses, operating income, net income attributable to ACM Research, Inc., and basic and diluted earnings per share as supplemental measures to GAAP financial measures, each of which excludes stock-based compensation (SBC) from the equivalent GAAP financial line items. In addition, non-GAAP net income attributable to ACM Research, Inc., and basic and diluted earnings per share exclude unrealized gain on trading securities. The following table reconciles gross margin, operating expenses, operating income, net income attributable to ACM Research, Inc., and basic and diluted earnings per share to the related non-GAAP financial measures:

		Three Months Ended September 30,
		2022																2021
		Actual (GAAP)				SBC				Other non- operating adjustments				Adjusted (Non-GAAP)				Actual (GAAP)				SBC				Other non- operating adjustments				Adjusted (Non-GAAP)
		(In thousands)
Revenue		$	133,709			$	-			$	-			$	133,709			$	67,013			$	-			$	-			$	67,013
Cost of revenue			(67,742	)			(130	)			-				(67,612	)			(37,328	)			(108	)			-				(37,220	)
Gross profit			65,967				(130	)			-				66,097				29,685				(108	)			-				29,793
Operating expenses:
Sales and marketing			(13,133	)			(349	)			-				(12,784	)			(6,363	)			(417	)			-				(5,946	)
Research and development			(15,678	)			(666	)			-				(15,012	)			(7,856	)			(293	)			-				(7,563	)
General and administrative			(5,520	)			(748	)			-				(4,772	)			(3,671	)			(460	)			-				(3,211	)
Income (loss) from operations		$	31,636			$	(1,893	)		$	-			$	33,529			$	11,795			$	(1,278	)		$	-			$	13,073
Unrealized loss on trading securities			(5,281	)			-				(5,281	)			-				(919	)			-				(919	)			-
Net income (loss) attributable to ACM Research, Inc.		$	21,004			$	(1,893	)		$	(5,281	)		$	28,178			$	10,155			$	(1,278	)		$	(919	)		$	12,352
Basic EPS		$	0.35											$	0.47			$	0.17											$	0.21
Diluted EPS		$	0.32											$	0.42			$	0.15											$	0.19

		Nine Months Ended September 30,
		2022																2021
		Actual (GAAP)				SBC				Other non- operating adjustments				Adjusted (Non-GAAP)				Actual (GAAP)				SBC				Other non- operating adjustments				Adjusted (Non-GAAP)
		(In thousands)
Revenue		$	280,290			$	-			$	-			$	280,290			$	164,609			$	-			$	-			$	164,609
Cost of revenue			(150,480	)			(383	)			-				(150,097	)			(95,199	)			(289	)			-				(94,910	)
Gross profit			129,810				(383	)			-				130,193				69,410				(289	)			-				69,699
Operating expenses:
Sales and marketing			(27,494	)			(1,277	)			-				(26,217	)			(17,460	)			(1,400	)			-				(16,060	)
Research and development			(44,391	)			(1,733	)			-				(42,658	)			(21,293	)			(801	)			-				(20,492	)
General and administrative			(15,560	)			(1,843	)			-				(13,717	)			(11,081	)			(1,333	)			-				(9,748	)
Income from operations		$	42,365			$	(5,236	)		$	-			$	47,601			$	19,576			$	(3,823	)		$	-			$	23,399
Unrealized gain (loss) on trading securities			(9,562	)			-				(9,562	)			-				1,817				-				1,817				-
Net income (loss) attributable to ACM Research, Inc.		$	27,454			$	(5,236	)		$	(9,562	)		$	42,252			$	22,192			$	(3,823	)		$	1,817			$	24,198
Basic EPS		$	0.46											$	0.71			$	0.39											$	0.42
Diluted EPS		$	0.41											$	0.64			$	0.34											$	0.37

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