(2) Prior period results have been adjusted to reflect the three-for-one stock split effected in the form of a stock dividend in March 2022.
Outlook
For fiscal year 2022, the Company now expects revenue to be in the range of $365 million to $385 million, versus the previous guidance range of $365 million to $405 million. The range of the Company’s 2022 outlook reflects, among other things, the impact from the new US trade policy, supply chain constraints, various spending scenarios for the production ramps of key customers, and the timing of acceptances for first tools under evaluation in the field, and assumes stability with respect to the COVID-19 pandemic in China.
Impact of New Department of Commerce’s Bureau of Industry and Security Controls on Exports
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.
Operating Highlights and Recent Announcements
- Shipments. Total shipments in the third quarter of 2022 were $163 million, versus $99 million in the third quarter of 2021. Total shipments include deliveries for revenue in the quarter and deliveries of first tool systems awaiting customer acceptance for potential revenue in future quarters.
- 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.
Financial Summary
Unless otherwise noted, the following figures refer to the third quarter of 2022 and comparisons are with the third quarter of 2021.
- Revenue was $133.7 million, up 99.5%, reflecting an increase in revenue from single wafer cleaning, Tahoe and semi-critical cleaning, and incremental contribution from ECP, furnace and other technologies.
- 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.
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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.
Conference Call Details
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.
Online Registration: https://register.vevent.com/register/BI0816b9546a0844788d1501bc0975e22f
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.
Use of Non-GAAP Financial Measures
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.”
