Prepared remarks
Good day, ladies and gentlemen. Thank you for standing by. Welcome to the ACM Research Second Quarter 2026 Earnings Conference Call. (Operator Instructions) 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 Pelayo, Managing Director of the Blueshirt Group. Steven, please go ahead.
Good day, everyone. Thank you for joining us to discuss second 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 Investors section of our website that we will reference during our prepared remarks. On the call with me today are CEO Dr. David Wang; our CFO, Mark McKechnie; and Lisa Feng, 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 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 release, which is posted on the IR section of our website and to Slide 13. Also, unless otherwise noted, the following figures refer to second quarter 2026 and comparisons are with the second quarter 2025. So with that, I will now turn the call over to David Wang. David?
Thanks, Steven. Hello, everyone, and welcome to ACM's Second Quarter 2026 Earnings Conference Call. The June quarter marked another period of strong execution for ACM Research. Revenue and shipments increased 36% year-over-year. Revenue growth was led by our ECP and advanced packaging product categories, both of which increased more than 150% year-over-year. This strong performance reflects the progress we are making in transforming ACM into a broader, multi-product semiconductor equipment company. In June of this year, third-party research firm Frost & Sullivan published a report called the Global and China Semiconductor Equipment Market Research. They now estimate the global semiconductor equipment market exceeded $140 billion in 2025 and will grow to more than $200 billion by 2029. They also estimate the Mainland China market exceeded $50 billion in 2025 and will grow to more than $80 billion by 2029. To fund our global operations, we have recently strengthened our balance sheet. ACM now has more than $1 billion of net cash globally. This includes approximately $300 million in the U.S. following our $150 million registered direct offering completed this past May. This financial strength provides a solid foundation to support our mission to become a key supplier of world-class capital equipment for the major product segments of semiconductors. We believe AI is driving one of the most significant technology transitions the semiconductor industry has experienced in many years. As chip complexity and chip size continue to increase, traditional wafer-level packaging is approaching and reaching practical limits, creating demand for entirely new manufacturing technology across advanced packaging. ACM predicted a shift from wafer-level to panel-level packaging more than five years ago and began investing early in horizontal panel-level plating and other panel-level wet process technology. We believe the market is now coming to us and has begun to validate those investments. Today, I'm pleased to announce that we have received orders from two advanced packaging customers for our panel-level horizontal plating tool addressing both 510 x 515-millimeter and 310 x 310-millimeter panel sizes. One is a production order from an existing customer in Mainland China and the second one is an evaluation system for a new customer in Asia. We believe ACM will be among the first companies to deliver horizontal panel-level plating systems to multiple customers across multiple regions. Our proprietary horizontal plating architecture is a key differentiator, delivering superior plating uniformity while addressing the process requirements of next-generation AI packaging. These orders are an important milestone for what we believe could become a significant long-term growth opportunity. I'm pleased to report today that our order book has been quite strong. For the first half of 2026, orders increased 105% year-over-year. This is a mix across all product categories with a heavier emphasis on some of our new products. As in prior years, ACM Shanghai plans to release a backlog figure as of September 30 in early October. Thanks to good execution by our operations team, we continue to expect shipments across each of our categories to grow faster than revenue. We remain confident in our growth target for 2026 and beyond. 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 a few product cycles, including our SPM and furnace, to enable us to outgrow the China WFE. Beyond this year, we estimate that our newer platforms, including Track, PECVD and horizontal panel-level plating, will proceed from evaluation into commercialization, resulting in production orders that will drive our growth for years to come. In summary, we see 2026 as a big year for new products and another year of solid growth for ACM. Now on to our business results. Please turn to Slide 3. Revenue for the second quarter was $293 million, up 36%. Shipments for the second quarter were $282 million, up 36%. Gross margin was 46% and operating profit margin was about 19%. And we ended the quarter with gross cash of $1.4 billion and net cash of $1.0 billion. Now I will provide detail on product. Please turn to Slide 4. Revenue from single-wafer cleaning, batch and semi-critical cleaning tools was $133 million, down 14% and represented 45% of revenue. We believe ACM has built the industry's broadest cleaning product portfolio. Our products in this category include SAPS, TEBO, Tahoe, backside clean, solvent clean, spray rinse, scrubber and wet etcher, and our proprietary single-wafer hard SPM technology. In May, we presented our proprietary hard SPM cleaning technology at the 2026 Surface Preparation and Cleaning Conference. This system demonstrates fewer than 15 particles performance at 15 nanometer particle sites. Our proprietary nozzle design prevents acid mist and chemical splashing outside the chamber during the hot SPM process and therefore does not require periodic external chamber cleaning. For customers, this means less maintenance, better uptime and more stable particle performance. We believe this represents the best performance in the industry. Our SPM platform is well suited for advanced logic and memory, where cleaning requirements are becoming more demanding. Today, we also announced new capability for Ultra-C Tahoe, expanding it into a broader wet process platform. Tahoe is built on our patented hybrid architecture that combines batch SPM processing and single-wafer cleaning. We have added wet etching and monitor wafer reclaim applications to the Tahoe platform. This integrates multiple processes that had previously required separate stand-alone tools into one Tahoe platform. The expanded platform has been adopted by multiple leading semiconductor manufacturers. ACM will continue to drive world-class process performance with a focus on ESG benefits to help make advanced semiconductor manufacturing more efficient, more stable and more sustainable. We shipped a handful of single-wafer SPM tools in the first half of this year, and we are on track to ship more in the second half of this year — more than 20 by year-end. As a reminder, we estimate that SPM represents about one-third of the total cleaning market. We have had very little revenue today for the SPM tool, and with this major product cycle, we expect our overall cleaning revenue to rebound as our customers qualify the first tool and we grow our repeat shipments. Revenue from ECP, furnace and other technology grew 168% and represented 44% of the revenue mix. Growth was driven by momentum on both front-end and back-end plating tools. In logic devices, we have benefited from larger die sizes and a steady increase from higher interconnect layer counts. In memory devices, we have benefited as HBM packaging demands higher levels of DRAM stacking and thus more copper process steps. During the quarter, we shipped our 2,000th electroplating chamber. This follows our 500th chamber shipment in 2022 and our 1,500th chamber shipment in 2025. This shows how quickly our installed base has grown and how broadly customers are adopting our technology in volume production. We had a larger contribution from furnace in the quarter, but it's still a small part of our overall revenue mix. We continue to improve technology across key applications, including LPCVD, thermal oxidation, thermal ALD, PLD and ultra-high temperature anneal. Revenue from advanced packaging, which excludes ECP but includes service and parts, was up 153% and includes coaters, developers, etchers, sweepers, scrubbers and vacuum cleaning tools supporting a broad 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 these tools. We are making good progress with our new Track and PECVD platforms. We remain confident that we have the right approach for our PECVD and Track platforms, and we have made significant progress in 2026. Our proprietary one-chamber three-tray architecture for PECVD performed well in our Lingang mini lab earlier this year. We shipped a second tool to a new customer in Q1, and we anticipate qualification by year-end. The story is similar for our Track platform. Indeed, our high-throughput KIF Track tool is progressing through customer evaluation, and we anticipate production qualification by year-end. We see strong interest in both stand-alone tools and configurations integrated with scanners. For both PECVD and Track, we are hard at work on development efforts with several key customers. We are optimistic that our tool performance can meet or exceed customer requirements and result in production orders in the near future. Please turn to Slide 5. This quarter, we updated our market assumptions with the latest WFE data from the report I mentioned earlier. This results in a $1 billion increase to ACM's global SAM to about $22 billion. Please turn to Slide 6. There is no change to our long-term revenue target of $4 billion. It's still based on market share assumptions for each of our product categories, which gets us to about $2.5 billion from Mainland China and $1.5 billion from the global market. We adjusted some assumptions based on China WFE now being about $50 billion. We continue to assume a robust WFE environment over the next several years for the global market. The magnitude and timing of our growth will be impacted by overall customer spending trajectories and our market share gains. Next, let me provide an update on our production facilities. First, on Lingang — please turn to Slide 8. The first building is in volume production, and we plan to open the second building later this year. Together, the two facilities can support up to $3 billion in annual output. With our strong order book, we are fortunate to be ready to scale the second facility. Next, our Oregon facility — please turn to Slide 9. In Oregon, we remain on track for a U.S.-based demo center with multiple tools in a world-class cleanroom environment starting later this year. This is important for our global customers, and we believe it will help us secure production orders. Our global business is beginning to scale. As we said last quarter, we expect to have more than 20 tools installed at customer sites outside Mainland China by the end of 2026. This includes about 10 customers in five countries. It's clear that leading global chip makers can benefit from our innovative products. Although it is still early days for our global deployment, our engagements are growing, and we are confident that our global sales and service team will deliver good results. Now I will provide our outlook for full year 2026. Please turn to Slide 10. Based on our first half performance and improved visibility, we have reached the midpoint of our full year revenue guidance. We now expect full year 2026 revenue of $1.125 billion to $1.175 billion versus the prior range of $1.08 billion to $1.175 billion. This new range implies 25% to 30% year-over-year growth. We also expect shipment growth to outpace revenue growth in 2026. Now let me turn the call over to our CFO, Mark, who will review details of our second quarter results.
Thank you, David, and good day, everyone. Please turn to Slide 11. Unless I note otherwise, I'll refer to non-GAAP financial measures, which exclude stock-based compensation and unrealized gains or losses 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 second quarter of 2026 and comparisons are with the second quarter of 2025. I'll now provide financial highlights. Revenue was $292.9 million, up 36%. Revenue for single-wafer cleaning, Tahoe and semi-critical cleaning was $133.0 million, down 14.2% and represented 45.4% of sales. As David noted, this included very little contribution from some of our newer products. As normal, SPM will be reflected first in our shipments, followed by revenue contribution in later quarters. Revenue for ECP front-end and packaging, furnace and other technologies was $128.5 million, up 167.7% and represented 43.9% of sales. Revenue for advanced packaging, excluding ECP, services and spares was $31.4 million, up 153.3% and represented 10.7% of sales. We saw a good improvement in our customer concentration. During the first half of 2026, our 10% customer mix has improved to just one customer at 12.7% of our revenue mix. This compares to three 10% customers representing 49.9% of our mix for the first half of 2025. While this can vary by period, we consider the reduced concentration positive as it represents a broadening of our customer base. Total shipments were $281.5 million, up 36.4%. For 2026, we expect shipment growth to outpace revenue growth. Gross margin was 46.0% versus 48.7% a year ago. Gross margin was above the midpoint of our long-term target model. We maintain our 42% to 48% long-term target range and product mix can cause fluctuations on a quarterly basis. Operating expenses were $78.5 million, up 23.9%. R&D was 13.9% of sales, sales and marketing was 7.7% and G&A was 5.2%. For 2026, we plan for R&D in the 16% to 18% range, sales and marketing in the 8% range and G&A in the 5% to 6% range. Operating income was $56.3 million versus $41.5 million. Operating margin was 19.2% as compared to 19.3%. Income tax expense was $13.5 million versus $1.9 million. For 2026, we expect our effective tax rate in the 10% to 12% range. Net income attributable to ACM Research was $44.5 million versus $37.3 million. Non-GAAP net income excludes $6.6 million in stock-based compensation expense and a $69.6 million unrealized gain on short-term investments and its effect on noncontrolling interest. Net income per diluted share was $0.61 versus $0.55. Now on to the balance sheet and cash flow items. Cash, cash equivalents, restricted cash and time deposits were $1.36 billion at the end of the second quarter. Net cash, which excludes short-term and long-term debt, was $1.0 billion. This includes about $300 million of net cash on our U.S. balance sheet. Total inventory, net, was $783.1 million. This consisted of raw materials, net, at $406.1 million, work in progress, net, at $89.0 million, and finished goods inventory, net, at $287.9 million, which 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 $6.4 million and capital expenditures were $65.4 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.
Questions and answers
(Operator Instructions) Our first question is coming from the line of Sujeeva De Silva with ROTH Capital.
Lisa, congratulations on the progress here — great diversification going on. So it's really good to see. My first question: the global tools shipped to 2000 is a great number. What geographies are you seeing the largest shipments today? And maybe what geographies do you expect the best growth opportunity near-term as you scale out beyond China?
Yes. In the first half of this year, we shipped close to a dozen tools to Singapore — primarily to packaging houses there — and we also have a tool running at one of the foundries in Singapore. So we see Singapore as an opportunity for our front-end and packaging tools. We also continue to have customers in the U.S., and as I mentioned, we're finishing the construction of our demo lab in Oregon. With that demo lab in operation, we can attract more interest and attention to our differentiated technology. It will allow us to provide more demonstration capability for customers globally.
Great. And then my second question: given that you now have a significant amount of cash in the U.S., about $300 million, maybe for David or perhaps Mark, what are some of the planned uses of those proceeds? Is it expanding capacity — in which regions — and perhaps even inorganic activity? Any color would be helpful.
Yes. Obviously, this cash position shows our determination and confidence in expanding sales activity outside Mainland China. As I mentioned, our long-term goal is still $1.5 billion in revenue outside China. Those funds will support our activities in the U.S., Taiwan, Singapore and other parts of Asia, as well as Europe. We see demand for our differentiated technologies — cleaning, plating and furnace — and for ongoing R&D on new process tools. We expect developments in Shanghai to benefit customers globally, and that's the objective of this funding.
Okay. That's very helpful. And then my last question: I know you guys are diversifying your customer base and you have one >10% customer focusing on global. But I'm curious in China, how levered are you to what's going on with CXMT in the DRAM market? Understanding AI is a plating play for you in other areas where you're very strong, but the DRAM effort there is growing very strongly. I'm curious how much leverage you have to that opportunity.
I really cannot comment on individual customers, but looking at the overall market and the Frost & Sullivan report, it shows strong WFE demand and growth in China. China is a large market for many applications, including AI-related devices, and that supports a lot of chip manufacturing and corresponding WFE demand. At ACM, we now have multiple products coming online, and 2026 is a major year for new product introductions. Our PECVD, furnace and Track systems have been under development since 2019 and our R&D teams have produced some exciting results in the past several years. Some products are approaching top-tier performance and in some cases exceed it, which gives us confidence that the new products will sustain or increase our growth in China. Those products, once qualified in China, will also be sold to the global market. So we expect our revenue to come not only from cleaning and plating but also increasingly from new products such as furnace, PECVD and Track over the next few years.
Congratulations to you and the team on the strong execution here.
Our next question is coming from the line of Charles Shi with Needham & Company.
Maybe the first one — I know you don't really guide the quarter, but can you walk us through how Q3 and Q4 are shaping up? You had a very big beat in Q1 and now in Q2. If I look at consensus estimates for Q3 and Q4, those numbers may need to come down a little bit. Has the timing of revenue or shipments changed over the last 90 days?
As I mentioned in our prepared remarks, PO receipts in the first half increased by more than 100%, which indicates strong demand and a large backlog. Some of those tools we plan to deliver in Q3 and Q4, while some will be delivered later. We are increasing our capacity, but the industry is experiencing longer component lead times due to high demand, which creates some supply constraints. So Q3 and Q4 revenue will depend on our execution in manufacturing and qualifying and shipping tools. We remain positive about the full-year projection, which is why we've raised the low end of our guidance to the new range implying 25% to 30% growth. We are confident in that forecast.
Maybe another question for Mark. I noticed that the guidance ranges for SG&A as a percent of revenue were revised down a little versus last quarter. Based on your midpoint of guidance, OpEx may come in lighter than you previously expected. What is the reason for a slight OpEx tightening this year? Was it related to timing of the R&D center build-out in Lingang or other timing differences?
Charles, there's not a lot to read into that. R&D we're looking at 16% to 18%, G&A 5% to 6% and sales and marketing around 8%. It's really just a tightening of the estimates now that we're halfway through the year, but not a meaningful change from where we were at the beginning of the year.
Our next question is coming from the line of Jimmy Huang with JPMorgan.
Mark, congrats on the results. Can you hear me? My first question: China's manufacturing capacity build is very robust and structural, and you have a solid product portfolio for WLP and PoP. Do you have any guidance or expectations for manufacturing equipment shipment growth rate for this year and next year?
We don't provide a specific shipment growth rate target for the year, but because of our strong backlog and orders, we expect shipments to outgrow revenue this year. Component constraints and lead times could impact timing, but we believe shipment growth will be strong in 2026. We are actively managing the supply chain to mitigate delays and ensure components arrive to meet demand.
Do you have any order intake expectations for your advanced packaging equipment for this year? Also, for an OSAT 10k wafer capacity build for 2.5D wafer-level packaging, what is ACM's equipment content value based on your products at this moment? Some equipment companies share this to help investors understand progress.
I didn't quite catch the last part — could you repeat the question on the 10k wafer capacity and content?
Sure. For a 10k wafer per month OSAT line — for 2.5D packaging capacity — how much equipment spending would that drive and how much of that might be ACM's content today?
It depends on the specific line and the process flow. To frame it another way, cleaning historically occupies about 5% to 7% of total fab spend, depending on whether the fab is advanced or mature. For future advanced fabs, cleaning is becoming more important and could grow toward 10% over time as cleaning becomes more demanding, particle control tightens and drying methods evolve from IPA to supercritical CO2 drying. Copper plating has also grown substantially over the past few years; earlier we projected copper plating to be $1.5 billion and today it's approaching that already. With increased DRAM stacking and HBM requirements and the rise of panel-level packaging, plating demand is strong. ACM is a pioneer in panel-level electroplating and horizontal plating technology, which gives us a meaningful opportunity in that market. Beyond cleaning and plating, furnace, PECVD and Track offer additional upside, so overall the equipment content per line can be substantial and we see growing intensity for our offerings in advanced packaging environments.
Thanks, Dr. Wang. On panel-level plating: you announced the first PLP ECP evaluation system shipped to a customer in Asia. When might we expect evaluation results and could we receive a first production purchase order in the next few quarters or within 6 to 12 months?
Panel qualification can be challenging and differs by customer and region. We see strong interest across Mainland China, Taiwan, Korea and Singapore. We are positioned for larger sizes such as 510 x 515 millimeters as well as 310 x 310 millimeters. We are prepared for both market segments and expect the evaluation process to proceed; timing for purchase orders will depend on customer qualification cycles, but we are optimistic about progressing to production orders in the near term.
(Operator Instructions) Our next question is coming from the line of Christian Schwab with Craig-Hallum Capital.
It's Ben Taxel on for Christian here. Great quarter, exciting stuff going on at ACM. My first question: any initial commentary on 2027? I realize it's early, but between new products and strong orders is there anything else we should think about for 2027?
We see multi-year expansion plans from many fabs in China and a strong market going forward. Some orders we receive this year we will not be able to ship until next year, so that will flow into 2027 and shape up as a good growth year. Our new platforms, including Track and PECVD, could also kick in and contribute meaningfully. We are optimistic that '27 will be a solid growth year driven by backlog, new product commercialization and expanded global deployment.
And to add, some orders received this year will carry over into next year, so that will help 2027's top line. We're starting to see that shape up into a pretty good growth year.
One other quick question: any update on the Hong Kong listing timeline?
We cannot comment in detail on the Hong Kong listing at this time. The April timeline we announced earlier remains the only specific information we can share now. We may disclose more at a later date as appropriate.
We have a follow-up question from Jim Huang with JPMorgan.
We talked about component shortages. There are also component price increases. Will rising component costs impact gross margin? If so, which quarters might be affected, and what options do you have to pass costs to customers?
Component supply is tight globally, with many key suppliers in Japan and Korea experiencing high demand. We have seen longer lead times for some mechanical parts and robotics components. We have been working to secure supply and, in some cases, switch to local suppliers where feasible. We anticipated a heavy year and purchased certain parts at the end of last year to buffer against shortages, and our vendors have been helpful. At present, we are not broadly raising prices, and while some suppliers have increased prices in limited cases, most have delayed shipments rather than increasing prices significantly.
We are comfortable with our gross margin target range of 42% to 48%. We have a good amount of raw materials inventory that we purchased to mitigate price and lead-time risk. Based on current inventory and our outlook, we don't see a significant impact to gross margin from these factors at this time.
Is it possible to pass through incremental component cost increases to customers, or is that not a priority?
It's hard to generalize. We are not currently raising list prices broadly. Some suppliers have delayed shipments but not materially increased prices for our key components, so at this stage we do not expect significant price pass-through to customers.
Regarding manufacturing capacity outside Mainland China: if you see more international orders, will you build more capacity in Southeast Asia or other regions?
We already have manufacturing capability in Korea, which is beginning to pay off. Some tools we ship to the U.S. are currently made in Korea, and future tools shipped to Taiwan and Singapore will likely be made there as well. If international demand increases, we can scale secondary manufacturing sites accordingly and we are considering the right locations and scale to support global customers.
Would you need to dispose of any stake in Shanghai or pursue other financing to fund overseas capacity expansion?
We are comfortable with our balance sheet. As David mentioned, we have about $300 million on our U.S. balance sheet as a war chest to support production orders. We do not have near-term plans to dispose of Shanghai shares to fund capacity expansion.
Our next question is from a Capital Markets analyst.
Congratulations on the new orders — very impressive. By segment, can you rank which end markets are the strongest: DRAM, HBM and logic?
We didn't break out orders by end market in our prepared remarks. David mentioned that orders are across our customer base and across our products, with somewhat stronger adoption in some of our newer products. We don't provide a ranking by DRAM, HBM or logic at this time.
Generally, we see strength in both memory and logic markets. Memory-related packaging such as HBM and DRAM stacking is a clear driver for plating demand, and logic also benefits from larger die sizes and additional interconnect layers. So both are meaningful markets for ACM.
One more question on cash flows and CapEx. With the strong industry tailwind and new product launches, how should we think about operating cash flow and CapEx going forward?
We're still in growth mode and investing in CapEx, facilities and demo centers. This year we are deploying capital to expand production and support new platforms including our U.S. demo center and Lingang facility. That may result in some negative operating cash flow this year as we invest, but longer term we expect those investments to generate positive cash flow as scale and production ramp. For 2026, we continue to expect CapEx of about $175 million.
There are no further questions in the queue. I will now turn the call back over to Steven Pelayo for closing remarks.
Okay. Great. Before we conclude, I want to give everyone a quick reminder of our upcoming investor conferences. On August 20, we will participate in the Needham Seventh Annual Virtual Semiconductor and SemiCap One-on-One Conference. On August 25, we'll present at the 2026 Jefferies Semiconductor IT Hardware and Communications Technology Conference at the Four Seasons Hotel in Chicago. On October 13, we will present at the 18th Annual CEO Summit Conference in conjunction with SEMICON West in San Francisco. Attendance at these conferences is by invitation only. For interested investors, please contact your sales representatives to register and schedule one-on-one meetings with the management team. With that, this concludes the call, and you may now disconnect.
Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.