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Good day, ladies and gentlemen. Thank you for standing by, and welcome to the ACM Research First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, we're recording today's call. If you have any objections, you may disconnect at this time.

Now I'll turn the call over to Mr. Steven Pelayo, Managing Director of Blueshirt Group. Steven, please go ahead.

Thank you. Good day, ladies and gentlemen. Thank you for standing by, and welcome to ACM Research First 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. Sorry, I'm repeating that.

We released first quarter 2026 results before the U.S. market opened today. The release is available on our website as well as from Newswire services. There's also a supplemental slide deck posted to the Investors section of our website that we will reference during our prepared remarks.

On the call with me today are our CEO, Dr. David Wang; our CFO, Mark McKechnie; and Lisa Feng, our CFO of our operating subsidiary, ACM Shanghai.

Before we continue, please turn to Slide 2. Let me remind you that remarks made during this call may include predictions, estimates or other information that might be considered forward-looking. These forward-looking statements represent ACM's current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results to differ materially. Those risks are described under Risk Factors and elsewhere in ACM's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward-looking statements, which reflect ACM's opinions only as of the date of this call. ACM is not obliged to update you on any revisions to these forward-looking statements.

Certain financial results that we provide on this call will be on a non-GAAP basis, which excludes stock-based compensation and an unrealized gain and loss 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 on Slide 13. Also, unless otherwise noted, the following figures refer to the first quarter of 2026, and the comparisons are to the first quarter of 2025.

So with that, I'm going to now turn the call over to David Wang. David?

Thanks, Steven. Hello, everyone, and welcome to ACM's First Quarter 2026 Earnings Conference Call. We started the year with a solid Q1 report with revenue up 34% and gross margin above the middle point of our long-term target range. Revenue growth for the quarter was driven by the continued strength in our ECP and Advanced Packaging business.

With a global boom in AI, the market is demanding solution for enabling high-speed, high-density and low-power consumption semiconductor devices manufacturing. Many of which have not yet been invented. It is clear that ACM's focus on world-class differentiated tool based on our own IP is right strategy to win in global market. We are happy to see 2026 as a big year for new product.

Our investment in our proprietary R&D over the past 5 years, together with our fully functioning [indiscernible] at Lingang, is beginning to deliver significant benefit. For instance, we now have industry-leading offering across multiple product categories that enable our global customers to effectively solving their evolving production challenges. As we progress through 2026, we expect to see an increased impact to our financials from new product.

With regard to revenue, we anticipate incremental contribution from new product cycle from Tahoe, single-wafer SPM and our vertical furnace product. With regarding to the shipment, we expect to increased shipment of our evaluation tool across a range of customers for our panel level horizontal plating, panel low-pressure flux cleaning, high-throughput track and PECVD tools.

This quarter, at SEMICON China, we announced the ACM Planetary Family. This organized ACM tool portfolio into a product family, aligned with the key step in the semiconductor manufacturing process. This represents ACM's comprehensive world-class multiproduct offering and the global reach of our company. We encourage you to view the video on our IR website.

Now on to our business results. Please turn to Slide 3. First quarter revenue was $231 million, up 34%. The ECP category was a primary growing driver with revenue up more than 3x year-over-year. Next, advanced packaging services spare parts category was growing 62%. This was partly offset by cleaning, which declined by 6%. We had a little contribution from new cleaning product in our Q1 2026 revenue. But as I will discuss later in the call, we have a significant ramp ahead for our single-wafer SPM tools, which we delivering in Q1.

Shipments for the first quarter were $241 million, up 54%. The solid growth reflects strong customer demand and execution across our product portfolio, and it also includes contribution from the initial ramp of single-wafer SPM tools for wafers shipment of the cleaning category grew by 32% for the quarter. I also note that about 15% of Q1 shipments were from catch-up of product that had been rescheduled from Q4 of last year. For 2026, we continue to expect the shipment growing to outpace revenue growth.

Gross margin was 46.5% for the first quarter, above the middle point of our long-term range, 42% to 48%. We ended the first quarter with gross cash of $1.3 billion and net cash, $924 million. This balance including $110 million of gross proceeds from February sale of ACM Shanghai shares, the capital providing a solid foundation for continued investment in our global operations.

Now I will provide detail on product. Please turn to Slide 4. Revenue from single-wafer cleaning, Tahoe semi-critical cleaning tool was down 6%. We continue to believe ACM's full product offering in cleaning is amongst the best in the world. As noted in the prior calls, we believe cleaning technology becomes even more important as the industry moving to more advanced production technology. This trend play directly to ACM's strength, particularly in differentiated technology such as N2 bubbling wet etcher, single-wafer SPM cleaning, Tahoe and others.

I'm pleased to announce today that we expect a significant production ramping of single-wafer SPM production product line with more than 15 to 20 units to be delivered by year-end across our customer base. This is a result of many years of R&D by our team to develop a better solution than the current market leader. As I noted for the past several investor calls, ACM proprietary approach delivered excellent particle performance with a fewer than 15 particle at 15-nanometer, much better than market leader, while other players need a periodical DI water cleaning of the process chamber and the surrounding environment to remove residue generated by the hot SPM films.

Our system does not. Instead, our unique module design providing a maintenance-free solution as the chamber does not need to be taken offline for periodical DI water cleaning. This not only improved tool uptime but also enhanced particle cleaning performance at 13 nanoparticle and beyond. Such fine particle removal is very critical for manufacturer advanced node GAA logic devices and memory devices such as SPM. It is no surprise that we are also seeing strong interest in our SPM tool from multiple global customers.

SPM cleaning process tool has occupied 30% of the cleaning market. We believe our innovative hot SPM tool will take a significant market share in the next few years.

Revenue for ECP, furnace and other technology grew 205%. Growing was driven by strong momentum in electroplating, supported by our leading position and expanding engagement across both front-end and advanced packaging applications. In advanced packaging, our panel level horizontal plating solution is gaining additional traction in Asia and with the global customers.

We began development of our panel-level horizontal electroplating platform in 2022, well ahead of the industrial and delivered world first horizontal plating tool, 515x510 millimeter, to a customer in the fourth quarter last year. Since then, we have continued to expand customer engagements and build a backlog, supporting both 515x510 millimeter and 310x310 millimeter format panels.

In April, we presented a keynote at the Taiwan Electronic Equipment Forum on 3D IC packaging technology, highlighting our role in enabling next-generation AI driven packaging solutions. We are confident that a successful customer evaluation will lead to volume production order for 550x510 and additional evaluation of 310x310 later this year.

For our vertical furnace business, tools are under evaluation at multiple customer sites, and we continue to expect a more meaningful revenue contribution later this year. We continue to see solid demand across key applications, including LPCVD, oxidation, thermal ALD, PLD and ultra-high temperature anneal supported by our ongoing technology development.

Revenue from advanced packaging, which excludes ECP, but including service and [indiscernible] was up 62%. This category including coders, developer etcher, [indiscernible], scrubber and vacuum clean flux tools, supporting a range -- a broader range of advanced packaging applications. We're also providing back-end plating tool, including in ECP category.

Last quarter, we announced multiple advanced packaging equipment orders from leader -- leading global customers. In Q1, we shipped our panel-level vacuum cleaning system to a leading global semiconductor packaging manufacturer outside Mainland China. We also completed shipment of multiple wafer level advanced packaging system to a leading OSAT customer in Singapore.

ACM is unique -- is uniquely positioned with a comprehensive set of wet process solutions and plating technology to address key process steps in advanced packaging. Our integrated process capability provide valuable insight into next-generation packaging challenges as industry involved towards 2.5D and 3D integration, including TSV-based architecture and heterogeneous integration, we believe our capability position us to supporting this increasingly complex requirements.

We are making good progress with our new track and PECVD platforms. In April, we shipped our first PECVD silicon carbon nitride system to a leading semiconductor manufacturer, now in customer evaluation process. This is a big deal. We achieved a great results in our media line and the tool is now being evaluated at the customer site. The system incorporate ACM proprietary 3-station rotating architecture and 1 station 1 RF technology, enabling strong film uniformity, interface control, process stability and small footprint. We believe this positions us for growth in back end of the line and advanced packaging.

For high-throughput 300 WPH KrF track tool, we delivered our first tool evaluation last September and are progressing towards mass production qualification this year, and we continue to see growing interest from multiple customers for both stand-alone and the configuration integrated with the scanner.

ACM culture is deeply rooted in differentiated R&D. We bring innovative solutions to the ever-evolving challenges faced by major global semiconductor manufacturers. Our current success is driven by good decision-making fab and the future success depends on today's innovation. We are committed to our strategy to providing a long-term road map of world-class tool across our growing product portfolio. We remain confident in our $4 billion revenue target and our longer-term goal of becoming a top-tier supplier of capital equipment to the global semiconductor industry.

Next, let me provide an update on our production facility. 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 with two facilities, we can support up to $3 billion in annual output. On a strategic note, I will now discuss our Lingang line, which went into full operation in the second half of last year. We now have a fully experiment R&D line in the Class 100 Environment, running our own tool and those of other vendors. This is a big deal. It is accelerating our own R&D effort, and it will also speed up our joint R&D collaboration with our customer in Asia. We expect this to have a meaningful impact on our operating model.

For new product rather than delivering multiple tool for extended customer evaluation, we now process custom wafer on our new product in the Lingang mini line to validate the tool to meet the customer specific requirements before shipment. We expect this approach to shorten qualification cycle of a new product at the customer site, shorten the time of conversion to revenue and enhance overall capital efficiency.

We are now already seeing early benefit across multiple products. I will give a few examples. Our first shipment of the PECVD silicon carbide nitride system completed customer-specific validation and down to shipment. We expect this to reduce on-site qualification time and enable faster ramp to production. We tested and improved our single-wafer SPM tool for several months, hand-in-hand with our leading customer and confirm 50 nanoparticle performance. This due to volume orders from numerous different customers. We are confident that we can produce each customer-specific production environment in our lab, resulting in shorter qualification and order a few quarters rather than more than a year.

Next, our Oregon facility, please turn to Slide 9. We continue to advance investment in Oregon. We remain on track for in-house demo lab with multiple tools and the capability to produce U.S.-made tool in Oregon by year-end 2026. This is important for our global customer, and we believe it will strengthen our position as a key local partner as they scale production.

Our global initiatives are beginning to pay off. By the end of 2026, we expect to have more than 20 tools installed outside of the Mainland China market. This including about 10 customers in 5 countries. Although still early days for our global deployment, our engagement team are growing, and we remain confident that our investment in global sales and service team will deliver good results.

ACM Shanghai continue to play a critical role in our overall strategy, serving as a leading supplier to the semiconductor industry in Asia and as a key source of capital to support our global expansion. We completed a minority share sale last February, generating approximately $110 million in gross proceeds, and enable the strong on our U.S. accounts. We intend to deploy this capital to support our U.S. expansion and broader global growth initiatives. In April, ACM Shanghai announced a proposed H-share secondary listing in Hong Kong.

Now turning to our outlook for the full year 2026. Please turn to Slide 10. In mid-January, we introduced our 2026 revenue outlook in the range of $1.08 billion to $1.175 billion. This implies 25% year-over-year growth at the midpoint. We reiterate this outlook today. We are expecting our annual shipment growth will outpace our revenue growth in 2026.

Now let me turn the call over to our CFO, Mark, who will review details of our first quarter results. Mark, please?

Thank you, David, and 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 and loss on short-term investments. Reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release. Also, unless otherwise noted, the following figures refer to the first quarter of 2026 and comparisons are with the first quarter of 2025.

I will now provide the financial highlights. Revenue was $231.3 million, up 34.2%. Revenue for single-wafer cleaning, Tahoe and semi-critical cleaning was $122.5 million, down 5.5% and it represented about 53% of sales for the quarter. As David noted, this included very little contribution from new products. We expect significant shipments of SPM to ramp through the year, followed by revenue contribution in later quarters. For the full year 2026, we do anticipate the mix in cleaning will normalize towards the 65% level, similar to the mix in 2025. Revenue for ECP front-end packaging, furnace and other technologies was $84.2 million, up 204.9% and represented 36.4% of sales for the quarter. The majority was ECP front end, and we had very little contribution from furnace.

Revenue from advanced packaging, excluding ECP, services and spares was $24.5 million, up 62% and represented 10.6% of sales for the quarter. Total shipments were $240.7 million, up 53.6%. As David noted, this was driven by solid demand and good execution and also cleaning shipments grew by 32%. Approximately 15% of the shipments were catch-up from tools that were originally scheduled for Q4 delivery. For 2026, we continue to expect shipment growth to outpace revenue growth.

Gross margin was 46.5% versus 48.2%. Q1 gross margin was above the midpoint of our long-term target model of 42% to 48% and a good recovery from the low 40% range in Q3 and Q4 of 2025. Favorable product mix and a slightly lower impact from the inventory provision led to the recovery. We maintained our 42% to 48% target range and note that product mix can cause fluctuations on a quarterly basis.

Operating expenses were $65.8 million, up 38.5%. R&D was 15% of sales, sales and marketing was 8.3% of sales and G&A was 5.1% of sales. For 2026, we plan for R&D in the 16% to 18%, sales and marketing in the 8% to 9% range and G&A in the 5% to 6% range. Operating income was $41.8 million versus $35.6 million. Operating margin was 18.1% as compared to 20.7%.

Long term, we look to grow our R&D spending in line with revenue, but to show operating leverage in SG&A. Income tax expense was $3.8 million versus $2.2 million. For 2026, we expect our effective tax rate in the 8% to 10% range. Net income attributable to ACM Research was $24.3 million versus $31.3 million. Net income was $24.3 million versus $31.3 million. I just said that. I am -- okay.

Our non-GAAP net income excluded $5.6 million in stock-based compensation expense for the first quarter. We anticipate SBC will increase in Q2 due to option grants related to ACM Shanghai stock that were granted in Q1. Net income per diluted share was $0.34 versus $0.46.

Now on to the balance sheet and cash flow items. Cash and cash equivalents, restricted cash and time deposits were $1.25 billion at the end of the first quarter of 2026 versus $1.13 billion at the end of 2025. Net cash, which excludes short-term and long-term debt was $924.2 million at quarter end versus $844.5 million at year-end 2025. Total inventory was $738 million versus $702.6 million at year-end 2025. Raw materials were $377.9 million, up $28.3 million quarter-over-quarter. We made additional strategic purchases to support production plans and to mitigate potential supply chain risk.

Work in process was $81.6 million, up $20.2 million quarter-over-quarter. Finished goods inventory was $278.4 million, down $13.1 million quarter-over-quarter. Finished goods inventory primarily consists of first tools under evaluation at our customer sites, along with finished goods located at ATM's facilities. Cash used by operations was $29.5 million. Capital expenditures were $22 million. For the full year 2026, we now expect to spend about $175 million in capital expenditures.

That concludes our prepared remarks. Let's open the call for any questions that you may have. Operator, please go ahead.

Your first question comes from the line of Suji Desilva with ROTH Capital.

Can you talk about the cleaning segment and what drove the decline year-over-year in 1Q? And then how it's going to ramp up? What caused that pause? It would be helpful to understand that.

Okay. Thanks, Suji. Actually, let's put it this way. And the 2025 we start to see our cleaning product has been going through the many applications, right, including those mature nodes and all the advanced nodes. So the 2025, we're still facing some difficulty and also problem, right, for those new applications. And with the 12 months, our problem solving with the customer, especially most important in the our Lingang production has started using. So those kind of problems actually we're mostly solving already. And that really show that is, I want to say, last whole year progress also are difficult. That's why we can see impact our Q1 revenue.

However, as I said, since we're solving most of the issue, even today, our performance -- some tool performance even outpaced our leading supplier from global. So we see that really growing for our revenue. And you can see that the first quarter, our revenue grow, revenue, I must say our shipment from the Canadian product is a 32% increase year-over-year, right?

I give another picture, our project backlog increased from this first 6 months versus last 1 year, first 6 months were almost like 50% increase too for [ the PO receiving ]. So that really shows the momentum continuing.

And also in my script, I specifically mentioned about this SPM process. It's really our proprietary technology we are gaining customer interest, especially reach excellent results at the 50 nanoparticle size. That's really show our technology is better than the leading supplier. So we have confidence you can take significant market share in the SPM business, right? We're expecting 15 to 20 tool will deliver to the customer in Asia or in China, too.

So anyway, that's, I think, the answer for you.

Very helpful color. And then, David, just kind of following through on that, with shipments expected to outpace revenue in '26, would we think that '27 should be an above trend year? I mean, obviously, you're not guiding, but just trying to understand the implications of that.

Well, I mean, '27 is a little bit far away, right? But I want to see that our -- let me put it this way, 2026, we gained a lot of share, I mean, a PO or the customer interest for our cleaning tool, obviously, copper plating tool, right? Copper plating, you can see grows a lot. And also, we see the interest -- people were interest our furnace and the PECVD and track system. So I want to see that 2027, we see our new product, including, for example, copper plating for panel 2, we're getting into the revenue and shipment picture in 2027. So as I mentioned in a couple of earnings call, with our new product sort of playing into our product line, we see a lot of bigger growth in the next few years and we are supporting ACM's multiproduct strategy and continue to grow our long-term revenue.

Your next question comes from the line of Denis Pyatchanin with Needham & Company.

Just one question from us today. So it looks like the ECP, the Frontend Packaging and other Technologies segment has been seeing pretty sustained strength, up very significantly both year-over-year and quarter-over-quarter. Can you tell us more about what's doing well in that segment? What kind of customers are adopting, which tools? Just some more color would be great.

Yes. I want to say that this plating business has been growing a lot, right? Obviously, front end growing and also you can see HBM is also driving. And obviously, advanced packaging for all the 2.5D and application also growing and driving too. So that's really driving factor for the copper plating and also our advanced packaging wet process tool, including coated developer, wet etcher, PR stripper and cleaning.

Seeing no more questions in the queue, let me turn the call back to Steven Pelayo for closing remarks.

Great. Thank you. Before we conclude, I just want to give everyone a quick reminder on our upcoming investor conferences. On June 17, we will present at the 16th Annual ROTH London Conference at the Four Seasons Park Lane in London. Attendance at the conference is by invitation only. For interested investors, please contact your respective sales representative to register and schedule one-on-one meetings with the management team.

This concludes the call, and you may now disconnect. Take care.

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the ACM Research Fourth Quarter and Fiscal Year 2025 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 Blueshirt Group. Steven, please go ahead.

Good day, everyone. Thank you for joining us to discuss fourth quarter and fiscal year 2025 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 Relations section of our website that we will reference during our prepared remarks. On the call with me today are our CEO, Dr. David Wang; our CFO, Mark McKechnie; and Lisa Feng, our CFO of our operating subsidiary, ACM Shanghai.

Before we continue, please turn to Slide 2. Let me remind you that remarks made during this call may include predictions, estimates or other information that might be considered forward-looking. These forward-looking statements represent ACM's current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results to differ materially. Those risks are described under the 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 gain or loss on short-term investments. For our GAAP results and reconciliations between GAAP and non-GAAP amounts, you should refer to our earnings release, which is posted on the IR section of our website and to Slides 14 and 15. Also, unless otherwise noted, the following figures refer to the fourth quarter and fiscal year 2025, and comparisons are going to be with the fourth quarter and fiscal year 2024. I will now turn the call over to David Wang. David?

Thanks, Steven. And hello, everyone, and welcome to ACM's Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. I'm pleased with our fourth quarter results, which capped off a solid year of execution. Revenue grew 9% in the fourth quarter and 15% for the full year. We continue to execute well across our core business. We made a lot of progress with new product platforms, and we strengthened our position in China and globally. Investment in AI and data center infrastructure is reshaping the global semiconductor demand, shifting capital towards advanced logic, memory and advanced packaging. The industry is looking to key supplier for new technology, many of which have not yet been invented.

ACM differentiated technology portfolio has been aligned well with this high-value process steps and the market is how -- now the market is coming for us for solutions. A good demonstration is recent momentum with several key global customers outside the Mainland China market that we announced in today's press release. First, we announced that we have delivered multiple single-wafer cleaning tools to Singapore facility of our Asia-based foundry customer. This marks ACM's first tool installation to Singapore, a key milestone for ACM.

Second, we announced that we're receiving multiple orders for our advanced packaging tool from 3 global customers. This included orders for multiple-wafer level advanced packaging system from a leading global OSAT customer based in Singapore with deliveries scheduled for the first quarter of 2026. A panel-level advanced packaging vacuum cleaning tool from a leading global semiconductor packaging manufacturer based outside Mainland China, also scheduled for delivery in the first quarter of 2026 and multiple-wafer level packaging system from a leading North America-based technology customer with delivery scheduled later this year.

Now on to our business results. Please turn to Slide 3. For the fourth quarter of 2025, we delivered $244 million in revenue, up 9%. For the year 2025, we delivered $901 million in revenue, up 15%. Top line growth of 15% was better than growth for the overall China WFE market, which third-party estimate as generally flat for 2025. We consider this good result, especially since our 2025 revenue includes very little contribution from our new products. We expect a strong product cycle in 2026 from SPM cleaning and our furnace product as we made a very good technical progress for this new product across our customer base. We also made a good progress with our supercritical CO2 dry, Track, panel-level plating and PECVD, which we expect to contribute some more in 2026, but more in 2027 and beyond.

Shipments for 2025 were $854 million versus $973 million. Remember, 2024 shipments increased 63% over the year. So we had a tough compare. We also had some shipment for new product pushed into the 2026. Importantly, we expect 2026 shipment growth to be higher than our 2026 revenue growth. Gross margin was 41% for the fourth quarter and 44.5% for the full year. Q4 gross margin was slightly below our long-term target range of 42% to 48%. We attribute the Q4 level to product mixing, including a few semi-critical products with a lower margin due to the competitive pressure and also higher seasonal inventory provisions.

We expect lower gross margin to be temporary. We believe our new product ramp, combined with the product design and supply chain initiative will enable us to deliver the best product at a lower cost. There's no change to our long-term target model range of 42% to 48%. Moving on, we ended the year with a net cash of $845 million versus $259 million at the year-end of 2024. This balance sheet provides the foundation to continue our effort to develop world-class tools for the leading global semiconductor manufacturers. Before I review our product, I will provide our view on competitive dynamics in China and how we will win in this environment.

We have recently seen a flood of new local entrants to the China capital equipment industry. In many cases, there are 5 or more players going after a single point product, all with very similar design and performance. We believe we will compete and win in China market because, number one, we have a differentiated technology with many products almost the best in the world. Two, we have a deep portfolio of IP with strong protection in China; and three, our local customer demand the best technology in order to compete in the global market.

Now I will provide detail on product. Please turn to Slide 4. Revenue from single-wafer cleaning, Tahoe and semi-critical cleaning tool was $626 million, up 8% in 2025 and represented 69% of total revenue. We now estimate our cleaning portfolio address 95% of the application and process steps, and we are working on developing remaining solution that will bring us to 100% in 2026. We believe ACM now has the widest coverage of cleaning tool, far more extensive as compared to all competitors. The 8% year-over-year growth in 2025 included very little contribution from our newer cleaning line. We expect this new product, including single-wafer SPM, Tahoe and N2 bubbling wet etch to contribute more meaningfully to our 2026 revenue.

As the industry moves to more advanced nodes, we expect increased demand for high-performance cleaning tools. The increased adoption of multiple patterning is driving higher layer counts, potentially impact yields and demand more cleaning steps with a higher cleaning efficiency. We believe this plays right into ACM's strength. For example, our proprietary N2 bubbling etching technology is uniquely positioned in the market. We are seeing growth interest for advanced 3D NAND application where larger bubble size and uniformity control will become more critical as the industry moves to 300 layer and above. In SPM cleaning, customers recognize the advantage of our proprietary nozzle and chamber design.

We believe our platform outperforming leading competitors in small particle cleaning performance. We made a significant technical progress at the end of 2025 with our new SPM nozzle design. We achieved a 50 nanoparticle size count of under 20, which we believe is the best-in-class performance for the industry. Our unique nozzle design does not require any routine chamber DI water cleaning. This is a big deal for customers because it not only delivers a better cleaning environment for the chamber, but also increased uptime of our equipment.

As a result, I'm pleased to report today that we have received a strong repeat order for our SPM cleaning tools from a major customer for delivery to module fab in 2026. We are also seeing very strong interest for our unique SPM technology from numerous global customers because they are not satisfied with the performance of their current plan of the record tool. Our supply -- our supercritical CO2 dry tool integrated ACM proprietary cleaning IP while reducing CO2 consumption by approximately 40% as compared to their competitors. This results in process efficiency with lower operation cost. We made a successful in-house demo for the multiple Logic and memory customer at the end of 2025.

We have already received a demo PO for evaluation tools from 2 customers for delivery middle of 2026, and we expect to deliver additional tools to multiple customers later this year. In Mainland China alone, we estimate the incremental market opportunity for this next-generation cleaning product is nearly USD 1 billion. We remain confident in our long-term objective to achieve approximately 60% of the market share in China cleaning market, and we expect the cleaning to outgrow the China WFE this year and in the year ahead.

We estimate our market share for ECP in China is now more than 40%, and we remain confident in our long-term goal to achieve 60% or more. Front tool was -- represent about 70% of the mixing for year, including our Map, MAP Plus, ECP 3D, ECP G3 products. ECP back-end tool were about 30% of the mix, including our ECP AP product line. In Q4, we delivered our first Ultra ECP ap-p horizontal panel-level electroplating tool to industry-leading large panel fabrication customer. We -- our customer prefer ACM preferred horizontal plating solution versus competitors' vertical plating approach due to the much better plating film uniformity and much less cross-contamination between multiple plating chemicals.

We expect a growing customer interest in our panel-level solution as the industry looks for higher throughput and lower cost to support advanced packaging solution for multiple large die size and HBM AI chips. As discussed earlier, we received order from 3 global customers for both wafer-level and panel-level packaging tools. Our furnace tool are under various stage of evaluation of many customers. Revenue from furnace was relatively small in 2025, and we expect a more meaningful contribution in 2026. We made several technical breakthrough for LPCVD and ALD and PEALD in 2025.

We see good demand across multiple applications, including high-temperature neo, especially 1,350-degree version, LPCVD, ALD and PEALD. We believe ACM differential design position us to capture meaningful market share. Revenue from advanced packaging, which exclude ECP, but including service and spare was up 45% in 2025 to $76 million and represents 8% of revenue. This includes coater, developer, etchers, stripper, scrubber and vacuum cleaning tools. We believe ACM is the only company to offer a full portfolio of wet process tool and world-class plating product for the advanced packaging.

We think the combination is very powerful. It provides ACM with a valuable insight into the challenging of next-generation packaging as AI drives industry towards 2.5D and 3D integration. We are making solid progress with our new Track and PECVD platforms. Last September, we delivered our high-throughput 300 WPH KrF track tool for evaluation at a key customer. We expect mass production qualification in 2026 for the tool. And we anticipate this will lead to demand from additional customers, including both stand-alone and full integrated system in line with the lithography tool.

We believe our high throughput design positions this platform to compete effectively with the current supplier. In Q4, we delivered our first Ultra Lith BK system. This milestone represents the first customer deploy of our Track series following early demonstration and validation. It also marked our entry into the display panel market, a new segment that require high-volume manufacturing and strong performance stability. We anticipate to develop our proprietary PECVD platform. Our design has 3 trucks per chamber, which we believe is the only one in the world. This provides flexibility for a wide range of process with the same hardware.

We feel good about our positioning as the team works through the technical detail with a few tool in our Lingang mini lab running wafer test and custom demo wafer. We expect to ship multiple EVA tools in the near term. In summary, we innovation -- our innovation engine contribute to drive differentiated solutions across a broader growing portfolio. As AI drives a more complex semiconductor process, customers are turning into ACM as a trusted partner to help solving their increasing challenges.

Next, let me provide an update on our production facility. First, on Lingang, please turn to Slide 8. Our Lingang production and R&D center is now our primary production center. The first building is in volume production and the second provides capacity for the future expansion. Together, the 2 facilities can support up to $3 billion in annual output. During 2025, we made a good progress on our mini line and Lingang. We have enhanced our process development capability and now support the on-site customer evaluation in fab-like conditions. Our mini line, including ACM tools and tools from other players and metrology tools.

We believe the mini line will accelerate our internal product validation, shorten R&D and qualification cycle and strengthen collaboration with key customers as we introduce next-generation platforms. Next, our Oregon facility, please turn to Slide 9. We are accelerating investment in Oregon with the operation expected beginning in the second half of 2026. This facility will allow customers to evaluate our technology and to test their wafer locally, and it will serve as our initial base for production in the United States. Our global customers are encouraging by our commitment, which we believe will help them to choose ACM as a key supplier to scale production.

We remain very pleased by the success of ACM Shanghai team, which continue to be a key supplier to the semiconductor industry in Asia. ACM Shanghai has also proven to be a great source of capital and financial flexibility for ACM. In September 2025, ACM Shanghai completed a private offering of ordinary share, generating approximately $623 million in net proceeds. In February 2026, we completed the sale of approximately 4.8 million ACM Shanghai shares at RMB 160 per share, generating approximately $111 million in gross proceeds.

ACM Shanghai also has been a good source of dividends in 2023, 2024 and 2025. We received dividends net of tax of $19.2 million, $28.5 million and $29 million, respectively. Our major ownership in Shanghai -- ACM Shanghai remain a strategic asset. It enhances our financial flexibility and supporting disciplined execution as we continue expanding globally. Taken together, our expanding product portfolio, increased manufacturing capacity and strengthening capital position give us confidence in our long-term strategy.

Now turning to our outlook for the full year 2026. Please turn to Slide 10. In middle January, we introduced our 2026 revenue outlook in the range of $1.08 billion to $1.175 billion. This implies 25% year-over-year growth at the middlepoint. We reiterate this outlook today. Since our founding in California in 1998 and the establish of ACM Shanghai in 2005, we're building a globally competitive semiconductor equipment company grounded in innovation and different technology.

Our leadership in cleaning and electroplating created a strong foundation, and we are now expanding across Furnace, Track and PECVD as we broaden our multiple product portfolio. In Asia, we are recognized as a leader in wafer cleaning and plating, and we are engaging with a global customer across U.S. and Europe. With continued progress across SPM, Tahoe, supercritical CO2 dry, Furnace, Track, PECVD and panel-level packaging, we believe we are entering a new phase of a product cycle that are driving sustained growth. We have the customer, the product, the capacity and the capital to execute our global business plan, and we remain committed to our long-term target of $4 billion in revenue.

Now let me turn the call over to our CFO, Mark, who will review details of our fourth quarter and full year results. Mark, please.

Thank you, David. Good day, everyone. Please turn to Slide 11 and 12. Unless I note otherwise, I'll refer to non-GAAP financial measures, which exclude stock-based compensation, unrealized gain/loss on short-term investments. Reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release. Also, unless otherwise noted, the following figures refer to the fourth quarter and full year of 2025 and comparisons are with the fourth quarter and full year of 2024.

I will now provide financial highlights. Revenue was $244 million for the fourth quarter, up 9.4%. For the full year, revenue was $901.3 million, up 15.2%. Full year revenue was in line with our original guidance set a year ago and slightly above the updated range announced on January 22. Fourth quarter revenue for single-wafer cleaning, Tahoe and semi-critical cleaning was $159.9 million, up 3%. For the year, this category grew by 8.1%. Fourth quarter revenue for ECP, Frontend Packaging, Furnace and other technologies was $64.1 million, up 23.9%. For the year, this category grew by 32.1%.

Fourth quarter revenue for Advanced Packaging, excluding ECP, services and spares was $20.5 million, up 23.8%. For the year, this category grew by 45.3%. I will now provide revenue mix by customer type for 2025. Starting this year, rather than disclosing specific customer names, we are now disclosing revenue by customer type once a year. For each customer type, this includes product, services and spare parts. We've included the mix table on Slide 7 of our presentation. For 2025, our revenue mix by customer type was split among Foundry, Logic and Other, 59%; Memory, 27%; Packaging and Wafer Processing, 14%.

In 2025, we had 4 10-plus percent customers, including our top customer was 16.9%, next was 13.5%, then 11.6% and 10.2% for an aggregate total of 4 customers representing 52.2% of total sales. For 2024, we had 4 10% customer also for a total of 52.2%. Total shipments were $228 million for the fourth quarter, down 13.5% and $854 million for the full year of 2025, down 12.2%. David noted, we had a tough compare versus a strong 2024 when shipments increased 63% year-over-year.

We also did have some shipments for new products pushed into 2026. We expect 2026 shipment growth rate to be higher than our 2026 revenue growth rate. Gross margin was 41.0% for the fourth quarter and 49.8%. For the full year, gross margin was 44.5% versus 50.4% in 2024. Q4 gross margin was slightly below our long-term target model. Adding to David's earlier remarks, gross margins were down 8.8 percentage points year-over-year on a quarterly basis. This was due to product mix and margin pressure concentrated in a few semi-critical products, which contributed about 5 points of the headwind and a higher level of inventory provisions that contributed about 4 points negative impact.

As David noted, we expect the lower gross margins to be temporary. We believe our new product ramp, combined with supply chain initiatives will enable us to deliver the best products at a low cost and there is no change to our long-term target model range of 42% to 48%. For modeling purposes, we expect gross margins to be at the lower end of this longer-term target range for the first half of 2026 with an anticipated lift in the second half due in part to contribution from newer products, which generally have higher gross margins.

Operating expenses were $70.6 million for the fourth quarter, up 21%. For the full year, operating expenses were $258.4 million, up 34%. For 2025, R&D was 15.1% of sales, sales and marketing was 7.8% of sales and G&A was 5.8% of sales. For 2026, we plan for R&D in the 16% to 18% range, sales and marketing in the 7% to 8% range and G&A in the 6% range. Operating income was $29.5 million for the fourth quarter versus $52.8 million. Operating margin for Q4 '25 was 12.1% as compared to 23.6%. For the full year, operating margin was 15.9% as compared to 25.6%.

Long term, we look to grow our R&D spending in line with revenue, but we expect to show operating level -- operating leverage in SG&A with spending growth below our revenue growth level. Income tax expense was $6.6 million for the fourth quarter versus $17.3 million. For the full year, income tax expense was $13.3 million versus $35 million in 2024. For 2026, we expect our effective tax rate in the 8% to 10% range. Net income attributable to ACM Research was $17.3 million for the fourth quarter versus $37.7 million. For the full year, net income attributable to ACM Research was $110.2 million versus $152.2 million.

Net income per diluted share was $0.25 for the fourth quarter versus $0.56. For the full year, net income per diluted share was $1.61 versus $2.26. Our non-GAAP net income excluded $6.4 million of stock-based compensation expense for the fourth quarter and $33.6 million for the full year. I will now review selected balance sheet and cash flow items. Cash, cash equivalents, restricted cash and time deposits were $1.13 billion versus $441 million at year-end 2024. Net cash, which excludes short-term and long-term debt was $845.5 million versus $259.1 million at year-end 2024. $585.4 million increase in net cash for 2025 included $623 million net raised in the private offering by ACM Shanghai in 2025.

Total inventory at year-end was $702.6 million versus $676.4 million at the end of the third quarter. Raw materials were $349.7 million, up $23.5 million quarter-over-quarter. We made additional strategic purchases to support production plans and to mitigate any potential supply chain risk. Work in process was $61.4 million, up $1.9 million quarter-over-quarter. Finished goods inventory was $291.6 million, up $0.9 million quarter-over-quarter. Finished goods inventory primarily consists of first tools under evaluation at our customer sites along with finished goods located at ACM's facilities. Cash provided by operations was $33.9 million for the fourth quarter.

For the full year cash -- 2025, cash used by operations was about $10 million. Capital expenditures were $58 million for the full year 2025. For the full year 2026, we expect to spend about $200 million in capital expenditures. This continues -- this includes continued investments in Lingang, including the mini line and the second production facility, fixed assets for the business and investments in Oregon, along with other items. That concludes our prepared remarks. Now let's open the call for any questions that you may have. Operator, please go ahead.

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

I believe you gave pretty good color on shipment versus revenue growth this year. So I have a question since you mentioned about new products probably going to be a bigger driver this year for growth. And wonder if you can give us some color, let's say, excluding the new products, what's the growth, either shipment or revenue is expected to be excluding all the new products for the -- maybe -- I think maybe I'm talking about the existing product lines in cleans, plating, et cetera.

Okay. Okay. Thank you, Charles. And actually, you know that we -- as we said, we made quite a big progress, right, in the SPM process. Generally speaking, SPM, product SPM represent 25%, 30% of the cleaning market. And this market in the last couple of years, were not much touched so much. And as I said, last 2025, we made a very good progress both into the special module design for the high temperature and also Tahoe product. So we're getting to very aggressively into this market. And again, this is a very high-margin product and also a lot of customers, both in the Mainland China, also outside China, they suffered the particle issue with this high-temperature SPM process. And we think with our proprietary design model, we can control a very good environment, so therefore, can be -- will reduce particle size.

So that can be really enhanced our market growth in cleaning. Secondly, I want to see that is our N2 bubbling proprietary bubbling wet etch technology is really critical for the 3D NAND silicon nitride etching process, which we believe our proprietary technology not only cover today's demand for 300-layer, we believe as people moving to 400 or even 500 layer will suffer this kind of uniformity on the wear top or wear bottom, right? So we're using large bubble and size. We also with our proprietary technology, we can make a very uniform and large bubble distribution in the tank. That will be really enhance the etching uniformity from the top to the bottom for the wear.

So we believe that's not only demand in the market in China, we also see that demand outside in the global market, too. And third one, I also mentioned that is our supercritical CO2 Dry, we also made a lot of progress, right? And which is the past customer demo. We have 2 tools scheduled to be delivered in the first or second quarter of this year. We have additional interest in coming. Again, since the supercritical CO2 with our proprietary design, we got a capacity our CO2 chamber is about 40% smaller.

So we believe that we're really providing customers a 40% reduction of the consumable cost. And that really also, again, right, driving this product not in the local, I call it China market, but also getting to outside China market. So with all this cleaning I call it add together, we believe also expansion in the future. This will probably represent even China, over $1 billion market potential for us to get in. So we're still very excited about our continued expanding our cleaning product in the China market, plus also give us really strong differential technology in global market, right?

So that's for cleaning. And again, for copper plating, as I mentioned, we have a full set of the cleaning products, front-end, TSV, back-end, advanced packaging, including also this, I call it compound semiconductor. Plus recently, we just announced our panel horizontal plating, which we believe very, very key technology to driving for the panel size plating. This moment, everybody using vertical and copper plating for panel. We are the first one in the world so far doing horizontal plating, right? With our different technology, we believe probably most likely, we're the only one in the market to drive another horizontal copper plating.

So this year also, we see the bigger interest, not only in the China market, we see also a lot of interest coming in for us to deliver this tool. So with that, all new products in our existing cleaning, copper plating can drive a lot of revenue this year, including next year, right? And then plus, as I said, our other Furnace and PECVD and also Track business, we are developing for the last 4, 5 years, really made a lot of technology breakthrough, too. So we believe those technology getting this year start getting market, and we're real sustaining our next 3- to 5-year growth. And which you know that last 3, 4 years, our major growth has come from cleaning and copper plating. And next few years, we see this new product coming will definitely strengthen our highgrowth profile in the next few years. So we are very excited, very try to execution our strategy to continue to grow our revenue. Charles?

Maybe a question on profitability. So you reported last year, you gave some color about this year. But I believe if my math is right, your operating margin will compress last year from maybe close to 26% in '24 to 16% in '25. But this year, based on your -- what you guided about gross margin, what you guided about R&D, SG&A, it doesn't look like operating margin can rebound. It feels like operating margin probably more or less the same or even coming down a little bit depending on how the gross margin trends for the remainder of the year. So I wanted to get some sense how -- what's the reason for operating margin being under pressure for almost 2 years? And how do you plan to address this and maybe try to expand the operating margin from here?

Yes. Actually, that's this way. Looking at gross margin, right, we are the probably top of the equipment company in China, right, for gross margin, right, for the last few years. And as you said, Q4 of -- Q4 last year, we do see our first time gross margin is lower than our range, 40% to 48%, right? As we explaining maybe 3 factors. One is the product mix. We have 1 or 2 products, which is a semi-critical tool, do have pressure from the competitor for pricing there. The next one is really this inventory provision. But we think this year, as we are new product coming, as I mentioned, the 3 products coming will definitely enhance our margin. And also our inventory provision, we believe will be also greatly reduced too.

So with that, we still have confidence we're in the 42% to 48% gross margin in this year or beyond. And more than that is, as you said, we put quite a bit of R&D last year, right? It used to be R&D 13%, 14%. This -- last year, we're getting to 16%. We probably will keep that number in a way. Why? The next few years, AI is driving a lot of demand for the new technology. And everybody else, first tier company outside China, all people put a lot of R&D. And so we'll continue to invest that, which we know will impact a little bit our operating margin, but it's worth to spend money now. Why? I said the opportunity is there, right? And a lot of customers real demand for the new technology, which I believe a lot of AI technology today even not invented yet.

So it really give ACM a good opportunity with our, I call it our innovation power, our different technology, development capability, we can use this AI trend, we catch a lot of new technology and also catch the customer. This horizontal plate is one good example, for example, right? So again, and it's worth to spend more R&D and even get a few percent of the operation margin lower, which is a real long run, and we're working for the investor interest and also the growth ACM market into the next few years.

Yes. David, I might add a few things. I think that was a good overview. But Charlie, I think kind of summarizing it up, we're spending into the $4 billion market opportunity. There's a number of products that -- areas that we've been investing in that haven't scaled yet, but we expect them to scale over the next few years. It's the right thing to do to spend into that. You're right about the operating margin for 2026 kind of comes in at the mid-teen level, similar to what it was here in 2025. You move out a few years, our target is to keep those gross margins at that target range and then grow our top line faster than our OpEx. I think you can see some leverage in the out years.

Our next question will come from the line of Edison Lee with Jefferies.

Congratulations on the results. I just have 2 quick questions. Number one is that for the fourth quarter, the margin is a little bit low and the revenue growth also is a little bit slow and then your shipment, I think, declined on a year-on-year basis. So how much of that is just product mix and seasonality? And when do you think these numbers will actually start improving in 2026? And then the second question is about the USD 111 million you raised by selling down ACMS. Can you shed some light as to how you would actually utilize that proceeds?

Okay. So let's answer your first question, right? I think that you look in the -- I just mentioned last couple of years, our major growth engine from cleaning and also copper plating, right? Even the cleaning, I said there's one important product, which is SPM process were not touched too much. As I mentioned last year, end of last year, Q4 last year, we made a significant progress with this special nozzle design. We believe our performance is outperforming and top tier as a tool. So we see that growth continuously, right? And so then I would say our cleaning, copper plating and also horizontal panel continue to expand, too.

So that keep momentum. Our cleaning market probably today in China about 35% range. We're expanding to 50%, 60% in the next few years. And the copper right now, the 40%, I still say we'll try to catch 60% beyond market in China. More than that is those product -- different products, we see a very high interest from global top-tier customer. So that's what we also reinforce our sales outside China.

So that's where I see the impact or boost our revenue for our existing product. But -- and also, I want to see that through the last 5 years, we are really working with differentiated PECVD and Track and also Furnace technology, which we believe a lot of new technology we are putting in and nobody had it before, right? So that's what reinforce our, I call, market position. And plus those tool really with our differential technology, we put a lot of time to develop IP, develop the road map. It costs a little bit long time than the other guys. So -- and now it's come the moment for the market. And plus, I want to see another bigger impact is, I call it improvement is last Q3, we started using Lingang mini line, which we do not have it before. that was really helping our internal demonstration, internal R&D speed.

We see the bigger impact already. So that will be helping our tool mature before we ship the customer. So with altogether, I want to say this new growth from the existing and also our new product coming, we're driving ACM is real high growth profile in the year -- this year and in the next few years. So we are very confident. Plus even I say WFE market in China is flat, we can get a higher growth rate because of new product coming. And plus also, as you say, we have made a lot of progress in the global customer, this news announced today.

We also see a lot of interest in coming to our different technology from top-tier customer because we have a patent has been locked the technology already. They almost have no choice. They have to come to us. anyway, so that's really exciting for our technology. We're really trying to push in our technology will benefit the international global customer for their AI challenges. Dave, anything you want to add on that?

Yes. Let me add on to something before you answer his question about our Shanghai stock sales. So Edison, for Q4, you probably remember last call, we mentioned that Q4 and the year -- the overall year came in at the midpoint of where we started the year, maybe a little bit better. And don't forget, we had 2 things. Our newer products didn't kick in, very little in 2025. And then we did have a customer push out from Q4 into 2026. And so that was kind of -- those 2 things that hit 2024 -- I'm sorry, the Q4. When you look out to 2025, we're expecting linearity pretty similar to -- I'm sorry, 2026, we're expecting our linearity to be pretty similar.

So the first half will be about 42%, 43% of revenue. Second half will be 57% to 58%. But I would kind of anticipate Q1 at about 18% to 20% of the full year mix. Maybe, David, if you wanted to take this question, what are we going to do with the cash that we raised in -- or that we sold -- the cash that we sold.

Sorry, Mark, Mark, Mark, can you hear me?

Yes. Yes.

Before we move on to the use of proceeds, can you also comment a little bit on what you said about, I think, some products having some pricing pressure, which I think partially account for lower margin in the fourth quarter?

Yes. And there's not much to add to what I said there. Or what David and I have both said. There were a couple of semi-critical products that had particularly low margins that hit us in Q3 and Q4. And we -- David mentioned in the prepared remarks, he talked about the competitive situation in China. We are very focused on developing world-class tools. We think that there is also a bigger provision in the back half of the year. So we think that will be -- the overall provision for 2026 probably be smaller than it was in 2025, and it will probably be more balanced throughout the year.

Okay.

So you want me to touch the how we're using proceeds, right?

Yes.

Okay. Well, obviously, we have a second offering in China, right? Those money will be really focusing on R&D again, our expansion for their manufacturing. We have a second building will start decoration this year. So with that add together, probably we can manufacture $3 billion annually, which really give us a lot of room for manufacturing. And plus, we're also putting money in the mini line, as I mentioned, this mini line really speed up our internal R&D and debugging tool and also even can do the joint development with the customer process, too.

So it's really well spend for those money. And the proceeds we got from the -- so the 1.3% from Shanghai here, definitely the major purpose for that was spending global customer, global marketing sales. So we see that opportunity really big in the global market. As I mentioned, we do have some differential technology might be the only solution for their AI challenging. So those products, we think will be really gather attention from the global customer.

So we have spent money and building the international strong sales channel and also where we already had a Korea manufacturer base already. And however, with this geographic tariff going on, we have to really minimize the tariff impact, right? So that's why we started assembly tool in the U.S.A. So that will be real reduce our concern or any dynamic changing for those tariff will impact our revenue. So anyway, that's really what we work on. And our goal is very simple. We try to working with satisfy all regulation and requirement and maximize the investor interest, we're building a global sales, global company. That's our goal.

Our next question comes from the line of Jimmy Huang with JPMorgan.

Can you hear me?

Yes, please.

Congrats for the good results. I want to ask about we deliver single-wafer cleaning tools to a Singapore gas foundry. What would be the potential size of shipments in terms of units or dollars this year or next year and next year? This is my first question.

Yes. Very good question. Actually, we have a few tools, we're in the installation process right now, right? This tool will be qualified and go in production this year. And with that, we definitely will induce more of a cleaning tool. And also, we do have a copper plating and in -- behind. So that really will give us exposure of product in the Asian market. And so this will be real making more of, I call it, confidence and also get a high interest from other players in Asia and the market, too. So we see this will be a bigger milestone and for us, and plus we're not only looking at the customer only in Singapore, and we do have a customer in Korea and also we have a customer potentially in Taiwan.

So we have really confidence we should have expanding quickly in the Asia market. And plus, again, we're also very focusing on our U.S. market, too. We do have advanced packaging tool PO and receiving and we should deliver by end of this year. And we see a lot of potential going on in the U.S. market, too. Again, because today, all the memory or logic, they are AI driven for their advanced technology. ACM, I want to say I feel good technology we needed for their production line. We believe that will be beneficial for the customer and also can help expansion of market to global. So it's a great opportunity because, again, innovation is a key and every customer and every key customer, they all demand for innovation technology, which will probably fit our strategy.

Yes. Yes. So for Singapore business, how is the chance that we penetrate to Singapore gas memory makers in the next few years? And my second question is for advanced packaging. We are making great process. But for Taiwan, Taiwanese foundries and OSATs are leading the panel-level packaging for AI GPUs . Could we talk about our POP progress with potential Taiwanese players? Do we have any like order forecast or purchase orders in -- from Taiwanese potential customers?

Yes. Actually, we are talking to a few key customers, right, even the panel large size, 515 x 510. And also, we're talking about their 310 x 310, right, which is a true vision right now, people try to push in. So we have very good exposure to those customers. By the way, April 7, 8, we have -- we're attending the panel conference in Taiwan. In that conference, we do the keynote speaker about the horizontal plating and also our vacuum cleaning technology. So that's really a lot of exciting, I want to say, interest coming. And also, I said -- I heard everybody say panel product or equipment, they're probably satisfy all other products, except plating.

So plating become a bottleneck for their production expansion. So with that demand, I said we are the only one supplying horizontal plating. You probably heard that is the one key player in Taiwan, they said they only want horizontal plating. They don't want vertical. So our horizontal plating perfect fit their strategy or their demand. So as I said, really, we see a big opportunity and with our panel product. Actually, we're not only trying to introduce so far 3 products, right, panel plating, vacuum cleaning and also the bevel. We can develop also additional coater, developer, wet etcher, cleaning all kind of wet tool we are putting in. So that's really what we catch this wave of the panel, I call shift, right, for the advanced packaging. So we're in a very good position for those coming panel, advanced packaging expanding. We're very excited about this opportunity, right?

Yes. But do you know like in which kind of periods, quarters it will be more clear that whether we will have any order forecast or purchase orders for this POP equipment?

Well, let's put this way, we announced that we do have also PO from outside Mainland China, right? I mean we said already. So you know what I mean here. So -- and then we're continually expanding more, right? So again, I want to say this year, we have a confidence cash additional PO for our bevel, for our vacuum cleaning and also for the horizontal copper plating, not only in Taiwan market, we also see the opportunity in Korea, also in Singapore, by the way. So it's very exciting.

Yes. Maybe I can squeeze in my last question about the investor FAQ that ACM has disposed a small portion of stake in ACM Shanghai. How do we think about more further such disposal in the future? You mentioned that U.S. international capacity builds will require more funding. Will we dispose more stakes of ACM Shanghai in the future?

Repeat the question again. I'm sorry. Can you repeat again?

He's asking, are we going to sell more of our ACM Shanghai?

I see. I see. Okay. We sold 1.3% already, right? And we got a proceed of about $111 million. And we do have both arms to raise money. We can raise in U.S., we can raise in Shanghai. We're very flexible for what we're choosing, number one. And at this moment, I want to say our Shanghai stock is still -- we think it's still undervalued, okay, with our growth. So we maybe consider what the money demand and the time line, also what's the stock pricing in Shanghai. We decide where or when we should sell additional or not. And plus, as we have silver arm, we can raise the money in U.S.A. So it's quite flexible for us to raise the fund. And at this moment, I want to say, obviously we'll continue investing more in global market, and we have no concern for those money where it come from, right? We are very confident. We also have another , another tool we can get the money anyway.

Thank you. Seeing no more questions in the queue. Let me turn the call back over to Steven Pelayo for closing remarks.

Okay. Great. Before we conclude, I just want to give everyone a quick reminder on our upcoming investor conferences. On March 9, we will participate virtually in Loop Capital Markets' Seventh Annual Investor Conference for one-on-one meetings. On March 23 and 24, we will present at the 38th Annual ROTH Conference in Dana Point, California. Attendance at the conference is by invitation only. For interested investors, please contact your respective sales representative to register and schedule one-on-one meetings with the management team. This concludes the call, and you may now disconnect. Take care.

This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the ACM Research Third Quarter 2025 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'd like to turn the call over to Steven Pelayo, Managing Director of the Blueshirt Group. Stephen, please go ahead.

Good day, everyone. Thank you for joining us to discuss third quarter 2025 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 our CEO, Dr. David Wang; our CFO, Mark McKechnie; and Lisa Feng, our CFO of our operating subsidiary, ACM Shanghai.

Before we continue, please turn to Slide 2. Let me remind you that the 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 on Slide 13. Also, unless otherwise noted, the following figures refer to the third quarter of 2025 and comparisons are with the third quarter of 2024.

With that, I will now turn the call over to David Wang. David?

Thanks, Steven. Hello, everyone, and welcome to ACM's third quarter earnings conference call. I'm very pleased to report another strong quarter for ACM. Revenue grew 32% year-over-year to a new quarterly record, reflecting broader demand across our innovation product portfolio. Across industry, AI and data center investment are accelerating semiconductor and wafer fab equipment spending. AI is also demanding new innovations, many of which have yet to be developed. We believe these trends are driving the market toward us. ASM strategy remains focused on building a multiproduct portfolio of world-class tools that expand our service market and play a critical role in enabling the next generation of chip making.

Our differentiated technology continue to raise the performance bar across both front-end and advanced packaging applications. For example, in advanced packaging, we are seeing strong global customer engagement in our proprietary horizontal plating technology for panel-level packaging, and we plan to ship our first system in the fourth quarter. In cleaning, our high-temperature SPM platform is reaching industry-leading performance as our proprietary nodule design achieving performance at 19 nanoparticle sites down to single-digit particle counts. We believe this will lead to higher product yield for our customers.

Further, with no need to clean out chamber, the tool requires significantly lower maintenance. This is truly world-class tool, and our team has a road map to even lower particle size down to 70 nano, 50 nano and 30 nano to support the next few generation technology nodes.

In Track, we shipped our first KrF high-throughput Track platform this quarter, further broadening our reach into lithography adjacent applications, which demonstrate ACM's ability to grow into new product categories. Together with innovations such as nitrogen bubbling, cleaning and etchers and high-temperature furnace discussed last quarter, this advancement reflects ACM commitment to continuous innovation and the tangible performance improvement we have delivered to customers.

In September, our ACM Shanghai subsidiary completed its second capital raising on STAR Market, raising net proceeds approximately $623 million. ACM has the technology, the customers, the capacity and global reach and now additional capital to pursue our mission to become a key supplier to major global semiconductor producers. These funds strengthen our balance sheet and will be used for additional investment in our Lingang mini-line and to expand our global production capacity.

We also plan to accelerate our R&D investment. This will advance our existing cleaning and electroplating tool for next-generation process. It will also speed up the development for our new product categories, including furnace, PECVD, Track and panel-level packaging tools. And we're also investing in new products that we have not announced yet.

ACM is committed to world-class product for both China and global customers. Our tools enable next-generation devices architecture and help solve our customer complex process challenging across front and back-end applications. We have a world-class technology and a strong IP position. Customers around the world come to us for our technology rather for low price. We believe this is the right combination to grow our business and maintain our gross margin targets. We feel that ACM is now an inflection point in which innovation will win the game and drive a significant shift in the market share.

Now on to our business results. Please turn to Slide 3. For the third quarter of 2025, we delivered revenue of $269 million, up 32% year-over-year. Shipments were $263 million, up 1% year-over-year. Gross margin was 42.1%. This was at the low end of our target due in part to product mix, inventory provision and other adjustments. There's no change to our target model range of 42% to 48%. We ended the quarter with net cash, USD 811 million versus $206 million last quarter and $259 million at the year-end of 2024.

Now I will provide detail on product. Please turn to Slide 4. Revenue from single-wafer cleaning, Tahoe and semi-critical cleaning tool grew 13% and represent 68% of total revenue. We believe our top bottom cleaning portfolio is world-class and put us in a strong position to gain additional share both in China to expand to global markets.

The 13% year-over-year growth was mainly from our traditional cleaning product. The contribution from our newer cleaning line, including single-wafer SPM, Tahoe and semi-critical CO2 is still fairly small. We expect this new platform, especially SPM to contribute more revenue in 2026 and beyond. We estimate an incremental opportunity of more than $1 billion for those new cleaning products from the Mainland China market alone. We remain confident in our target for 60% market share in China market, and we expect higher growth rates for cleaning next year and beyond.

Revenue from ECP, furnace and other technology grew 73% and represent 22% of total revenue. We had a record revenue quarter for ECP front-end tool, which represent about 60% of the mix for this group. This group, including our MAP, MAP+, ECP 3D and ECP G3 product, all of which grew from last year, ECP back-end tools were about 40% of the mix for the quarter.

Revenue from furnace was small for the quarter and year-to-date. That said, we are making good technical progress across a range of customers and multiple product offering. This including our ultra-high temperature new furnace, which operates at more than 1,250 degrees C, our LPCVD oxidation and ALD for both thermal and plasma. We continue to focus on qualification at the key customers, and we anticipate incremental revenue contribution from furnace in 2026. And as I noted earlier, we are seeing very strong interest in our panel level plating tool for advanced packaging from both China and global customers. We will ship our first panel level packaging tool in Q4.

Revenue for advanced packaging, which excludes ECP, but including service and spell was up 231% and represent 10% of revenue. About 2/3 of this group for this quarter is small tools for advanced packaging. This including coder, developer, etcher, steeper and wafer-level packaging tool that run around $50,000 to $1 million each. We had a good contribution this quarter from a handful of different customers. Although we include plating product for advanced packaging in the ECP group and the combination is very powerful, it appear -- it provides ACM with valuable insight into the challenges of next-generation packaging as AI drives industry towards 2.5D and 3D integration, stacking die with through silicon via TSV and integrated memory and logic in a single packaging. We also shipped advanced packaging tool in Q3 to 2 new customers in the U.S., and we expect the installation and then true acceptance in the next couple of quarters.

We are making good progress with our new Track and PECVD platforms. I already mentioned the shipment of our first KrF Track tool. We believe our high throughput design position this platform to compete effectively with the incremental supplier. Our proprietary PECVD platform with 3 trucks per chamber gives the flexibility to support a wide range of processes with the same hardware. We feel good about our positioning as the team continues to work through the technical detail with a few tools in our Lingang mini-lab running wafer test and the EVA tools planned to ship in the near term.

To close on product, ACM's culture of innovation continue to deliver industrial-leading performance across the broader portfolio. Customer engagement is deepening as the chip makers look for partner that can enable their next-generation processes.

Please turn to Slide 6. global WFE demand continues to be fueled by investment in AI and data center infrastructure, particularly in advanced logic and memory, while China market, in our view, remains stable. Last quarter, we increased our long-term revenue target to $4 billion, supported by an estimated USD 2.5 billion contribution from China and $1.5 billion from global markets.

Next, let me provide an update on our production facility. First is Lingang. Please turn to Slide 8. Our new Lingang production and R&D center is now fully up and running. The site's first building is already in volume production, while the secondary providing additional room for future expansion. Together, the 2 building can support up to $3 billion in annual output, positioning ACM to meet growing customer demand and support our long-term growth plans. We plan to allocate part of the proceeds from ACM Shanghai's second capital raising to expand our mini-line at Lingang to strengthen our process development capability and enable on-site customer evaluation on the fab-like condition. This will accelerate product validation, shorten development cycle and enhance collaboration with the key customer as we're expanding our portfolio of next-generation tools.

Turning to our Oregon site. Please turn to Slide 9. This facility will allow customers to test wafer locally on ACM tool and will serve as our initial base for production and technology development in the United States. Our global customers are encouraging by our commitment, which we believe will help them to choose ACM as a key supplier to scale production.

Now I will provide our outlook for the full year 2025. Please turn to Slide 10. We have narrowed our 2025 revenue outlook to a range of USD 875 million to $925 million versus prior range of $850 million to $950 million. This implies 15% year-over-year growth at the midpoint. We made a greater progress with several major product lines this year, including single-wafer SPM, Tahoe panel-level plating, furnace, Track, PECVD. We believe this new product providing a solid foundation for multiple major new product cycle for the continued growth in the coming years.

Now let me turn the call over to our CFO, Mark, who will review details of our third quarter results. Mark, please?

Thank you, David, and 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, unrealized gain/loss on short-term investments. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release. Unless otherwise noted, the following figures refer to the third quarter of 2025 and comparisons are with the third quarter of 2024.

I'll now provide financial highlights. Revenue was $269.2 million, up 32%. Total shipments were $263.1 million, up 28% sequentially and up 0.7% year-over-year. Gross margin was 42.1% versus 51.6%. This is the low end of our target model. Adding color to David's earlier remarks, we attribute this to 2 key factors. First, product mix. Our Q3 sales included a high number of smaller front-end tools, which had forced margins, and that contributed about 200 basis points of the headwind to the gross margin. Second, we had a higher level of inventory provisions and other adjustments, which hit our COGS for the quarter contributed about 300 basis points negative impact.

I want to reiterate, there is no change to our target model of 42% to 48%. ACM is fully committed to developing world-class tools that enable our customers to scale production of leading-edge semiconductor devices. We believe this creates a healthy pricing environment for our tools, which combined with an efficient cost structure results in good profitability.

Operating expenses were $76.9 million, up 56.3%. R&D was 14% of sales, sales and marketing was 7.7% of sales and G&A was 6.9% of sales. For 2025, we continue to plan for R&D in the 14% to 16% range, sales and marketing in the 8% range and G&A in the 6% range. Operating income was $36.5 million, down 34.9%. Operating margin was 13.6% versus 27.5%. Income tax expense was $2.9 million versus $4 million. For 2025, we now expect our effective tax range in the 7% to 8% range.

Net income attributable to ACM Research was $24.8 million versus $42.4 million. Net income per diluted share was $0.36 versus $0.63. Our non-GAAP net income excluded $7.6 million in stock-based compensation expense for the third quarter and $18.7 million in unrealized gain on short-term investments.

I remind the analysts that as a result of the second capital raise of $632 million net by our subsidiary, ACM, our ACM's ownership in ACM Shanghai is now 74.6% versus 81.1% at the end of last quarter.

I will now review selected balance sheet and cash flow items. Cash and cash equivalents, restricted cash and time deposits were $1.1 billion at the end of the third quarter versus $483.9 million at the end of the second quarter. Net cash, which excludes the short-term and long-term debt was $811 million or about $12 per share versus $205.8 million at the end of the second quarter.

Total inventory net was $676.4 million versus $648.3 million at the end of the second quarter. Raw materials were $326.2 million, up $40.6 million quarter-over-quarter. We made additional strategic purchases to support production plans and to mitigate any potential supply chain risk.

Work in progress was $59.5 million, down $1.2 million quarter-on-quarter. Finished goods inventory was $290.7 million, down $11.3 million quarter-over-quarter. Finished goods inventory primarily consists of first tools under evaluation at our customer sites, along with finished goods located at ACM's facilities.

Cash flow used by operations was $4.6 million for the third quarter and $44.4 million year-to-date. Capital expenditures were $43.2 million. For the full year, we expect to spend about $60 million to $70 million in capital expenditures.

That concludes our prepared remarks. Let's open the call for any questions that you may have. Operator, please open up the call for questions.

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

David and Mark, congrats on the progress here. Can you talk about the shipments and the growth there? Are there any factors, puts and takes in terms of what we should expect in terms of your visibility in the next 4 quarters?

Yes. shipment, we see there are some customers asking for delay for maybe the Q1 next year. And also the certain parts were shortage, right? We cannot fully complete the order as a manufacturer final testing. But those products probably will still get into the Q1 shipment, and we're still expecting next year's shipments still continue to grow.

These part shortages, David, how long do you expect that to persist? Is that a multi-quarter effect? Or is that short term?

It's not really. I think there are certain parts we're using right now and we kind of replaced some parts. We're kind of -- and they're looking for a new supplier. And those things has been qualified in their customer process. And so those parts qualify finish, then we can use more of the, I want to say, domestic made in China parts. So that's probably a portion of the fact there.

Yes, one other thing I'd add to the shipments for the quarter and even for the year, we talked about this before, but some of the newer products that we would be shipping that David talked about in his prepared remarks, some of those probably a little more fell indeed is going to fall into next year versus this year.

Okay. Helps Mark. And then my final question is on the panel tools. Can you talk about the opportunity as you ramp maybe into the HBM memory or AI memory opportunity, how much that can grow as a percent of revenues and how quickly that can ramp?

Well, okay. So panel packaging, right? Sujit?

Yes.

Okay. Well, and the panel has been real hard, right, in this year, especially a major customer in Taiwan real promoting the panel business. We believe panel is a way to solving the large area AI chip, right, packaging with HBM together. So all the wafer level is a lot of, I call the area. So with the efficiency of the using the area.

So panel packaging, one key is plating technology, right? I should say a lot of people in the copper plating for panel is a vertical style. And we are probably the first one to propose the horizontal and cover plating for the panel, which also we got the 3D Insight award, Innovation Technology award from USA.

We believe we really have a good solution and they can play their panel uniformly and there will be a fill requirement of all this either 310x310 or 515x510. By the way, we're going to ship one of the panel plating tool in the fourth quarter. And also, we're engaging with multiple customers for the panel packaging business in Taiwan and U.S. and also in China -- Mainland China.

And our next question comes from the line of Charles Shi from Needham & Company.

A couple of questions here. The first one, a follow-up to Suji's question on shipment. So it sounds like it's more of a customer push out and partly due to parts shortage. And it sounds like the implied message seems like it's not a reflection of the end market demand. But I wonder, can you kind of quantify a little bit what's the expectation for Q4 shipment? And maybe on a full year basis as well, it looks like the shipment probably is going to be down this year. This is probably the first time in many years, your shipment is down on a full year basis.

David, do you want to take that? Or you want me to start on that?

Go ahead, Mark.

Yes. Charles, so I think your read is good. We're not really making a call on the end markets here. It's hard to say company-specific versus end market. But yes, in terms of our shipments, the Q4 will probably be down from Q3. So you could have -- the full year would be down year-on-year. And that is different than what we had expected. I think I would point out that shipments were pretty heavy last year, as we know. And some of the reasons that we talked about for the deferment of shipments, we should start seeing those pick back up in the first half of next year.

I think David in his prepared remarks talked about an inflection point where we're still shipping a lot of our current products and a lot of newer products we expect to really start kicking in and contributing more next year, the SPM, the furnace and this panel level packaging product line.

Yes, actually, including we're probably shipping a few PECVD tool, and we see that will be definitely contributing revenue in the next year. So I think it's kind of -- we're in the time of inflection point, right, and the new product come out. And also, we're expecting some new cleaning tool come out too contributing on the -- our shipment and revenue, especially as I mentioned, this proprietary design and SPM special nozzle which a very excellent result, which is -- we think we'll continue to gain a lot of market share for SPM process.

Got it. I do have a question a little bit later around the innovation, some of the comments you made, David, around, I mean, also proprietary design, et cetera. Before that, maybe a question on the 300 bps impact from inventory write-down. Mark, it wasn't clear to me what's the reason for writing down, if my math is right, around $8 million-ish of the COGS of the inventory. And may I ask if the write-down is related to inventory you have at your own facility or this is about some of the write-down of the evaluation tools at your customer sites? And if the latter, what's the reason for that?

Yes. No, thanks for the question, Charles, on that. So inventory, you always have a pretty thorough process internally to kind of value the inventory on your books. And so a big piece of it is related to the aging of some of our raw materials. And it's interesting, we think that -- and so it's just kind of a formula you apply to the age profile of your raw materials.

And on the other side, there were some finished goods that we took a write-down on. And these were -- I think these were mostly at our own internal. I see these were tools that I'm pretty sure were -- that we had internally. And so we're not really disclosing it internal versus end customers. Yes.

Great. So maybe my last question. I think you spoke -- we probably have discussed about this along the same line before, but you talked a lot about innovation, but develop better products than your global competitors win market share. But I think what I am hearing is the domestic customers are probably more looking for simply matching the global baseline, like matching what the global tools they already have given restrictions, given self-sufficiency, all kinds of reasons. At this point of time, like trying to do a lot of product innovation, do you think you may be missing out some near-term opportunities? I understand you said that you're going to win in the long term, but do you think that you're going to -- I mean, because your tool, even though it's performing better, maybe will perform differently from their global baseline, your customers' global baseline. Could you -- could that cost you some business in the near term?

Yes. Actually, we are winning a short time. In other words, I give this example, this high-temper SPM process, right? And with our special proprietary design, we can really control all the high-temperature SPM splash out of the chamber and also the vapor into that environment. So therefore, we control the environment very well. That's why I said our 19 nanoparticle down to a single-digit number, between less than 5. So we are better than even top-tier player today in the SPM process. Also, because of the control environment, we think about even 70 nano, 50 nano, even 30 nano, we can control better.

So answer your question is, yes, there's a certain domestic player going there or there's other first tier -- I mean, tool vendor still set in China, but I said, we're in the best performance. And also, we think that either customer in China or outside China, they still desire the best performance, right? As go to small geometry, those 19-nano, 70-nanoparticle will matter the yield loss. So that's why we think that we really gain our market -- help us gain market share, both in China and also outside China.

We still strongly believe our innovation product has been heavily patent in China also in global semiconductor country area. We have confidence, nobody will copy our proprietary technology or patented technology. So that's why we have the confidence to maintain our -- continue to increase our market share, maintain our gross margin.

And I still think AI driving a lot of innovation and the customer desire new technology. Those customers maybe prefer more technology other than low price, right? So that's really, I think, a strong point. And also, I want to say a lot of our existing products cannot meet customer future requirements. So that's another reason we have confidence on our tool.

[Operator Instructions] Our next question comes from the line of Mark Miller from The Benchmark Company.

I was just wondering if you can give us some color on what you expect for MOCVD next year and also give us an update on what's going on with SK Hynix.

Okay. Well, actually, maybe, Miller -- Mark, I want to make sure this -- we're not going to make MOCVD, we'll make a PECVD. Okay. So anyway, PECVD has been big -- a lot of market size. We developed the PECVD almost from 5 years ago, right? And we're choosing, again, innovation approach. And we're differentiated from a major player in the PECVD, 2 big players now. And for example, like a chamber has 3 trucks, right? Other people have 4 or either 2. So we believe 3 truck in 1 chamber can do their -- almost all the process. And therefore, customer buying platform, we can do almost every PECVD process, right? And for other reasons, we also have a lot of control chamber, power supply, or other differentiation come here. So we believe our PECVD will be -- we're shipping probably 2 this quarter or continue shipping more next quarter. And we'll see that the PECVD is getting into the market and also expecting those PECVD will be generator revenue next year. And also, we have a really high expectation and those PECVD not only service in China, we're expecting to go Korea and also the global market.

If you can comment, please, on Hynix and any developments there?

Hynix is our customer, right? It's a long, long customer, and we're engaged with a multi tool, cleaning, obviously, and also other products. We're still thinking Hynix is real innovator, leading customer, and we'll continue to engage with them on multiproduct right now. And as I said again, a lot of new stuff were developed right now, and they are very interested, right? And because they're also leading all the HBM everything, right, even the DRAM field. So they are designed more of advanced technology.

Also, we have a Korean team and the Shanghai team together. So it's working very well. And a lot of our technology actually was invented and developed in Korea, too. So that's really fitting their requirement locally manufactured, locally R&D. So we still see a lot of potential we can provide good technology to our customer in Korea.

So is your panel packaging tool is that of interest to Hynix?

Yes, not only packaging, right? Also, you talk about front end too. right? And in all level of the engagement and including -- we talk about our furnace, PECVD, Track and other even product in development.

What about your cleaning tools? Have you been able to penetrate Hynix with the cleaning tools, Tahoe and SAPS?

Well, we have a SAAPS tool has been sold many tool, right, in Hynix already. And now obviously, we have new cleaning tool engaged with them. And one is our probably end bubbling tool and which really take care probably more than 5 layer of 3D NAND and all this one of the major applications, we think will be contributing to their customers in the future 3D NAND technology.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Steven Pelayo for any further remarks.

Great. Thank you. Before we conclude, I just want to give everyone a quick reminder on our upcoming investor conferences. On November 19, we'll present at the 14th Annual ROTH Technology Conference in New York City. On December 3, we will present at the UBS Global Technology and AI Conference in Scottsdale, Arizona. On December 16, we will present at the 14th Annual New York City Summit in New York City. And then on January 15, we will join the 28th Annual Needham Growth Conference virtually for our presentation and one-on-one meetings. Attendance at the conferences are by invitation only. For interested investors, please contact your respective sales representative to register and schedule one-on-one meetings with management.

This concludes the call. You may now disconnect. Take care.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the ACM Research Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, we're 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 2025 results, which we released before the U.S. market opened today. The release is available on our website as well as from our newswire services. There is also a supplemental slide deck posted in the Investors section of our website that we will reference during our prepared remarks today.

On the call with me today are our CEO, David Wang; our CFO, Mark McKechnie; and Lisa Feng, our CFO of our operating subsidiary, ACM Shanghai.

Before we continue, please turn to Slide 2. Let me remind you that the remarks made during this call may include predictions, estimates or other information that might be considered forward-looking. These forward-looking statements represent ACM's current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results to differ materially.

Those risks are described under Risk Factors and elsewhere in ACM's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward-looking statements, which reflect ACM's opinions only as of the date of this call. ACM is not obliged to update you on any revisions to these forward-looking statements.

Certain of the financial results that we provide on this call will be on a non-GAAP basis, which excludes stock-based compensation and unrealized gain and loss 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 the second quarter of 2025 and comparisons are with the second quarter of 2024.

I will now turn the call over to David Wang. David?

Thanks, Steven. Hello, everyone, and welcome to ACM Research second quarter earnings conference call.

We delivered another quarter of good results with strong sequential growth in both revenue and shipment, reflecting continued progress across our expanding product portfolio. We saw momentum from our STM, Tahoe, plating and furnace tool, which are helping expand our addressable market and gain market share. We also continue to make progress with new platform, including track, PECVD and panel-level packaging tools, which represent important long-term growth drivers.

We recently announced a major upgrade to our Ultra C wb wet bench cleaning tool. The technology integrated ACM patent-pending nitrogen bubbling technology to generate a large-sized bubble with good bubble density uniformity and enhance etching rate uniformity in the 3D structure across the wafer.

I'm happy to announce that we have received repeat orders for the new Ultra C wb wet bench tool with our proprietary N2 bubbling technology. We expect good shipments for this tool this year and next. The technology is also adaptable to our Ultra C Tahoe platform with significant application potential for manufacturing advanced 3D NAND, 3D DRAM, 3D logic devices. We believe this new technology is another example of ACM's leadership in cleaning tools that will be good for our customers and support our growth initiatives.

Our nitrogen bubbling technology tool adds to early breakthrough for Tahoe and other recent products launching such as our high-temperature SPM tool and panel-level packaging tool for flux clean and bubble etch taken together, these developments reinforce ACM's differentiated leadership in wafer cleaning and give us confidence that we will continue to gain share in a critical segment. We remain committed to deliver innovative new products such as this to enable our customers to meet next generation of semiconductor manufacturing challenges as demand by the artificial intelligence transformation.

Now on to our business results. Please turn to Slide 3. For the second quarter of 2025, we delivered revenue of $215 million, up 25% sequential and 6% year-over-year. Shipments were $206 million, up 32% sequential, up 2% year-over-year. Gross margin was 48.7%, exceeding our target range of 42% to 48%. We ended the quarter with a net cash of $206 million.

Now I will provide a detail on product. Please turn to Slide 4. Revenue from single-wafer cleaning, Tahoe and semi-critical cleaning tools grew 1% and represent 72% of total revenue. We believe our top to bottom cleaning portfolio put us in a strong position. We continue to make technical improvement and customer progress with our SPM tool.

Our high-temperature SPM system features ACM proprietary nozzle design, which prevent both liquid SPM and acid mist spat out of the chamber during SPM process. This improving particle performance reduced chamber preventative maintenance, cleaning frequency and enhance the system uptime. We have achieved a better particle control over average particle count less than 10 at 26 nanoparticle size. We also believe it will show better performance than competitors offering at the particle sizes more than 17 and 15 nanometers.

In Q2, we delivered SPM and Tahoe tools to several more customers, as we continue to gain market share in SPM space. Revenue from ECP, furnace and other technology grew 23% and represented 22% of total revenue. ACM recently delivered an ECP tool to a customer, which included company's 1,500 electroplating chamber shipped. We are seeing a strong momentum for ECB tool in advanced packaging driving by demand for both front and back-end plating system.

We are also seeing growth interest in our new Ultra ECP APP panel level horizontal plating system as the industry shift from wafer to panel-level packaging to support the next-generation AI chips, our unique horizontal plating approach, which delivers superior uniformity than vertical panel plating solution has attracted attention from the major players.

Our furnace products are building momentum, supported by strong customer interest and expanded pipeline of evaluation and engagement. We see good demand across multiple applications, including high-temperature neo, especially our 1,250-degree C-degree version, high-temperature neo furnace and also LPCVD oxidation and ALD. We believe ACM differentiated design position us to capture meaningful market share.

Revenue from advanced packaging, which excludes ECP, but including service and spell was up 20% and represent 6% of revenue. We are making good progress with our new track and PECVD platform. Our proprietary PECVD platform with 3 trucks for chamber give us flexibility to support a wide range of process with the same hardware. We feel good about our positioning with a plan to deliver more beta tool to a handful of customers this year and look for revenue contribution in 2026 and beyond. For Track, we're in the final development phase of our 300 wafer per hour in-line KrF tool, and we expect to deliver the beta tool to a key customer in the current quarter.

To close on product, our road map, including incremental contribution from Tahoe SPM and furnace tool in 2025 with the panel-level packaging, Track and PECVD tool expected to drive growth in 2026 and beyond.

Please turn to Slide 6. Our first half results reflect solid execution across our product portfolio. We remain confident in the year and our long-term opportunity in China. As a result, we have increased our long-term revenue target for Mainland China to $2.5 billion versus our previous target of $1.5 billion. The increase is based on 2 main factors. First, we're now assuming a long-term China WFE market size of USD 40 billion versus our prior assumption of USD 30 billion. This is based on updated by third-party global market forecast and also our view of the China semiconductor industry.

Second, we have adjusted our market share targets for product group as follows: we have raised our market share target for both cleaning and plating to 60% versus 55% prior. This is a result of our current assessment of customer traction and increased confidence for share gain for new products. For furnace, PECVD and Track, however, we're keeping our target at 15% and 10% level. Of course, we aspire to achieve better results, but need more time in the market before we will formally adjust the target.

Moving to the bottom of the chart, we maintain our revenue target for the rest of the world at $1.5 billion. We believe ACM focus on differentiated world-class product, combined our global sales and service team will deliver results with our global customers. As an example, we have a plan to deliver a several tool to the U.S. in the third quarter. We remain engaged with our major U.S. customer with active evaluation across a range of the cleaning process steps as we continue to work towards our global -- our goal for production orders. Bottom line, we have raised our long-term revenue target to $4 billion versus our prior target of $3 billion.

Now I will provide an update on ACM Shanghai's proposed capital raise in China. ACM Shanghai recently received approval from the CSRC to proceed with its proposed follow-on offering on the stock market to raise up to USD 620 million by selling less than 10% of the total share. The capital raising is leadership is intended to help accelerate our updated revenue target and add to the long-term foundation to support our effort to scale our product to major global customers. As the majority shareholder, we view the proposed transaction as an important step in strengthening our position in the China market, and it demonstrates the long-term value of our ownership stakes.

Next, let me provide an update on our production facility. First is Lingang. Please turn to Slide 8. As I discussed last quarter, our state-of-the-art Lingang production and R&D center is nearly completed. The site including 2 production buildings with the first now in production and the second available for future expansion. Each of the 2 production buildings can support up to $1.5 billion of annual production capacity combined. We believe we can eventually support $3 billion of production at Lingang from the 2 manufactured building.

Next, our Oregon facility. Please turn to Slide 9. Recall, we purchased a 40,000 square feet facility last year. We made good progress during the second quarter, and we have began upgrade on our customer demo R&D lab. We believe this will help our effort with the customer in the regime as we will let them test wafer locally on ACM tool. We also are moving forward with a plan to add production capacity to the Oregon facility. We target the middle of 2026 for the demo lab and production to commercial operations. Our investment in Lingang and Oregon are key enabler of our growth strategy, expanding our capacity, strengthening customer support and prepare us to scale globally.

Now I will provide our outlook for the full year 2025. Please turn to Slide 10. We are maintaining our 2025 revenue outlook in the range of $850 million to $950 million. This implies 15% year-over-year growth at the midpoint. In close, our focus remains on delivering differentiated, enabling technology that solve our global customers' most critical process challenges.

Now let me turn the call over to our CFO, Mark, who will review the details of our second quarter results. Mark, please?

Yes. Thanks, David. Good day, everybody. Please turn to Slide 11. Unless I note otherwise, I'll refer to non-GAAP financial measures, which exclude stock-based compensation, 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, the following figures refer to the second quarter of 2025 and comparisons are with the second quarter of 2024.

I'll now provide the financial highlights. Revenue was $215.4 million, up 6.4% Total shipments were $206 million versus $202 million in Q2 '24 and $157 million in Q1 of 2025. Strong sequential rebound in Q2 shipments led to a return of positive year-over-year shipment growth for the quarter.

Gross margin was 48.7% versus 48.2%. This exceeded our long-term business model target range of 42% to 48%. We expect gross margin to vary from period to period due to a variety of factors, including sales volume, product mix and currency impacts.

Operating expenses were $63.4 million, up 38.8%. R&D was 14.5% of sales. Sales and marketing was 9.3% of sales and G&A was 5.6% of sales. For 2025, we now plan for R&D in the 14% to 16% range. This is an increase versus last quarter's plan due to ACM's continued focus on proprietary R&D programs. We plan for sales and marketing in the 8% range and G&A in the 5% to 6% range.

Operating income was $41.5 million, down 20.2%. Operating margin was 19.3% versus 25.6%. Income tax expense was $1.9 million versus $9.3 million. For 2025, we expect our effective tax rate in the 10% range.

Net income attributable to ACM Research was $36.8 million versus $37.5 million. Net income per diluted share was $0.54 versus $0.55. Our non-GAAP net income excluded $9.8 million in stock-based compensation expense for the second quarter.

I will now review selected balance sheet and cash flow items. Cash, cash equivalents, restricted cash and time deposits were $483.9 million at quarter end versus $498.4 million at the end of the first quarter. Net cash, which excludes short-term and long-term debt was $205.8 million versus $271.0 million at the end of the first quarter.

Total inventory net was $648.3 million versus $609.6 million at the end of the first quarter. Raw materials was $285.6 million, up $45.7 million quarter-on-quarter. We made strategic purchases to support production plans and to mitigate any potential supply chain risk.

Work in progress was $60.7 million, down $10.2 million quarter-on-quarter. Finished goods inventory was $302 million, up $2.2 million quarter-on-quarter. Finished goods inventory primarily consists of first tools under evaluation at our customer sites, along with finished goods located at ACM facilities.

Cash flow used by operations for the first half of 2025 was $39.6 million versus $51.9 million cash flow provided by operations in the year ago period. Capital expenditures were $32.2 million for the first half of 2025 versus $39.7 million in the year ago period. For the full year 2025, we expect to spend about $70 million in capital expenditures.

That includes our prepared remarks. Now let's open the call for any questions that you may have. Operator, please go ahead.

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

First question on shipment. I noticed that the shipment was up, but only up slightly on a year-on-year basis. I recall you guys previously said the full year '25 shipment should be -- I mean, should grow, maybe not necessarily growing faster than revenue this year, but that should grow. But it looks to me that in second half of the year, you have a good amount of catch-up to do for shipment to be flattish versus last year's level. Is that still the right target to think about shipment or maybe the full year number may actually come down a little bit on a year-to-year basis?

Charles, our 2024 shipment was very strong, right? You recall about over 2023 is 63% of the increased rate. So then we also have a lot of new products and this year, we're contributing to the shipment this year. So I want to say the first second half year, obviously, much stronger than the first half of the year. We're expecting still growing for '25 -- I mean 2025 and growth is still achievable.

Got it. So relative to, let's say, 90 days ago, the expectation for shipment for this year, do you see actually its shipment growth may be stronger than you thought 90 days ago or flattish or weaker? And any directional color you can provide?

The reason why I ask this, maybe it's good to get your thoughts as well. The -- your U.S. peers who have reported so far ahead of you have been seeing China WFE upside, especially for the second half of the year. Wonder if you are seeing the same thing or not.

Yes. I should say our Q3 is very strong, right? We see the Q4, and there's still some slot fill in. And so I still see the very good and outlook for Q4. So I was compelled like you said 90 days ago, we see that the market situation can improve.

Got it. Lastly, I think, Mark, you mentioned some strategic purchase you made over the last quarter. I think the news flow did suggest that the U.S. may be working on something at -- in terms of export control at the subsystem level. Wonder what's the ACM assessment on, let's say, supply chain risks, maybe for the reasons of potential new export controls and how the company has prepared to mitigate that risk. And any thoughts on that front would be great.

Yes, David, do you want to take that first, and I can add? Or do you want me to go ahead -- yes, go ahead.

And obviously, now we are doing a multi-source of the components, right? And we're definitely looking for the new components and supplier in the other country than the U.S. And also, we have also looking for the local supplier in Mainland China. And I want to say there is a certain challenging, however, and I think we can overcome that with the multi-source alternative source supplier for our key components in the tool. So Mark, do you want to add on that?

Yes. Charlie, the only thing I'd add, I think it's a good question. It's something that we look at a lot. I mean it's -- we have a pretty good solid balance sheet. We have a good forecast for our shipments. So we thought it was the right thing to do to kind of increase some of our strategic supplies of some key components. So we might even do a little bit more here in the second quarter. I'm sorry, in the third quarter.

Yes. Maybe just a quick follow-up because of strategic purchase, it could be for preparing for higher demand in coming quarters or it can be more for mitigating supply chain risks, especially the -- let's say, maybe some of the components you are sourcing currently from the U.S. Which one is it more for you to do that?

Yes. Yes. I mean as of December -- or sorry, January 1, you can't get parts from the U.S., right? So yes, these are strategic purchase probably from other regions. And I won't really break out how much of it is to mitigate the risk or just kind of based on our forecast. But it's a combination of those, Charlie.

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

I had a question about long-term borrowings. They're up significantly over the last 6 months. I'm just wondering, what's going on there?

Yes, I can hit on that a bit, and then we got Lisa here in the background. But long-term borrowing, we did step things up a bit. There's controls over how we can use some of our capital from the China capital raise and what have you. Of course, we have that coming along. So we did step up our long-term borrowing a bit here in the first half of the year. Lisa, did you want to add something?

Yes. In addition to that, the interest rate for deposits is much higher than borrowing in China. So we're trying to use that kind of leverage to maximize the returns.

Good opportunity to kind of take the lower interest rate down. Yes. Next question please operator.

The next question comes from Suji Desilva with ROTH Capital.

Congrats on the progress here. So milestone-wise, can you talk about the customer traction outside China and what some of the milestones we would look for here, update on those -- on the customer base across different parts of the world?

Yes. Suji, I think we'll continually work with a key customer in Korea and also in the U.S. And at this moment, I want to say, the -- it take a little more time. However, we are really working closely with the key customer evaluate our differentiated cleaning technology and our Masonic cleaning, and we are reaching a very encouraging result. Also, we're working with the Korean customer for their copper plating product, and that also made the progress, right?

And continuing, we're also exploring new customer in both U.S. and Taiwan. And I think especially -- I want to say, our panel level packaging tool made a very strong attraction right from Taiwan customer, too. So I want to say with our continued innovation technology we're providing in the market, and we're going to have our -- expand our sales revenue outside China, especially we're now building our R&D center in Oregon and also the manufacturing. And those R&D center will real maker easier and for our cleaning cover plating demo and for the customer outside China.

And also manufacturing, we're doing right now prepare for the Oregon and that really give us a strong position and to minimize impact of any tariff situation. So we believe our strategy, building our R&D manufacturing center in China, in Korea and the U.S. will further strengthen our position in the global market. And we are fully confident with our new differential product.

And also, I want to say, a lot of new future AI chip request, a lot of new technology, which is even today, nobody offering in the market. And those new demand for the technology driving or we put ACM's product in the differential or other position. So we believe with our innovation continues going on, and we'll continue to gain traction from the key customer in cleaning, in copper plating and panel and also other new products we're planning to.

So we still have a very strong confidence, right? We're getting to the global market. I still want to say every customer in the world, the demand for the best technology, right? As we just meeting to announce, we have N2 bubbling technology, with generator large-sized into bubble with uniformity across the entire wafer in the best. So we believe that's what really driving the innovation requirement for the both 3D NAND and 3D DRAM in the future, probably also the 3D logic down the road. So that's another word I look at our innovation technology we bring to the market.

Okay. Mark, do you want anything to add on that?

Yes. No, David, that's a good answer. I mean we're working really hard with our big U.S. customers. We got some additional tools that are going to different organizations here in Q3 to the U.S. So our team is pretty active in Oregon. We're pretty focused on getting our demo room up and running and being ready to produce tools in the U.S.

The next question comes from Edison Lee with Jefferies.

Can I maybe ask you 2 questions. Number one is for the 2Q growth at the revenue level is 6%, which is actually below the growth rate that you are guiding for the full year. So what was actually driving that slower growth in the second quarter?

And then for 3Q, you said that the outlook is very strong. Can you share the growth drivers coming from logic, memory, power and advanced packaging. So which areas actually you are seeing the strongest growth and which area you are seeing the slowest growth?

Yes. I mean revenue can be lumpy, right? And we're still expecting 15% middle point growth for the year. And also, we are -- you're asking the Q3 driving force, I want to say, still our cleaning and copper plating is still the major driving there. And also certain product, customer requests were shipping turned to Q2, Q3, right? I want to say, over the year, we still have a whole year, we're expecting growth better than the Q2.

Right. So in China, can you talk about the growth that you're seeing from memory versus logic?

I would say there -- we both on our tool sell to the memory and the logic customer, right? But you would say which is growing faster? I don't have a real number right now put in my hand. I want to say both, even look in the long run, I want to say memory is still very strong, both the 3D NAND and also this DRAM business. And of course, this is in the logic and the people are still building fabs and both for mature node and other advanced nodes. And so I want to say that I look in the next really a few years, those market is very solid, still there.

[Operator Instructions] Your next question comes from the line of Matt Cook with Pro Tanto.

Can you hear me, okay?

Yes.

Good. Great. So I just wanted to ask, ACM Shanghai reported its results about 60 minutes ago. Now I know that there are different accounting standards, but their numbers look a lot better than yours. Like the difference is bigger than we're kind of used to. So revenue was $270 million compared to $215 million for ACMR and adjusted net income was $62 million compared to about $37 million that you just reported.

So Mark, could you just help understand like what's caused the difference? I know there are different recognitions on revenue and timing. That's the first question, like why the results are so much better there? And if there could be some kind of like if that could swing the other way in Q3?

And then the second question is, are shipment numbers different for ACM Shanghai? And if so, what are they in dollars? That would be great.

Yes. David, I can go ahead and hit that, and you can add if you want.

So in reverse order, yes, I mean, simply, the shipments are the same for both. They're measured the same. The difference is RevRec. And so under China GAAP, the China organization recognizes revenue upon installation. And of course, U.S. GAAP is 606, right, where we take revenue on repeat shipments or upon acceptance when it's a first tool shipments.

So just a timing difference in the RevRec standards. And this quarter was a little bigger than it had been in the past. I think it could be kind of a result of some of the bigger shipments that we had last year that it took a little long -- the timing of the installations here in Shanghai. And we won't really guide how that's going to change for the back half of the year, Q3 and Q4. I don't think we're going to give any specific details on that.

Yes. I want to add on that, you look at the long run, the 2 numbers should be matching, right? But looking at the quarterly, quarterly base, you get sometimes U.S. is higher, sometimes Shanghai is higher. So that's, as Mark mentioned, different recognition of the revenue. So I want to say, overall, like you said, the Shanghai number looks good. But that's on a quarterly quarter base, right? I want to say a whole year, I mean, over long run, this number is very matching.

Matt, one other thing I could bring out that I think will be important is that the U.S. GAAP on the R&D side, we don't capitalize anything, right? So it's all expensed. And so there is some capitalization of R&D. I don't know if they give out the exact mix, but that's -- the big difference is on the operating expenses. That's one.

And then, of course, ACMR, the global operation, we've got our cost of being a public company. And then we also have our sales and marketing effort that are incremental expenses.

Helpful.

Thanks, Matt. Yes.

Thank you.

Operator, next question please. I think we lost the operator here. Charles, are you able -- do you have a live line, Charles? I think Charles Shi is live as Q&A.

Your next question comes from the line of Charles Shi with Needham & Company.

Can you hear me?

Yes. Charles, I can hear you.

Yes, I feel obligated to ask a question about the long-term target. I think it's important update. But I have a really question on the Mainland China portion of the long-term projection there. I think one key change versus your prior target was the Mainland China WFE market size. You kind of raised it from $30 billion to $40 billion. It does match with where China WFE numbers were trending over the last couple of years. Last year, I believe it's slightly above $40 billion. This year, maybe around $40 billion.

But I think my question is, would there be any concern, I mean, by the team, maybe you are a little bit extrapolating the peak China WFE number there from the last year's peak run rate level into the future? Or what's the confidence on China WFE maintaining at this $40 billion level over the long-term?

Okay. Charles, obviously, year-over-year can be kind of changing, right, maybe 5%, 10% up and down. And I want to say our long-term revenue is not for next year, right? It's like a 5-year or time line, we talk about or beyond. So we believe that year, China WFE market will be $40 billion. That's what we talk about a long run of the goal.

And you look at the expanding in China of either memory or the logic or including IGBT, there's a lot of demand here. So that's our confidence. We believe that the market, $40 billion, you look at the 5 years down the road should be the number. Of course, the global market growth, too. So $40 billion, we think is a reasonable target we put there.

And second one, I want to see that is we do have also a new product coming and we through last 3, 4 years, R&D, our furnace PECVD and Track, including our latest panel level packaging tool getting into the market and start to generate revenue this year and also next year.

Second, I want to mention that is we just get approval, right, from CSRC, and we have second fund raising more than $600 million. Those fund raising that will help ACM to accelerating the target R&D. And so that will be another big factor.

And third one I would mention that is ACM has been really in China market insist all the differentiation, innovative technology to the market. And so I believe Chinese the customer still like the best technology with IP protection. So that really put ACM in a very unique position. And at this moment, we have not found any local Chinese company and copy our IP, infringe our IP. So we have a very confidence ACM can maintain our differential product margin. And also, as I said, customer locally we design the best technology, which is we are providing a differentiated solution.

So we are much better than those people provide the similar product. And since I said, we're providing differentiation. That's what's solving the future needs for the customer. So with all 3 automation, so we are very confident. That's why we're raising this China market from $1.5 billion to $2.5 billion.

The next question comes from the line of Jimmy Hang with JPMorgan.

Can you hear me?

Yes, please.

So I want to ask about whether you have any source of visibility into 2026. And actually, can you also share about your estimates on the China WFE for '25 and '26, either absolute numbers or Y-o-Y comparison?

Yes. Well, I mean, looking at '25 and obviously, different report, right, show different results. And looking at the Gartner, they're pretty like lower. But you have another IC semi that try showed a very, I want to say, different results. In other words, it's better than the Gartner.

I mean you look at '25, '26, I'm still hard to predict maybe, I mean, 10% up or down, right? But for our feeling is it doesn't matter, as I said, China market still exists. This -- they already reached about 30%, 35% of the global number really. So with our differential technology with the new product come out and even the flat of the revenue or the WFE spend in China, we're still expecting our growth and also high growth.

As I said, our new product, PECVD, we have a few customers, hand of customers coming to their evaluation this year. We also put our 300 WFE wafer per hour KrF line, which is in line with the scanner will ship out very soon and probably in Q3 and also added a new technology, as I mentioned, our panel level packaging traction. And plus, we have this high temperature anneal 1,250 degrees C, that really can really shorten the anneal time for the IGBT, also other critical application.

So as I said, all the new product we put in the market will give us a strong confidence where we have a growing fast even with a flat or Chinese WFE market. As I mentioned, just asked -- also Charlie is we offer China market with a real differentiated product. And we feel confident we can protect our IP and therefore, we can have our, I want to say, margin maintained and give the customer best choice. And so we're not getting into that kind of similar product and price competition.

As I said, the Chinese customer still demand for the best performance. If they're choosing performance versus price, of course, they're choosing performance. So that's why we -- our differentiated product can offer such a superior better results, then those people provide a similar product, right? So we think that will be our strong point.

Yes. If you don't mind, I might just add a few things on that. Just -- obviously, we're not going to -- we don't give our guidance for 2026 until early in the year. But you probably noticed our OpEx was pretty strong this year relative to our revenue. Even if we do the midpoint, it's still kind of -- we're growing our OpEx this year. And a big reason is we're spending into the market opportunity, right? I mean David mentioned a lot of the new R&D projects. We're also spending more on sales and marketing. But clearly, that spending is kind of anticipating good growth ahead.

Yes. I want to add on that, compared to the first-tier guy, their R&D is 10% to 12%, right? And we'll spend 14% to 16% that really show our heavy invested R&D. Also with our new product come out in the speed and we have more, I call it product -- new product common ratio compared to the first-tier global guy. And that's why it showed that our spend is higher. So that's why we're spending -- investing in R&D and also sales and marketing, and that's really supporting our next 5-year growth. And we believe we spend this -- I mean, we spend this operation spending is very important and also supporting our long-run growth.

Yes. Also want to ask about the cleaning equipment market share target to get to 50% in the long run in China. Do you think in that case, what will be the split of the remaining 40% share between other Chinese peers and international suppliers? Yes. [indiscernible] 50% market share in China. Yes.

It's hard to divide who is the second, who is the third, right? I mean, again, we're currently #1 in China, of course, right? Why I see that is our product portfolio really almost can match 95% of the cleaning process step. So we are probably the widest product in the world compared to even the 3 big guys in the global international, right?

And also, as I said, our product has a lot of differentiation and pow tool and SAS, Masonic, TEBO and non-violation or non-damaging Masonic technology and also continue adding this recent announced N2 bubbling, right, with a special proprietary design, generate a large bubble size with uniformity.

So we're continuing to really not just our product wider spread, also have a lot of innovative approach and better than those top tier in the world, especially I mentioned SPM. Our SPM, as I mentioned, we have new proprietary nodule design and real limit all the liquid splash or acid mist out of chamber. And that really can improving the small particle performance.

And today, as I said, 26 nano, we're reaching average almost 5 in the particle. And we believe with improving the chamber environment, and we should get a better result than the 50 nano, 70 nano, which is real advanced next step. So particle.

Anyway, I want to say we do our -- again, different approach with IP protection. And that's the strong point, we are saying we're expanding China market. And also, we're not facing any -- as I said again, we've got a very strong IP portfolio in China and globally, also, we do not expect any local Chinese people can copy our tool. So that's a real strong confidence, and we see that expanding in the China market.

Of course, with those different product tests in the China market, we push to the global, right? As you know, the cleaning has been more and more important for the future AI chip manufacturing because of the yield suffer. So this cleaning become more and more challenging for 3D NAND, 3D and DRAM down the road and also 3D logic, eventually people see that. So all the 3D cleaning, we do have a product technology really for that. So we're very excited. We're very -- and kind of see our technology going to spread out in other global markets.

Yes. Maybe I have my last question. Can you talk more about your progress in Taiwan and Southeast Asia region and also for the PLP testing because I think the industry now think that mass production of Taiwan foundry FOPLP or [indiscernible] will wait until 2029 or even '30. I think the development time for test and manufacturing will be longer than expected. So how do you think about the mass production of the FOPLP or co-op with the final stage, yes, the last stage for the [indiscernible] done by the panel makers, I mean, for the advanced process.

Sure. Actually, PLP, this panel level packaging, we believe is ready to go for the large size of the AI chip packaging, right? As people laid down in the panel 310x310 square versus circle, their effective area increased more than 60%, 60%, right? It's a bigger gain for the customer, especially for large chip.

Obviously, the people get a no to 310x310, we're probably very soon moving to large-size panel. So we believe that's really a strategic step and the Taiwan customer taking that direction. And to the ACM, I feel we have a very good product really for that product, and we're already putting the market for the low-pressure cleaning, bubble cleaning. Also, I want to mention that is our horizontal and rotational electroplating is really a solution for this panel level, right?

And why is looking at the 200-millimeter packaging used to be vertical, and you go 300-millimeter wafer, every turn to horizontal. And now you can see our panel level, we are probably the only guy providing this horizontal solution because of proprietary IP design. And this year, in March, we got a reward -- got a technical award from the 3D IC InCites USA. So we believe our strong position in this horizontal plating will position AC in a very strong position for this future AI PLP market.

So we see that as recent, we reached our horizontal plating uniformity less than 5%. And I want to say we'll try next go less than 3%. So we'll maintain equal performance panel square plating versus the circle, same level. That's really driving to the panel.

As you mentioned about 2029 or timing, I think that's really depend on technology driving, right? And if a customer can solving the all issue, they can speed up. If they kind of solving maybe delay. So really, this is a market driven by 2 manufacture technology combined together.

So I mean, with our copper plating, we definitely believe that will be speed up, right, in the copper plating process, which is one of the major block for the people moving from 300-millimeter wafer to the panel level. And we're glad this technology offers to the customer enabling the production line and hopefully speed up their production. That's our confidence and also, we engaged with the customer in the Taiwan.

Yes. I know that you have technology leadership, you have real products and IP. I feel like the issues that the ecosystem is not ready. So the customer might need to delay their co-op mass production time line. And meanwhile, do you think that they're taking tool supplier from co-op to co-op, Will they still stick to the original Japanese and American supplier, or they could adopt new supplier for co-op? Yes, on co-op for the [indiscernible]? Yes.

I want to say, I mean, wafer level, we're engaging, right? I mean then you're looking at this panel level, I think we are a much better superior product, right? Wafer level probably will offer equal in this moment, I want to see that. But for the real panel level, as I mentioned, I mean, look in the last 10 years, nobody can do horizontal plating, right? We're the first guy announced the product. We can do horizontal. As I said, even today, we're about 5% uniformity. Our next goal go 3%.

I believe with a strong IP position; we should offer the best panel plating tool in the world. And again, right, that's really exciting for our -- I call the penetrate the global market and is one of the key products we offer to enabling the technology for the customer. So we are very -- to put effort on those product development. Plus, we also prepare additional other differentiated products and also enabling the panel level. And we're going to announce probably in the end of this year, we'll work on the new product too and to further get into this market. So we're very excited about this panel level, right? It's way to go because all AI chip at the size big and bigger. I mean we have a very -- we invest a lot in this product.

Your next question comes from the line of [ Yang Li May ] with UBS.

Can you hear me?

Yes, please.

Just one quick one. It seems like your Q2 year-over-year growth in for the Asia is still underperforming other like China peers. Any reason the hike probably due to different customer exposure?

David, I think the question was the growth maybe of ACM Shanghai's revenue or EBITDAs versus some of the China peers, maybe the -- it was -- what's the reason for the difference?

Between China, within U.S. with our folks -- with other peers?

Maybe between ACMR, both U.S. and China -- Shanghai versus other like China WFE peers?

WFE versus China peers.

Okay. I didn't see the other results come out in China peer. Obviously, looking at the Shanghai, our revenue growth still looks good, right? And so I want to say we're confident. And also this year, as I said, we'll come to the moment of the multiproduct and the revenue will not much contribute this year. But with the next year, we see our furnace PECVD, Track start contribution, right?

And also, we have a new product with cleaning and continue expanding copper plating. So I want to say we still have a very good confidence and also outlook for 2026. And this year, and well Q3 very busy and in Q4, we have a couple of slot open, but we think it will be also fill that soon. So in general, we still have good confidence, we have good growth still this year.

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

Okay. Thanks, operator, and thank you for all the participating on today's call and for your support. Before we close, Steven is going to mention our upcoming Investor Relations events. Steven, please.

Thanks, David. Before we conclude, I just want to give everyone a quick reminder, our upcoming investor conferences on October 21, we're going to present at the Sixth Annual Needham Virtual Semiconductor and SemiCap One-on-One Conference. On August 25, we will present at the Jefferies Semiconductor IT Hardware and Communications Technology Summit at the Four Seasons Hotel in Chicago. On September 3, we'll present at the Benchmark 2025 TMT Conference in New York City. On October 7, we'll present at the 17th Annual CEO Summit in Phoenix, Arizona. Attendance at these conferences are 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 the call, and you may now disconnect. Take care.

Thank you.