ACMR (2021 - Q1)

Good day, and thank you for standing by, welcome to the ACM Research First Quarter 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers presentation there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today Gary Dvorchak, thank you . Please go ahead. Gary Dvo

Good morning, everyone. Thank you for joining us on today's call to discuss first quarter 2021 results. We released results after the U.S. market close yesterday. The release is available on our website as well as from Newswire services. There is also a supplemental slide deck posted to the Investor portion 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 Fang, the 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 we provide on this call will be on a non-GAAP basis, which excludes stock-based compensation, a loss relating to the change in fair value of a financial liability, and an unrealized gain in trading securities. 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. With that, let me now turn the call over to David Wang, who will begin with Slide 3. David.

Thanks, Gary. Good day and welcome to today's call. We are off to a greater start with a solid results. For the first quarter, we delivered stronger revenue growth record shipments and excellent profitability. First quarter results demonstrates competitive strength of our technical expertise, strength of our product portfolio and our growing production scale. Revenue grew to 43.7 million, up 80% year-over-year. Shipment were 73 million, up from 67 million last year and up from four million in the first quarter of 2020. We delivered good balance of growth and profitability with a 41.4% gross margin and 11% operating margin. We are committed to deliver profitable growth as we continue to invest in R&D for new products and global sales and marketing. On the bottom-line we report $0.35 of net income per diluted share, up from $0.11 in the last year. We ended quarter with a 79 million of cash and also ACM market share were $27 million equivalent as of quarter end. I will now just cover recent operational highlights on Slide 4. First, our Q1 revenue growth was broader based, driven by current and new products and customers - and other products represents 73% of total sales in Q1 and grew 42%. Our advanced packaging and other process tools and service and the space business has coming for remaining 27%. Our revenue up six times year-over-year. As highlight on Slide 5, we have five major prime customers in foundry, and DRAM. We also have several back end packaging and customers. On newer customers, manufacture power and analog devices. As we discussed on our last call we have two of the five key trading edge nodes our analog, power IC, and the CIS manufacturing in China. I'm excited to share with you that during the first quarter, we receive orders. From additional one of the five key cleaning edge nodes customers. We are actively engaged with the remaining two players with a goal of receiving orders from one or both of them later this year. On top of that, during the first quarter, we also penetrate two additional advanced hydrogen houses and one compound semiconductor IC manufacturer. Looking forward, we believe our existing front end and back end customers alone represent a significant opportunity for ACM. Most of them are still in early or middle stage or multiyear capacity expansions. And we expect to continue adding more new customers, as we believe every major semiconductor manufacturer can benefit from all technology. Second, we delivered total shipments of 74 million in the first quarter, another record for the company. This is a major accomplishment, especially during a Lunar New Year holiday period. It is strong testament to our production team, which have been aggressively adding capacity to meet the strong customer demand. As shown on Slide 6, our regional facility is on Pudong include our R&D, SG&A and prototyping and production of newer products. During the first quarter, we expanded the production capacity by reducing a second duty at our factory in Pudong. This will provide us with enough floor space to gradually increase our production capacity for more than 500 million up from current level of 350 million. Our long-term plan is to build a production center in Lingang region of Shanghai. The one million square feet of floor space will enable us to increase our annual production capacity to 1.5 billion U.S. dollars. We expect additional architectural and design work to be completed this quarter with initial production targets by the end of 2022. Third, we invested in our global sales team to hiring Jim Shaw to head our U.S. and Europe sales effort last year. We have added several other senior employees in the business development and the service team. Yesterday, we announced the addition of the [indiscernible], a 21-year veteran of a major U.S. semi cap equipment makers. [Indiscernible] will lead our US service and its delivery team we now have a seasoned or working world-class industry to drive our efforts to expand our business. So, additional major customer beyond our [indiscernible]. Our team remains deeply engaged in technology discussions and evaluation with the US and Taiwan based semiconductor manufacturers. We are making good progress and are confident that we can secure way at a one or more customers during 2021. Fourth, we continue to gain traction with our ECP goals. We are especially bullish on our opportunity for our ECP product line in - smaller geometry required advanced cleaning solutions. Meanwhile, back end at around packaging more important as the industrial shift to packaging innovation to drive a higher performance as industry moving through post -. Our ECP product line includes the MAT for damage being covered in the connections the Tier 3, for through silicon via for - and for advanced packaging. ACM and ECP match products presents alternative differentiated solutions that can provide a uniform trading also since the layer. During per quarter, we introduced a proprietary high speed copper plating technology that can deliver improvement from the at a high throughput. We are especially important for advanced packaging customers; the highest bidder capabilities combined with our proprietary technology to improve uniformity at a knowledge area give our ECP AB system a strong competitive position to win the market. The tool support cover pewter bump for copper, nickel, and tin fever, since 3D and a high density fan out - wafers. The ECP with a high speed of radiant arrays together with our FAD cover polishing tool for the job to grow and it becomes important providers in 3D advanced packaging. According to your development, status of advanced packaging industry 2020 report, the modified [indiscernible] was increase annually by 16% to 21% over the next four years. We believe the total global market for ECP will expand faster by up to three times from the present five million to up to 1.5 billion in the near future. Fifth, we recently bought an ultra FN furnace drypowder tool portfolio. We added different semiconductor manufacturer profits including, low pressure chemical vapors separation, or I have the - and third- party [indiscernible] build on reconfigurable systems, previously announced oxide, very nice high availability and high vacuum - process capability. The alter FN furnace platform was the designed from the ground up to meet customers best in class requirements as devices continues to shift and increasing complexity. Because these devices are designed with a compressed fine geometry, providing consistent and stable heat control is fair amount in maintaining wafer integrity. To meet this demand, the ultra Ultra FM Heater features for primary control algorithm, which provide people with temporary control. We believe there is several first tools supporting the new applications in Q1 and expect to deliver additional units as we progress through the year. We also plan to add a high temperature outstation and probability to all furnace product line in the third quarter. The next major development in our further roadmap is a batch of operation or ARD process, which review as a most challenging and promising product for manufacturing. Putting all together, we are making greater progress, growing our business with new product lines. Please turn to Slide 7. As noted in prior calls, our current product address a market more than five billion. This year we are committed to become a multi-product company. We are positive on the growing opportunity from our core critical tools including fab table and our Semi-Critical tools. We are also beginning to see meaningful contribution from newer products offering starting with ECP which we expect start ramping in 2021 and beyond, followed by our product, which expect to run in 2022 and beyond. As we mentioned last quarter, we have begun significant R&D investment in two major new product categories to achieve our long-term goal for double the total addressable market of our products from five billion to more than 10 billion. As ACM policy, we will provide detail on this new product categories after we secured custom orders for first delivery. Before I provide our updated 2021 outlook, let's discuss the mark IPO of ACM Shanghai. We continue to make progress. Out team segment fabrication report to the Shanghai Stock Exchange Commission all have the in later March. This report plan the cost action last year - that was filed in U.S. last year related to the shorter report published on October 8, 2020. We are responding to other important and manageable inquiry. We remain confident that we will receive approving from FFEC and then moving to CSRC with registration process to complete IPO that is consistent with the practice. So, as not to provide us with a time table that would enable us to predict the perfect timing of IPO. Now, let's moving in to our 2021 outlook on Page 8. Out guidance reflects optimism about our growth for 2021. We are reaffirming our guidance, our revenue in a range of 205 million to 230 million with 39% annual growth as we reported. Our outlook for 2021 is based on several key assumptions. First, the global COVID-19 situation continues to improve. Second, stability in the U.S. China trade policy. Third, our spending scenario for the production rent of key customers. Fourth, variance in the trajectory of DRAM recover and [indiscernible]. Finally a range of outcome for timing for customers acceptance offered to us. Our results and outlook demonstrate a successful fusion of our strategies. Our stronger growth is supporting acceleration, in the R&D spending and new products. We are building our global sales and marketing resource to penetrate the new customer a new region. And we are scaling production capacity to support our long-term. Our mission to become a major equipment supplier for the global semiconductor industry remains on-track. To conclude, I would like to thank our employees for their hard work and dedication. I also want to thank our customers, partners and shareholders for their continued support and the confident in the ACM Research. I will now turn the call over the Mark to discuss the financial results in more detail. Mark.

Thank you, David. Good day to everyone. As David indicated we are off to a good start in 2021. I note otherwise, I will refer to non-GAAP financial measures, which excludes stock-based compensation, and unrealized gain in trading securities. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release. Now the first quarter shown on Slide 8. Revenue was 43.7 million up 79.6%. You may have noticed more detailed reporting of our revenue in yesterday's earnings release. Revenue for single-wafer cleaning tools, which include SAPS, TEBO, Tahoe and our Semi-Critical Clean was 32.4 million, up 42% from 22.89. Revenue for ECP furnace and other technologies 5.6 million versus zero in the first quarter of 2020, and revenue for advanced packaging excluding ECP. services and spares is 5.8 million versus 1.6 million in 2020. Total shipment were 74 million, versus 12 million in the first quarter of 2020, and 67 million in the fourth quarter of 2020. This includes delivery for revenue in the quarter and delivery systems awaiting customer acceptance for potential revenue in future quarters. As David mentioned, this was another quarter of record shipments. This was a great accomplish by competent by our production team during our holiday shortening Lunar New Year period. Gross margin was 41.4% versus 42.2%. This was in our normal expectation of 40% to 45%. We expect gross margin to continue to vary on a quarterly basis due to a variety of factors including product mix, and manufacturing utilization. Operating expenses were 13.5 million versus 8.4. The increase in operating expenses reflected higher R&D on new products, sales related activity and preparations for the China serve market IPO. Operating income was 4.7 million up from 1.9 million, operating margin was 10.7% versus 7.8%. Unrealized loss on trading securities related to the change in market value of SMIC investments was $1 million in the first quarter of 2021. Note that we exclude this non-cash item from our non-GAAP results. Tax benefit was 2.8 million versus the tax expense of 304,000 in the year ago period. The benefit was because of stock options that were exercised during the quarter. Net income attributable to ACM Research was 7.7 million versus 2.4 million in the year ago period. Net income per diluted share was $0.35, compared to $0.11 in Q1 of 2020. Tax items in the effect of foreign exchange fluctuations and operating results provided net benefit 3.8 million to $0.17 per share in the first quarter of 2021 versus a net benefit of 0.6 million or $0.03 per share in the first quarter of 2020. Now I will review the selected balance sheet items. Our cash balance was 78.8 million at the end of the first quarter, up from 71.8 million at the end of 2020. In addition to the cash balance, we also had traded securities as 27 million related to our SMIC investment. Short-term borrowing at quarter end were 23.5 million down from 26.1 million at the end of the fourth quarter of 2020. Long-term borrowings were 17.4 million. Total inventory was 103.2 million at quarter end, versus 88.6 million in the prior quarter. The quarter-over-quarter increase in inventory was driven primarily but then growth in finished goods inventory. This represents first tools that have been delivered to customers for evaluation and are pending acceptance, and which grew to 47.1 million at the end of Q1 2.4 million at the end of Q4, combined balance of working process of raw materials was essentially unchanged over the same period. For 2021 our base case for capital spending is $10 million to $15 million. Our 2021, investments will be focused on catastrophe increases that are [indiscernible] of factories, investments to support R&D programs, throughout the planning at some initial spending on [Huahong] (Ph). In summary, we continue to execute on our strategy. We are participating the growth of major new IC fabs. We are ramping production with the keenly develop and deliver innovative products to broaden our array of customers. Were positive on our opportunities in China and expansion outside of China. We remain committed to achieving our mission becoming a major player in the semiconductor equipment market. 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 Patrick Ho [Stifel].

Thank you very much. And congrats on the nice quarter. This is first off in terms of the increase in inventories and the increase in shipments. Maybe Mark if you can just give a little bit of detail whether you experienced any component shortages or any supply constraints. Given that your revenue levels were very healthy, it doesn't seem like there were any issues but if you could detail, some of the issues you may have had to manage through during the quarter?

Maybe I will let David go ahead and start.

Actually we sit at the main the higher right we have got a lot of demand from the customer, either existing customers or new customers. We do feel pressure and our supply chain, our components leading time getting longer. So, in that therapy will actually project, project and therefore, were published through some loan leading item. At the - that is purchasing from our vendor, try the managing the delivery time. But again, this is something that is real dynamic changing, right and with some factories some supplies come out from the supply come out and because of vendor has - because various orders coming. So, I should say, yes, there is definitely challenging right now and I should say also maybe there especially the media and analyst here, we see that probably the delay orders trend will continue. So, it is good to have it but - as we can. Also expanding our capacity, hire more people and put a quality work and also the successful operation. So it is later in the year. Mark, you want anything to add on that?

Actually David, I think you covered it well. We can have another question.

Yes. My follow-up question maybe you can talk - gross margin came in the range that you guys have previously talked of 45%. But at the same time, a lot of increasing utilization you also have start-up pull ups, all of these areas. Over the next couple of quarters, how do you look at those inflows and which were the biggest one we should be looking out for?

Yes. You bet, Patrick. So, on the gross margin side, Q1 reported 41.4% in our normal 40% to 45% range. This is due to, it is almost due to product wins. So, Q1 we had a higher mix of Semi-Critical and back end products, those carry over lower relative margin. And these are new early stage products and haven't necessarily hit the volume or we have significant amount on them. So, the newer products, we do expect the margins on those products to mature, many balance that The other side of the mix is our ship trading tools and where we get very good margins. So, no change to our projected gross margin range of 40% to 45%. David, you have anything to add?

Yes. As Mark covered it really well, as you pointed out clearly, there is a mix between the low products and high margin products. And our I think as time going on as volume increase there, Semi-Critical coming in for and [indiscernible] as volume increase we can increase our manufacturing efficiency. We have a higher quality and therefore the increased margin and pricing also cost of manufacturing. So, I think is within our range of 40% to 45% and we are confident that will continue in our range and as time going on we will try to increase our efficiency and also increase product quality and then more stable process [indiscernible] and gross margin.

Great. Thank you very much.

You have a question from line of Donnie Teng [Nomura].

Hi. Good evening, David and Mark. Congrats on a good results. The first question is regarding to your shipment and revenue. So, it looks we have strong shipment trends in the second quarter 2020. But, it look like our sales trend is like, our sales trend was a little slower since fourth quarter last year and the gap between shipment and sales is getting bigger and bigger. So, I understand that we need to shift to customers first and then wait for customers acceptance. So, just wondering how are we able to resolve this kind of huge gap going forward? And is there any, if you are seeing any longer acceptance period by your customers or is there any other issue? Thank you.

Okay. Ronnie, thank you. As we look in the last year or this year, to what just this year quarter, we see their a new getting or increase a new customer, right, normally a new customer, even for the I coordinate mature existing products. And they are not a recurring revenue until they quantify their policy in the production line, right, although a lot of new customer, there is new production line. So, this relatively the longer time, to prequalify mature products. Meanwhile, also were shipping from new tools, to the existing customer compared to like you mentioned wherever, vertical - and also have advanced packaging tool for their - . And also, we have a front end of [indiscernible]. So those kind of, it is the new, even for new customer or for the existing customers, those will take a longer time than normal expectations. Again, there is a process we have to go through as a matter of the semiconductor business where, tied with all bad supporting, and the meet the customer requirements for supporting and fix the any problem happen, either, but I mean, that is our goal, right. But I think, looking at history so far, where we have confidence, and all of every first tool, or our first the customer, new customer, we have got our tool. So, like, is that as a matter of timing, but we will go through that process. And Mark, anything you want to add on that?

Yes, no, I think you covered well, and I don't think we can we haven't seen any change in the, in the timing of the substance rates at abroad level. A product part of our outlook is tougher for, when we are getting acceptance on those and so when we mentioned that as one of our guidance dependencies.

So, simply to say, that we are extending the new more and more and more new equipment. So more shipment but probably longer preparation time. Is that correct?

Really, actually, it depends on the product, right? And some product, we have got our senses that we do six months, but I should say regularly, say six month, a one year timeline, and we will do a series on difficulty, a tool or maybe going longer than one year right. So, but I say major our tool got to quantify within six months and one year time line, that time should be no change.

And my second question is really regarding to your full-year guidance. So, based on the very strong and actually, as you have seen a lot of foundry or memory companies have started to add CapEx. So, just wondering if there is any chance that our sales momentum in the second quarter or beyond to be stronger than our expected. And also could you comment on the Euro market although because highly sales were quite slow last year and so I was just wondering when are we seeing a DRAM sales from DRAM can start to pick-up this year? Thank you.

Okay. Yes, good question. Actually we see they are like that we see the demand become stronger and I mean, our Q2 our Q1 was very busy. I can say for the Q2 - and even the Q3 and Q4 is a pretty high, right. I work on amazing Wednesdays because of a new customer new product come out and we are really balancing it in the revenue versus the shipment. And if I say for maximum revenue, obviously I should take it on appeal or you are risking customers order. However, we also balanced their new customer and a new tool. So, it is really kind of innovators dilemma here right. We need to maintain good the new customer future revenue at the same time whether we - some deliver for the existing or the order. So, I think we are going to make a very good balance in that and then lead the revenue obviously and at then the same time we also have new product or new customer. Right, that is what we did for your first question. For the second one, probably you see, we also notice that there is a our customer Hynix and probably we didn't increase their spending this year, 2022 spending for the 2021. I have very good news and media from other vendor feels long leading item when we make that some indication, it more to assume real actually working with our customer. And maybe I can report to you, an issue of the database so this moment we are still kind of waiting for their instructions for the DRAM.

Okay. Thank you.

Thank you. We have a question from the line of Suji De Silva [Roth Capital Partners].

Hi, David. Hi, Mark. Congratulations on the progress here. Can you talk maybe my belief - that the lead times your according to your customers versus three months ago and your ability to meet demand whether it is surging or whether it is been pretty steady? Can you control your own manufacturing?

You are asking our leading time right now. Is that correct?

Yes, your lead times, according to your customers if they are extending it all?

Okay right, you can apply that, right. I should say I will normal leading time used to be about four months. And obviously not away extended right? In some product, you can go through five months, and some even go longer. Reason for that is a certain component or system or several components. We will get a longer and longer order time and we will need a time there. So, which is our vendors supplying major turnover, delay. Further, obviously we have a volume manufacture - and as I mentioned, we are expanding our manufacturer of phasing right now. We are going to hire more people. So, that was a secondary factor which is either right now. So answer to your is yes, we do see our new desire for our product and get a longer average, I should say between five to six months right now.

Okay, great. And then you mentioned in the press release global customers and opportunity there. Can you update us on remaining steps like additional customers? It sounds like you have visibility for shipments potentially into qualification there. But any color there will be helpful?

Yes. I think we are actively working with the customers and making that as we mentioned and we did it months ago to demo for one customer and so far the result there is satisfied and we are in kind of negotiation right now. So, hopefully we can win the customer and which is a timeline. Also we are working with additional other first tier customers too. As we mentioned our we got a one this year maybe we make it more, that is our goal.

Okay. Thanks. One last question on IPO. Do you have a sense that, the report you filed, you need to have further comments or responses or a second report required? Do you have any remaining steps like these? Thanks.

Good question. I think we are actively working on it for 3, 4 months, right, and we have seen same thing in China. And in the process in China here [indiscernible] and there are some report of early in the February, March timeline and they are continue to be more material and more so. We are in very active dialogue and engagement with the - so by April 30, we are looking to I think the report what are the requirement to almost finish [indiscernible] and working for them to make final acceptance and that we are not getting yet. And I should say, when we expect all the report with the acceptance finish, then I think we are moving to the registration process with CSRC. So, we are now in a final phase of the acceptance of report and then we are pretty close to registration for the CSRC that is right now.

Okay. Great. Thanks guys.

You have a question from the line of Charlie Chan [Morgan Stanley].

Hi, David. Hi, Mark. Congratulation for results. Just to follow that question from Suji about IPO timing. So, when your report get affected by does that means they need to another to review the documents or just needs to be quicker.

Well, it is hard to predict, right. I mean, as I said, we see the products that are 95% of our job already and hoping 99% or 100%, right or it is something that we have to add more. But I think at the moment, we don’t know yet. It can be one, two week, can be more weeks. At this moment, I should say that is what we have right now. The primary acceptance now that [indiscernible] but we believe we did a most we can do and with something whatever these request so far. And our team, our thinkers, our lawyers, and also including or you firm, our team did a great job. So, this moment, the best way, we definitely know patient weakness right.

Okay, got it. And I think that Donnie asked the question, I tried to ask, I mean you see a foundries I guess, Vanguard UNC [indiscernible] revised out their CapEx, right. Maybe you saw it 50% and 70%. Do you see a similar abort revision of your customers, especially in China over the past half that two months?

Again, obviously, you can see that, in Intel and just on the - there make a very, faster or and you announced the bigger expansions, right. Again, I'm in China, our customers in China right now, they have a multiyear expansion plan, right. And I don't see that now two months the market is changing. However, the keeper, they are feeding feed-up, and also there, again, if you are not in US and Beijing right now. So, we have seen more of a demand for existing customer, more than that is also, second tier customer, as I mentioned, five cleaning edge to customer, they also see that there also at least another maybe more than right, people coming out. There is a lot of demand there in China, and [indiscernible] they are probably still. I heard somebody say they got some license, as there was some waiting for some license but rest of other customer in China, they are keeping --. And also I can see that their demand is stronger. And now like to give them a [indiscernible]. And more I agree, gradually and stronger, stronger not I see the in the customers in China.

And then, and also good, good control on OpEx in first quarter, I mean it is 33% of OpEx ratio. So, maybe this questions to Mark. So, for the upcoming two to three years period still - do you still do think the organization will still be around 30%? Is that kind of right, by the assumption for the coming two or three years?

Yes, Charlie, on that front. I mean, obviously, we cannot guide a lot on that area. But this year, we are investing pretty heavily at R&D, sales and marketing, what have been so. So, a few years, we would obviously like to see some leverage, and some better leverage on the top line. Longer term, we would get our top line faster than our operating expenses.

Maybe I think to add one sentence there. I think next few years definitely we are continuing in less R&D, right. As I mentioned, we do have additional friends or further demand to grow new products. And that will put more R&D in next few year, obviously. So, R&D number one, investment and continually further itself modeling will continue to as we are very good. I call this sales marketing in the Mainland China as I'm having in Korea, however we do we do think [indiscernible] in Taiwan, in the U.S., maybe the fusion is in Europe. So, that is market itself can do the investment too, right. So, can you give me a measurement too, right. So, in the next few years, I think the real balance between profitability versus growth opportunity. So, we are probably need to put more effort on their growth opportunity right in sales and marketing, our product development, that is our major spending areas.

Yes. That bring me to my last question. David, can you give us some direction or timing about when are you going to add a new - and can you update your 10? I think currently it is like five billion and any - you expand to 10 in the coming year?

Yes. That is a good question. Actually, as I mentioned, in the last earnings call. We already doing two new products development actually, right. And one is earlier and one is later. I think there probably maybe by beginning next year for our first product and then hopefully we can get second one come out later next year that is a timeline. We are already, I mean, started this initial quarter feasibility study and initial R&D, almost a year ago, right. So it takes time, but these are excellent team both in Korea and in China. And I think they are very efficient and also we have very good sales channel and customer requirements and also with our sovereign control and system, all look kind of thing are real adding our speed from R&D part to the market. So, we will continue our efforts and this will be two new product and have additional five billion addressable market. So, added to our existing five billion as we think about the future of product addressable size, would be beyond 10 billion that is our target and goal.

Okay. Great. Thanks for your answers. Thank you.

You have a question from the line of Quinn Bolton [Needham & Company].

Sorry, guys. I was on mute. Congratulations on the results. With start of the shipments, you have seen very strong shipments of the past three quarters increasing from 59 million in the third quarter to 74 million here in first quarter. Is there any reason why you would think that, that trend in shipments would take a big step down over the next couple of quarters, or do you expect shipments to remain at pretty healthy levels?

Yes. Quinn, very good question. I think our shipment continue would be probably increased, right. That is what happened here - where PAC was appeal, right. However, we are struggling to make manufacturing capacity increase. And we are also balancing the deal versus new tool. So, that is what right now. Obviously, there is another factor we will know is the supply chain is hiding right now and especially to some non-leading items in - that is where I'm struggling right now. Yes, I mean, we tried to do our best managing our supply chain and also manage our manufacturer capacity with a good that people and good quantity. And so, we see that shipment will continue to increase in the next few quarters.

Great. Thanks for the additional disclosure on the revenue break down by back end and bill pay. What is very impressive is the growth in the advanced packaging or the backend where revenue was up by about 10 times versus last year and backend now sort of somewhere between 25% and 30% of revenue. I guess, as you guys look forward, can you give us some sense of where do you think the split will be 2021 between the leaning and front-end tools versus the advanced packaging and other backend tools?

Yes. And I can get there and what is driving for as the ratio go up is our copper - right. And they are, obviously they are, - much high than other older developer and community. So that is a really amazing driving force and we will see that trend continue increase and that is why I mentioned - become renting this year next year, and that we will continue next year. And that will be real driving our packaging revenue continue go up. And obviously you also have a front end of a - community grow too, right. And so for us the [indiscernible] yes. The major driving force for the, at the moment are the [indiscernible] and for the applications.

But, David do you think that the mix stay at roughly 75%, say 25% front end versus back end in 2021. Is that about the right mix for folks you are thinking about?

Good question. And I couldn't give you that firm answer, right. And we had been in the [indiscernible] right. You can see that or continue to get more attraction and our furnace right that is what is the renting and then for the products. So, that is what we add additional there and then it also say the front end keep going too. So, I think about an issue, but I don't know how much of that would be precisely matches, right. Maybe go slightly higher, maybe slightly lower. But I can see there both side continue to grow, right.

Thank you David.

Next question from the line of Christian Schwab [Craig-Hallum Capital Group].

Hey guys. Congratulations on a great start to the year. Most of my questions have been answered. I just have one quick, as we are look at your guidance for calendar year 2021. To me, the peers, kind of conservative, given the spending trends in some of the leading customers that you are dealing with. I understand, your commentary between, having to manage new customers versus existing customers. And so, if we are having a conversation in December, and my estimation that the expectations like a little conservative, would that be like greater supply chain management or what would be some of the puts and takes to that?

Yes. I think, you mentioned very good point, right. I should say, it will give guidance and now and this time we didn't change it much or didn't change it. The reason for real that is, we are going to do coming, right, we got a more of a shipment going on. And while the same time we got into something real holding out right now also manufacturing capacity internally, I click spacing. So if I can say, yes the major is how we are really managing our manufacturing, how we are managing, our supply chain. And really overall the balance, right, our revenue versus a shipment, and new customer versus an existing customer so, that is something will have the real bad way. So, once the journey was a revenue right. New beginning, it was our projections of shipment that obviously, we are going to change the shipment and by now, I give you the new updates, but the because the revenue I have, and especially you will have so many new customer and new tool come out. So let us see, right and hopefully will give you more of the updates on their second quarter earnings call.

Sounds great thanks guys.

You have a question from the line of Chi Tsai [Jefferies].

So, my first question is regarding your Asia IPO. So, when I look at the Shanghai Stock Exchange website, it says your status is tapped by the and just EP and it is updated on April 30. So, could you give us some update on the stages of your IPO, and whether we are in the stages of waiting for the since IPO ready and to the extent more of the Asia outlook happens in fourth quarter?

Okay, so I think you want to check revenue guide. There are things on SEC - those through as of you are seeing or as updating whether they are receiving or accepting new material. And we should be looked at it with something new to our 2020 the revenue and our financial report also were new to our additional revenue - right, for this cost action, and also with a need of a certain shareholder clarification requirement, right. There is a reason require, but as you see for any, any company, we are going to file application anyway. So, this moment I think in Asia what I should say 95 or 98%, there. And were waiting for a final acceptance all together. So, that is why the updating that there is so far of status on the April 30. Final acceptance, if they give us as I don't know, maybe a few weeks, maybe, within two weeks or so it depends on the other classes [indiscernible]. So after that, there will one morning for the CSRP registration right. So, again, it is really hard for us to give a precise timing. And but we think, maybe that is the appeal week is good timing we are thinking, but again, nobody guarantee that right. That is so far our faster estimation.

That is very clear, but I am very happy that you are making big progress. So, I think my second question is regarding gross margin. So in first quarter, our gross margin was slightly down versus first quarter last year, that our product has rubber cleaning equipment was 95% last year. But it sounds 75% in the first quarter of this year. So, I'm wondering, whether cleaning equipment is higher gross margin products in effect and how should we like view this gross margin product in this product, in the separate product, I mean?

Yes. last year also, obviously, this year too. We have a Semi-Critical product and those are - scrubber and [indiscernible] and those Semi-Critical products, their gross margin is lower than that, right, obviously. And also, certain at the most world and also there margin profile either. So, add all together which is really probably for the lowest side 40% or 45%. However, as I said, as we are seeing increase and also with our product quality improve, and again our pricing and also our manufacturing efficiency also at the pollination monument, will give us space to increase our gross margin. So again, we are seeing within China and also as a we have more higher margin at 45% in the customer and this will bring the higher, at this moment I'm not going to worry about that, as a matter of the product mix. And we are trying to satisfy customers and meet the customer requirement and at the same time expanding our competitive position and also give the good mixing of product portfolio. That is where we are managing. So, I mean, that is the way we are thinking right now.

Thank you. Thank you for taking my questions.

The final question comes from the line of Mark Miller [The Benchmark Company].

I was just wondering with respect to guidance, any potential upside. I know pull in some of their spending plans, also could you give us a status, do you have licenses to ship to SMIC?

Okay. So, let's put it to market for SMIC and I had some company - and some companies [indiscernible] This moment I can tell you, we are continue to shipping their product, and however I can see that is there are products to ship to SMIC and not as a volume of other customers at a moment, right. And so, let's see, maybe they have to get a lot of other customers, give their license and they can really fully expend their capacity and we are expecting, we got more of an appeal and we can have some more tool to SMIC. At this moment, [indiscernible] and we have preparation too, and they need our technology, they need our product and obviously have the patterns and have to make sure the timing and what they largely expanding their capacity. So, what we do right now.

Okay. So you are waiting to shift for SMIC, you will need to require it. You need to get a license, is that what you said?

Not clear there and our team to almost [indiscernible] in the China, right? So, there is not a U.S. technology. So, we have talked to our extra control lawyers in Washington D.C. as long as we control our U.S. components, less than seven percentage and we do not give license to ship for the SMIC, that is our legal I will call it, gave U.S. advice.

And what about any upside factors? And you can see in the year ahead and do you think, it could be significant upside coming?

For SMIC?

No. Just in general in terms of general market.

Okay. Yes. Actually, our local demand here and our products as I said are clean which is our initial SaaS people - getting more acceptance in the market today and also have a Semi-Critical product, especially the U.S. customer. And also we have a couple of ready and [indiscernible] also have vertical component. So, it is a great. We have a new product and whatsoever new customer come out to buy the tool. It is great. This year, that is why we made - for the high shipment in the Q1, right. And also our Q1 revenue was a record high be the way in the year. So, this year, we see tremendous opportunities. As I mentioned, we need to managing very well on our supply chain, and managing good quality and high capacity expansion, also have managing high expectation from customer and also our operation and our service supporting field. So, it is a lot of challenges we are facing. Hire is a very good headache. And we are expanding our capacity or training our employees within year or two. So, it is a great year. It is a tremendous opportunity, and we got to catch and new - also put the effort into the new product development and we are also considering not just this year, but three, five years down the road ACM continues to grow. And our goal is become order - semiconductor provider. So, I think our $10 billion future market addressable market will bring us to become bigger player in the global market.

Thank you.

Thank you Mark.

Thanks Mark.

And there are no additional questions at this time. I would like to turn the call over to David Wang for closing remarks.

Thank you, operator and thank you all for participating on today's call and for your support. Now Gary will mention some upcoming investor events. Gary please.

Thanks David. The company has a number of upcoming conference appearances, and very May 12th we are going to present at Credit Suisse China and Asia's conference on the 18th will be at the Needham Virtual Technology and Media Conference. On May 26th, we will be at the Goldman Sachs TechNet Virtual Conference in Asia Pacific. We also have coming up the Craig Hallum Conference in Minneapolis on June 2nd, the Cowen Virtual Tech Media and Telecom conference on June 3rd and the Stifel, Virtual Prospector Insight Conference on June 10th. So, all of those conferences are attendance is by invitation only replying to the firm, please contact those firms, your sales representative if you want to register and sign up for one on ones. That concludes the call, so everyone may now disconnect and have a good day.

Ladies and gentlemen, this does conclude today's conference call. Thank you for participating. You may now disconnect.