Overview of the Company’s Financial Performance

ACM Research is a leading global supplier of semiconductor capital equipment for the manufacturing of integrated circuits. The company develops, manufactures and sells innovative tools to the global semiconductor industry, with a focus on wet cleaning equipment for wafer processing.

In 2024, ACM Research reported total revenue of $782.1 million, a 40.2% increase from 2023. This strong revenue growth was driven by higher sales across the company’s key product categories, including single wafer cleaning, Tahoe and semi-critical cleaning equipment, ECP (front-end and packaging) technologies, and advanced packaging solutions. The company attributes this performance to continued investments by current and new customers in mainland China, as well as the successful launch of new products.

Gross margin improved to 50.1% in 2024, up from 49.5% in 2023, reflecting improved product mix and operational efficiencies. Operating expenses increased 33.4% year-over-year, primarily due to higher personnel costs, stock-based compensation, and allowance for credit losses. Despite the increase in expenses, ACM Research was able to grow adjusted operating income by 62.8% to $200.6 million.

Net income attributable to ACM Research increased 31.0% to $103.6 million in 2024. The company’s strong profitability was supported by growth in revenue and gross margin, as well as effective management of operating expenses. ACM Research also benefited from a decrease in unrealized losses on short-term investments compared to the prior year.

Revenue and Profit Trends

ACM Research’s revenue growth has been driven by increasing demand for its semiconductor capital equipment, particularly in mainland China. The company has seen strong adoption of its single wafer cleaning, Tahoe and semi-critical cleaning tools, as well as its ECP (front-end and packaging) technologies and advanced packaging solutions.

The company’s revenue is generated primarily through sales of tools to a small number of large semiconductor manufacturers. Sales cycles can be lengthy, ranging from 6 to 24 months, as ACM Research often needs to perform additional research, development and testing to meet customers’ specific requirements. The company also offers evaluation periods of up to 24 months for first-time tool purchases, which can delay revenue recognition.

Despite the variability in the timing of revenue recognition, ACM Research has demonstrated consistent profitability. Gross margins have remained in the 42-48% range, supported by the company’s proprietary technologies and operational excellence initiatives. While operating expenses have increased to support growth, ACM Research has been able to leverage its scale and maintain strong adjusted operating margins around 25-30%.

The company’s net income has grown at a faster pace than revenue, reflecting the benefits of its high-margin business model and disciplined cost management. ACM Research has also benefited from favorable foreign exchange movements and income from equity method investments, which have contributed to its bottom-line performance.

Strengths and Weaknesses

Key strengths of ACM Research include:

1. Technological leadership: The company has developed a portfolio of proprietary technologies, such as SAPS, TEBO, Tahoe and ECP, that provide differentiated cleaning and plating capabilities for semiconductor manufacturers.

2. Strong customer relationships: ACM Research has established close partnerships with a concentrated base of large semiconductor companies, particularly in mainland China, which has enabled it to secure repeat business and gain insights into evolving customer needs.

3. Operational excellence: The company has implemented lean manufacturing principles and effective inventory management to drive continuous improvements in cost efficiency and product quality.

4. Diversified product portfolio: ACM Research has expanded its offerings beyond wet cleaning equipment to include furnaces, PECVD tools, and advanced packaging solutions, providing customers with a broader range of semiconductor manufacturing capabilities.

Potential weaknesses and risks include:

1. Customer concentration: A significant portion of ACM Research’s revenue is derived from a small number of large customers, making the company vulnerable to changes in their spending patterns or loss of a major account.

2. Lengthy sales cycles: The extended sales and evaluation periods for the company’s tools can create uncertainty in revenue recognition and cash flow generation.

3. Regulatory challenges: ACM Research’s operations in mainland China and Korea have been impacted by recent export control regulations imposed by the U.S. and other governments, which could limit the company’s ability to serve certain customers.

4. Reliance on mainland China: The majority of ACM Research’s manufacturing, research and development, and revenue are concentrated in mainland China, exposing the company to risks associated with the region’s economic and political environment.

Outlook and Future Prospects

Looking ahead, ACM Research remains well-positioned to capitalize on the continued growth of the global semiconductor industry, particularly in mainland China. The company’s strong technology portfolio, customer relationships, and operational capabilities position it to maintain its leadership in wet cleaning equipment and expand into adjacent product categories.

However, the company will need to navigate the evolving regulatory landscape and potential supply chain disruptions to sustain its growth trajectory. Successful execution of new product introductions, continued operational improvements, and diversification of its customer base and geographic footprint will be critical to ACM Research’s long-term success.

Overall, ACM Research has demonstrated its ability to deliver consistent financial performance and create value for shareholders. The company’s focus on innovation, operational excellence, and strategic partnerships should enable it to navigate the challenges ahead and capitalize on the significant opportunities in the semiconductor capital equipment market.