ACM Research, Inc. Q4 FY2020 Earnings Call

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the ACM Research Fourth Quarter and Fiscal Year 2020 Earnings Conference Call. As a reminder, we are recording this call. If you have any objections, you may disconnect at this time. Now I will turn the call over to Mr. Gary Dvorchak, Managing Director of The Blueshirt Group. Mr. Dvorchak, please go ahead.

Good morning, everyone. Thank you for joining us on today's call to discuss fourth quarter 2020 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's 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. Dave 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 morning, and welcome, everyone, to today's call. 2020 was a very productive year for ACM. We faced several challenges, such as the COVID-19 pandemic and trade tensions. We overcame these challenges through hard work and good execution and a positive tailwind in the China semiconductor industry. We focused on what we could control. We managed our supply chain, executed our customer deliveries, expanded capacity, introduced new products, and made great progress with new customers. We also moved forward with our long-term facility plan in Lingang and completed the development for employee housing. Before getting into detail, 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 confidence in ACM Research. For the full year, we had a record revenue of $156.6 million, up 46%, and a record shipment of $182 million, up 58%. Non-GAAP operating margin was 17.3%, and we ended the year with $71.7 million in cash and an additional $28.2 million from our holdings of SMS, STAR Market shares. Our success starts with our customer. Please turn to Slide 4. We have five major front-end customers across foundry and DRAM, as well as several back-end wafer packaging and assembly customers. Our new customer, a manufacturer of analog devices, chose ACM technology to optimize their own production capability. We'll help them achieve the operational excellence they need to compete in today's global semiconductor markets. Let me discuss our key customers. I will start with the Shanghai Huali and Huagong Semiconductor, also known as Huali Huagong Group. They are leading advanced foundries in China and our customers in 2020, accounting for 37% of total sales. They are great customers and neighbors with production near our Shanghai headquarters. Shanghai Huali is a leader in a multi-year capacity expansion, making good progress in 2020. While on semiconductor is adding capacity at its edge fab in Asia. Their major products are CIS and power devices, and capacity will be more than 80,000 per month by the end of this year, up from 30,000 per month at the end of last year. We are participating in both projects. We have several first demo systems in Huali for some of our newer product offerings. Next, YMTC. YMTC is our seventh largest customer, contributing to 27% of the total sales in 2020. We are working closely to support YMTC's 3D mass production line in Wuhan. Public reports say that YMTC is increasing its production capacity to 50,000 wafers per month in 2020, and they are expected to add another 25,000 to 50,000 in 2021 and convert from 64 layers to 128 layers. We believe they are, YMTC, the largest single-wafer supplier. ACM tools are being employed in a significant number of cleaning fabs. So we continue to expect strong demand from YMTC as they scale their production capacity in Wuhan and other major facilities to come. ACM's next largest customer was SMIC, the largest foundry in China, accounting for 12% of sales in 2020, up from single digits in 2019. While we are positioned to deliver to SMIC, our business level also depends on other new suppliers gathering licenses to ship their own tools to ACM. We are well-positioned with a range of tools for SMIC but are factoring in just a small amount from SMIC in our 2021 outlook. Now let's touch on our other significant customers. I will begin with SK Hynix, the second-largest global DRAM supplier. SK Hynix was ACM's first major customer, a strong testament to our proven fast cleaning technology and ability to improve production yields. We started with just a few production steps at SK Hynix, and now our tools are used in more than 20 steps as progress towards more advanced nodes. SK Hynix was less than 10% of our sales in 2020, down from about 20% in 2019, as expected due to a pause in the DRAM cycle. SK Hynix implemented several technology updates in 2020, and we expect them to return as a 10% customer for 2021 and beyond through technology upgrades and capacity additions. Next, in XMP, a non-China-based entrant to the DRAM industry. We delivered our first SAPS-V tool to them in late 2019 and recognized revenue in Q4 of 2020 upon acceptance. They selected us for compelling value, proven ability to improve yields, and a solid technology roadmap. XMP is in the early stage of a multi-year production plan. We are positioned to participate in the SAPS, Tahoe, and other critical cleaning pools, ECP, and other tools when they scale up in 2021 and beyond. Finally, we have two new analog power IC customers. We delivered multiple first tools in the third and fourth quarters of 2020 and recognized some revenue in Q4. The first tools included our semi-critical cleaning tools, scrubber, wafer, backside cleaning tools, and ultra-precision SAPS cleaning tools, as well as Ultra FM Furnace tools for the cleaning process. With this, we have penetrated two of the five key cleaning edge nodes in other PIC and CIS manufacturing in China. I'm happy to see we are very active with all of the remaining three players and expect to receive orders from them this year. We believe these customers alone represent a significant opportunity for ACM. Many of them are still in the early or middle stages of multi-year capacity expansions and are buying just a fraction of our products. We think our current customer base alone can support solid growth for years to come, as these customers add capacity with our tools in additional production fabs and buy more ACM products. Innovation will enable us to capture new and improved large market opportunities. Please turn to Slide 5. As an emerging supplier, we're focused on delivering advanced technology at competitive costs. We have a strong R&D team in Shanghai and Korea and one of the largest service teams for semiconductor equipment employees in China. This puts our critical mass near some of the newer and larger semiconductor projects on the planet. We consider this a great opportunity. We have not yet stretched the scope for the next few years; this is a landgrab period to expand our product line and scale our business as new major semiconductor products build their business in China. We intend to gain market share by expanding our product line and gaining new customers both in China and around the world. We estimate our current product portfolio addresses about $5 billion of the global wafer cleaning market. This includes DRAM, 3D NAND, foundry, power devices, and analog applications. Our cleaning tools address about $2.5 billion or 80% of our $3 billion total wafer cleaning market. We start with our flagship products, SAPS, TEBO, and Tahoe, coupled with our semi-critical cleaning tools. Our new product adds another $2.5 billion, including $1.7 billion by Furnace, $5 million by our ECP, and more than $30 million by our strategy polishing products, wafer manufacturing, and other advanced packaging process equipment, including coder, developer, scrubber, and other cleaning tools. In 2020, we spent 12% of sales, or about $18 million in R&D, up 55% from 2019 levels. That spending enabled us to expand our offering beyond SAPS, TEBO, and Tahoe, semi-critical tools, ECP, and most recently, Furnace products. Our ECP tools are off to a very good start. In 2020, we delivered a handful of first tools to front-end and back-end packaging customers and had a greater revenue contribution for the year. Our key products, including ECP AP for advanced packaging and ECP MAP for copper interconnections, ECP tools for the front end. Our secret sauce is the ability to provide uniform plating and outer center layer. For advanced packaging, we have developed a proprietary high-speed copper plating technology with a patent pending to significantly improve copper pillar plating. To place metal film, our tools achieve high speed and better reformatting, which is a major challenge around 3D plating applications today. Historically, copper plating for pillars has limitations due to mass transfer challenges that reduced preparation rates and generally resulted in an uneven top profile of pillars. Our new high-speed plating technology solves the mass transfer challenges while achieving a better pillar profile and delivering the best height in quality of less than 3% as well as high throughput. The CCGT high-speed plating rate, combined with our SAPS copper polishing tool, will become major winning products in upcoming 3D advanced packaging. We are also excited about our Furnace opportunities in 2020. We delivered full Foster tools to two companies and they plan to deliver several more in the first quarter of this year. The Furnace has been jointly developed by our Chuansha and Shanghai team. Both teams have worked seamlessly to solve their alpha and beta tool issues and the teaming process to meet customer requirements. They have made significant progress in improving this process, including HDL, cleaning, and a high vacuum cleaning process. Our teams continue to develop new and high-temperature oxidation processes. Our next step is to develop autonomous layer separation (ALD) processes, which is the most challenging and promising product for advanced manufacturing nodes. We have successfully implemented our multiple product strategy and expanded our product portfolio from wet products such as wet SAPS, joint products and vertical Furnace, which mark our first entry into dry products and more will come in the near future. For 2021, to prepare for new opportunities ahead, we plan to accelerate our R&D to about 14% of our sales, redoubling total market addressed by our products from $5 billion today to more than $10 billion. We are too early to offer details. I can see that our team has begun work on serving new major products that can get us close to the $10 billion addressable market growth in the next couple of years. Next, I will comment on our efforts on winning major first-tier new customers. Our investments in our global sales team are making steady progress. We hired a U.S.-based sales team in April of 2020 as well as several other key hires. During the year, we delivered our very first win in a few labs, with a lab of an equipment player that needed to separate cleaning from its process. Thanks to the great execution of our service team, the customer formally accepted the tool, and we booked the revenues in Q4. The team is actively building a sales pipeline with regular engagement, such as technology discussions in the U.S. and among Taiwan players. We are confident that, in fact, with TEBO, Tahoe, high-speed copper plating, as well as SAPS, we can secure wins at one or more major first-tier customers during 2021. To fulfill our growth ambitions, we will need capacity. Let me update you on our progress. Please turn to Slide 6. Our original facility in Shanghai remains. The headquarters is in Shanghai and includes our R&D, SG&A, and prototyping and production of new products. We stated that we started production at our second factory in Chuansha during September of 2018. We quickly saw an addition of the second floor to production in Q3 2020. We now have a $300 million annual revenue capacity at Chuansha. We believe that we can further expand to more than $500 million of revenue capacity by leasing additional space. Our new Lingang facility will include production and R&D with a planned 1 million square feet of growth space. We will have the ability to increase our production capacity to $1.5 billion. During 2020, we purchased 50-year land rights in Lingang. We expect additional architectural and design work in the first half of 2021 with initial production expected in late 2022. Ventures in our Lingang operation involve low-cost employee housing. While not common in the U.S., it is expected as a practice for large companies in China, particularly in Shanghai. We offer housing to attract and maintain key experienced employees. We train many of our key engineers and managers to be more than a decade. We need to keep these key employees to secure our future growth and technology development. During 2020, we deposited $40 million towards the purchasing of 152 housing units. We paid for these over half of the amount from ACM Shanghai cash balance. We financed the other half with a 10-year loan facility. Before I provide our 2021 outlook, let's discuss the status of the STAR Market IPO of ACM Shanghai. Progress is steady, but slower than expected. Soon after 2018, complications from the Shanghai Stock Exchange caused a delay in IPO. This was initiated with the short seller report issued on October 8, 2020, followed by a class-action lawsuit on December 21, 2020. We have previously discredited our disagreements with the short seller report and therefore believe there is no substance to allegations, which is largely based on the short sale report. The SEC, which is not familiar with this kind of report and a lawsuit, wants to better understand the U.S. legal process. As we have also previously described, we responded with a five-point verification report to the short seller report. That report was accepted by the SEC on December 11, 2020, and released publicly in both China and the U.S. Before our registration application should be filed with the China Securities Regulatory Commission (CSRC), however, the civil suit was filed, and the SEC would again require additional information. Our team is now in the process of providing a secondary response to the SEC report to address the class action lawsuit. We are confident that we will overcome this hurdle and complete our IPO. However, the SEC does not provide us with a timetable for this review and therefore we cannot predict the precise timing. Now let's move to our 2021 outlook on Slide 7. Our values reflect optimism about our growth prospects for 2021. We reported that we offered preliminary guidance in early January, which is unchanged. We expect revenue to be in the range of $205 million to $230 million, which represents 39% annual growth in the cleaning business. Our outlook for 2021 is based on several key assumptions: First, the global COVID-19 situation improves in the coming months; second, U.S.-China trade policy stabilizes; third, a range of spending scenarios for the production lending of key customers; fourth, variance in the trajectory of DRAM recovery; and finally, a range of outcomes for the timing of customer acceptance of the first tool. Our results and outlook demonstrate the successful execution of our strategy. Our strong growth is providing the capability to accelerate our R&D spending in new products. We are building a global sales and marketing resource to penetrate new customers in new regions, and we are scaling production capacity to support our long-term growth plan. We are increasing operational spending to take advantage of the growth opportunities ahead. Our mission remains to become a major equipment supplier to the global semiconductor industry. I will now turn the call over to Mark to discuss the financial results in more detail.

Thank you, David. Good day, everyone. Q4 was another strong quarter, capping off a tremendous year for ACM. For the full year, we grew our business significantly with increased market share, good customer exposure, and expanded production at our second factory. We launched several major product lines, including the Furnace, semi-critical cleaning, and introduced a number of extensions for SAPS, ECP, and advanced packaging. We closed the year with a solid balance sheet, including $72 million in cash and an additional $28.2 million of trading securities of our SMIC stockholders. Now I'll put some detail around our full year 2020 results. Unless I note otherwise, I will refer to non-GAAP financial measures, which exclude stock-based compensation, changes in fair value of financial liability, and unrealized gains on trading securities. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release. First, highlight the results for the full year 2020, shown on Slide 8. Revenue was $156.6 million, up 46%. We break out 10% customers annually and provide occasional color on our quarterly calls. As David noted on Slide 4, we had three 10% revenue customers for 2020. First, the Huahong Group accounted for 37% of revenue versus 26.5% in 2019. That grew by 103%, a big contributor to growth as we expanded penetration from Huali Shanghai fabs to additional factories in Huahong and Wushi. YMTC was our second-largest customer at 27% of revenue versus 27.5% in 2019. Our revenue from YMTC increased by 42% year-over-year, helped by YMTC's expansion of wafer starts to 50,000 per month and some share gain into additional cleaning steps driving the growth. SMIC was 12% of revenue versus single digits in 2019, and participation with SMIC improved nicely in 2020, due in part to successful sales efforts and SMIC's recognition of our ability to scale. SK Hynix was a little less than 10% of revenue versus 19.8% in 2019. This was as expected due to a pause in DRAM spending. Revenue from wet cleaning and other front-end processing was 87% of 2020 sales versus 84.6% in 2019. Revenue from advanced packaging, other back-end processing tools, services, and spares was 13% of sales in 2020 compared to 15.4% in 2019. Total shipments were $182 million versus $115 million in 2019. Gross margin for the year was 44.5%, compared to 47.3%. This was within our normal expectation of 40% to 45%. We expect gross margin to continue to vary on a quarterly basis due to product mix and manufacturing utilization. Operating expenses were $42.7 million compared to $29.5 million. The increase was due to higher R&D spending on new products, increased sales in North America, and related costs tied to the IPO. Operating income was $27.1 million compared to $21.4 million; operating margin was 17.3% versus 19.9% a year ago. Non-GAAP results exclude stock-based compensation, along with two additional line items below the operating line. The first is a change in the fair value of financial liability, a non-operating non-cash book loss of $12 million. As described in previous calls, this was related to investments in ACM prior to our 2017 IPO that were restructured in Q3 of 2020 in connection with the STAR Market IPO. This liability was terminated upon our issuance of an equity warrant, after which it became a balance sheet item and no longer impacted our income statement in Q4 and beyond. Second is an unrealized gain of trading securities of $12.6 million from our investment in SMIC prior to the STAR Market IPO. This investment was marked to market at year-end, and the gain reflects the increase in value from the original IPO price. We will exclude this item from non-GAAP results until the gain is realized if and when we sell the shares. Net income attributable to ACM Research was $23.8 million versus $22.5 million. Net income per diluted share was $1.12 compared to $1.17 in 2019. Tax items and the effects of foreign exchange fluctuations on operating results provided a net benefit of $0.9 million and $4.7 million in 2020 and 2019, respectively, or $0.04 per share and $0.25 per share. Now for the fourth quarter, as shown on Slide 9. Revenue was $45.6 million, up 85.2%. Total shipments were $67 million versus $25 million in the fourth quarter of 2019 and $59 million in the third quarter of 2020. Gross margin was 43.3% versus 50.7%. Operating expenses were $13 million versus $8 million. Operating income was $6.7 million, up 49.6% from $4.5 million. Operating margin was 14.8% versus 18.3%. Unrealized gains on trading securities, excluded in non-GAAP provisions mentioned above, were $3.6 million in the fourth quarter of 2020. Net income attributable to ACM Research was $6.2 million versus $4.6 million in 2019. Net income per diluted share was $0.29 versus $0.23 in 2019. Tax items and effective foreign exchange fluctuations on our operating results provided a net benefit of $0.9 million or $0.04 per share in the fourth quarter of 2020 versus a net benefit of $1.1 million or $0.05 per share in the fourth quarter of 2019. Now I will review the balance sheet. The cash balance was $71.8 million at the end of 2020. Short-term borrowings at year-end were $27.7 million versus $13.8 million in 2019, and long-term borrowings were $19.7 million. Total inventory was $88.6 million at year-end versus $44.8 million in 2019. The increase in inventory was driven by a couple of factors: First, finished good inventory. For ACM, that represents first tools delivered to our customers for evaluation and awaiting acceptance. Finished goods grew to $32.4 million at year-end, up from $19.3 million at the end of 2019. The remaining inventory growth was mainly due to work in process and raw materials to support our sales growth in 2021. Cash flow used by operations was $13.5 million for the year. Cash was used to fund our growth in 2021 and to deploy first tools and new products for key customers. Capital expenditures for the year were $5.5 million versus $2 million in 2019. In 2020, we spent a total of $50 million on Lingang-related investments, which includes the $9.7 million for the 50-year land rights and $40.2 million in deposits for employee housing. For 2021, our base case for capital spending is between $10 million and $15 million. Our 2021 investments will be balanced between capacity increases at our second factory in Chuansha, investments to support our R&D programs, as well as planning and some initial spending on Lingang. We expect to adjust our capital spending upwards after our China IPO. To conclude, we continue to execute on our strategy. We are participating in the growth of major new IC fabs. We are ramping production and continue to develop and deliver innovative products. We're positive on our opportunities in China and our expansion outside of China. Let's now open the call to any questions that you may have. Operator, please go ahead.

[Operator Instructions] We have the first question from the line of Patrick J Ho from Stifel.

Congrats on a nice finish to the year. Maybe, David or Mark, looking ahead at local Chinese domestic spending, we're looking at potentially another strong, robust year. Can you just give a little bit of color on the breakdown between your thoughts on memory spending versus the trailing edge foundry logic spending and whether you see potential growth in both areas? Or is it going to be weighted more on one segment or the other?

Okay. Thanks, Patrick. We actually have very good availability in our basic 3D NAND and also in Huagong Huali. We see that continuing to...quickly spend on their fab, both in the advanced 3D NAND and the memory side, as well as in the logic foundry side for Huagong Huali Group. Plus, they also acquire their, what we call, second-tier customers. We got two already, and this year, we have companies that will get the rest of the three additional second-tier customers. So we're building favorably, lately. I still say probably more than 50% will come from the top three customers. We're seeing five additional new customers expanding quickly. We cannot give a precise number for this year, but obviously, they are expanding their fabs. Mark, anything you want to add on?

Yes. Thanks, Patrick. I mean, I think you asked about the relative growth versus memory and trailing edge. As you know, YMTC is a 3D NAND big customer, so we're expecting to grow there with their capacity adds. David mentioned Huali Huahong and SK Hynix. We are anticipating a DRAM recovery from them. They were less than 10% in 2020, so we'd expect them to show some decent growth here in 2021.

Great. That's helpful. And maybe for my follow-up question for you, Mark. As you get the new facility and factory ramped up for production, how do you look at gross margins given that there are typically startup costs and some underutilization to begin with? How quickly do you get that within your normal, I guess, corporate ranges as that facility ramps?

Yes, you bet. So Patrick, we're not going to modify our gross margin outlook, kind of the 40% to 45% range. There's a lot -- obviously dependent on the product mix, and that's really the biggest driver. Relative to production capacity, we said a bit here. Chuansha, we're adding capacity pretty quickly. We have good demand throughout the year. The Lingang facility, we're looking at that for the end of 2022 when that would start kicking up. We don't anticipate any impact on our gross margin from that Lingang; that will be out there in 2023 and beyond.

We have the next question from the line of Suji De Silva from ROTH Capital, please.

David, Mark, congratulations on a strong end of the year. A quick question on the STAR listing. Can you just give us a sense qualitatively of the level of detail the SEC requested in this additional review versus the original report you filed? Just give us some sense of magnitude here of how much more they're looking for.

Okay. I just stated that the short seller report had come out, and we spent almost two months to finish the report. We got accepted and almost began to acquire we call it registration for CSRC, but then there was a lawsuit that came up. Anyway, we are taking care and have hired a very experienced lawyer in the U.S. The lawyer has told us that there is no substance in the lawsuit right now. We are responding with detail to the SEC regarding the legal process in the U.S. I think it will be very soon, and then we are waiting for their response. If we receive a positive report, we can start continuing the registration process in the CSRC. So that's the timing right now. We don't know how long it will take for them to resume our second report. That’s why we couldn't provide a precise timeline for the IPO. But I think we're confident; we’re at about 90% or 95% down already with the remaining 5% we are confident we should be successful with the IPO based in China.

Okay. And then perhaps on the financials, with the tools you have placed with customers entering '21. Maybe I'm curious, do you have a higher percentage of visibility from those tools into your guidance for '21 versus, say, a year ago, given that you have more customers and more products?

Yes. I can see that this year is obviously better than last year, right, and looking at our projection. As you are aware, we're very busy in Q1 and Q2. We're really stretching plating and manufacturing capability. We started hiring more people and training them before the Chinese New Year. At this moment, it’s a very busy Q1, Q2, and even Q3. So we're very confident in our projection for this year.

Yes. And Suji, you could obviously look at the level of finished goods inventory at the end of last year, which increased from about $19 million to about $32 million. That indicates our corporate gross margin to get an idea of how much revenue visibility would there be.

We have our next question from the line of Charlie Chan from Morgan Stanley.

So my question is about your China customers' contribution. You mentioned about YMTC and Huahong. But how about SMIC? The company also announced they want to spend around USD 4.7 billion CapEx. Do you think that is going to be a significant growth driver for you for this year? What do you think about their capacity expansion progress given the SAPS issue?

I think we're pretty well positioned with SMIC, and we have worked with them for the last three to five years. We do have products for their cleaning and SAPS processes. We also have copper plating and TSV tools. We're also positioned to introduce our Furnace tool to SMIC. So I think we're well positioned in the market now. Looking at their announcement, they're expanding 10,000 wafers per month for their 128-nano technology, so we are positioned for that. Again, if the licensing can be resolved quickly, we can see quite a tremendous opportunity in front of us. However, at this moment, we're still cautious and observing the situation closely and supporting our customers.

Yes, Charlie. One thing I'd add, it's obviously a bit of a wildcard. We've got really good visibility with a number of our top customers. But for SMIC, we're not factoring a significant amount into our outlook. It really depends on their ability to get tools from other U.S. manufacturers. Demand in China is quite strong across the board, and we think it's mixed depending on how much capacity they add and how much some of the other manufacturers may step up their spending. It's hard to tell, but for them, we're not going to factor too much into our outlook.

The next question comes from the line of Quinn Bolton from Needham & Company.

So let me say congratulations on the strong finish and the nice outlook for 2021. David, I wanted to follow up on Suji's question around the SEC review. I understand you're about to file your response with more information about the class action lawsuit. You don’t know how long it will take the SEC to review that. But once you receive that, can you walk us through how long it typically takes to get through the CSRC registration process? So folks can have a sense of time; once the SEC review is complete, what the timeline for an IPO might look like? Is it order of weeks? Is it a couple of months? Any thoughts you could provide would be helpful.

Okay. Quinn, very good question. As I said, when the SEC finishes a review for a second report, we will be getting into registration for CSRC. By the data available, the average registration time in CSRC is about 45 to 60 days. So, that would be the registration time period. After that, we probably spend another two to three weeks on the road shows. You can estimate about two to three months for the IPO time after we finish acceptance or approval for the secondary report. Did I answer your question?

Got it. It's perfect, yes. And the second question is very nice job on the shipments in the fourth quarter. Mark, I believe I heard you say $67 million. Obviously, that gives you some pretty good visibility into 2021. I'm wondering if you might be able to break down for us how much of that $67 million were your traditional critical clean tools versus some of your newer semi-critical Furnace and ECP tools? Is the majority still the critical clean? Or are you starting to see a broader composition of the shipments you're making?

Yes. I couldn't give you the sort of detailed numbers, but generally speaking, probably cleaning tools occupy about 80%, 85% of the total, while the rest of it, 15% to 20%, is our new products coming in, copper plating and application in the packaging application. So that probably gives you the ballpark, the 80-20 division.

The next question comes from the line of Chi Tsai from Jefferies.

So you reported to deliver $182 million in shipments for 2020, and I think that would indicate $31 million in backlog for the year and you now have more than $60 million in backlog. Do you see this backlog expanding in 2021? Or are you expecting similar ranges?

Yes. Let me just correct a few things. You would want to look at the finished goods inventory level, not the number we shipped in the year. That finished goods inventory was a little over $32 million, carried at cost. You would assume our corporate gross margin to get an idea of potential revenue that's in that. For 2021, we don't provide guidance on our overall shipments, but we would anticipate strong shipments again, including deliveries of demo tools this year.

Yes. Well, obviously, this year, there are more new customers coming in, especially with new products like SAPS and our Furnace product. We're also expecting additional new customers; therefore, we are looking forward to deferred revenue coming from the first tools delivered that could be recognized as revenue upon acceptance. So I expect the end of this year much more first tools could be deferred to next year.

I see. My second question is that, can you kind of bridge the outlook of 2021 revenue between the first and second half? A lot of capacity expansion plans were made in the second half last year due to opacity shortages. So can you give us some idea on how first half and second half will look this year?

Yes. We typically give a full year outlook. Q1 is generally our seasonally weakest quarter; you have the Chinese New Year in there. Yes, we typically see a strong snap back in Q2. Q3 has traditionally been our biggest quarter, and then a slight decline in Q4. That's how we're looking at it. I think you're correct, a little bit more in the second half than the first half is expected to balance that way. But nothing traditionally out of the ordinary from the seasonality you've seen in the last year.

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

You indicated you expect the return of Hynix to be a 10% customer. Is that more of a second half or a first half return?

Okay. I think that will probably happen in the second half of this year. We do have some orders coming in Q1, and looking at the market, people project that DRAM will recover quite compared to last year. We expect some orders may come in the second half of this year.

Your sales and marketing expenses were up significantly, as well as R&D despite somewhat lower sales in the fourth quarter. Do you expect this trend to continue into 2021?

Yes. We’re using a sales marketing percentage of 9% to 10%, and that range will continue. However, this year, we do add an additional probably 3 points or more for R&D. So it totals around 14% on top of R&D efforts since this is a pivotal year. It's critical we’re positioned strongly in the Asian market, therefore we’re investing more in developing new products.

Yes, Mark, just to make sure you're aligned, this is on a non-GAAP basis, right? So we're excluding stock-based compensation for those percentages that Dave was giving you.

You mentioned stock-based compensation. What was the stock-based comp last quarter?

Q4 stock-based comp was $1.3 million, and it was $5.6 million for the year.

We have a follow-up from Charlie Chan for Morgan Stanley.

Yes, Charlie, I think we cut you off somehow or maybe we lost you.

Yes, yes. Sorry, I got disconnected. Working from home. So maybe another follow-up is for you about your international customer progress. I know Hynix probably will be a 10% this year, but how about other major Chinese - Huagong, TSMC, or other U.S. customers? Any progress here?

Great. Charlie, let me elaborate on our next big plan coming into the outlook for these customers. We're looking three to five years ahead at technology trends in the industry. Our cleaning tool, SAPS, TEBO, is really good for cleaning. TEBO is currently the only technology in the world that can remove tiny particles inside deep trenches in modern devices. Other technologies cannot achieve this quality. I see that the 3D major applications down the road will involve multilayer interconnections and also 3D connectors. Our 3D technology is a key position. We are also making recent steps on high-speed copper plating. Our key point is to achieve less than 3% fault for the right top-tier profiles, which has attracted attention from top-tier customers. We are also working to polish copper while significantly reducing consumable costs by 80% compared to previous solutions. We're focused on efficiency with our Furnace. We think it can play a major role in their future projects. ACM's technology differentiation is our core point. We are actively engaging with U.S. and Taiwan customers. We are already conducting demos for key customers, and we are very confident we can penetrate one or more top-tier customers this year with our cleaning and advanced copper plating sides. So Mark, anything you'd like to add?

Yes. The only thing I'd add, Charlie, is that we didn't factor any revenue from these big customers into this year's outlook.

The next question comes from the line of Christian from Craig-Hallum Capital.

Great. Actually, the last few questions were the questions I had. So congratulations on a great outlook. I don't have any further questions to ask at this time.

Okay. Thank you. Great.

Thank you. Seeing there are no more questions in the queue, I would like to hand the call back to our presenters for some closing remarks.

Thank you, operator, and thank you all for participating in today's call and for your support. This concludes the call, and you may now disconnect.

Okay. Thanks, everybody.

Thank you. Ladies and gentlemen, that does conclude the conference for today. Thank you for participating. You may all disconnect now. Thank you.