ACM Research, Inc. Q1 FY2022 Earnings Call

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the ACM Research First Quarter 2022 Earnings Conference Call. Currently, all participants are in a listen-only mode. Later we'll conduct a question-and-answer session and instructions will follow at that time. As a reminder, we are recording today's call. If you have any objections you may disconnect at this time now. Now I'd like to 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 first quarter 2022 results. We released results before the US 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 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 Feng, the 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. Also, certain of the financial results that we provide on this call will be on a non-GAAP basis, which excludes stock-based compensation and any unrealized gain or loss 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 our IR section of our website and on Slide 8. With that, let me now turn the call over to Dr. David Wang, who will begin with Slide 3. David?

Thanks, Gary. Good afternoon, everyone, and welcome to the ACM Research First Quarter 2022 Earnings Conference Call. I would like to start today by reviewing our Q1 results and then provide an update on the latest status of our Shanghai operation. Please turn to Slide 3. As we mentioned in our business update prior to this call, late in the first quarter, our operations were impacted by the citywide lockdown in Shanghai. Our hearts go out to everyone affected, including our employees, business partners, and customers. The government has been working diligently to bring the outbreak under control, and we fully support their efforts. We also thank our dedicated and hard-working team, some of whom have literally lived at our facility. Our team has kept ACM operating as best as we could under these challenging circumstances. Q1 revenue was 42.2 million. Shipments were 67 million, and non-GAAP earnings per share showed a loss of $0.01. We ended the quarter with 533 million in cash and time deposits. Revenue and shipments were significantly below plan as the lockdown limited our ability to ship finished products, process final acceptance, and produce new tools. As an example, we had 13 completed tools that could not be shipped in Q1 due to logistical issues. We expect to deliver all of those tools in the second quarter. We expect the Shanghai lockdown to be temporary, and we have begun to increase the level of operations. At the end of April, the Shanghai government put ACM on the White List of essential businesses. This enabled us to increase production and restore logistics to our facility. We started closed-loop production at our Chinese facilities, also known as Tools Bus 19. This is where workers travel as a group between our factory and their hotel or home on a dedicated bus. We have started receiving incoming supplies and shipping products, and we are bringing back more people to work every day. Demand remains very strong. We are in constant contact with our customers and are committed to delivering tools to support their capacity expansion plans. As of today, we have not seen any changes to our order book, which remains full through Q2 and Q3 and nearly into Q4. We expect solid growth in 2022 from our core cleaning products, the significant ramping of the ECP tool, and increased shipments of our furnace products. The main obstacles to achieving our plan are the pace of reopening of the City of Shanghai and, in turn, our ability to scale production. We have been able to positively offset the lockdown by having our Shanghai R&D and management team working from home. Our team is focused on expanding our current portfolio and is introducing two new platforms later this year. Please keep in mind that our R&D center and the production facility in South Korea are unaffected by the Shanghai lockdown and are assisting with the recovery. Meanwhile, our global sales team in the rest of Asia, the US, and Europe are pursuing potential new customers in those regions. We are committed to gaining additional share of the $8 billion market addressed by our current products. We are on track to double our addressable market opportunity by year-end with the introduction and initial shipments of two new product categories. Q1 R&D expense increased significantly due to the increased manpower and was also elevated for the quarter due to the cost of building development tools. We are committed to investing in new products, but do expect our R&D spend to moderate to a run rate level in Q2 and beyond. I will now highlight new product development and recent announcements. Our ECP product cycle remains strong. Q1 revenue for ECP furnace and other products was $12.2 million or 29% of sales. We shipped 20 tools in 2021 and anticipate significant growth for 2022. We are gaining market share with our proprietary ECP technologies in the China market for both the front-end with our ECP and AP, and in advanced packaging with the ECP AP products. Long term, our goal is to achieve a 50% market share of the China plating market and a 25% share of the global plating market. Today, we announced a new volume purchasing contract for 10 ultra ECP AP high-speed plating tools from a leading China-based OSAT customer. Our ECP AP was previously qualified for multiple China-based OSAT customers for advanced WLP applications. We expect to deliver some of those tools in late 2022 and the majority in 2023. Also, on February 17, we announced an order of 21 ECP tools. Those orders were split between 13 ultra ECP MAP and eight ultra ECP AP copper plating systems. On April 21, we announced that our 18 Chamber 300-millimeter Ultra C VI, single-wafer tool was qualified for mass production by a mainstream memory chip manufacturer in China. This tool provides 50% more throughput than our four Chamber tool but with a similar footprint and is an important tool to support high-volume production lines in one of our key memory customers. We expect the 18 Chamber cleaning platform to play an important role with this customer and others for 3D NAND, DRAM, and advanced logic curve production. On February 13, we also announced a volume purchasing order of 29 Ultra C WB wet bench tools for 300 mm wafer applications from several China-based customers. While these are semi-critical tools, we believe our newly developed low-pressure dry technology allows us to gain wet bench market share from a majority of our major international competitors and give us a strong advantage over smaller local competition. I will now provide an update on our major customer initiatives. First, for our major US customer, our US service team has started and is engaged on a daily basis to prepare for the delivery of the tool for Ultra C V 4-Chamber cleaning tool. The evaluation tool is in final assembly, and we remain on track to deliver it later this quarter, with production tool shipment soon to follow. We believe a successful evaluation could lead to a larger opportunity with this and other major customers in the region. Second, for a global IDM with a China-based packaging facility, we delivered the first Ultra C PR web stripping system in Q4 2021, followed by a second tool in Q1. We have also received orders for two additional systems to be delivered in Q3. We are hopeful that success with our first product can lead to broader adoption of other WLP tools including ECP AP at this important customer. Third, for a major global semiconductor manufacturer with a China fab, they ordered the Ultra C/V 4-chamber cleaning tool to evaluate in their China facility, and we are on track to deliver the tool in Q2. Finally, we received an order for the Ultra ECP MAP copper plating tool for a regional Asia-based semiconductor manufacturer. This tool was delivered in Q1, and the customer has begun its evaluation with our service and process team. We are confident that the successful qualification of this opportunity can result in larger business opportunities, and we continue to build our sales pipeline with other top-tier players. We continue to move forward with our Lingang construction and plan to complete the first production building in early 2023, with production commencing in the middle of the year. We are also planning R&D centers in Wuxi and Beijing to support several key mainland China customers, and we are considering a more meaningful investment in South Korea. We currently have more than 100 engineers and supporting staff and two leased production facilities. In addition, we are actively evaluating land in South Korea to build our own facility and to further establish a local footprint near two additional major players, providing customers with a secondary production center to ensure robust supply chain and production continuity. Now, let me discuss our outlook. Since we have been added to the White List, we are increasing our production and logistics activities. We feel that the worst impact of the lockdown could be behind us. While there is some uncertainty on the pace of the City of Shanghai reopening, our order book remains intact, and we believe we can make up lost ground for the full year starting with the second quarter. As such, we are maintaining our full-year guidance for revenue in the range of $365 million to $405 million. Among other factors, this guidance assumes a timely return to scale of ACM production and shipping operations in Shanghai, the absence of unexpected interruptions of our supply chain, and continued demand from our customers. Before I turn the call over to Mark, I want to update you on auditor situations. As we have previously discussed, in early March, we were included on the SEC's list of non-compliant companies due to our use of a China-based auditing firm for 2021. As indicated in our prior press release, we have begun to interview potential US auditors that would allow us to comply with the PCAOB inspections. Although the current SEC guidance allows us until the 2023 fiscal year to transition, we are in an advanced stage of evaluating potential auditors, and we are committed to engaging a PCAOB compliant auditor firm for our 2022 fiscal year. Now let me turn the call over to Mark, who will review details on first quarter results.

Thank you, David. Good day, everyone. Please turn to slide 5. Before I begin, keep in mind that unless I note otherwise, I will refer to non-GAAP financial measures, which exclude stock-based compensation and unrealized losses in trading securities. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release. As David noted, our Q1 results were impacted by the lockdown in Shanghai, with revenue and shipments below plan, and we had 13 completed tools that could not be shipped in Q1 due to logistical issues. To be clear, these tools were included in both repeat shipments and first tool shipments. As I review our results, keep in mind that we believe year-over-year comparisons are less meaningful due to the circumstances created by the lockdown. Revenue for the first quarter of 2022 was $42.2 million, down 3.5%. Revenue for single wafer cleaning tools, which includes SAPS, TEBO, Tahoe, and Semi-Critical cleaning, was $26 million, down 19.7%. Cleaning was 62% of sales in Q1 2022 versus 74%. Revenue for ECP furnace and other technologies was $12.2 million, up 120.7%. This category represented about 29% of sales reflecting growth in our new product group. Revenue for advanced packaging, excluding ECP services and spares, was $3.9 million, down 32.3%. This category was about 9% of sales. Total shipments in the quarter were $67 million versus $74 million in the first quarter of 2021. Gross margin was 46.9%, up from 41.4%. This was higher than our normal expected range of 40% to 45% reflecting a favorable product mix. 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 $27.7 million versus $13.5 million. The majority of the year-on-year increase was from R&D, with modest growth in sales and marketing and G&A expenses. As David noted, Q1 R&D expense grew significantly due to manpower, and also in the first quarter it was particularly elevated due to the cost of building development tools. For the full year, we now expect about 16% R&D intensity at the midpoint of our outlook range. Operating loss was $7.9 million versus operating income of $4.7 million in the year-ago period. Unrealized loss on trading securities was $3.9 million in the first quarter of 2022 versus an unrealized loss of $1 million in the year-ago quarter. This non-cash item is excluded from our non-GAAP results. Income tax benefit was $4 million versus the benefit of $2.8 million in the year-ago period. As described in our earnings release, the change in the US Internal Revenue Code Section 174 that went into effect on January 1, 2022 has caused a potential increase in ACM's effective tax rate for the full year. We are still evaluating the impact on the 2022 tax provision, and we note that Congress is considering legislation to defer the capitalization requirements to later years. The net loss attributable to ACM Research was $0.6 million versus net income of $7.7 million in the year-ago period. Net loss per diluted share was $0.01 compared to net income per diluted share of $0.12 in Q1 of 2021. I'll now review selected balance sheet items. Cash, cash equivalents, and timed deposits were $533 million, an increase of $63 million at the end of the fourth quarter of 2021. Total inventory was $271.5 million at quarter-end, up from $218.1 million at the end of the last quarter. This included finished goods inventories of $106.6 million, work in process of $56.8 million, and raw material of $108.2 million. These items were above normal levels at quarter-end due to the impact of the lockdown. The 13 tools that we could not ship in the first quarter were reflected both in finished goods inventory and in work in process inventory. In closing, as David noted, we believe the effects of the Shanghai lockdown will be temporary, and we are making steady progress toward a gradual return to scale production. Demand for our tools remains solid, and we have several strong product cycles ahead. We will continue our investments in new products, new customers, and capacity as we look through the lockdown and drive forward with our mission to become a major player in the global semiconductor industry. Now, let's open the call for any questions that you may have. Operator, please go ahead.

Thank you. Our first question comes from Suji Desilva with Roth Capital. Your line is open.

Hi, David. Hi, Mark. So a couple of questions. First of all, on the White List activity that called you essential business, how soon does that imply you can get back up to full production and full shipment?

Great. That's a good question. Yeah, actually, as I mentioned, we already have our 2.1 line and closed-loop production. And we're adding more people to our facility. By the current pace, we calculate it will probably take a few weeks, and as we gradually add more people, hopefully, really by the end of this month, we can have our other employees and our workers start getting to our China factory. And meanwhile, also, we're starting to send people into our Zhanjiang office, which is a design engineering site. Hopefully, also then gather our design engineers back in the office too.

Okay. That's encouraging to hear. And then David perhaps or Mark, the ECP furnace category is growing here. It's 29% of revenue. What are the sub-segments there that are showing the most growth? Is it across the board? And how does that mix look like it's going to look a year out? I know, the single wafer cleaning is also growing very well so curious if that's going to grow in the mix a year or two out?

I believe this year, the copper plating and furnace segments will see growth. The main contributions will come from copper plating. Last year, we shipped 22 units for the copper plating site, and the same applies for the furnace. For this year, it's clear that copper plating will generate more revenue than the furnace. Additionally, our demand for cleaning tools remains robust. We have both single wafer cleaning and significant deals, with the introduction of supercritical CO2 cleaning tools expected later this year. We also just announced a substantial order for the Ultra bench. Furthermore, we have developed a key technology called low pressure drying over the past two years, which has been instrumental in helping us gain market share from competitors, especially against our smaller rivals in China. We maintain a strong presence in the cleaning market in China.

Okay. That's great. And then lastly, on the tools, the 13 that you're unable to ship, I'm curious, what portion of those roughly is a first tool? Because I imagine those may take a little longer to get in place versus the repeat tools as you kind of recover the shipment process here?

Yeah. I mean, these 13 tools are a mix of our cleaning tools, batch tools, copper plating, and also advanced packaging, right? And obviously the 13 tools will be shipped by mid-May, right? Some of them actually have been shipped out already. All of the 13 tools should be shipped out by mid-May per our logistics process.

Okay. One last question, if I can sneak it in. Have your customers' capacity expansion plans also been impacted? I'd imagine they have. And then just if so, are those getting back on track? Because obviously that's the fuel for your demand to kind of re-achieve your count of 2022 numbers. What's going on with the customers' capacity expansions and their ability to kind of install tools?

We're always keeping a weekly dialogue with customers, right? There are some delays in shipping timelines we couldn't manage. We'll try to quickly ship the tools out. They're also pushing us for tools in April and, or sorry May and June. Our engineers are working very hard. I think we try to catch up in manufacturing scale. Hopefully, we can get into Q2, based on our plan. Obviously, Q2 will be better than Q1.

Thank you. Our next question comes from Quinn Bolton with Needham & Company. Your line is open.

Hi, guys. Since demand and bookings remain strong, I just wanted to focus more on the production and the lockdown effect. First, David just wanted to clarify your response to Suji's question that you would be back up and effectively back to full capacity by the end of May?

Yes. I think that's by the plan. We're gradually putting people back in the production line. And that's our goal, right? Hopefully, we can get there earlier, but that's probably a realistic plan, and we will gradually get to 50% and eventually to 100%. That's our goal.

Got it. And then sort of a second question.

Hey, Quinn, just to clarify one thing because what David mentioned is all our employees will be back to the facility as our target by the end of the month. I mean the logistics will still have to catch up to get our supply chain and some of those details worked out. We'll gradually get our overall output to full capacity as we move through the year. But in terms of our staffing, we're targeting that by the end of this month.

Got it. And I guess sort of a related question. Mark, obviously, you haven't shared the quarterly progression of your annual plan. But through the lockdowns you had press released that you were going to come in well below your internal plan. As you sit here today, are you going to be below the internal plan at the beginning of the year in the second quarter and then expect to catch up in Q3 and Q4 since it's a much, much heavier back-end loaded year, or do you think the second quarter can be back in line with the original operating plan?

Let me add something, Quinn. What happened is, we have ordered those parts either from overseas suppliers or suppliers in China closest to Shanghai, right? Most of all our machine shops in Shanghai are not shut down, right? So those parts have been fabricated already. Obviously, we are trying to deliver. As I said, we already got this return production. We received special permission, and we have trucks loading parts back to our factory now. As I said, deals are still there, and demand remains strong. Our long-leading items on the line, of course, some of them are waiting to clear at the customer port in Shanghai. So, I expect Q2 may still get some impact. However, those parts will not delay future orders. We need to manage our workers' efficiency, and we may have to run more than two shifts and consider three shifts. That's all part of our plan to catch up with the demand and also meet delivery requirements for our customers.

Got it. Thank you for that. And then just lastly, on the two new platforms, since the R&D folks had to work from home, have there been any delays in the intended launch dates of those two new platforms or do you still expect to introduce one in the first half and one in the second half of 2022?

Yes, I believe we are still on track. The reason I say this is that two platforms were designed partially by our Korean team and partially by our Shanghai team. The Korean team is operating normally and has no impact on the timeline. Meanwhile, the Shanghai team has been working hard from home. Therefore, I do not foresee any significant impact for the second half of the year. Our plan is to deliver one platform early in the first half and another in the second half, and I believe we can achieve that.

Excellent. Thank you, David. Thank you, Mark.

Thanks.

Thank you. Our next question comes from Charlie Chan with Morgan Stanley. Your line is open.

Hi, David. Hi, Mark. Hey, how are you? Yes, I know it's kind of a tough quarter for you, but it seems like the full year is still fine. My question is about, first of all, because the other big foundries like TSMC and UMC mentioned some bottlenecks in global equipment. So even if you still have a purchase order, my concern is that given those other increments of bottlenecks, whether your China customers can really build those production lines on time? Because even for TSMC, the equipment delay is around three to six months. At UMC, they're expecting to have parts come in on time. Just wanted to get your thoughts on whether that impacts your future orders. Thank you.

Yes, that's a really good question. And it's really hard for us to comment whether our customers' production is on time or not. But at this moment, all customers in China genuinely want us to deliver on time, right? Of course, they want us to deliver ahead of time, but we cannot do that. Right now, all customers are still pursuing full speed in their production line installation. At this moment, I think that's our job to assume they have other critical parts and important equipment from larger international suppliers, and then we will do our part. So, so far, I haven't seen anybody delay their delivery or postpone their orders.

Okay. Got you. And another thing is more about the competing landscape. I was just aware that there is a new competitor in the cleaning category called IDG Power. It seems like management comes from ex-land research. I'm not sure if you are aware of this competition, and what would that change your long-term market share targets, especially in China? Thank you.

Yes, you mean the China market, right? That's your question? Is that correct? IDG, okay. Well, I mean, the main competitors are the international big three. We have also local players coming in. This more than I think we are working on many competitors. With the beginning of wafer fab tool, we got the first PO from the Korea market, right? You have international big companies as well as local competitors. So, I think we're okay with our competition, right? Our goal in China is very clear. With our technology superiority through single for the bench SAP TEBO, Tahoe also semi-critical products, we're definitely in a leading position in this market. I think, again, our goal is to take 50% of the market. The rest of 50% consists of bigger international players and new smaller companies in China, and that's okay. We like competition as long as they are competing on product, right? So we're okay. I think we are pretty confident in our strong relationships, and customers like our tools and our innovations. Especially, they appreciate us having their future solutions. Not just cleaning products, we do have a couple of competing corners. In the near future, we're coming out with two new platforms in the second half of this year. So we are really a multi-product platform company, and we feel very comfortable about our future growth.

Okay. Okay. I just wanted to make sure you are aware of the new competition. Yeah. And maybe one last question is to Mark. I know you maintained the full-year revenue targets. But from a CFO perspective, if you can run through the full-year projection for the bottom line, after this shutdown do you see any downside to your original budget for the bottom line for 2022? I just want to make sure whether the following quarters can fully make up the loss in the first quarter.

Yeah. Hey, Charlie, so we don't chat on the bottom line but we certainly talk about the top line, the $365 million to $405 million we're maintaining that outlook. We would anticipate that running through our overall operating model for the year would probably not change much from what we anticipated before the lockdown, just that the revenue has shifted to the back half of the year. Where we are evaluating additional costs associated with the lockdown, we think that at this point, they may exist but they won't be material. We’ll have to evaluate that as we move through the year.

Okay, yeah, I just want to make sure this is fully temporary. That's why I asked. Thanks for your information.

Yeah. Thanks, Charlie.

Thank you. And our next question comes from Mark Miller with The Benchmark Company. Your line is open.

Thank you for the question. The 13 tools that could not be shipped in Q1, can you estimate approximately what revenue this represented?

Yeah. David, you want to take that first?

Hey Mark, please.

Oh, yeah, I can hit that. I mean, David talked a lot about the spot lockdowns that started in mid-March and then the so-called five-day lockdowns which started at the end of March. And of course, we didn't completely shut down. On the 13 tools, we're not really going to quantify the exact specifics, but there are five cleaning tools, a couple of ECP tools, and the remainder were advanced packaging. So we did mention that those tools are reflected both in finished goods inventory and work in-process on the balance sheet. We also had some impact from acceptances and qualifications that were delayed. And then, of course, some slowing of production. I'd also point out this is typically our seasonally weak quarter because of the Chinese New Year. A lot of the business would fall in the last month of the quarter. I mean typically, our quarters would be more linear and the overall mix relative to our plan doesn’t take many tools to move the revenue significantly given the average selling prices. So I don't know if you wanted to add anything more to that, David?

Yeah, I think you covered that pretty well, Mark.

Yeah, it's pretty good.

Okay. Thanks, Mark.

You're expecting these tools to ship by the middle of May?

Yeah. I think we started shipping some of them already. By mid-May, we will probably complete all shipments, and yeah, that's our plan.

You're interviewing auditors. When do you think that process is going to be complete? And you'll have an auditor selected?

Yeah, Mark, on that front, look, we remain committed to NASDAQ, we're confident we're compliant. We've been evaluating auditors for the past several quarters. As David mentioned, we're in the advanced stage of selection, and we're working hard to appoint one for 2022, which would be a year ahead of the mandate. We're not going to give a lot more detail on that. When we have something to announce, we'll certainly do so.

Thank you.

Thank you. Our next question comes from Chaolien Tseng with Credit Suisse. Your line is open.

Hey, David and Mark. This is Chaolien. So, one very quick question for the R&D expense on a full year basis. Did you mention earlier it will be around 15% for the year?

Yes. Our goal for this entire year is our trade spending anywhere between the range of 15% to 16%, obviously a couple of points higher than last year. The reason for that is that we increased R&D investment for the existing product line expansion and also add the furnace and including furnace ARD. And plus, we are introducing two new platforms this year. This all adds on to engineering, manpower, and also development tools. So, additional office hires, all those expenses are accounted for. That's why we're planning for a slight increase in R&D for this year's budget. Mark, anything you want to add on that?

Yes. I wouldn't add a lot. I mean, our overall operating spend has a mix between sales, marketing, and R&D. But we’re clearly investing in our new product opportunities, and there were some elevated costs in Q1 as that relates to development tools.

Thank you. Next question is on the competition side. And just by the way, the new local competitor that Charlie mentioned earlier should be IDG Energy. I think one investor pointed that out. My question is on the Ultra ECP side, because it looks like the company's Ultra ECP is getting through to customer orders now based on the announcement in February. Do you see any strong local competitors in China for our Ultra ECP tool? And back in February, you mentioned that one of the ECP tool orders is from a top-tier Chinese foundry. Has that top-tier Chinese foundry ordered ECP for wafer-level packaging application?

Yes, I'll hit competition first. Copper plating is a relatively new technology. There are just a few companies globally that can do that. The reason is the technology difficulty, number one. Number two, also there's a strong IP barrier for new entrants in the business. So, I think ACM is one of the companies holding comprehensive IP for the copper plating technology, both in dense applications and advanced packaging too. Regarding local competitors, I think it's going to take time for them. Number one, they need to develop new IP that respects existing IP of ACM and other major players. They also have to overcome critical technology barriers. At this moment, we are confident in our technology and IP, and we have a path to penetrate the local Chinese customer base rapidly, either in advanced applications or in the advanced packaging tool line. As for your second question, yes, all major top-tier customers in China are currently operating with our tools. You could say, SMIC, and several others all have our copper plating tools. We're also gaining traction in the second tier and third tier of foundries in China. We just received our first volume order from a prominent packaging company in China and they have expressed confidence in our technology and performance.

Thank you, David. And one last question for me if I may. I hate to ask this, but some investors are very curious why revenue for other semiconductor-related equipment makers in Shanghai, with major production in Shanghai, didn't seem to get hit as hard as yours in the first quarter. What are the biggest challenges contributing to ACM's comparatively weak revenue performance in Q1? Was it employee loss at home, logistics issues, customer acceptance issues, or small raw material issues? What would you say were the biggest contributing factors?

Yeah, I know what you mean. Obviously, with different companies, I couldn't comment on their combinations for the quarter-to-quarter differences. For our case, this quarter is a unique combination of issues, right? Okay, so you talk about Chinese revenue recognition, right? And for China, revenue recognition requires that you sell the tool and ship it to the customer's site. There's a simple recognition rule for that. For the US, revenue is recognized upon shipment. It impacts a lot, especially if we can't ship repeat orders – then revenue cannot be recognized. It's why you can see that our China revenue is higher than our US revenue, let's put it that way. You might see that, but I still see positive performance in our China revenues. We did encounter delays in production line installations. We shipped nearly ten tools to their facility, but they could not install them on time. For this quarter, a lot of unusual combinations went together, right? The Chinese New Year, installation delays, and the shutdown altogether. But anyway, this is just one quarter. I don't think it will have a major impact on our long-term business. We do have to prepare better for future shutdowns. Now we will continue our closed-loop production during crisis situations until this pandemic is controlled. If anything can be learned, we want to make sure our production remains healthy in the face of these outages. Of course, we are hoping they do not occur again. If they do, we can still ensure supply chain breathing space.

Okay. Understand. Thank you, David.

Thank you.

Thank you. At this time, I'm showing no further questions. I'd like to hand the conference back to Mr. Wang for any closing comments.

Okay. Well, again, thank you to everyone for participating in our conference call. I will report back to you for our next earnings call. Thank you very much.

Ladies and gentlemen, thank you for your participation in today's conference. You may now disconnect. Everyone have a wonderful day.