ACM Research, Inc. Q2 FY2023 Earnings Call

Good morning, and thank you for standing by. Welcome to the ACM Research Second Quarter 2023 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. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Yujia Zhai, Managing Director of The Blueshirt Group. Please go ahead.

Thank you, operator. Good morning, everyone. Thank you for joining us on today's call to discuss second quarter 2023 results. We released results before the U.S. market opened today. The release is available on our website as well as from newswire services. There's also a supplemental slide deck posted to the 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, and other information that might be considered forward-looking. These forward-looking statements represent ACM's current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results to differ materially. Those risks are described under the risk factors and elsewhere in ACM's filings with the SEC. Please do not place undue reliance on these forward-looking statements, which reflect ACM's opinions only as of the date of this call. ACM is not obliged to update you on any revisions to these forward-looking statements. Certain of the financial results that we provide on this call will be on a non-GAAP basis, which excludes stock-based compensation and unrealized gain 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 the IR section of our website in Slide 12. With that, let me now turn the call over to David Wang, who will begin with Slide 3. David?

Thanks, Yujia. Hello, everyone, and welcome to ACM's second quarter 2023 earnings conference call. Please turn to Slide 3. For second quarter, revenue was $144.6 million, up 39% from the same quarter last year. Shipments were $153 million, up 37% from the same quarter last year. Gross margin was 47.6%, and operating margin was 22.4%. We achieved record revenue and EPS, as our operating and industrial supply chain largely returned to a new normal following several years of COVID-related disruption. These results were driven by strong mature node demand from our China customers, market share gain, and penetration of a new product with a new customer. Let me touch on each of these, beginning with mature node investment in China. Last year, following U.S.-China trade restrictions, some industrial analysts predicted that China's WFE market would decline dramatically. At that time, we predicted a relatively quicker shift to spending on mature nodes in China. After an expected pause, as the industry adjusted to the new export regulations, our prediction appears to be playing out as we are now seeing broader signs that China has indeed sped up its capacity expansion in mature nodes. This is driven by the substantial gap between China's mature nodes capacity and market consumption. We see continued investment in 28 nanometer and 45 nanometer and above front-end fab capacity. We also see the ramp up of EV production in China as a driver of China-based investment in both power devices and other 28 and 45 nanometer devices. This creates a good tailwind for us that we believe is still in the early stages, as China intensifies its effort to boost its domestic semiconductor capabilities. We believe we are well positioned to benefit and further increase our market share due to our strong market position, leading differentiated technology, and broad multi-product portfolio. Moving to product, please turn to Slide 4. Single wafer cleaning, Tahoe and semi-critical cleaning grew 55%. In the last few years, we introduced and began ramping our semi-critical product line, including auto bench. And then, last year, we introduced Bevel Etch and high-temperature SPM tools. Over the past quarter, we introduced supercritical CO2 dry. Now, ACM has one of the broadest cleaning product portfolios in the industry, covering nearly 90% of all cleaning process steps. We believe this product portfolio will play a key role among mature nodes, development in China, and advanced nodes in our international efforts going forward. ECP, furnace and other technologies declined 7% due to quarterly fluctuation. However, for the first six months of 2023, ECP, furnace and other technologies grew 40% year-over-year. Growth in this category was driven primarily by ECP product cycle with some contribution from furnace. Our higher temperature anneal and LPCVD furnace, including silicon nitride and poly and ARD, have expanded to multiple customers and are under evaluation. Advanced packaging, excluding ECP, services, and spares grew 14% in Q2 and 58% year-to-date. This category includes a range of our packaging tools, including coater, developer, scrubber, PR stripper, and wet etcher, and service and spare parts. ACM is the only company that offers a full set of wet tools and advanced plating tools. We believe advanced packaging will become more important as the industry looks for packaging innovations such as 2.5D, 3D, and fan-out to drive higher performance for new applications such as AI and GPT. Finishing up on products, we continue to make good progress on sales efforts with our new Track and PECVD platform. We're in active discussions with our key customers, and we are planning to deliver more evaluation tools this year. Similar to our cleaning, plating, and furnace product lines, our Track and PECVD platform has proprietary technology that we believe will make them winners with major customers both in China and outside China. Moving on to the customer, please turn to Slide 5. We continue to make progress with our customers both inside China and internationally. In China, we believe ACM tools are now used by nearly all semiconductor manufacturers. Our sales and service team are working to expand the deployment of each of our major product lines across our growing customer base. In addition to our current customers, we're also seeing a good number of well-funded new entrants. Our team has done a good job of gaining traction for our products with these customers. Our new customers will start reflecting our shipments this year once they achieve customer acceptance at a later date. Also, as some of you may have heard, on July 21, 2023, Hua Hong Semiconductor, a greater strategic customer, announced the pricing of its Shanghai STAR Market IPO and is expected to start trading soon. The total proceeds were RMB 21.2 billion, or approximately $3 billion. In the U.S., evaluation at our key customer is progressing well, and we remain optimistic for qualification later this year. In Europe, we announced an order for our first evaluation tool from a major semiconductor manufacturer in the first quarter of this year. The tool is planned for delivery in early Q4, and we are beginning to build a local service team to support this effort. To support our growing initiatives, we continue to make progress on our facility expansion in China and other regions. Please turn to Slide 6. In China, the construction of the Lingang Production and R&D center is nearly complete and is expected to begin initial production later this year. In Korea, as noted in prior calls, we have increased our commitment in this region. We believe a strong commitment to Korea will improve our relationship with our key customer SK Hynix and others. In Q1 of this year, we completed the purchase of land in a high-tech area outside Zhangjiang as a site for a new R&D and Production center. In the U.S., as noted last quarter, we leased a facility in Oregon to add to our service support and the demonstration capability for R&D and custom activities in the region. As a reminder, for 2023, we expect to spend about $100 million in CapEx. This includes continued investment in the Lingang facility, remodeling for new headquarters for ACM Shanghai, and our other investments in Korea and the U.S. I will now provide our outlook for the full year 2023; please turn to Slide 9. We reaffirm our 2023 revenue outlook to be in the range of $515 million to $585 million. The range of outlook reflects, among other things, management's current assessment of the continuing impact from international trade policy, together with the expected spending scenario of a key customer, supply chain constraints, and the timing of acceptance for the first two evaluations in the field. Now let me turn the call over to our CFO, Mark, who will review details of our second quarter results. Mark, please.

Thank you, David. Good day, everyone. Please turn to Slide 10. Unless I note otherwise, I will refer to non-GAAP financial measures, which exclude stock-based compensation and unrealized loss on trading securities. Reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release. Also, unless otherwise noted, the following figures refer to the second quarter of 2023; comparisons are with the second quarter of 2022. I'll now provide financial highlights for the second quarter. Revenue was $144.6 million, up 38.5%. Total shipments were $153.4 million, up 37%. Revenue for single wafer cleaning tools and semi-critical cleaning was $112.5 million, up 55%. Revenue for ECP, furnace, and other technologies was $19.1 million, down 6.7%. For the first six months of 2023, this category grew by 39.6% versus the prior-year period. Revenue for advanced packaging, excluding ECP, services, and spares was $12.9 million, up 14.3%. Gross margin was 47.6%, up from 42.4%. This exceeded our normal expected range of 40% to 45%. The increase in gross margin was primarily due to a favorable product mix, improved gross margins for specific product lines, and a favorable impact from fluctuations in the renminbi to U.S. dollar exchange rate. We expect gross margin to continue to vary from period to period due to a variety of factors, such as sales volume, product mix, and currency impacts. Operating expenses were $36.3 million, up from $22.3 million. The increase was due to higher R&D, sales and marketing, and G&A costs in support of our new customer and new product activities, and a boost in post-COVID travel. Operating income was $32.4 million, up from $22.0 million. Operating margin was 22.4%, up from 21.1%. We recorded a realized gain of $3.9 million from the sale of trading securities for the quarter. Recall that realized gains are included in the non-GAAP earnings. Income tax expense was $7.6 million, down from $7.7 million. Recall that as a result of the change in Section 174 of the U.S. Internal Revenue Code, our effective tax rate remains elevated primarily due to the requirement to capitalize and amortize previously deductible research and experimental expenses. Net income attributable to ACM Research was $31.3 million, up from $14.6 million. Net income per diluted share was $0.48, up from $0.22. Now, I'll review some selected balance sheet items. Cash and cash equivalents, restricted cash, and time deposits were $376.1 million at the end of the second quarter versus $381.7 million at the end of the first quarter. Total inventory was $471.1 million at the end of the second quarter, generally flat versus the end of the first quarter. Capital expenses for the second quarter were about $6.7 million. I'll now provide an update on our auditor. On July 21, 2023, Armanino informed us that it will resign as our independent auditor, effective as the earlier of, a, when we engage a new auditor or, b, the filing of this year's third quarter 10-Q report. They advised us this was due to their decision to exit from the practice of providing financial statement audit services to all public companies. As a result, our audit committee has begun the process to select and appoint a new auditor. We filed an 8-K with the full details on July 27, 2023. And I would note that we've also seen a number of similar filings from other Armanino clients. Regarding the search for a new auditor, we are considering several options including U.S. and China-based auditors. That concludes our prepared remarks. Now, let's open the call for any questions that you may have. Operator, please go ahead.

The first question comes from Quinn Bolton with Needham & Company. Your line is open.

Hey, guys. Congratulations on the very strong second quarter results. I guess kind of big picture question for the second half of the year, I know you're not increasing your 2023 guidance, but since you're not increasing the guidance, it looks like revenues may flatten out or at least grow at a much, much slower rate in the second half. How are you thinking about the second half? Was the second quarter really that sort of COVID supply chain catch up and you see more normalization now? Or just any thoughts you could share on the second half, or the shape of revenue in the second half would be helpful.

Yes, okay, Quinn. In general, actually, looking at the last couple of years, our second half year was stronger than the first half, right? I think that trend will probably continue. And regarding supply chain, I should say, it's much better than last year, but we still feel some components are constrained. I’m thinking maybe second half of this year, that will improve further for the supply chain. Mark, anything you want to add on?

Yes, you bet. So, Quinn, our overall outlook obviously factors in a flattish overall CapEx for China. I think there's a lot of debate about that, but we see better growth from our new products, share gains, and new customers. First half/second half, you can look at the numbers, but it's about 40%/60%. And so, we'd expect Q3 to be up, and depending on where the year plays out, Q4 could be down, which is the normal type of seasonality for us. Yes.

Understood. It seems we might experience a decrease in the fourth quarter after a couple of years affected by COVID, which disrupted typical seasonality patterns. Mark, regarding the auditor situation, I know it has been quite a challenge for you over the past few years. If you decide to go with a China-based auditor, could you explain the current process considering that PCAOB now oversees those auditors? This choice shouldn't affect your listing status in the U.S., but I understand it raises many questions. Could you clarify the latest implications if you select a China-based auditor? Thank you.

Yeah, you bet. Thanks for that question, Quinn. So, I think, as you know, last year, we cut over to Armanino, a U.S.-based auditor, and they completed a good audit for our 2022, signed by a U.S. auditor. But yes, the rules, there was a positive development late last year; the PCAOB was able to inspect the China auditors. And so, the HFCAA Act, which would result in a delisting if you were on a certain list for three consecutive years, became moot at least for the foreseeable future now that we believe the PCAOB has been granted the inspections in China. So, that's why we pointed out in terms of our possibilities for a U.S. auditor, but we could certainly go with a China-based auditor as well, and maintain our listing at this point.

Great. And then, a final quick one for me. David, you mentioned sort of expanding placements of Track and PECVD this year. Can you give us sort of any sense of how broad you may be able to go with those evaluations to an expanding customer base, or to an expanding base within your existing customers with Track and PECVD?

Yeah. Actually, as I mentioned, we do have differentiated technology with PECVD, right? So now we're actually developing two models; one for memory application, another one for real logic, foundry application. So, this year, we're working with customers on both sides and we are trying to get evaluations going on. Obviously, revenue will come in next year, right? So, PECVD is a huge market and has really promising products beyond our furnace. We have high expectations and we are putting a lot of effort into this product and also expecting very good outcomes, good future driving ACM to continue to grow in the next few years at a high growth rate. So, it's an exciting product.

Thanks, David. Thanks, Mark.

Thank you, Quinn.

The next question comes from Suji Desilva with ROTH Capital. Your line is open.

Hi, David. Hi, Mark. Congrats on the progress here. So, just to dig in a little bit on the ECP furnace category, I want to make sure what's the decline here. Was the furnace products uptake still ramping? Or is there just some supply chain catch up across that category?

Great. Actually, our furnace by the end of last year, we had only a few customers. However, this year, we're expecting to increase to more customers, right? Probably by the end of this year, we're hoping our customer base becomes double digits. So, revenue-wise, yes, not as quickly as contribution from copper plating; however, our customer base is increasing quite dramatically. We also have other high-temperature anneal and LPCVD products also on the customer qualification process, and they have shown very promising data. So, we’ll see that it would likely contribute more next year, right? It's a quickly growing market for us.

Okay, great. That's good progress there. And then, for the Korea operations, David, could you give us a sense of what the milestones are as you start to get the land there and build that out? Just give us some things to look for in the next several quarters to keep track of?

Great. Actually, Korea and SK Hynix became a customer in 2011, right? It's really a long-term relationship. We sold a lot of tools to the Wuxi FAB. Obviously, now they're likely building factories for more advanced nodes, and they will be focused on the Korean site. That's really due to our effort to focus more on the Korean market. And that's why we're going to increase investment and hire more people. Our furnace, PECVD, and Track development involves collaboration between the teams in Shanghai and Korea. We are now really engaged with Hynix regarding not just cleaning, but also copper plating and further, we'll be also engaging with furnace and PECVD as well. We aim to become the major supplier in the future for Hynix. Meanwhile, a strong R&D and manufacturing base in Korea will help us further expand our technology in the U.S., Taiwan, and Europe markets. So, we have a new dual R&D-manufacturing center that will make ACM really flexible in this dynamic fab situation.

Okay, great. And that sounds like a good opportunity. And then lastly, just want to sneak one last question in. Just on your advanced packaging, with the talk in the market of AI and high bandwidth memory, I'm just curious, do you see an exposure there to the growth in AI, gen AI, or is that advanced nodes versus trailing nodes? Just give me a sense of the advanced packaging opportunity you may be leveraging there?

Yes, actually good. ACM has a really good product lineup for advanced packaging. We have a flagship tool for copper plating, and we also have a widely-used copper wet process tool, including coater, developer, wet etcher, stripper, and cleaning tools. So, we are well-prepared and we have significant SFPs for advanced package applications. So, we are well positioned. Yes, we are fully engaged with other top-tier customers, and we are also engaged with customers in China, too. So, I see a very growing market. As I said, AI and GPT are definitely driving the high end of the advanced packaging and applications. Our products are perfect for this application.

Okay, thanks, David.

The next question comes from Christian Schwab with Craig-Hallum Capital. Your line is open.

Thanks for answering my question. In the prepared comments, we mentioned market share gains in China. Can you elaborate on that? Are we gaining market share across all product lines, or is it focused mainly on cleaning, ECP, and furnace? Any details would be appreciated.

Yes. Actually, if you look at the cleaning products, they increased 55%. I mean, three years ago, we only had single wafer or semi-critical tools, mostly single wafer side. However, in the last two to three years, we introduced auto bench, which is really a significant market for the 45 nanometer technology and above, also including power devices. This is really driving our cleaning tools to continue to increase. Obviously, copper plating also increased quite a lot, right? Now we're definitely number one local supplier in cleaning and in copper plating as well. I would also say that for furnace, as I mentioned, we will continue to increase the customer base. I look forward to the next few years, it will also drive revenue growth. Additionally, we now spread our cleaning and copper plating outside China, which has gained significant attention from top-tier customers outside China.

Great. And then, a question for Mark. Given the supply chain issues and COVID costs are kind of behind us, is it time to potentially raise the gross margin target range for the company on a consistent basis? Or is there just still too much volatility in mix to raise it at this point?

Yes, I'll take that. So on the gross margin, you're correct, we've come in at the upper end of our range or maybe a little better in past few quarters or so. Christian, I think our gross margins are quite dependent upon product mix, new products, and old products and that we have a range across them. I think for now, we're going to keep our 40% to 45% range. Of course, we always like to do as well as we can, but we're not ready to move that range higher.

Okay, great. No other questions. Thanks, guys. Great quarter.

Okay. Thanks, Christian.

Thank you.

The next question comes from Chaolien Tseng with Credit Suisse. Your line is open.

Hi, David and Mark, thanks for taking my question. The first question is about the customer new order momentum. Can you talk about the recent customer new order momentum? Do you see that improving compared with the first half of this year? And can you talk about the order momentum moving forward? Because we are thinking that back-end equipment orders have earlier corrected. We believe now that back-end orders may have some improvements, especially from Chinese customers. Thank you.

Okay. Actually, as you see, our front-end customers, especially existing customers, are obviously continuing to spend, right, and that's driving our growth. We also see a significant amount of orders coming from our second-tier and third-tier customers, which are driving our shipments and revenue, too. In addition, looking at the back-end, it really depends; some customers are still pausing, and some are still continuing to invest. I would say this year is obviously not as good as last year, but looking forward, I believe we will keep growing, but some customers will continue to slow down, while others will invest in back-end.

Okay. So, we understand that there are many Tier 2 and Tier 3 fabs in China. We are just thinking if we look at front-end revenue exposure, do you think the revenue contributions or the order momentum would be about maybe one-third from these Tier 2 to Tier 3 customers already, or even maybe half of the new orders coming from the Tier 2, 3 customers? Thank you.

Yes. I really cannot provide a real breakdown right now; this is a dynamic situation. At the end of this year, we can give you the top ten customer breakdown. I can say that some second-tier and third-tier customers will obviously add to our top 10 customer rankings by the end of this year. A significant portion of our shipment revenue is coming from second-tier and third-tier customers as they are driving for the mature nodes.

Okay. Significant revenue and shipments from, okay.

Yes, increased rate.

Next question is, when you look across your products including cleaning, copper plating, and furnace, do you still have any tools that have over six months lead time? We still hear from a small number of international equipment suppliers that there are still some tools with over six months lead time. So I'm just wondering if it's the same for ACM? Thank you.

Yes. Actually, last year, we did experience long lead times, right? Some products took 10 months, sometimes even more than that. This year, the lead time has been shrinking, right? It's now between five to seven months, depending on the product. It also depends on specific components we have on hand. This has improved, and we're expecting it to continue improving.

Thank you, David. And next question is that when I look at the revenue by region, it's impressive to see that revenue from China actually grew quite strong in the second quarter, although that's still just 7% revenue. So, I'm just wondering if this increase is mainly from the front-end or back-end business.

You mean outside China?

Yes. In the second quarter, you talked about 7% revenue.

Yes, our majority still comes from China right now. However, we see that outside of China, sales activity could grow, and there’s more interest from customers, as I mentioned in Korea. So far in Korea, we have Hynix as a major customer, and we're also seeing traction for other packaging customers, showing interest in our plating tools. We also have customers from the U.S. showing interest in our other application tools, and we have European customers as well. So, in the next few years, we expect a lot to happen for our international efforts—cleaning, plating, and furnace—these will also contribute to revenue in our international markets.

Okay. Understand. Thank you. And David, if possible, may I just ask about the furnace? I have been expecting some decent revenue growth from the furnace. It seems that still not a lot of new revenues from the furnace in the second quarter. So I'm just thinking, can you share a bit more about the furnace? I mean, as I know, you talked about this earlier; I'm just thinking from the revenue perspective—will the major revenues, new revenues from the furnace come in Q4 this year or maybe from 2024?

I would say we’ll have an increased customer base, as mentioned earlier. By the end of last year, we had three customers for the furnace, and this year we’re hoping to increase that total customer number to double digits by the end of this year. Revenue wise, it's hard to tell since new customers will take time, but I expect more revenue to come from the contribution next year.

Okay, understood. Thank you.

All right. Next question, please, operator.

The next question comes from Mark Miller with The Benchmark Company. Your line is open.

Congratulations on a very strong quarter.

Thanks, Mark.

The question is about the evaluation tools in Europe and also the U.S. When would you expect them to generate revenues? Would that be next year probably?

Good question. Actually, we have this tool for evaluation, and we are expecting the tools to get qualification by the end of this year. So, either the end of this year or early next year, that's our expectation, it will start generating revenue.

Are there any other tools outside of Europe and the U.S., especially in China, that are evaluation tools?

We also have evaluation tools in China. We have a copper plating tool and cleaning tool along with advanced packaging tools in those companies with manufacturing facilities in China. We'll continue expanding that base as well. Obviously, we also have evaluation tools with Chinese customers, in furnace, plating, and various cleaning tools as well, like our Bevel etcher and supercritical CO2, which are also being evaluated by customers.

Just a couple of housekeeping questions. What was stock-based compensation and cash from operations?

Yeah. Hey, Mark. Stock-based compensation was about—it's in the press release, about $2 million for Q2. And then cash flow from operations in Q2 was positive, about $6 million.

Thank you.

Thank you, Mark.

The next question comes from Robert McKay with Blue Lotus. Your line is open.

Hey, David and Mark. Thank you for taking my question. I wanted to ask about inventory levels. They've been a little bit high for a couple of quarters, and I was wondering what the reason for that is? And if we can expect to see that come down in later quarters? Yeah, thanks.

Hey, Mark, do you want to take that question?

Yes, I didn't hear the question.

Can you speak louder? I think his question is regarding our inventory, which he said is a little higher, and he asked if there will be a reduction in the next few quarters.

Okay. Yes, we did not—can you hear us on our end? We didn't hear that question.

Yes, I can hear you.

Okay. So, David repeated the question. So it's about the inventory. Is that correct?

Yes, exactly. Just wondering why it's a little bit high.

Okay. So again, I didn't hear the question well, but I think I can address it if it has to do with the inventory. So, our inventory at the end of the June quarter was $471 million. It was split between raw materials, about $192 million, work in process was $109.8 million, and then finished goods inventory was $168.9 million. So we did build some inventory based on our forecasts, and due to the supply chain tightness. However, as David noted, some of the supply chain is loosening up, so we're looking to bring those inventories down to more normalized levels.

Got it. Super clear. I don't know if you can hear me now.

Your sound is still light. Can you speak closer to the speaker?

I'm on my headset. Yes, I'll speak as loud as I can. I was wondering if there's information you can share on the orders from Hua Hong on its new expansion this year? Are we already factoring that into our revenue guidance?

Yes. Actually, Hua Hong is a significant strategic customer. They have multiple fabs being built in different locations, right? They will definitely contribute a lot to our revenue in the future, especially in the next year and the two following years. It's a great customer, and we have a strategic relationship with them regarding our cleaning, fab cleaning tools, and our furnace. They are evaluating our products, and we hope to see continued growth from our relationship with Hua Hong.

Got it. Very clear. Once again, sorry for my microphone quality. I wanted to follow up a question on the revenue guidance. I think our revenue guidance is still quite wide. I just wondered if you could share why it remains so wide?

Yes. Well, I mean, you're right, it's a little wider. There's still uncertainty, right? We’ll probably narrow it around the Q3 timeline and provide more clarity. At this moment, I think we’ll keep it unchanged.

Got it. Is there just some uncertainty about some orders from some of your customers? Is that the reason for the wide range?

Yes. I think you're right; some orders are still pending, and some components are still a bit uncertain. That’s likely giving us a wider projection right now.

Got it. Great. And then the last question I'll ask, and maybe I'll go back in the queue after, is about the dividend. I think Shanghai subsidiary issued quite a large dividend. I was wondering what our plans are for that dividend. If we're just going to invest it? And what we'll finally do with that? Yes, thanks.

Great. Actually, as we announced, we have a dividend, right, and it will go to all the shareholders of ACM Shanghai company, which is 82.5% coming to ACM USA. We are going to use this money to invest in marketing, continue to invest in our R&D activity, a demo center in the U.S., and also for our other regional expansions. We are going to put the money into enhancing our sales and marketing capabilities to help our products reach first-tier customers worldwide.

Got it. Thank you very much. Sorry for my audio quality. I'll go back into the queue. Thank you, and congrats on the good results.

Thank you.

Our next question comes from Mark Miller with The Benchmark Company.

Thank you for the second question. How should I think about modeling R&D for the remainder of this year?

R&D expense, yes, let me give some thoughts on that. R&D overall was about 12.7% non-GAAP in 2021, 15.3% in 2022. So, we're looking at for the year, about 14% to 15% would be the right range for R&D.

Thank you.

Yes, thanks, Mark.

I show no further questions at this time. I would now like to hand the call back over to David Wang for closing remarks. Again, I show no additional questions...

Thank you, operator. Thank you all for participating in today's call and for your support. Before we close, Yujia is going to mention our upcoming Investor Relations events. Yujia, please.

Thanks, David. From August 22 to 23, we will be presenting at the Annual Needham Semiconductor and SemiCap Conference. From August 29 to 30, we will be presenting at the 20th Annual Jefferies Semiconductor Conference in Chicago. On September 13, we will present at the 10th Annual Benchmark TMT Conference in New York City. As a reminder, attendance at the conference is by invite-only. For interested investors, please contact your respective sales attendant to register and schedule one-on-one meetings with the management team. All right. So this concludes the call. You may now disconnect. Thanks.