Good day, ladies and gentlemen. Thank you for standing by. Welcome to the ACM Research First Quarter 2026 earnings conference call. Currently, all participants are in listen-only mode. Later, we'll conduct a question and answer session, and instructions will follow at that time. As a reminder, we're recording today's call. If you have any objections, you may disconnect at this time. Now I'll turn the call over to Mr. Steven Pelayo, Managing Director of The Blueshirt Group. Steven, please go ahead.
Thank you. Good day, ladies and gentlemen. Thank you for standing by. Welcome to ACM Research First Quarter 2026 earnings conference call. Currently, all participants are in a listen-only mode. Later, we will conduct a question and answer session. 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. Sorry, I'm repeating there. We released first quarter 2026 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 section 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, our 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. 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 financial results that we provide on this call will be on a non-GAAP basis, which excludes stock-based compensation and an unrealized gain and loss on short-term investments. For our GAAP results and reconciliation between GAAP and non-GAAP amounts, you should refer to our earnings release, which is posted on the IR section of our website and on slide 13. Also, unless otherwise noted, the following figures refer to the first quarter of 2026, and the comparisons are to the first quarter of 2025. With that, I'm gonna now turn the call over to David Wang. David?
Thanks, Steven. Hello, everyone, and welcome to ACM's first quarter 2026 earnings conference call. We started the year with a solid Q1 report, with revenue up 34% and gross margin above the middle point of our long-term targets range. Revenue growth for the quarter was driven by the continual strength in our ECP and advanced packaging business. With a global boom in AI, the market is demanding solution for enabling high speed, high density, and low power consumption semiconductor devices manufacturing. Many of which have not yet been invented. It is clear that ACM's focus on world-class differentiated tool based on our own IP is right strategy to win in global market. We are happy to see 2026 as a big year for new product.
Our investment in our proprietary R&D over the past 5 years, together with our fully functioning at Lingang, is beginning to deliver significant benefit. For instance, we now have industry-leading offering across multiple product category that enable our global customer to effectively solving their evolving production challenges. As we progress through 2026, we expect to see an increased impact to our financials from new product. With regard to revenue, we anticipate incremental contribution from new product cycle from Tahoe, single wafer SPM, and our vertical furnace product. With regarding to the shipment, we expect an increased shipment of our evaluation tool across a range of customer for our panel level, horizontal plating, panel low pressure flask cleaning, high throughput track, and PECVD tools. This quarter, at SEMICON China, we announced the ACM Planetary Family.
This organized ACM tool portfolio into 8 product family, aligned with the key step in the semiconductor manufacture process. This represent ACM's comprehensive world-class multi-product offering and the global reach of our company. We encourage you to view the video on our IR website. Now onto our business results. Please turn to slide 3. First quarter revenue was $231 million, up 34%. The ECP category was a primary growing driver, with revenue up more than 3 times year-over-year. Next, advanced packaging services spare parts category was grow 62%. This was partly offset by cleaning, which declined by 6%. We had a little contribution from new cleaning product in our Q1 2026 revenue. But as I will discuss later in the call, we have a significant ramp ahead for our single wafer SPM tools, which we delivering in Q1.
Shipment for the first quarter were $241 million, up 54%. The solid growth reflect strong customer demand and execution across our product portfolio. It also includes contribution from the initial ramp of a single-wafer SPM tools. For reference, shipments of the cleaning category grew by 32% for the quarter. I also know that about 15% of Q1 shipments were from catch-up of a product that had been rescheduled from Q4 of last year. For 2026, we continue to expect the shipment growing to outpace revenue growth. Gross margin was 46.5% for the first quarter, above the middle point of our long-term range, 42%-48%. We ended the first quarter with a gross cash of $1.3 billion and net cash $924 million.
This balance including $110 million of gross proceeds from February sale of ACM Shanghai shares. The capital providing a solid foundation for continued investment in our global operations. I will provide detail on product. Please turn to slide 4. Revenue from single-wafer cleaning Tahoe semi-critical cleaning tool was down 6%. We continue to believe ACM's full product offering in cleaning is amongst the best in the world. As noted in a prior calls, we believe cleaning technology becomes even more important as the industry moving to more advanced production technology. This trend play directly to ACM's strengths, particularly in differentiated technology such as N2 bubbling wet etcher, single-wafer SPM cleaning, Tahoe, and others.
I'm pleased to announce today that we expect significant production ramping of our single-wafer SPM production product line, with more than 15-20 units to be delivered by year-end across our customer base. This is a result of many years of R&D by our team to develop a better solution than the current market leader. As I noted for the past several investor calls, ACM's proprietary approach delivers the excellent particle performance with fewer than 15 particles at a 15 nanometer. Much better than market leader. While other players need a periodic DI water cleaning of the process chamber and the surrounding environment to remove residue generated by their hot SPM films, our system does not. Instead, our unique nozzle design provides a maintenance-free solution, as the chamber does not need to be taken offline for periodic DI water cleaning.
This not only improve tool uptime, but also enhance particle cleaning performance at a 13 nano particle and beyond. Such fine particle removal is very critical for manufacture advanced node, GAA logic devices, and memory devices such as HBM. It is no surprise that we are also seeing strong interest in our SPM tool from multiple global customers. SPM cleaning process tool has occupied 30% of the cleaning market. We believe our innovative hot SPM tool will take a significant market share in the next few year. The revenue for ECP, furnace, and other technology grow 205%. Growing was driven by strong momentum in electroplating, supported by our leading position and expanding engagement across both front-end and advanced packaging applications. In advanced packaging or panel level, horizontal plating solution is gaining additional traction in Asia and with the global customers.
We began development of a panel-level horizontal electroplating platform in 2022. We're ahead of the industrial, and delivered world first horizontal plating tool, 515 by 510 millimeter, to a customer in the fourth quarter last year. Since then, we have continued to expand customer engagements and build a backlog, supporting both 515 by 510 millimeter and 310 by 310 millimeter format panels. In April, we present a keynote at the Taiwan Electronic Equipment Forum on 3D IC packaging technology, highlighting our role enabling next-generation AI-driven packaging solutions. We are confident that a successful customer evaluation will lead to volume production order for 515 by 510 and additional evaluation of 310 by 310 later this year.
For our vertical furnace business, tools are under evaluation at multiple customer site, and we continue to expect a more meaningful revenue contribution later this year. We continue to see solid demand across key applications, including LPCVD, oxidation, thermal ALD, PLD, and ultra-high temperature anneal, supported by our ongoing technology development. Revenue from advanced packaging, which excludes ECP, but including service and spare, was up 62%. This category including coaters, developer, etcher, stripper, scrubber, and vacuum clean flux tools, supporting a broader range of advanced packaging application. We're also providing back-end plating tool, including in ECP category. Last quarter, we announced multiple advanced packaging equipment orders from leading global customers. In Q1, we ship our panel-level vacuum cleaning system to a leading global semiconductor packaging manufacturer outside mainland China.
We also complete shipment of a multiple wafer level advanced packaging system to a leading offset customer in Singapore. ACM is unique, is uniquely positioned with a comprehensive set of wet process solution and plating technology to address key process steps in advanced packaging. Our integrated process capability provide a valuable insight into next generation packaging challenges. As industry evolve towards 2.5D and 3D integration, including TSV-based architecture and heterogeneous integration, we believe our capability position us to supporting this increasingly complex requirements. We are making good progress with our new track on the PECVD platforms. In April, we ship our first PECVD silicon carbonitride system to a leading semiconductor manufacturer, now in customer evaluation process. This is a big deal. We achieved a greater results in our mini-line, and the tool is now being evaluated at the customer site.
The system incorporates ACM proprietary 3-station rotating architecture and 1 station, 1 RF technology, enabling strong film uniformity, interface control, process stability, and small footprint. We believe this position us for growth in back-end-of-line and advanced packaging. For high throughput, 300 WPH KrF track tool, we deliver our first tool evaluation last September and are progressing towards mass production qualification this year. We continue to see growing interest from multiple customer for both standalone and their configuration integrate with the scanner. ACM culture is deeply rooted in differentiated R&D. We bring innovative solution to the ever-evolving challenges faced by major global semiconductor manufacturers. Our current success is driven by good decision-making, facts, and the future success depends on today's innovation. We are committed to our strategy to providing a long-term roadmap of world-class tool across our growing product portfolio.
We remain confident in our $4 billion revenue target and our longer term goal of becoming a top-tier supplier of capital equipment to the global semiconductor industry. Let me provide an update on our production facility. First, on Lingang, please turn to slide 8. The first building is in volume production, and we plan to open the second building later this year. Together, 2 facilities, we can support up to $3 billion in annual output. On a strategic note, I will now discuss our Lingang mini-line, which went into full operation in the second half of last year. We now have a fully experimental R&D line in a Class 100 environment, running our own tool and those of other vendors. This is a big deal. It is accelerating our own R&D effort, and it will also speed up our joint R&D collaboration with our customer in Asia.
We expect this to have a meaningful impact on our operating model. For new product, rather than delivering multiple tool for extended customer evaluation, we now process custom wafer on our new product in a Lingang mini-line to validate the tool to meet the customer's specific requirement before shipment. We expect this approach to shorten qualification cycle of a new product at a customer site, shorten the time of conversion to revenue, and enhance overall capital efficiency. We are now already see early benefit across multiple product. I will give a few example. Our first shipment of the PECVD silicon carbonitride system complete the customer-specific validation at Lingang to shipment. We expect this to reduce on-site qualification time and enable faster ramp to pro-production.
We test and improve our single-wafer SPM tool for several months, hand in hand with our leading customer and confirm 50 nano particle performance. This led to volume orders from numerous different customers. We are confident that we can produce each customer-specific production environment in our lab, resulting in shorter qualification on the order of few quarter, rather than more than a year. Next, our Oregon facility. Please turn to slide 9. We continue to advance investment in Oregon. We remain on track for in-house demo lab with multiple tools and the capability to produce U.S.-made tool in Oregon by year end of 2026. This is important for our global customer, and we believe it will strengthen our position as a key local partner at this scale of production. Our global initiatives are beginning to pay off.
By the end of 2026, we expect to have more than 20 tools installed outside of our mainland China market. This including about 10 customer in five countries. Although still early day for our global deployment, our engagement team-Are growing, and we remain confident that our investment in global sales and service team will deliver good results. ACM Shanghai continue to play a critical role in our overall strategy, serving as a leading supplier to the semiconductor industry in Asia, and as a key source of capital to support our global expansion. We completed a minority share sale last February, generating approximately $110 million in gross proceeds, and enable the strong of our U.S. accounts. We intend to deploy this capital to supporting our U.S. expansion and broader global growth initiatives. In April, ACM Shanghai announced a proposed H-share secondary listing in Hong Kong.
Now turning to our outlook for the full year 2026. Please turn to slide 10. In mid-January, we introduced our 2026 revenue outlook in the range of $1.08 billion-$1.175 billion. This implies 25% year-over-year growth at the midpoint. We iterate this outlook today. We are expecting our annual shipment growth will outpace our revenue growth in 2026. Now let me turn the call over to our CFO, Mark McKechnie, who will review details of our first quarter results. Mark, it's yours.
Thank you, David, good day, everyone. Please turn to slide 11. Unless I note otherwise, I will refer to non-GAAP financial measures, which exclude stock-based compensation and unrealized gain/loss on short-term investments. Reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release. Unless otherwise noted, the following figures refer to the first quarter of 2026, and comparisons are with the first quarter of 2025. I will now provide the financial highlights. Revenue was $231.3 million, up 34.2%. Revenue for single wafer cleaning, Ultra C Tahoe and semi-critical cleaning was $122.5 million, down 5.5%, it represented about 53% of sales for the quarter. As David noted, this included very little contribution from new products.
We expect significant shipments of SPM to ramp through the year, followed by revenue contribution in later quarters. For the full year 2026, we do anticipate the mix in cleaning will normalize towards the 65% level, 6, similar to the mix in 2025. Revenue for ECP, front-end packaging, furnace, and other technologies was $84.2 million, up 204.9%, and represented 36.4% of sales for the quarter. The majority was ECP front-end, and we had very little contribution from furnace. Revenue from advanced packaging, excluding ECP, services and spares, was $24.5 million, up 62%, and represented 10.6% of sales for the quarter. Total shipments were $240.7 million, up 53.6%.
As David noted, this was driven by solid demand and good execution, and also cleaning shipments grew by 32%. Approximately 15% of the shipments were catch-up from tools that were originally scheduled for Q4 delivery. For 2026, we continue to expect shipment growth to outpace revenue growth. Gross margin was 46.5% versus 48.2%. Q1 gross margin was above the midpoint of our long-term target model of 42%-48%, and a good recovery from the low 40% range in Q3 and Q4 of 2025. Favorable product mix and a slightly lower impact from the inventory provision led to the recovery. We maintain our 42%-48% target range and note that product mix can cause fluctuations on a quarterly basis. Operating expenses were $65.8 million, up 38.5%.
R&D was 15% of sales and marketing was 8.3% of sales, and G&A was 5.1% of sales. For 2026, we plan for R&D in the 16%-18%, sales and marketing in the 8%-9% range, and G&A in the 5%-6% range. Operating income was $41.8 million versus $35.6 million. Operating margin was 18.1% as compared to 20.7%. Long term, we look to grow our R&D spending in line with revenue, but to show operating leverage in SG&A. Income tax expense was $3.8 million versus $2.2 million. For 2026, we expect our effective tax rate in the 8%-10% range. Net income attributable to ACM Research was $24.3 million versus $31.3 million.
Net income was $24.3 million versus $31.3 million. I just said that. Okay. Our non-GAAP net income excluded $5.6 million in stock-based compensation expense for the first quarter. We anticipate SBC will increase in Q2 due to option grants related to ACM Shanghai stock that were granted in Q1. Net income per diluted share was $0.34 versus $0.46. Now on to the balance sheet and cash flow items. Cash and cash equivalents, restricted cash and time deposits were $1.25 billion at the end of the first quarter of 2026 versus $1.13 billion at the end of 2025. Net cash, which excludes short-term and long-term debt, was $924.2 million at quarter end versus $844.5 million at year-end 2025.
Total inventory was $738 million versus $702.6 million at year-end 2025. Raw materials were $377.9 million, up $28.3 million quarter-over-quarter. We made additional strategic purchases to support production plans and to mitigate potential supply chain risk. Work in process was $81.6 million, up $22.2 million quarter-over-quarter. Finished goods inventory was $278.4 million, down $13.1 million quarter-over-quarter. Finished goods inventory primarily consists of first tools under evaluation at our customer sites along with finished goods located at ACM's facilities. Cash used by operations was $29.5 million. Capital expenditures were $22 million. For the full year 2026, we now expect to spend about $175 million in capital expenditures. That concludes our prepared remarks.
Let's open it to call for any questions that you may have. Operator, please go ahead.
Thank you. At this time, we'll conduct a question and answer session as mentioned. As a reminder, you'll need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Your first question comes on the line from Sujit with Roth Capital.
Hi, David. Hi, Mark. Can you talk about the cleaning segment and what drove the decline year-over-year in 1Q, and then how it's gonna ramp up? What caused that pause? Be helpful to understand that.
Okay. Thanks, Sujit. Actually, let's put it this way. You know, 2025, we start to see our cleaning product, you know, has been go through the many application, right? Including those mature nodes and all the advanced nodes. 2025, we're still facing some, you know, difficulty and also problem, right? For those new applications. With the 12 months, you know, our problem-solving with the customer, especially most important in the our Lingang production has started using. Those kind of problem actually we're mostly solving already. That really show that is, you know, I want to say last whole year progress also are difficult. That's why you can see impact our Q1 revenue.
However, as I said, since we're solving most of the issue, even today, our performance, you know, some tool performance even outpace of leading supplier, you know, from global. We see that really growing for our revenue. You can see that the first quarter, our revenue grow, revenue, I must say our shipment from the cleaning product is a 32% increase year-over-year, right? Right. Give another picture of probably backlog increase from this first six months versus, you know, last 1 year, first six months were almost like a 50% increase too for the PO receiving. That really show the momentum continuing. Also in my script, I specifically mentioned about this SPM process. It's really our proprietary technology really gaining customer interest, especially reach excellent result at a 50 nanoparticle size.
That really show our technology is better than the, you know, leading supplier. We're have a confidence it can take a significant market share in the, in the SPM business, right? We're expecting 15-20 tool will deliver to the customer, you know, in the Asia or in China too. Anyway, that's I think, you know, the answer for you.
Very helpful color. David, just kind of following through on that, with shipments expected to outpace revenue in 2026, would we think that 2027 should be an above trend year? I mean, obviously you're not guiding, but just trying to understand if the implications of that.
Well, I mean, 2027 is a little bit far away, right? I wanna say that, let me put it this way. 2026, we gain a lot of share, I mean, PO or the customer interest for our cleaning tool, obviously copper plating tool, right? Copper plating, you can see the growth a lot. Also we see the interest, you know, people were interested our furnace and the PECVD and the track system. I want to see that 2027, we see our new product, including horizontal, you know, copper plating for panel 2, will get into the revenue and the shipment, you know, picture in 2027.
As I mentioned in a couple of earnings call, with our new product start playing into our, you know, the product line, we see a lot of bigger, you know, growth in the next few years. Really supporting ACM's multi-product, you know, strategy and continue to grow our long-term revenue.
Thanks, David. That helps paint a picture. I will pass it along.
Thanks, Sujit. Yeah.
Thank you.
Oh, next question, operator, please. Yeah.
Yes. Thank you. Your next question comes the line of Denis Pyatchanin with Needham & Company.
Much appreciated. Just one question from us today. It looks like ECP, the front-end packaging furnace and other technology segment has been seeing pretty sustained strength, you know, up very significantly both year-over-year and quarter-over-quarter. Can you tell us more about, you know, what's doing well in that segment? What kind of customers are adopting which tools? Just some more color would be great. Thank you.
Yeah. I want to say that this, you know, plating business has been grow a lot, right? Obviously, front-end growing and also can see HBM is also driving. Obviously advanced packaging, you know, for all the 2.5D and application also growing and driving too. That's really driving factor for the copper plating and also the, you know, our advanced packaging wet process tool, including coater developer, wet etcher, PR stripper and cleaning.
Much appreciated. Thank you.
Thank you.
Great. Thanks, Denis. Yeah.
Okay. Thank you. Seeing no more questions in the queue, let me turn the call back to Steven Pelayo for closing remarks.
Great. Thank you. Before we conclude, I just want to give everyone a quick reminder on our upcoming investor conferences. On June 17th, we will present at the 16th Annual Roth London Conference at the Four Seasons Park Lane in London. Attendance at the conference is by invitation only. For interested investors, please contact your respective sales representative to register and schedule one-on-one meetings with the management team. This concludes the call, and you may now disconnect. Take care.