What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-03 compared with 2024-02-28 · 157 added, 148 removed, 609 unchanged (33% of the section changed)

9 unchanged sentences

We supply advanced, innovative capital equipment developed for the global semiconductor industry.

Fabricators of advanced integrated circuits, or chips, can use our wet-cleaning and other front-end processing tools in numerous steps to improve product yield, even at increasingly advanced process nodes.

Fabricators of advanced integrated circuits, or chips, can use our wet-cleaning and other front-end processing tools in numerous steps to

improve product yield, even at increasingly advanced process nodes.

We have designed these tools for use in fabricating foundry, logic and memory chips, including DRAM 3D NAND-flash memory chips, power semiconductor and compound semiconductor chips.

11 unchanged sentences

We conduct a substantial majority of our product development, manufacturing, support and services in mainland China, with additional product development and subsystem production in Korea.

Substantially all of our integrated tools are built to order at our manufacturing facilities in the Pudong region of Shanghai, which now encompass a tota l of 236,000 squ are feet of floor space for production capacity, with 100,000 square feet having been added in 2021 with the lease of a second building in the Pudong region of Shanghai.

In May 2020 ACM Shanghai, through its wholly owned subsidiary ACM Shengwei, entered into an agreement for a land use right in the Lingang region of Shanghai.

In 2020 ACM Shengwei began a multi-year construction project for a new 1,000,000 square foot development and production center that will incorporate state-of-the-art manufacturing systems and automation technologies and will provide floor space to support significantly increased production capacity and related R&D activities.

We expect to complete construction of the first Lingang manufacturing building and commence initial production in the first half of 2024 timeframe.

See “I tem 2.

Substantially all of our tools are built to order at our Chuansha manufacturing facilities in the Pudong region of Shanghai.

In the three-months ended December 31, 2024, we began initial operations at our Lingang development and production center.

The facility, when fully completed, is intended incorporate state-of-the-art manufacturing systems and automation technologies to expand our production capacity and support additional research and development activities.

Properties,” of Part I of this report.

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jurisdiction.

BDO China Shu Lun Pan Certified Public Accountants LLP, or BDO China, had been our independent registered public accounting firm in recent years, including for the year ended December 31, 2021.

On June 22, 2021, the U.S.

Senate passed the Accelerating Holding Foreign Companies Accountable Act, which was enacted on December 29, 2022 under the Consolidated Appropriations Act, 2023, as further described below.

On December 16, 2021, the PCAOB reported its determination that it was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, including BDO China, because of positions taken by mainland China authorities in those jurisdictions.

On March 30, 2022, based on this determination, ACM Research was transferred to the SEC’s “Conclusive list of issuers identified under the HFCAA.” See “Item 1A.

Ernst & Young Hua Ming LLP, or E&Y our independent registered public accounting firm for the fiscal year ended December 31, 2024, is based in mainland China.

S hould the PCAOB determine that it is unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, including E&Y, ACM Research could be transferred to the SEC's “Conclusive list of issuers identified under the HFCA,” ("Conclusive List").

See “Item 1A.

Risk Factors—Risks Related to International Aspects of Our Business—We could be adversely affected if we are unable to comply with recent and proposed legislation and regulations regarding improved access to audit and other information and audit inspections of accounting firms operating in mainland China” of this report for more information.

Under current regulations, if ACM Research were to be included on this list for two consecutive years due to our independent auditor being located in a jurisdiction that does not allow for PCAOB inspections, the SEC would prohibit trading in our securities and this ultimately could cause our securities to be delisted in the U.S., and their value may significantly decline or become worthless.

On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong in 2022 and vacated its previous December 16, 2021 determination to the contrary.

However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control.

mainland China authorities will need to ensure that the PCAOB continues to have full access for inspections and investigations in 2023 and beyond.

Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions.

If the mainland China authorities do not allow the PCAOB complete access for inspections and investigations for two consecutive years, the SEC would prohibit trading in the securities of issuers engaging those audit firms, as required under the HFCA Act.

Further, on December 29, 2022, the Consolidated Appropriations Act, 2023, was signed into law by U.S.

President Biden, which, among other things, amended the HFCA Act to reduce the number of consecutive non-inspection years that would trigger the trading prohibition under the HFCA Act from three years to two years (originally such threshold under the HFCA Act was three consecutive years), and so that any foreign jurisdiction could be the reason why the PCAOB does not have complete access to inspect or investigate a company’s public accounting firm (originally the HFCA Act only applied if the PCAOB’s ability to inspect or investigate was due to a position taken by an authority in the jurisdiction where the relevant public accounting firm was located).

On June 30, 2022, and June 15, 2023, stockholders of ACM Research ratified the appointment of Armanino as our independent auditor for the years ended December 31, 2022 and 2023, respectively.

Armanino was neither headquartered in mainland China or Hong Kong nor was it subject to the determinations announced by the PCAOB on December 16, 2021, which determinations were vacated by the PCAOB on December 15, 2022.

On July 21, 2023, we were informed by Armanino, that Armanino would resign as our independent auditor effective as of the earlier of (a) the date we engaged a new independent registered public accounting firm or (b) the filing of our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2023.

On September 14, 2023, the Audit Committee completed a competitive selection process to select and appoint a new accounting firm to serve as our independent registered public accounting firm commencing with the audit of our financial statements for the fiscal year ended December 31, 2023.

As a result of this process, the Audit Committee approved the engagement of E&Y as our independent registered public accounting firm for the fiscal year ended December 31, 2023.

The engagement of E&Y became effective on September 20, 2023.

E&Y is a PCAOB-registered firm that is headquartered in mainland China;

however, we do not believe ACM Research will appear on the “Conclusive list of issuers identified under the HFCAA” for a second consecutive time, as the determinations announced by the PCAOB on December 16, 2021 were vacated by the PCAOB on December 15, 2022.

Under current regulations, if ACM Research were to be included on the Conclusive List

for two consecutive years due to our independent auditor being located in a jurisdiction that does not allow for PCAOB inspections, the SEC would prohibit trading in our securities and this ultimately could cause our securities to be delisted in the U.S., and their value may significantly decline or become worthless.

STAR Listing and IPO

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• a concurrent initial public offering, which we refer to as the STAR IPO, of ACM Shanghai shares in mainland China, at a pre-offering valuation of not less than RMB 5.15 billion ($747.1 million).

Following the completion of the STAR IPO, ACM Shanghai’s shares began trading on the STAR Market under the stock code 688082.

ACM Shanghai’s shares began trading on the STAR Market under the stock code 688082.

In the STAR IPO, ACM Shanghai issued 43,355,753 shares, representing ten percent of the total 433,557,100 shares outstanding after the STAR IPO.

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Upon completion of the STAR IPO, ACM owned approximately 82.5% of the outstanding ACM Shanghai shares.

However, in May 2023, ACM's ownership declined to 82.1% due to the exercise of 2,150,309 stock options related to ACM Shanghai shares (note 18).

As of December 31, 2024, ACM's ownership declined to 81.5% due to the exercise of 2,150,309, and 3,033,344 stock options in May 2023 and December 2024, respectively, related to ACM Shanghai shares (note 17).

We believe the STAR Listing will continue to help scale our business in mainland China, and we continue to seek to broaden our markets in Europe, Japan, Korea, Taiwan and the United States.

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ACM Shanghai Dividend

During year ended December 31, 2023, ACM Shanghai paid a dividend to the stockholders of ACM Shanghai (including ACM Research) in the amount of RMB 0.372 per share for an aggregate total of RMB 161.28 million ($22.2 million).

During the year ended December 31, 2024, ACM Research's principal operating subsidiary, ACM Shanghai (SSEC:

688082.SS), paid a cash dividend for an aggregate total of approximately RMB 273.2 million ($38.4 million) to the stockholders of ACM Shanghai, including ACM Research, which owned 82.0% of the outstanding shares of ACM Shanghai at the time.

ACM Research intends to use the net proceeds for working capital and general corporate purposes.

ACM Shanghai Proposed Private Offering

In January 2024, ACM Research announced ACM Shanghai's intended plan to offer up to 43.6 million of its ordinary shares, subject to market conditions, the approval of ACM Shanghai’s stockholders, completion of the review process by the Shanghai Stock Exchange, completion of the registration process by the China Securities Regulatory Commission, and other factors, in a private offering to qualified buyers, in compliance with the requirements of the China Securities Regulatory Commission, which would constitute up to 10% of ACM Shanghai’s share capital prior to the transaction (the “Private Offering”).

ACM Research estimates that if consummated in full, the proposed Private Offering would generate gross proceeds of up to RMB 4.5 billion ($642.2 million) to ACM Shanghai, whose management would have broad discretion over the use of such proceeds.

It is unlikely that any of such proceeds would be distributed to ACM Research.

ACM Research's equity interest in ACM Shanghai, if the proposed Private Offering is consummated in full, would decline from 81.5% to approximately 74.1%.

As of December 31, 2024 and the date of this report, the proposed Private Offering has not been completed.

Addition of ACM Shanghai and ACM Korea to U.S.

Effective on December 2, 2024, the U.S.

Department of Commerce’s Bureau of Industry and Security (“BIS”) promulgated a final rule naming a number of companies to the BIS Entity List (the "BIS Entity List").

Amo ng the 140 companies added to the BIS Entity List were two subsidiaries of ACM Research, ACM Shanghai, located in the People’s Republic of China, and ACM Korea, a direct subsidiary of ACM Shanghai, which is located in the Republic of Korea, and other related entities.

In general terms, the new BIS Entity List designations prohibit any party worldwide from furnishing hardware, software, or technologies that are subject to U.S.

export controls jurisdiction to ACM Shanghai or ACM Korea.

See “Item 1A.

Risk Factors—Regulatory Risks— Our operations in mainland China and Korea, including the import of components,

technology, and activities of U.S.

personnel therein, may be further impacted by the addition of ACM Shanghai, ACM Korea and related entities to the BIS Entity List ” of this report for more information.

Restrictions Imposed by the U.S.

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ACM Shanghai is continuing to assess the impact of the October 2023 changes, together with the October 2022 rules, and will continually adjust or modify its policies and practices as required to comply with these or other related updates.

Bas ed on our ongoing review, we believe these regulations may directly impact ACM Shanghai’s ability to meet its future production plans, or indirectly impact the spending plans of ACM Shanghai’s customer base.

Based on our ongoing review, we believe these regulations may directly impact ACM Shanghai’s ability to meet its future production plans, or indirectly impact the spending plans of ACM Shanghai’s customer base.

ACM may not be able to import, or may face substantial restrictions in importing, certain parts from the United States or parts subject to U.S.

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Each purchase order from a customer for one of our tools contains specific technical requirements intended to ensure, among other things, that the tool will be compatible with the customer’s manufacturing process line.

purchase order is received, we do not have a binding purchase commitment.

Until a purchase order is received, we do not have a binding purchase commitment.

Some of our customers to date have provided us with non-binding one- to two-year forecasts of their anticipated demands, and we expect future customers to furnish similar non-binding forecasts for planning purposes.

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• Fulfillment.

We seek to obtain a purchase order for a tool from three to four months in advance of the expected delivery date.

We seek to obtain a purchase order for a tool at least three to four months in advance of the expected delivery date.

Depending upon the nature of a customer’s specifications, the lead time for production of a tool generally will extend from two to four months.

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We have designed equipment models using a modular configuration that we customize to meet customers’ technical specifications.

For example, our Ultra C models for SAPS, TEBO and Tahoe solutions use common modular configurations that enable us to create a wet-cleaning tool meeting a customer’s specific requirements, while using pre-existing designs for chamber, electrical, chemical delivery and other modules.

For example, our Ultra C models for SAPS, TEBO, Tahoe and other solutions use common modular configurations that enable us to create a wet-cleaning tool meeting a customer’s specific requirements, while using pre-existing designs for chamber, electrical, chemical delivery and other modules.

Because of the relatively high purchase prices of our tools, customers generally pay in installments.

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Our sales arrangements for repeat purchases do not include a general right of return.

Substantially all of our sales in 2023, 2022, and 2021 were to customers located in Asia, and we anticipate that a substantial majority of our revenue will continue to come from customers located in this region for the near future.

Substantially all of our sales since our inception were to customers located in Asia, and we anticipate that a substantial majority of our revenue will continue to come from customers located in this region for the near future.

We have increased our sales efforts to penetrate the markets in North America and Western Europe.

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Cost of Revenue

Cost of revenue for capital equipment consists primarily of:

Cost of revenue fo r capital equipment consis ts primarily of:

• direct costs, which consist principally of costs of tool components and subassemblies purchased from third-party vendors;

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The rates at which we add customers and install tools will affect the level and time of this spending.

In addition, because we often import components and spare parts from the United States, we have experienced, and expect to continue to experience, the effect of the currency fluctuations on our cost of revenue.

We generally expect gross margin to range between 40% and 45% for the foreseeable future, with direct manufacturing costs approximating 50% to 55% of revenue and overhead costs totaling approximatel y 5% of revenue.

In addition, because we often import components and spare parts from various foreign countries, we have experienced, and expect to continue to experience, the effect of the currency fluctuations on our cost of revenue.

We generally expect gross margin to range betw een 42% and 48% for the foreseeable future, with direct manufacturing costs approximating 50% to 55% of revenue and overhead costs totaling ap proximately 5% of revenue.

We seek to maintain our gross margin by continuing to develop proprietary technologies that avoid pricing pressure for our wet cleaning equipment.

We actively manage our operations through principles of operational excellence designed to ensure continuing improvement in the efficiency and quality of our manufacturing operations by, for example, implementing factory constraint management and change control and inventory management systems.

We actively manage our operations through principles of operational excellence designed to

ensure continuing improvement in the efficiency and quality of our manufacturing operations by, for example, implementing factory constraint management and change control and inventory management systems.

In addition, our purchasing department actively seeks to identify and negotiate supply contracts with improved pricing to reduce cost of revenue.

A significant portion of our raw materials are denominated in the RMB, while the majority of our purchase orders are denominated in U.S.

A significant portion of our raw materials are denominated in the RMB, while the majority of our purchase orders from customers are denominated in U.S.

As a result, fluctuations in currency exchange rates may have a significant effect on our gross margin.

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• cost of trade shows;

• cost of promotional tools to new potential customers;

• cost of promotional tools to potential new customers;

• travel and entertainment;

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• other corporate expenses;

• credit losses;

• allocated overhead for rent and utilities.

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Stock-based compensation expense, when recognized, is charged to cost of revenue or to the category of operating expense corresponding to the service function of the employee or non-employee.

• We also grant discounts to employee s when they subscribe for the new shares o f ACM Shanghai, and we account for those stock-based awards in accordance with Accounting Standards Codification, or ASC, Topic 718, Compensation—Stock Compensation

• We also grant discounts to employee s when they subscribe for the new shares o f ACM Shanghai.

Mainland China Government Research and Development Funding

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The seventh grant was made in 2021, and relates to the development of the R&D and production center in the Lin-gang Special Area of Shanghai.

These governmental authorities provide significant funding, although ACM Shanghai and ACM Shengwei is also required to invest certain amounts in the projects.

These governmental authorities provide significant funding, although ACM Shanghai and ACM Lingang is also required to invest certain amounts in the projects.

The governmental grants contain certain operating conditions, and we are required to go through a government due diligence process once the project is complete.

The grants therefore are recorded as long-term liabilities upon receipt,

although we are not required to return any funds ACM Shanghai receives.

The grants therefore are recorded as long-term liabilities upon receipt, although we are not required to return any funds ACM Shanghai receives.

Grant amounts are recognized in our statements of comprehensive income (loss) as follows:

• Government subsidies relating to current expenses are recorded as reductions of those expenses in the periods in which the current expenses are recorded.

For the years ended December 31, 2023, 2022, and 2021, related government subsidies recognized as reductions of relevant expenses in the consolidated statements of comprehensive income (loss) we re $1.7 million, $1.2 million, and $11.3 million, respectively.

For the years ended December 31, 2024, 2023, and 2022, related government subsidies recogn ized as reductions of relevant expenses in the consolidated statements of comprehensive income (loss) were $0.5 million, $1.7 million and $1.2 million, respectively.

• Government subsidies related to depreciable assets are credited to income over the useful lives of the related assets for which the grant was received.

For the years ended December 31, 2023, 2022, and 2021, related government subsidies recognized as other income in the consolidated statements of comprehensive income (loss) were $0.5 million, $0.3 million, and $0.2 million, respectively.

Government subsidies related to VAT reduction are credited to income in the period received.

F or the years ended December 31, 2024, 2023, and 2022, related government subsidies recognized as other income in the consolidated statements of comprehensive income (loss) were $2.0 million, $0.4 million, and $0.3 million, respectively.

Unearned government subsidies received are deferred for recognition and recorded as other long-term liabilities (see note 12 in the Notes to Consolidated Financial Statements included herein under “Item 8.

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Allocate the transaction price to the performance obligations in the contract.

For contracts that contain multiple performance obligations, we allocate the transaction price to the performance obligations on a relative standalone selling price basis.

We defer revenue associated with spare parts, sold together with its tools, based on its stand-alone observable selling prices or using an expected cost-plus-margin approach when a stand-alone selling price is not directly observable, and recognizes revenue upon subsequent delivery.

Recognize revenue when, or as, a performance obligation is satisfied.

For contracts that contain multiple performance obligations, primarily those that include multiple tools, or spare parts sold together with tools, the Company allocates the transaction price to the performance obligations on a relative standalone selling price basis.

The Company recognizes contract liabilities associated w ith unsatisfie d performance obligations, based on the stand-alone observable selling prices or using an expected cost-plus-margin approach when a stand-alone selling price is not directly observable, and recognizes revenue as the related performance obligations are satisfied.

Recognize reve nue when, or as, a performance obligation is satisfied.

We recognize revenue from tools and spare parts at a point in time, when we have satisfied our performance obligation.

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Finished goods are comprised of direct materials, direct labor, depreciation and manufacturing overhead.

Inventory is stated at the lower of cost and net realizable value of the inventory on a moving weighted average basis.

The cost of an inventory item purchased specifically for a customized tool is determined using the specific identification method.

Market value is determined as the lower of replacement cost and net realizable value, which is the estimated selling price, in the ordinary course of business, less estimated costs to complete or dispose.

We assess the recoverability of all inventories quarterly to determine if any adjustments are required.

Inventory is stated at the lower of cost and net realizable value.

Our costing of inventories is principally determined by the weighted average cost method for raw materials.

We assess the recoverability of all inventories to determine if any adjustments are required.

We recognize a loss or impairment if in our judgement the inventory cannot be sold or used for production, if it has been damaged or should be considered as obsolete, or if the net realizable value is lower than the cost.

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We recognize a loss or impairment for any raw materials aged more than three years.

The three-year aging is based on our assessment of technology change, our requirement to maintain stock for warranty coverage, and other factors.

The three-year aging is based on our assessment of technology change, our requirement to maintain stock, and other factors.

For raw materials aged less than three years of age, we recognize a specific loss or impairment if we determine the item does not have future use or is otherwise impaired.

Actual demand may differ from forecasted demand, and those differences may have a material effect on recorded inventory values.

Our manufacturing overhead standards for product costs are calculated assuming full absorption of forecasted spending over projected volumes, adjusted for excess capacity.

Abnormal inventory costs such as costs of idle facilities, excess freight and handling costs, and spoilage are recognized as current period charges.

Allowance for Credit Losses

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Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in

income in the period that includes the enactment date.

A valuation allowance would be provided for the deferred tax assets if it is more likely than not that the related benefit will not be realized.

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The actual product performance and field expense profiles may differ, and in those cases, we adjust our warranty accruals according ly.

As of December 31, 2023 and 2022, we had accrued $9.8 million and $8.8 million, respectively, in liability contingency for potential warranty claims.

Recent Accounting Pronouncements

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Income from operations 19.3 17.2 15.2

Interest income (expense), net 1.0 1.8 (0.1)

Interest income, net 0.7 1.0 1.8

Realized gain from sale of short-term investments 0.2 1.6 0.3

4 unchanged sentences

Income tax expense -4.5 -3.5 -4.3

(3.5) (4.3) (0.1)

Net income 16.7 17.3 13.0

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$ 782,118 $ 557,723 $ 388,832

The increase in revenue for 2023 compared to 2022 was driven by higher sales of single wafer cleaning, Tahoe and semi-critical cleaning equipment, ECP (front-end and packaging), furnace and other technologies, and Advance packaging (excluding ECP), and services and spares.

We attribute the revenue growth to continued investments in mature process nodes by current and new mainland China-based customers amidst an ongoing target to achieve a greater share of the global semiconductor market, incremental contribution from newly introduced tools, and better penetration of our product portfolio across our customer base.

The increase in revenue for 2024 compared to 2023 was driven by higher sales of single wafer cleaning, Tahoe and semi-critical cleaning equipment, ECP (front-end and packaging), furnace and other technologies, and advanced packaging (excluding ECP), services & spares.

We attribute the revenue growth to continued investments in mature process nodes by current and new mainland China-based customers amidst an ongoing target to achieve a greater share of the global semiconductor market, incremental contribution from our new products, and better penetration of our product portfolio across our customer base.

The increase in revenue for 2023 compared to 2022 was driven primarily by higher sales of single wafer cleaning, Tahoe and semi-critical cleaning equipment, and increased contribution from newer ECP (front-end and packaging), furnace and other technologies.

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Cost of revenue and gross profit increased in 2024 as compared to 2023 due to the increased sales volume and an increase in gross margin.

The increased gross margin versus the prior-year period was primarily due to improved gross margins for certain products, overall product mix , and a positive impact due to a change in the RMB to U.S.

dollar currency exchange rate.

The increased gross margin versus the prior-year period was primarily due to improved gross margins for certain products and overall product mix.

Cost of revenue and gross profit increased in 2023 as compared to 2022 due to the increased sales volume and an increase in gross margin.

The increased gross margin versus the prior-year period was primarily due to a higher mix of ECP (front-

end and packaging), furnace, and other technologies, and a positive impact due to a change in the RMB to U.S.

The increased gross margin versus the prior-year period was primarily due to a higher mix of ECP (front-end and packaging), furnace, and other technologies, and a positive impact due to a change in the RMB to U.S.

dollar currency exchange rate.

Gross margin may vary from period to period, primarily related to the level of utilization and the timing and mix of revenue.

We expect gross margin to be between 40.0% and 45.0% for the foreseeable future, with direct manufacturing costs approximating 50.0% to 55.0% of revenue and overhead costs totaling 5.0% of revenue.

Operating Expenses

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Total operating expenses $ 240,556 $ 180,376 $ 124,580 33.4 % 44.8 %

Sales and marketing expense increased in 2023 as compared to 2022, and reflected an increase of $8.1 million due to higher costs for personnel, commissions, travel and entertainment and other costs, an increase of $4.7 million due to higher costs for professional services, outside services and other costs, and an increase of $3.8 million due to higher stock -based compensation, partly offset by a decrease of ($9.6 million) for the cost of tools built for promotional purposes.

Sales and marketing expense increased in 2022 as compared to 2021, and reflected an increase of $7.9 million due to higher costs of tools built for promotional purposes for potential new customers, and an increase of $5.3 million due to increased costs for personnel, commissions, outside services, travel and entertainment and other costs.

Sales and marketing expense increased in 2024 as compared to 2023, and reflected an increase of $8.4 million due to higher personnel costs, an increase of $4.9 million due to higher stock-based compensation, and increase of $4.4 million from travel & entertainment and commissions, and an increase of $0.7 million in professional & outside services and other expenses.

Sales and marketing expense increased in 2023 as compared to 2022, and reflected an increase of $8.1 million due to

higher costs for personnel, commissions, travel and entertainment and other costs, an increase of $4.7 million due to higher

costs for professional services, outside services and other costs, and an increase of $3.8 million due to higher stock -based

compensation, partly offset by a decrease of $9.6 million for the cost of tools built for promotional purposes.

We expect that, for the foreseeable future, sales and marketing expense will increase in absolute dollars, as we continue to invest in sales and marketing by hiring additional employees and expanding marketing programs in existing or new markets.

1 unchanged sentence

We are making dollar-based investments in order to support growth of our customer base in the United States, and the relative strength of the dollar could have a significant effect on our sales and marketing expense.

Research and development expense increased in 2023 as compared to 2022, reflecting an increase of $15.4 million in costs of components, costs of tools built for product development purposes, and costs of other research and development supplies, an increase of $7.1 million for personnel-related costs, an increase of $5.9 million in stock-based compensation, and an increase of $4.2 million in travel and entertainment costs to support product development, professional services, and other research and development related expenses, offset by a decrease of ($2.1 million) for outside services.

Research and development expense increased in 2024 as compared to 2023, reflecting an increase of $10.1 million for personnel-related costs, an increase of $5.7 million in stock-based compensation, and an increase of $3.7 million in travel and entertainment and other costs to support product development, offset by a $5.5 million decrease in supplies and spares used in product development activities and a $1.2 million decrease in expenses for outside services.

Research and development expense represented 13.5% and 16.6% of our revenue in the years ended December 31, 2024 and 2023, respectively.

Without reduction by grant amounts received from mainland China governmental authorities (see “—mainland China Government Research and Development Funding”), gross research and development expense totaled $105.9 million, or 13.6% of total revenue, in the year ended December 31, 2024 as compared to $94.5 million, or 16.9% of revenue, in the corresponding period in 2023.

Research and development expense increased in 2022 as compared to 2021, reflecting an increase of $6.9 million in costs of components, costs of tools built for product development purposes, and costs of other research and development supplies, and an increase of $16.7 million for personnel, stock-based compensation, and travel and entertainment costs to support product development, and an increase of $4.4 million for outside services and other research and development related expenses.

We expect that, for the foreseeable future, research and development expense will increase in absolute dollars as compared to 2023, as we continue to invest in research and development to advance our technologies.

Research and development expense increased in 2023 as compared to 2022, reflecting an increase of $15.4 million in costs

of components, costs of tools built for product development purposes, and costs of other research and development

supplies, an increase of $7.1 million for personnel-related costs, an increase of $5.9 million in stock-based compensation,

and an increase of $4.2 million in travel and entertainment costs to support product development, professional services, and

other research and development related expenses, offset by a decrease of $2.1 million for outside services.

We expect that, for the foreseeable future, research and development expense will increase in absolute dollars as we continue to invest in research and development to advance our technologies.

We intend to continue to invest in research and development to support and enhance our cleaning, plating, advanced packaging, furnace and future product offerings to build and maintain our technology leadership position.

General and administrative expense increased in 2023 as compared to 2022, reflecting an increase of $9.0 million in stock-based compensation, $3.3 million in personnel and professional services costs, $2.7 million in allowance for credit losses, and $3.1 million for travel & entertainment, depreciation and amortization, outside services, taxes and other general and administrative expenses.

General and administrative expense increased in 2022 as compared to 2021, primarily due to an increase in stock-based compensation, increased employee count, and an increase in legal, payroll tax and other fees.

We expect that, for the foreseeable future, general and administrative expense will increase in absolute dollars, as we incur additional costs associated with growing our business and operating as a public company.

General and administrative expense increased in 2024 as compared to 2023, reflecting an increase of $10.8 million in allowance for credit losses, $10.7 million in stock-based compensation, $3.1 million in personnel costs, professional services, and $4.3 million for travel & entertainment, depreciation and amortization, outside services, taxes and other general and administrative expenses.

General and administrative expense increased in 2023 as compared to 2022, reflecting an increase of $9.0 million in stock

based compensation, $3.3 million in personnel and professional services costs, $2.7 million in allowance for credit losses,

and $3.1 million for travel & entertainment, depreciation and amortization, outside services, taxes and other general and

administrative expenses.

Stock-Based Compensation Expense

9 unchanged sentences

$ 49,576 $ 27,338 $ 7,730

Interest income (expense), net, Other Income (expense), net

Interest income, net, Other Income (expense), net

Year Ended December 31,

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Interest Expense (4,151) (2,681) (1,655) 54.8 % 62.0 %

Interest Income (expense), net $ 5,673 $ 7,085 $ (260) -19.9 % -2,825.0 %

Interest Income, net $ 5,784 $ 5,673 $ 7,085 2.0 % -19.9 %

Other income (expense), net $ 6,334 $ (1,558) $ 3,315 -506.5 % -147.0 %

Interest income (expense), net, decreased in 2023 compared to 2022, principally as a result of reduced interest income from lower interest income on reduced cash balances, offset by increase in interest expenses incurred from a higher balance of total bank loans.

Interest income (expense), net, increased in 2022 compared to 2021, principally as a result of reduced interest income from lower interest rates on reduced cash balances, offset by increase in interest expenses incurred from short-term and long-term bank loans.

Other income (expense), net primarily reflects (a) gains or losses recognized from the impact of exchange rates on our foreign currency-denominated working-capital transactions and (b) depreciation of assets acquired with government subsidies, as described under “—Government Research and Development Funding” above.

Interest income, net, increased slightly in 2024 compared to 2023, principally as a result of increase in interest income due to increase in cash balances, offset by increase in interest expenses incurred from a higher balance of total bank loans.

Interest income (expense), net, decreased in 2023 compared to 2022, principally as a result of reduced interest income from

lower interest income on reduced cash balances, offset by increase in interest expenses incurred from a higher balance of

total bank loans.

Other income (expense), net primarily reflects (a) gains or losses recognized from the impact of exchange rates on our foreign currency-denominated working-capital transactions and (b) government subsidies, as described under “—Government Research and Development Funding” above.

We realized $6.3 million of other income in the year ended December 31, 2024, reflecting $4.2 million in gains from the impact of exchange rates on transactions, and $2.1 million from government subsidies and other items, as compared to $2.0 million in losses from the impact of exchange rates on transactions, and $0.5 million from government subsidies in the corresponding period in 2023.

We realized $1.6 million of other expense in the year ended December 31, 2023, of which $2.0 million was due to loss realized from transactions that resulted from changes in the RMB-to-U.S.

dollar exchange rate, as compared to a foreign exchange gain of $1.7 million in the corresponding period in 2022.

Other income (expense) increased by $3.3 million in the year ended December 31, 2022, of which $1.7 million was due to gains realized from transactions that resulted from changes in the RMB-to-U.S.

dollar exchange rate, as compared to a loss of ($0.6 million) in the corresponding period in 2021.

Realized gain and unrealized loss from short-term investments, and income from equity method investments

8 unchanged sentences

$ 423 $ 9,952 $ 4,666 (95.7) % 113.3 % $ (9,529)

We recorded a realized gain on sale of short-term investments of $9.0 million for the year ended December 31, 2023 as compared to a realized gain of $1.1 million for the same period in 2022 primarily due to the sales of ACM Shanghai’s indirect investment in publicly traded shares.

We recorded an unrealized loss on short-term investments of $2.7 million for the year ended December 31, 2023 as compared to an unrealized loss of $7.9 million for the same period in 2022, due primarily to a change in market value of ACM Shanghai’s indirect investment in publicly traded shares.

We recorded an unrealized loss on short-term investments of $7.9 million for the year ended December 31, 2022 as compared to an unrealized gain of $0.7 million for the same period in 2021, due primarily to a change in market value of ACM Shanghai’s indirect investment in publicly traded shares.

Income from equity method investments for the year ended December 31, 2023 increased by $5.3 million compared to the year ended December 31, 2022 primarily due to higher net income from equity method investments.

Income from equity method investments for the year ended December 31, 2022 was unchanged versus the year ended December 31, 2021.

Income from equity method investments increased by $4.0 million for the year ended December 31, 2021 due to higher net income from equity method investments.

We recorded a realized gain on sale of short-term investments of $1.8 million for the year ended December 31, 2024 as compared to a realized gain of $9.0 million for the same period in 2023 primarily due to the sales of ACM Shanghai’s indirect investment in publicly traded shares in the 2023 fiscal year.

We recorded an unrealized gain on short-term investments of $1.0 million for the year ended December 31, 2024 as compared to an unrealized loss of $2.7 million for the same period in 2023, due primarily to a change in market value of ACM Shanghai’s indirect investment in publicly traded shares.

We recorded an unrealized loss on short-term investments of $2.7 million for the year ended December 31, 2023 as

compared to an unrealized loss of $7.9 million for the same period in 2022, due primarily to a change in market value of

ACM Shanghai’s indirect investment in publicly traded shares.

Income from equity method investments for the year ended December 31, 2024 decreased by $9.5 million compared to the year ended December 31, 2023 primarily due to a significant decrease in net income from equity method investments.

Income from equity method investments for the year ended December 31, 2023 increased by $5.3 million compared to the

year ended December 31, 2022 primarily due to higher net income from equity method investments.

Tax Benefit (Expense)

7 unchanged sentences

federal (5,244) 7,316 (10,927)

state (63) 63 8

Foreign (119) 5,860 5,757

8 unchanged sentences

Those adjustments may materially affect our provision for income taxes and effective tax rate in the period in which the adjustments are made.

There were no adjustments made in 2023.

Our effective tax rate differs from statutory rates of 21% for U.S.

5 unchanged sentences

203, an entity certified as an “advanced and new technology enterprise” is entitled to a preferential income tax rate of 15%.

ACM Shanghai was certified as an “advanced and new technology enterprise” in 2012 and again in 2016, 2018, and 2021, effective until December 31, 2023, and is expected to be re-certified for future years in 2024 .

In 2021, ACM Shanghai was certified as an eligible integrated circuit production enterprise and is entitled to a preferential income tax rate of 12.5% from January 1, 2020 to December 31, 2022.

ACM Shanghai was certified as an “advanced and new technology enterprise” in 2012 and again in 2016, 2018, 2021 and 2024, effective until December 31, 2026.

In 2021, ACM Shanghai was certified as an eligible integrated circuit production enterprise and was entitled to a preferential income tax rate of 12.5% from January 1, 2020 to December 31, 2022.

Certain entities which meet requirements according to the Policy of the Lingang New area in China (Shanghai) Pilot Free Trade Zone are entitled to a preferential income tax rate of 15%.

ACM Lingang was certified for this in 2021, and this preferential income tax rate is valid from December 31, 2020 until December 31, 2024.

ACM Lingang was certified for this in 2021, and this preferential income tax rate is valid from January 1, 2020 until December 31, 2024.

We file income tax returns in the United States and state and foreign jurisdictions.

17 unchanged sentences

dollar equivalents.

The 2022 amount was especially large due to a weakening of the RMB versus the U.S.

dollar during the year ended December 31, 2022 together with a more significant RMB-denominated asset balance in 2022.

Comprehensive income (loss) attributable to non-controlling interests

Comprehensive income attributable to non-controlling interests

Year Ended December 31,

2 unchanged sentences

(in thousands)

Comprehensive income (loss) attributable to non-controlling interests $ 17,689 $ 1,854 $ 5,607 854.1 % -66.9 %

Comprehensive income attributable to non-controlling interest increased by $15.8 million compared to a decrease of $(3.8) million for the years ended December 31, 2023 and 2022 compared to the prior year, due to a significant change in net income generated from the non-controlling interests as impacted from foreign exchange rate fluctuations.

Comprehensive income attributable to non-controlling interests $ 26,365 $ 17,689 $ 1,854 49.0 % 854.1 %

Comprehensive income attributable to non-c ontrolling interest increased by $8.7 million for the years ended December 31, 2024 and 2023 compared to the prior year, primary due to a significant change in net income generated from the non-controlling interests as impacted from foreign exchange rate fluctuations.

Liquidity and Capital Resources

2 unchanged sentences

During the year ended December 31, 2024, we funded our technology development and operations principally through our beginning global cash balances, including the cash balances at ACM Shanghai, borrowings by ACM Shanghai from local financial institutions and our loan from China CITIC Bank.

Cash and cash equivalents, restricted cash, short-term time deposits and long-term time deposits were $304.5 million at December 31, 2023, compared to $420.9 million at December 31, 2022.

The ($116.4 million) decrease was primarily driven by ($75.3 million) of cash used in operations, ($60.2 million) used in investing activities excluding the change in time deposits, $18.5 million net cash provided by financing activitie s, a $1.7 million decrease from the effect of exchange rate on cash, cash equivalents and restricted cash, and a $2.4 million incr ease from the effect of exchange rate on time deposits.

Cash and cash equivalents, restricted cash, short-term time deposits and long-term time deposits wer e $441.9 million at December 31, 2024, compared to $304.5 million at December 31, 2023.

Th e $137.4 m illion increase was primarily driven by $152.5 million of cash generated by operations, ($103.8 million ) used in investing activities excluding the change in time deposits, $92.5 m illion net cash provided by financing activities, a ($4.8) million decre ase from the effect of exchange rate on cash, cash equivalents and restricted cash, and a $1.0 million increase from the effect of exchange rate on non-cash items.

The table below represents the cash an d cash equivalents, restricted cash, and time deposits as of December 31, 2024 and 2023:

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We believe our existing cash and cash equivalents and short-term and long-term time deposits, our cash flow from operating activities, and bank borrowings by us and ACM Shanghai will be sufficient to meet our anticipated cash needs within our longer-term planning horizon.

ACM Shanghai has historically participated in certain mainland China government-sponsored grant and subsidy programs, as described under “—Key Components of Results of Operations—mainland China Government Research and Development Funding” and “—Contractual Obligations” and we expect that ACM Shanghai will continue to take

advantage of these programs when they are available and fit with our business strategy.

ACM Shanghai generally applies for these grants and subsidies through the applicable mainland China government agency’s defined processes.

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The use of proceeds raised by the STAR Market IPO, without further approvals, are limited to specific usage.

We currently intend for ACM Shanghai to retain all available funds from any future earnings for use in the operation of its business and do not anticipate it paying any cash dividends.

We currently intend for ACM Shanghai to retain all available funds from any

future earnings for use in the operation of its business and do not anticipate it paying any cash dividends.

Our accounts receivable balance fluctuates from period to period, which affects our cash flow from operating activities.

2 unchanged sentences

We intend to retain all available funds and any future earnings to support the operation of and to finance the growth and development of our business and do not anticipate paying any cash dividends in the foreseeable future.

Cash Flow Used in Operating Activities.

Net cash used by operations of ($75.3 million) during the year ended December 31, 2023 consisted of:

Cash Flow Provided by (Used in) Operating Activities.

Net cash provided by (used in) operations during the year ended December 31, 2024, 2023, and 2022 consisted of:

Year Ended December 31,

11 unchanged sentences

(423) (9,952) (4,666)

Unrealized loss (gain) on short-term investments 2,737 7,855 (607)

Unrealized (gain) loss on short-term investments (973) 2,737 7,855

Deferred income taxes 5,286 (13,647) 4,027

Stock-based compensation 49,576 27,338 7,730

Dividends from unconsolidated affiliates 1,529 — —

Net changes in operating assets and liabilities:

(63,066) (184,590) (137,006)

Net cash flow used in operating activities $ (75,323) $ (62,194) $ (40,093)

Significant changes in operating asset and liability accounts during the year-ended December 31, 2023 included the following uses of cash:

increases of inventories of $164.0 million (Note 5), and an increase of accounts receivable of $108.7 million (Note 4).

As described under “—Key Components of Results of Operations—mainland China Government Research and Development Funding,” ACM Shanghai has received research and development grants from local and central mainland China governmental author ities.

ACM Shanghai receiv ed $51,000 of payments related to such grants in the year ended December 31, 2023, as compared to cash receipts of $1.1 million in the same period of 2022.

Net cash flow provided by (used in) operating activities $ 152,450 $ (75,323) $ (62,194)

Significant changes in operating asset and liability accounts during the year-ended December 31, 2024, 2023, and 2022 included the following uses of cash:

increases of inve ntories of $64.1 million (Note 5), and an increase of accounts receivable of $123.3 million (Note 4).

As described under “—Key Components of Results of Operations—Mainland China Government Research and Development Funding,” ACM Shanghai has received research and development grants from local and central mainland China governmental authorities.

ACM Lingang received cash payments of $3.9 million related to such grants in the year ended December 31, 2024, as compared to cash receipts of $51,000 in the same period of 2023.

The uses of cash are offset by the following significant sources of cash:

an increase in advances from customers of $30.0 (Note 3), an increase in other payables and accrued expenses of $21.4 million, and an increase in accounts payable of $42.3 million.

an increase in advances from customers of $67.1 (Note 3), an increase in other payables and accrued expenses of $23.2 million, an increase in FIN-48 and income taxes payable of $13.7 m illion, and an increase in accounts payable of $1.4 million.

Cash Flow Used in Investing Activities.

Net cash used in investing activities for the year ended December 31, 2023, excluding net cash proceeds from the sale of time deposits, was ($60.2 million), primarily consisting of ($64.3 million) purchase of property and equipment and intangible assets, and ($7.5 million) purchase of long-term investments (note 14), partly offset by $3.4 million net proceeds from the sale of short-term investments, and $8.2 million of dividends received from long-term investments (note 14).

Net cash used in investing activities for the year ended December 31, 2024, excluding net cash proceeds from the sale of time deposits, was $103.8 million, primarily consisting of $85.9 million purchase of property and equipment and intangible assets, and $24.9 million purchase of long-term investments (note 13) and $1.4 million purchase of equity investments, partly offset by $8.4 million net proceeds from the sale of short-term investments.

Cash Flow provided by Financing Activities.

Net cash provided by financing for the year ended December 31, 2023 was $18.5 million, primarily consisting of $16.3 million net proceeds from short and long-term borrowings, and $6.1 million in proceeds from the exercise of stock options, partly offset by ($4.0 million) of dividends paid by ACM Shanghai.

Net cash provided by financing for the year ended December 31, 2024 was $92.5 million, primarily consisting of $130.2 million net proceeds from short and long-term borrowings, and $11.1 million in proceeds from the exercise of stock options, offset by ($ 41.9 million) of short-term and long-term loan repayment, and ($6.9 million) of dividends paid by ACM Shanghai.

We and ACM Shanghai, together with the subsidiaries of ACM Shanghai, have short-term and long-term borrowings with six banks, as follows:

4 unchanged sentences

(in thousands)

China CITIC Bank (2) July 2023 Repayable by installments and the last installments repayable in December 2025

4.50 % RMB200,000 RMB100,000

China CITIC Bank (2) July 2023 Repayable by installments and the last installments repayable in December 2025 3.45 % RMB200,000 RMB99,896

$ 27,820 $ 13,881

China Everbright Bank July 2021 August 2024 3.00 % RMB150,000 RMB17,440

China Everbright Bank December 2024 December 2027 2.60 % RMB600,000 RMB399,327

$ 83,460 $ 55,549

China Merchants Bank August 2024 August 2025 2.60 % RMB200,000 RMB66,048

$ 27,820 $ 9,185

Bank of China September 2024 September 2025 2.50%-2.75% RMB400,000 RMB363,265

$ 55,640 $ 50,533

China Merchants Bank August 2023 September 2024 3.00 % RMB200,000 RMB153,000

Industrial and Commercial Bank of China November 2024 November 2027 2.50 % RMB300,000 NIL

Shanghai Pudong Development Bank December 2024 September 2025 2.60 % RMB300,000 NIL

China Merchants Bank August 2024 August 2034 2.95 % RMB1,000,000 NIL

$ 139,100 $ —

China Merchants Bank November 2020 Repayable by installments and the last installments repayable in November 2030

3.95 % RMB128,500 RMB94,633

Bank of China November 2024 November 2035 2.70 % RMB1,000,000 NIL

$ 139,100 $ —

Bank of China June 2021 Repayable by installments and the last installments repayable in June 2024

2.60 % RMB10,000 RMB7,500

China Merchants Bank November 2020 Repayable by installments and the last installments repayable in November 2030 3.65 % RMB128,500 RMB82,499

$ 17,874 $ 11,475

Bank of China September, 2021 Repayable by installments and the last installments repayable in September 2024 2.60 % RMB35,000 RMB28,000

Agricultural Bank of China April 2024 Repayable by installments and the last installments repayable in April 2034 2.53%-2.78% RMB300,000 RMB93,604

$ 41,730 $ 13,020

1 unchanged sentence

$ 13,910 $ 13,920

China CITIC Bank August 2023 Repayable by installments and the last installments repayable in August 2025

3.10 % RMB100,000 RMB100,000

China CITIC Bank August 2023 Repayable by installments and the last installments repayable in August,2025 3.10 % RMB100,000 RMB99,886

$ 13,910 $ 13,894

Industrial Bank of Korea July 2023 July 2024 6.03 % KRW500,000 KRW100,000

Industrial Bank of Korea December 2023 December 2024 4.27 % KRW2,000,000 KRW2,000,000

10 unchanged sentences

In 2020 ACM Shanghai, through its wholly-owned subsidiary ACM Lingang, entered into a Grant Contract for State-owned Construction Land Use Right in Shanghai City (Category of R&D Headquarters and Industrial Projects), or the Grant Agreement, with the China (Shanghai) Pilot Free Trade Zone Lin-gang Special Area Administration, or the Grantor.

ACM Lingang obtained rights to use approximately 43,000 square meters (10.6 acres) of land in the Lingang Heavy Equipment Industrial Zone of Lin-gang Special Area of China (Shanghai) Pilot Free Trade Zone, or the Land Use Right, for a period of fifty years, commencing on the date of delivery of the land in July 2020, which we refer to as the Delivery Date.

ACM Lingang obtained rights to use approximately 43,000 square meters (10.6 acres) of land in the East China Silicon Hub of Lin-gang Special Area of China (Shanghai) Pilot Free Trade Zone, or the Land Use Right, for a period of fifty years, commencing on the date of delivery of the land in July 2020, which we refer to as the Delivery Date.

In exchange for its land use rights, ACM Lingang paid aggregate grant fees of RMB 61.7 million ($9.5 million), or the Grant Fees, and a performance deposit of RMB 12.3 million ($1.9 million), which is equal to 20% of the aggregate Grant Fees, to secure its achievement of the following performance milestones:

2 unchanged sentences

• the start of production within 42 months after the Delivery Date (20% of the performance deposit), or Production Start Milestone.

Upon satisfaction of a milestone, the portion of the performance deposit attributable to that milestone will be repayable to ACM Shengwei within ten business days.

If the achievement of any of the above milestones is delayed or abandoned, ACM Shengwei may be subject to additional penalties and may lose its rights to both the use of the granted land and any partially completed facilities on that land.

Upon satisfaction of a milestone, the portion of the performance deposit attributable to that milestone will be repayable to ACM Lingang within ten business days.

If the achievement of any of the above milestones is delayed or abandoned, ACM Lingang may be subject to additional penalties and may lose its rights to both the use of the granted land and any partially completed facilities on that land.

The status of the performance milestones for the period ended December 31, 2024 is as follows:

• ACM Lingang achieved the Construction Start Milestone and 60% of the performance deposit was refunded to ACM Shanghai in 2020.

• We expect that the Lin-gang Special Area Administration, with supplementary land grant contracts, will adjust certain performance terms, including extension of the Construction Completion and Production Start milestones.

• The Construction Completion Milestone was required to be met by January 9, 2024 but was not achieved.

However, ACM Lingang believes it will receive the refund without penalty based on its explanation to the respective regulatory authorities of logistic-related delays, and expectations that it will meet the milestone before July 9, 2024.

We cannot guarantee that ACM Lingang will achieve the missed milestone in 2024, or even if it does achieve the milestone in 2024, that it will be refunded some or all of the 20% portion of the performance deposit of RMB 2.5 million ($0.4 million).

ACM Lingang believes it will receive the refund without penalty, however, based on extensions expected

in the supplementary land grant contracts.

We cannot guarantee that ACM Lingang will achieve the missed milestone, or even if it does achieve the milestone in 2025, that it will be refunded some or all of the 20% portion of the performance deposit of RMB 2.5 million ($0.4 million).

Contractual penalties in the case of a delay of Construction Completion Milestone :

3 unchanged sentences

In such case, the Grantor shall refund the Grant Fees for the remaining land use term after deducting the deposit agreed under the Grant Agreement and refund the deposit for timely commencement of production and relevant bank interests in full to ACM Lingang.

• The Production Start Milestone is now required to be met by January 9, 2025.

The Production Start Milestone was originally required to be met prior to January 9, 2024, but due to COVID-related delays, ACM filed multiple requests for extensions, the latest of which was granted on July 7, 2023.

• The Production Start Milestone, as extended due to COVID-19 related delays, was required to be met by January 23, 2025 but was not achieved.

ACM Lingang believes it will receive the refund without penalty, however, based on extensions expected in the supplementary land grant contracts.

We cannot guarantee that ACM Lingang will meet any extended deadline or be refunded this 20% portion of the performance deposit.

3 unchanged sentences

In such case, the Grantor shall refund the Grant Fees for the remaining land use term after deducting the deposit agreed under the Grant Agreement to ACM Lingang.

In addition to the milestones, covenants in the Grant Agreement require that, among other things, ACM Lingang will be required to pay liquidated damages in the event that:

(a) it does not make a total investment (including the costs of construction, fixtures, equipment and grant fees) of at least RMB 450.0 million ($63.4 million).

ACM Lingang shall pay the liquidated damages equal to the same proportion of the Grant Fees as the proportion of the actual shortfall amount of investment in the total agreed investment amount or the investment intensity.

(b) within six years after the Delivery Date, or prior to July 9, 2026, it does not (i) generate a minimum specified amount of annual sales of products manufactured on the granted land or (ii) pay at least RMB 157.6 million ($22.2 million) in annual total taxes (including value-added taxes, corporate income tax, personal income taxes, urban maintenance and construction taxes, education surcharges, stamp taxes, and vehicle and shipping taxes) as a result of operations in connection with the granted land.

In addition to the milestones, covenants in the current Agreement require that, among other things, ACM Lingang will be required to pay liquidated damages in the event that within seven years after the Delivery Date, or prior to July 9, 2027, it does not (i) generate a minimum specified amount of annual sales of products manufactured on the granted land or (ii) pay at least RMB 157.6 million ($22.2 million) in annual total taxes (including value-added taxes, corporate income tax, personal income taxes, urban maintenance and construction taxes, education surcharges, stamp taxes, and vehicle and shipping taxes) as a result of operations in connection with the granted land.

If the total tax revenue of the project fails to reach but is no less than 80% of the standard agreed under the Grant Agreement, ACM Lingang shall pay 20% of the actual shortfall amount of the tax revenue as liquidated damages.

4 unchanged sentences

We present information below with respect to four measures of financial performance:

• We define “shipments” of tools to include (a) a “repeat” delivery to a customer of a type of tool that the customer has previously accepted, for which we recognize revenue upon delivery, and (b) a “first-time” delivery of a “first tool” to a customer on an approval basis, for which we may recognize revenue in the future if contractual conditions are met, or if a purchase order is received.

tool” to a customer on an approval basis, for which we may recognize revenue in the future if contractual conditions are met, or if a purchase order is received.

• We define “adjusted EBITDA” as net income excluding interest expense (net), income tax benefit (expense), depreciation and amortization, unrealized (gain) loss on short-term investments, and stock-based compensation.

10 unchanged sentences

Shipments consist of two components:

• a shipment to a customer of a type of tool that the customer has previously accepted, for which we recognize revenue when the tool is delivered;

• a shipment made to a customer that have previously accepted a specific type of tool (“repeat shipments”), revenues are recognized upon shipment or delivery because the Company can objectively demonstrate that the tools meet all the required customer specifications;

• a shipment to a customer of a type of tool that the customer is receiving and evaluating for the first time, in each case a “first tool,” for which we may recognize revenue at a later date, subject to the customer’s acceptance of the tool upon the tool’s satisfaction of applicable contractual requirements or subject to the customer’s subsequent discretionary commitment to purchase the tool.

“First tool” shipments can be made to either an existing customer that has not previously accepted that specific type of tool in the past ─ for example, a delivery of a SAPS V tool to a customer that previously had received only SAPS II tools ─ or to a new customer that has never purchased any tool from us.

Shipments for the years ended December 31, 2023, 2022, and 2021 totaled $597 million, $539 million, and $372 million, respectively.

Shipments for the years ended December 31, 2024, 2023, and 2022 t otaled $973 million, $596 million, and $539 million, respectively.

Repeat tool shipments in the years ended December 31, 2024, 2023, and 2022 totaled $505 million, $310 million, and $288 million, respectively.

1 unchanged sentence

The dollar amount attributed to a “first tool” shipment is equal to the consideration we expect to receive if any and all contractual requirements are satisfied and the customer accepts the tool, or if the customer subsequently determines in its discretion to purchase the tool.

There are a number of limitations related to the use of shipments in evaluating our business, including that customers have significant, or in some cases total, discretion in determining whether to accept or purchase our tools after evaluation and their decision not to accept or purchase delivered tools is likely to result in our inability to recognize revenue from the delivered tools.

recognize revenue from the delivered tools.

“First tool” shipments reflect the value of incremental new products under evaluation delivered to our customers or prospective customers for a given period and is used as an internal key metric to reflect future potential revenue opportunity.

The cumulative cost of “first tool” shipments under evaluation at customers which have not been accepted by the customer is carried at cost and reflected in finished goods inventory (see note 5 to the condensed consolidated financial statements included in this report).

The cumulative cost of “first tool” shipments under evaluation at customers which have not been accepted by the customer is carried at cost and reflected in finished goods inventory (see note 5 to the consolidated financial statements included in this report).

“First tool” shipments exclude deliveries to customers for which ACM does not have a basis to expect future revenue.

19 unchanged sentences

Net Income $ 131,269 $ 96,852 $ 50,564 35.5 % $ 34,417

Interest expense (income), net (5,673) (7,085) 260 -19.9 % 1,412

Interest income, net

(5,784) (5,673) (7,085) 2.0 % (111)

Income tax expense

4 unchanged sentences

Adjusted EBITDA $ 219,086 $ 148,710 $ 81,228 47.3 % $ 70,376

The $67.5 million increase in adjusted EBITDA for the year ended December 31, 2023 as compared to the year ended December 31, 2022 reflected higher income tax expense, a decrease in unrealized loss on short-term investments, an increase in net income, an increase in stock-based compensation, and an increase in depreciation and amortization, partly offset by a negative impact from an increase in interest income, net.

The $70.4 million increase in adjusted EBITDA for the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily reflected an increase in net income, an increase in income tax expense, and an increase in stock-based compensation.

We do not exclude from adjusted EBITDA expense reductions and non-operating other income attributable to mainland China governmental grants because we consider and incorporate the expected amounts and timing of those grants in incurring expenses and capital expenditures.

If we did not receive the grants, our cash expenses therefore would be lower,

and our cash position would not be affected, to the extent we have accurately anticipated the amounts of the grants.

If we did not receive the grants, our cash expenses therefore would be lower, and our cash position would not be affected, to the extent we have accurately anticipated the amounts of the grants.

For additional information regarding our mainland China grants, please see “—Key Components of Results of Operations—mainland China Government Research and Development Funding.”

7 unchanged sentences

Free Cash Flow Data:

Net cash used in operating activities $ (75,323) $ (62,194) $ (40,093) 21.1 % $ (13,129)

Net cash generated by (used in) operating activities

$ 152,450 $ (75,323) $ (62,194) -302.4 % $ 227,773

Purchase of property and equipment (82,463) (61,876) (91,094) 33.3 % (20,587)

Purchase of long-term investments

Purchase of short-term and long-term investments

$ (26,264) $ (25,864) $ (4,279) 1.5 % (400)

31 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis