ACM Research Inc

NASDAQ:ACMR

Earnings Call Transcript 2023-Q1

[Operator]

Thank you for standing by, and welcome to the ACM Research First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After speakers’ presentation there will be a question-and-answer session. [Operator Instructions]. As a reminder, today's program is being recorded.

And now I would like to introduce your host for today's program, Gary Dvorchak, Managing Director of the Blueshirt Group. Please go ahead.

[Gary Dvorchak, Managing Director, Blueshirt Group]

Thanks, Jonathan, and good morning, everyone. Thank you for joining us on today's call to discuss first quarter 2023 results. We released results before the U.S. market opened today. The release is available on our website as well as from Newswire services. There is also a supplemental slide deck posted to the investor portion of our website that we will reference during our prepared remarks. On the call with me today are our CEO, Dr. David Wang; our CFO, Mark McKechnie, and Lisa Feng, the CFO of our operating subsidiary, ACM Shanghai.

Before we continue, please turn to Slide 2. Let me remind you that, remarks made during this call may include predictions, estimates or other information that might be considered forward-looking. These forward-looking statements represent ACM's current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results to differ materially. Those risks are described under Risk Factors and elsewhere in ACM's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward-looking statements, which reflect ACM's opinions only as the date of this call. ACM is not obliged to update you on any revisions to these forward-looking statements.

Certain of the financial results that we provide on this call will be on a non-GAAP basis, which excludes stock-based compensation and an unrealized gain loss in training securities. For our GAAP results and reconciliations between GAAP and non-GAAP amounts, you should refer to our earnings release, which is posted on the IR section of our website and look to Slide 12.

With that, let me now turn the call over to David Wang, who will begin with Slide 3. David?

[David Wang, CEO]

Thanks, Gary. Hello everyone, and welcome to ACM Research first quarter 2023 earnings conference call. Please turn to slide three. For the first quarter, revenue was $74.3 million up 76% from same quarter last year. Shipment were 89 million, up 33% from the same quarter last year, gross margin was 53.8%, and the non-GAAP operating margin was 14.7%. Our operation in the first quarter were impacted by their several factors, including [COVID] policy, the Chinese New Year Holiday supply chain challenging related to U.S. restriction and some delay deliver to certain customers. We factor our business to improve in the second quarter with expected acceleration in a third and a fourth quarter.

Study with a product pre central slide four. We had a good growth from our Canadian tools and increased contribution from our ECP furnace and other technology with the continuous strong product cycle from ECP products, which were more than one third of our first quarter selves. Single wafer cleaning, Tahoe and semi-critical cleaning grow 41% driven by single-wafer cleaning tools and strong mature nodes demand in China. ACM has one of the broadest cleaning product portfolio in the industry, covering nearly 90% of all cleaning process steps.

We recently introduced several important new cleaning tools including the Bevel Etch tool and high temperature SPM single-wafer cleaning tool, which is important for our international efforts. In Q1, we received the customer qualification of our single wafer wet Bevel Etch tool. ECP and furnace and other technology grow 117%. Growth investment category was driven primarily by ECP product cycle with some contribution from furnace. Our higher temperature near and LPCVD furnaces, including silicon [Indiscernible] have expanded to multiple customers and are in qualification.

Advanced packaging, excluding SAP service and spare parts grow from our small base last year and represent about 15% of the cells. This category, including a range of packaging tools including coater, developer, scrubber, PR shaver, and wet etcher, and a services spare parts. ACM is only a company that offers both a full set of web tools and advanced fleet tools. We believe advanced packaging will continue -- will become more important as industry looks for packaging innovation such as 2.5D and 3D in Apollo and a find out to drive higher performance.

Our product line is very well suit for the mature node and power devices, investment we see in a near term for China. We see continual investment in 28 - 45 nano and above nanometer in front and fab capacity as China is committed to close the gap between its consumption and production of semiconductors. To also see the ramp up of EV production in China as the driving of China-based investment in both power devices and other 28 and 45 nano devices. In this mature node expansion environment, we expect the solid growth from our Canadian tools, especially our auto bench, which is well suited for those applications. Reach up on products, I feel great about both our PSCVD and track platforms.

Similar to our convening plating and furnace product line, our PCVD and track platform have a proprietary technology, not we who are making them winner with a major customer both in China and outside China. We are in active discussion with our key customers. They are acceptive to our new approach and technologies, cost and their waver throughput. Although, we do not expect the revenue in 2023, we plan to deliver several innovation tools to key customers this year.

ACM has built a scale business in cleaning and we have strong product cycle from ECP furnace and other technologies. With the track and PCVD, we are moving from proof of concept during their last year to accept to active evaluation with the key customers. At this point, we now believe our differentiated technology can go head, head with any of their major players.

Moving on to customer pretend to Slide 5. I'm pleased with our position with the China based customer and the progress we are making with the potential new customers in other markets. In China, we believe Asian tool are now used by nearly other some economic manufacturers. Our sales and service teams are working to expand the deployment of each of our major product line across our growing customer base. We continue to go to gain traction from second and third tier semiconductor manufacturers, including power analog, seamless image sensor, compound connectors, MAs, and other devices.

In the US, the evaluation of a key potential customer is progressing well and we remain optimistic that this could lead to production orders. In Europe, we'll announce an order for our first evaluation tool from top tier customer in the first quarter. The tool is a plan for deliver in an early Q4 this year, and we are beginning to build a local service team to support effort. To support our growth initiatives, we continue add a facility in China and other region present to slide six. I will start with uptick on China, construction of a Lingham production and -- Center is on track for initial production in the second half of this year. We took ownership our new headquarter for ACM Shanghai in Zhangjiang the quarter and planned moving later this year. This is an important addition for us that we believe will provide stability for employee, help us to attract new talent and allow us to invest in work cost earning center to speed up the development of our tours.

Next in Korea. We have a strong base of more than 70 R&D engineers and more than 50,000 square feet of at least R&D, administrative and production facility. ACM Korea co-developed our furnace, frac and LPCVD products. Together with our Shanghai R&D team, as I've noted in previous calls, we have increased our commitment to Korea. We believe a strong commitment to Korea will improve our relationship.

We are also adding resource in the U.S. to support ongoing evaluation and additional sales activities. In the first quarter, we leased a facility in Oregon to add to our service, support and demonstration capability for R&D and customer activities in a region. As alluded on the call last quarter for 2023, we expect to spend about $100 million CapEx. This including continued investment in our Lingang facility, remodeling for our new headquarters for ACM Shanghai and our investment in Korea and the U.S. Following this important investment, we believe our major spending projects will be complete for next several years.

I will now provide our outlook for the full year 2023. Please turn to Slide 9. We reaffirm our 2023 revenue outlook to be in the range of 515 to [indiscernible] on the evaluation in the field.

Now let me turn the call over to our CFO, Mark, who will review details for our first quarter results. Mark, please.

[Mark McKechnie, CFO]

Thank you, David. Good day, everyone. Please turn to Slide 10. Unless I note otherwise, I would refer to non-GAAP financial measures, which exclude stock-based compensation, unrealized loss on trading securities. Reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release. Recall that our operations last year in the first quarter of 20 22 were impacted by the Shanghai COVID restrictions. As David noted, our operations in the first quarter of 20 23 were impacted by China's relaxed COVID policy, the Chinese New Year holidays supply chain challenges related to the U.S. restrictions, some delayed deliveries to certain customers.

I will now provide financial highlights for the first quarter. Revenue was $74.3 million versus $42.2 million in the first quarter of last year. Total shipments were 89 million, up 33%. Revenue for single wafer cleaning tools and semi critical cleaning was $36.6 million up 41 percent from $26 million in the first quarter of last year. Revenue for ECP furnace and other technologies was 26.6 million, up 117% from 12.2 million in the first quarter of last year. Revenue for advanced packaging, excluding ECP services, spares, was 11 million up 183% from 3.9 million. Gross margin 54% up 46 -- up from 46.9% in the prior year period. This exceeded our normal expected range of 40% to 45%. The high gross margin was primarily due to a favorable product mix with a particularly strong mix of our higher margin products and a lighter mix of our lower margin products for the quarter.

We expect gross margin to continue to vary from period to period due to the variety of factors such as sales volume, product mix, and currency impacts. Operating expenses were 29.2 million versus 27.7 million in the year ago period. The increase was due primarily to higher sales and marketing and G&A costs partly offset by lower R&D costs. Operating income was 10.9 million, representing 14.7% operating margin versus an operating loss of 7.9 million in the year ago period. Rerecorded a realized gain of $4 million from the sale of a portion of ACM Shanghai shares of SMIC for the quarter.

Recall that the realized gains are included in non-GAAP earnings. Income tax expense was $2.9 million compared to income tax benefit of $4 million in a year ago period. As a result of the change in section 174 of the U.S. internal revenue code of 1986 as amended, that became effective in January 1st, 2022. Our effective tax rate has increased primarily due to the new requirement to capitalize and amortize previously deductible R&D expenses.

Net income attributed to ACM research this 9.9 million versus a net loss of 0.6 million in the year ago period. Net income per diluted share was $0.15 compared to net loss per diluted share of a penny in Q1 of 2022. I will now review selected balance sheet items, cash, cash equivalents, restricted cash and time deposits for 381.7 million at the end of the first quarter versus 420.9 million at the end of the last quarter. Total inventory was 473.3 million at the end of the first quarter up from 393.2 million at the end of last quarter. This includes finished goods inventory of 195.7 million, working process of 74.4 million and raw material 203.2 million.

Capital expenditures for the first quarter were about $15 million, which includes spending on our Lingang facilities, normal maintenance spending, and as David mentioned the purchase of land in South Korea. That concludes our prepared remarks.

Let's open the call for any questions that you may have. Operator, please go ahead.

[Operator]

[Operator Instructions]. And our first question comes from the line of Quinn Bolton from Needham and Company.

[Quinn Bolton, Needham & Company]

Congratulations on the nice results and continued strong outlook. I guess first maybe, David and Mark, can you just give us your sense of spending in the China market both on sort of the mature nodes, but also including power semiconductors stocking carbide. Are you seeing continued strength in those nodes? And how sustainable do you think that spending is?

[David Wang, CEO]

Okay. Well actually look in the real electric vehicle growth market in China it’s pretty -- very promising right? And a lot of Chinese people like driving electrical car because much less gas spending. So we see that market going to grow and also they're using much more silicon base of their power devices versus sitting carbon, right? So we see that probably 12 inch wafer fab and also demanding for this IGBT or power devices is accelerating. So we see the market will be static grow. Also see the multiple fab, multiple customers also aiming for this very high potential market. You also see that as also our future growth and for both Canadian tool and tool and the furnace, including PCVD and the future, even a track. So we see that there one of the one major driving for the mature node, obviously 28 and 45 nano. Also other MA's devices also receive the potential and by the future a few years.

[Quinn Bolton, Needham & Company]

And Mark, I know you have been putting a lot of work in capital into inventory over the past couple of years. Balance is now up to almost 500 million, I guess, is there a point where you start to throttle back on inventory? I guess I was particularly surprised by the increase in finished goods. Your shipments weren't up that meaningfully. But wondering if you could just give us your kind of latest thoughts on you approach 500 million of inventory and the balance sheet does that balance start to level out for a period of time?

[Mark McKechnie, CFO]

So, for the quarter, Q1 shipments were down, right? And there were a number of reasons for that we talked about, right? The relaxation of the COVID restrictions were a lot of employees and our CU customers caught the illness in December and January. You had Chinese New Year the adjustments to the US restrictions as well and some delays. So, that led to a lower shipment number, and so our overall inventory uptick as you know, it's raw materials working process and finish goods inventory. We expect our shipments to rebound pretty nicely in Q2 and beyond. So, that that's one driver for the inventory.

And then I think you also know that the finished goods inventory most of that, includes the evaluation tools that are at our customers. So we had an increased quarter on quarter from that. We also did have an increased quarter and quarter of finished goods inventory that that was not shipped to the customer. So, for those reasons. So to answer your question, we do anticipate the inventory, it's at an el elevated level this quarter. We'd anticipate that being kind of a high water mark and should be coming down as we move forward.

[Operator]

And our next question comes from the line of Suji Desilva from Roth Capital.

[Suji Desilva, Roth Capital]

So, the gross margin in the quarter was above trend. I'm curious, can you remind us which of the segments are above trend that are driving that? And I know non-single wafer clean is doubling year over year. Is that a pace that continue and where the gross margin implications there?

[David Wang, CEO]

Yes. I think Suji, this is a gross margin, it will depend product combination, right? It really depends on how much a portion of the high margin product versus low margin product. So I still think our margin is still going to be 40%, 45%. The reason for that is we are still driving our product. And for all other like cleaning staff, advanced single wafer versus also the other bench and for the ECP, we have also phone and back end also too. So that's for this way, I think we are still probably we think our range is still 40, 45 and maybe until later on our PCVD and the track become a mature, especially while we are spending through international market, right? That might be changing. But for the near future, I think 40, 45 is pretty much good range for our a product portfolio and now.

[Suji Desilva, Roth Capital]

Okay. Alright. Thanks, David. And then you reiterated the full year expectation. Did the customer delays that you saw in 1Q did those -- are those normalizing recovering as expected right now? Do you expect any lingering impact in the '23 numbers around COVID or U.S. geopolitical challenges in China?

[David Wang, CEO]

There is a certain delay, right? And I think that both have some delay from their advance notes and also some even delay for their mature notes too. However, I think those are delayed the shipment. We think it's still what will probably happen, either something happens till end of this year, maybe something we have maybe next year. Also, I want to see that is, we see also other new customer coming, right? So looking to hold this year, we see that our shipment is still record high. It's real promising. And however, those revenue will come from most new customer, right? So they are -- so that's the reason we still maintain our revenue as we projected. And we will probably by second quarter later, we have a more clear picture and then they will start to a possible changing based on the new readout for next 6 months or beyond.

[Operator]

[Operator Instructions]. And our next question comes from the line of Charlie Chan from Morgan Stanley.

[Charlie Chan, Morgan Stanley]

So my first question is still about your first quarter revenue. I'm wondering what is kind of a unsteady factor, right? Because we all know there is a Chinese New Year has a COVID relaxing. But I'm just wondering what was kind of the embedded event? Because I feel like in terms of the full year targets, your quarterly run rate should be like $90 million to $100 million. But it seems like, it is kind of like a minor shortfall. Can you give us more explanation on that?

[David Wang, CEO]

Yes. Let me say something in the market and more. Actually, Charlie, our first quarter was lower, right? And obviously, there is Chinese New Year. And this year, more specialty, there is a COVID relaxing and which impact our operation and also supply chain too. So I look at the first quarter, as we think it's still pretty good quarter well compared with the year ago, right? I mean, year ago even worse, I know that, but I look in the second quarter obviously will be strong, and we see the third and fourth quarter even strong and strong, right? So that's why we still say, hey, first quarter resolve. It's natural and normal, and we see more of our growth in the next three quarter.

[Mark McKechnie, CFO]

Yes, Charlie. The only thing, what I'd add is, if you looked at last year, maybe the first half of the year was about -- and typically first half of the year is a 35% to 40%, and then the second half of the year, the remainder, so this year the first half would be in the 35%, that sort of similar range with the back half the rest, and we talked a few quarters ago when the restrictions on the advanced nodes, first hit and we are continuing to see a pause, right? As the overall supply chain and our customers adapt to comply with the rules. And so that's impacting the first half as well.

[David Wang, CEO]

Okay. Yes. So that sort of pause of the shipping to -- there is something that we didn't fully capture. Is that fair interpretation?

[Mark McKechnie, CFO]

No, I think we captured that. I mean, that was -- we had talked about that towards the end of last year, and so that was as anticipated.

[David Wang, CEO]

Yes. Well, I would just say there's some delay over their shipment, right? and for certain customer which that probably also and give us minor impact for also their revenue in Q1, Q2, but those shipment maybe we think maybe resume right in the Q4 or Q3 timeline, but we don't know yet. Just depends on the market point, right? So that's some I call her not a fully clear at this moment.

[Charlie Chan, Morgan Stanley]

Okay. Yes. I mean, sorry for asking all those details, because I feel like companies are running well, but share price didn't perform. So I thought, it should because of the first quarter revenue short fall. but that's all clear now. And the second question actually reads to the first one. So if you put a little bit a middle long term perspective, right? I mean, the opportunity for China now more depends on power, semi analog EVM market you just shared.

So I'm wondering, just in terms of the cleaning tool in terms of percentage of CapEx, can you give us some comparison, uh, between the mature node versus the leading edge, right? For example, if I assume cleaning is 10% of the mature node and 5% of leading edge, is it the right way to think about the opportunity?

[David Wang, CEO]

Yes. I will see that -- still we see the [Indiscernible], someone still major mature node driving, right? And we definitely see there also people for their power device, which is almost like 60, 80 nano right? Devices for their power device. So, I want to say the future, like say next year, one year, two year, we see a lot of fab building to production there -- this power devices and so we see that's two major driving 28 and 45. And also, power devices. But looking at real tool, I should say 28 nano is 80% is Canadian tool, but 45 above, and also including a power device. So probably 80% is the auto bench. Right? It's a reverse. Our product portfolio is both cover both applications. So, I should say, obviously, I see a lot of our demand for auto bench and the people moving 45 and also the power devices, right. And a lot devices. So we see that the model continue growth, which is the auto bench by the way. We're just bring the market 2, 3 years ago. So we see that as another driving force for our revenue growth.

[Charlie Chan, Morgan Stanley]

And my last one is about your supply chain and also link down facility. Right? So, then we just mentioned that the long-term growth margin may have upside given the PCVD and track contribution, but how about link down? I remember in your previous earning call, you said, Lingang can help you to improve the gross margin. Is that still the case?

[David Wang, CEO]

Yes, I think there obviously, even in PCVD have a high margin product also kind of a low margin product, right? Including track two. So we're probably balanced our customer and also our product portfolio. And this moment I still say maintain 40%, 45% is our range. And I said unless until we are really have a high margin and high quality product be proving in the market, which can be beyond 45%, so this moment I honestly maintain our gross margin. 40%, 45%, right? That's their right near future our gross margin.

[Charlie Chan, Morgan Stanley]

And how about Lingang scale?

[David Wang, CEO]

Yes, Lingang, I think that we're definitely -- we'll probably start production in the end of this year. And also they going to add more of automation for our assembly for our production. As long run, we -- will definitely added more value, right? In know, improve our gross margins. But this year, one year, two year, I don't know really -- it's really, you have the real makers fab running smoothly and around the full scale. So as a long run, definitely improve, shorter round you add some more of a cost maybe, but I don't think much -- not much point difference.

[Operator]

And our next question comes from the line of Christian Schwab from Craig-Hallum.

[Christian Schwab, Craig-Hallum]

Taking my questions and congratulations on a continued extremely strong revenue growth outlook versus WFE. I'm wondering number one, your thoughts that there's rumors in the marketplace that CX FT is going to do a large IPO, who's historically been a customer of yours that could bring in many billions of dollars. If that does occur, should we think of that as something very positive for you over time?

[David Wang, CEO]

Yes, I think that --

[Technical Difficulty]

So we see they continue to grow. And obviously, they are also one of a major customer. And we have our product cleaning and all kinds of -- I call it, cleaning tool and be evaluated also in production for XMP Plus are also copper plating, including future operating even in our furnace, even PCV done a role. We see the XMP as one of the major driving force for future revenue.

[Christian Schwab, Craig-Hallum]

Okay. Fantastic. And then as far as the total available market that you guys have talked about getting to $1 billion worth of business, just in mainland China and then the rest of the world with upside. I mean, we have got our first evaluation tool in Europe that you have talked about, and the local service team that's going in. You just announced that, you have a local service team in Oregon, obviously next to Intel, very large U.S. manufacturer. At what point, what would you have to see to start including the rest of the world, which is 10x the size of China for long-term revenue objective.

[David Wang, CEO]

I think at this moment, I still say, we have major sales also from China, right, is clear right now. However, we do see our differential product, obviously cleaning, even plus our plating. In the future, we believe our furnace and also PCVD will get into the outside China, right. Actually working with the customer in Korea, actively for the multi product. And for rest of the world including Taiwan, U.S. and also the Europe. And this moment, primarily, it's Canadian. And we see also some people interest, customer interest are kind of played in too. As the time moving on and as I said, our partnership more in the global market and we will see more of our opportunity for people buying not only our -- cleaning or buy also rest of the Canadian tool, and plus the copper painting tool, right? So I know the market grow outside Mainland China are still in a process in a way. But we think eventually with our differential product, which will break through other major customer in outside China.

Along, I still assume targeting half revenue come from Mainland China, half revenue come from outside mainland China, that's our strategic goal to grow ACM to be their major player in this market.

[Christian Schwab, Craig-Hallum]

Fabulous. Thank you for that clarity. And then I think it was last conference call. There seems to be -- Applied Materials talking about everybody is seeing strength in China, right, buying materials, you guys and anybody who has got a presence there, is seeing tremendous strength. But I think the consumption and production closing of the GAAP, I think you mentioned, I think it was last quarter that in the mature node/power et cetera that it would probably take at least three years to potentially close the gap. Did I remember that correctly?

[David Wang, CEO]

Yes. Obviously, we see that --

[Mark McKechnie, CFO]

Hi, operator. I think we lost David's audio --

[David Wang, CEO]

I got -- I was halfway, sorry. Maybe -- can you hear me now?

[Mark McKechnie, CFO]

Yes. We can hear you now, David. Maybe start over David for Christian's question was about the gap of Chinese semiconductor production versus consumption.

[David Wang, CEO]

Yes. Okay. I see that there obvious demand for their mature node 28 to 45. It's, there's still gap between the consumption rate versus major or fabricated in China, right? That gap will gradually could reduce as the more fab build up. And more important, I see that also this electric vehicle driving more demand, new demand come out for the channel market, right? We see that's another new driving force for the 28, 45 and also the power devices. So that's probably two driving force. Why is the new demand? Another one will reduce the gap between the production made in China versus the consumption rate.

[Operator]

And our next question comes from the line of Mark Miller from Benchmark.

[Mark Miller, Benchmark]

Just was wondering, if you could give us an impression or what you're estimating you had to sale the purchase order for the SAPs tools from Europe. You're setting up support for U.S. customer in Oregon. In terms of your sales projections for this year what percent do you think will come from outside of China?

[David Wang, CEO]

Well, Mark, it's very hard to give you precisely right. And we're working very closely with a major customer. We also continue to increase our investment, right in our sales marketing team and [Indiscernible] in China. I think, we're still in the market exploration in the -- and I call the stage, I think we'll have to be get a initial product qualify, then going to repeat the order, then get the [model] order, right? Then you got maybe other new pro -- I mean, other product getting too. So I still see that take time, and so you looking, I still will be next few year majority still come from Mainland China market, but we see the market growth working, including Korea in U.S., Taiwan, and Europe. And this the moment it very hard to give you percentage versus a year, right? Really depends on how we progressively are success -- successfully our team make the sales and then serve effort in outside Mainland China.

[Mark Miller, Benchmark]

Number of semi firms have done very well supplying EV manufacturers in China. I'm just wondering, you mentioned that it's an opportunity for you. I'm just wondering, could you also kind of give me an impression of what percent of sales this year are going to -- are related to EV sales?

[David Wang, CEO]

I have to give you the precise number, but I can say we see a few production line is a planning in the building process or expending process. And for this real EV market, right, which is including power devices analog and also their 45 aiming for their automobile. There's a market too. So it's a clear trend and their China fab and they're very anxiously also, they try to get in or prepare for growth, but even market in China.

[Operator]

Our next question comes from the line of Donnie Teng from Nomura.

[Donnie Teng, Nomura]

Congrats on the strong first quarter result. First question is regarding to your product mix in the first quarter. So cleaning tool the percentage of clean tool decline quite significant young year. So, which means that cleaning tool progress is pretty strong, but previously, I think, your target is like the weather cleaning still counted for a very big portion of this year's sales, but first quarter looks like it has been shrinking a lot. So are you changing your target this year and shall we back more non wave cleaning towards sales contribution significantly improved this year and how this will have the impact with the gross margin?

[David Wang, CEO]

Yes, well actually the first quarter I look in the detailed product mixing, right? And like you said, our Canadian tool is lower than 70%, right? 65%. But I look in real forecast this year. We think that 65% property is now the whole year number. I still say probably our Canadian or state, probably 70% range. And this year is still major Canadian. The reason I see that we see other our other bench growing pretty quickly. And also there's also demand for -- for Canadian too. So I should still say probably 70% is a whole year our range. But obviously, I can say, furnace and Stockwell and they I call their electro trading or two. But that ratio, I think probably 70 is the right portion, not a 65%.

[Donnie Teng, Nomura]

And just to follow-up, so for ECP and furnace et cetera, tools, are the major customers similar to the wave cleaning tools or they are maybe different categories?

[David Wang, CEO]

Pretty much I should say, obviously cover PD is more like way in the boss, right front and the back end. And the actually Copper -- we sell so far, $28 major and people still buy 45. Even some power devices also buy copper protein too. Plus also you can see are advanced packaging, right? The only, the copper --. So we still see copper protein still continue grow and for their -- for the coming year and for the coming next year. It's just a growing market. And also plus we see their, our furnace has been expanding customer and multiple customer right now. And so we'll see that it can be another driving force and for our non-Canadian product category.

[Donnie Teng, Nomura]

And my second question is regarding to the customers, right? So, for the leading end makers -- maker in China, are you still seeing they are spending the capacity or they are now more like to do some more qualification on the domestic equipment production line and the incremental capacity expansion maybe need to wait until all the domestic equipment, maybe like small production line qualification being passed and to continue the expansion. And for the Hynix, recently, there is an industry report mentioned about that Hynix is considering to extend fab to increase some legacy notes capacity. So are you seeing any signs of Hynix going to expand the capacity in China again?

[David Wang, CEO]

We have not seen that sign, right? Obviously, you can see that DRAM market continue to really suffer, right? Pricing, whatever. I'm not heard anything about it. And like you said, kind of Hynix expanding -- fab at this moment.

[Donnie Teng, Nomura]

Okay. How about the NAND maker, the leading NAND maker in China?

[David Wang, CEO]

Well, because we are obviously, we have something delayed, shipment, right? For whatever reason they couldn't do the expansion. In terms of when they can restarting and they're expanding, we don't know, right? It's really -- I mean, we don't know what to explain at this moment and this month. Obviously, they have the real field order missing puzzle. And we don't know yet, when they can finish that.

[Donnie Teng, Nomura]

Understood. So just a follow-up. So for the strong first quarter sales and as well as shipment, who are the major drivers behind the strong sales? Thank you. That's my last question.

[David Wang, CEO]

Okay. It's very hard to give you the precisely, right? Normally, we give the customer percentage and I think on a yearly base, right, Mark? We give them half yearly or yearly base, but --

[Mark McKechnie, CFO]

One in a year, at the end of the year.

[David Wang, CEO]

Yes. I thought to give you the quarter this moment. And obviously as I said, I can see this is still existing customer and also have them last year, we saw some new customer become mature and repeat the order. And some new customer also facing a strong demand, but it cannot become revenue in the Q1, right? That's the issue. I also see that. So that's a major. There are still you know; existing customer is a major contribution.

[Operator]

[Operator Instructions]. And our next question is a follow-up question from Mark Miller from Benchmark.

[Mark Miller, Benchmark]

Thank you for the follow-up. I'm just wondering what was stock-based compensation? Was it around $2 million during the quarter?

[Mark McKechnie, CFO]

Yes. Mark, it was $2.1 million for the quarter.

[Operator]

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to David Wang for any further remarks.

[David Wang, CEO]

Okay. Thank you, operator. And thank you all for participation on today's call and for your support. Before we close, Gary is going to mention our upcoming Investor Relations events. Gary, please.

[Gary Dvorchak, Managing Director, Blueshirt Group]

Hey, thanks, David. So on May 31, we'll present at the 20th Annual Craig-Hallum Capital Institutional Investor Conference in Minneapolis. Attendance at the conference is invitation only for clients of Craig-Hallum Capital. So please contact them to register and request one-on-one meetings with us.

So this concludes the call, you may all now disconnect.

[Operator]

Thank you, ladies and gentleman for your participation in today’s call. This does conclude the program, you may now disconnect. Good day.