| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The Company’s consolidated financial statements include the accounts of ACM and its subsidiaries, including ACM Shanghai and its subsidiaries. ACM’s subsidiaries are those entities in which ACM, directly and indirectly, controls more than a majority of the voting power. All significant intercompany transactions and balances have been eliminated upon consolidation. The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) Use of Estimates The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet date and the reported revenues and expenses during the reported period in the condensed consolidated financial statements and accompanying notes. The Company’s significant accounting estimates and assumptions include, but are not limited to, those used for revenue recognition and deferred revenue, the valuation and recognition of fair value of certain short-term and long-term investments, stock-based compensation arrangements, realization of deferred tax assets, assessment for impairment of long-lived assets and long-term investments, allowance for credit losses, inventory valuation, useful lives of property, plant and equipment and useful lives of intangible assets. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates and assumptions. Common Stock Split All prior period share and per share amounts and common stock presented in the accompanying financial statements and these notes thereto has been retroactively adjusted to reflect the impact of the Stock Split. Proportional adjustments were also made to outstanding awards under the Company’s stock-based compensation plans. Reclassifications Certain prior year amounts in the consolidated financial statements have been reclassified to conform with the current year presentation. These classifications had no impact on the Company’s results of operations. Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and bank deposits that are unrestricted as to withdrawal and use, and highly liquid investments with an original maturity date of three months or less at the date of purchase. At times, cash deposits may exceed government-insured limits. The following table presents cash and cash equivalents, according to jurisdiction as of December 31, 2023 and 2022: December 31, 2023 2022 United States $ 43,614 $ 25,011 Mainland China 70,418 129,695 China Hong Kong 64,057 89,187 Korea 3,934 4,007 Singapore 67 51 Total $ 182,090 $ 247,951 The amounts in mainland China do not include short-term and long-term time deposits which totaled $121,342 and $172,448 at December 31, 2023 and 2022, respectively. Cash held in the U.S. exceeds the Federal Deposit Insurance Corporation (“FDIC”) insurance limits and is subject to risk of loss. No losses have been experienced to date. Cash amounts at the banks in mainland China are subject to a series of risk control regulatory standards from mainland China bank regulatory authorities. ACM’s subsidiaries in mainland China are required to obtain approval from the State Administration of Foreign Exchange (“SAFE”) to transfer funds into or out of mainland China. SAFE requires a valid agreement to approve the transfers, which are processed through a bank. Other than these mainland China foreign exchange restrictions, ACM’s subsidiaries in mainland China are not subject to any mainland China restrictions and limitations on its ability to transfer funds to ACM Research or among our other subsidiaries. However, cash held by ACM’s subsidiaries in mainland China does exceed applicable insurance limits and is subject to risk of loss, although no such losses have been experienced to date. ACM California periodically procures goods and services on behalf of ACM Shanghai. For these transactions, ACM Shanghai makes cash payments to ACM California in accordance with applicable transfer pricing arrangements. For the years ended December 31, 2023 and December 31, 2022, cash payments from ACM Shanghai to ACM California for the procurement of goods and services were $42.5 million and $30.2 million, respectively. ACM California periodically borrows funds for working capital advances from its direct parent, CleanChip. ACM California repays or renews these intercompany loans in accordance with their terms. For sales through CleanChip and ACM Research, a certain amount of sales or advance payments from customer proceeds is repatriated back to ACM Shanghai, a subsidiary, in accordance with applicable transfer pricing arrangements in the ordinary course of business. ACM Research provides services to certain customers located in the U.S., Europe and other regions outside of mainland China to support the evaluation of first tools and provide support for tools under warranty on behalf of ACM Shanghai. For these transactions, ACM Shanghai makes cash payments to ACM Research in accordance with applicable transfer pricing arrangements. For the year ended December 31, 2023, ACM Shanghai paid $19,200 in dividends to ACM Research. Subsequent to June 30, 2020, with the exception of sales and services-related transfer-pricing payments in the ordinary course of business, and dividends paid by ACM Shanghai to ACM Research, no cash transfers or other payments or distributions have been made between ACM Research and ACM Shanghai. ACM Research intends to retain any future earnings to finance the operations and expenses of the business, and do not expect to distribute earnings or declare or pay any dividends in the foreseeable future. Amounts held in Korea exceed the Korea Deposit Insurance Corporation (“KDIC”) insurance limits and are subject to risk of loss. No losses have been experienced to date. There is no additional restriction for the transfer of cash from bank accounts in the U.S., Korea, Singapore, and Hong Kong. Time Deposits Time deposits are deposited with banks in mainland China with fixed terms and interest rates which cannot be withdrawn before maturity , and are presented as short-term deposits and long-term deposits in the consolidated financial statements based on their expected time of collection . They are also subject to the risk control regulatory standards described above upon maturity. Time deposits consisted of the following: December 31, 2023 2022 Deposit in China Merchant Bank which matured on January 29, 2023 with an annual interest rate of 2.25% $ — $ 38,772 Deposit in China Everbright Bank which matured on January 29, 2023 with an annual interest rate of 2.25% — 14,360 Deposit in China Everbright Bank which matured on May 22, 2023 with an annual interest rate of 5.07% — 3,000 Deposit in China Industrial Bank which matured on January 30, 2023 with an annual interest rate of 2.15% — 14,360 Deposit in China Merchant Bank which matured on January 29, 2024 with an annual interest rate of 2.85% 29,797 28,720 Deposit in Bank of Ningbo which matured on February 17, 2024 with an annual interest rate of 2.85% 44,630 43,080 Deposit in Shanghai Pudong Development Bank which matures on October 20, 2025 with an annual interest rate of 3.10% 7,322 7,180 Deposit in Shanghai Pudong Development Bank which matures on November 14, 2025 with an annual interest rate of 3.10% 7,307 7,180 Deposit in Shanghai Pudong Development Bank which matures on December 8, 2025 with an annual interest rate of 3.10% 4,376 4,308 Deposit in Shanghai Pudong Development Bank which matures on December 15, 2025 with an annual interest rate of 3.10% 4,373 4,308 Deposit in Shanghai Pudong Development Bank which matures on December 30, 2025 with an annual interest rate of 3.10% 2,912 7,180 Deposit in China Industrial Bank which matures on January 30, 2026 with an annual interest rate of 3.15% 14,528 — Deposit in China Everbright Bank which matured on January 5, 2024 with an annual interest rate of 5.38% 3,079 — Deposit in China Everbright Bank which matures on May 22, 2024 with an annual interest rate of 5.38% 3,018 — $ 121,342 $ 172,448 For the years ended December 31, 2023 and 2022, respectively, interest income related to time deposits wa s $3,689 and $3,472, respectively. Accounts Receivable Prior to adoption of Accounting Standards Update, or ASU, 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASC 326”), the Company reviews its accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. After adoption of ASC 326, as of January 1, 2023, the Company assesses collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when the Company identifies specific customers with known disputes or collectability issues. In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status, the age of the accounts receivable balances, credit quality of the Company’s customers based on ongoing credit evaluations, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from customers. At December 31, 2023, and 2022, the Company, based on a review of its outstanding balances and its customers, determined the allowance for credit losses were $4,830 and $0, respectively. Land Use Right, Net The land use right represents the cost to purchase a right to use state-owned land in mainland China with lease terms of 50 years expiring in 2070, for which an upfront lump-sum payment was made during the year ended December 31, 2021. The land use rights are treated as operating lease. The Company classifies the land use right as non-current assets on the consolidated balance sheets (note 7). Inventory Inventory consists of raw materials and related goods, work-in-progress, finished goods, and other consumable materials such as spare parts. Inventory was recorded at the lower of cost or net realizable value at December 31, 2023 and 2022. • The cost of a general inventory item is determined using the moving weighted average method. The cost of an inventory item purchased specifically for a customized product is determined using the specific identification method. Low-cost consumable materials and packaging materials are expensed as incurred. • Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete or dispose. The Company assesses the recoverability of all inventories quarterly to determine if any adjustments are required. Potential excess or obsolete inventory is written down b ased on management’s analysis of inventory levels and estimates of future 12-month demand and market conditions. Property, Plant and Equipment, Net Property, plant and equipment are recorded at cost less accumulated depreciation and any provision for impairment in value. Depreciation begins when the asset is placed in service and is calculated by using the straight-line method over the estimated useful life of an asset (or, if shorter, over the lease term). Betterments or renewals are capitalized when incurred. Estimated useful lives of assets are as follows: Buildings and plants 30 years Computer and office equipment 3 to 5 years Furniture and fixtures 5 years Leasehold improvements shorter of lease term or estimated useful life Electronic equipment 3 to 5 years Manufacturing equipment for small to medium-sized equipment, 5 to 10 years; for large equipment, estimated by purchasing department at time of acceptance Transportation equipment 4 to 5 years Expenditures for maintenance and repairs that neither materially add to the value of the property nor appreciably prolong the life of the property are charged to expense as incurred. Upon retirement or sale of an asset, the cost of the asset and the related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is credited or charged to income. Intangible Assets, Net Intangible assets consist of purchase software. Assets are valued at cost at the time of acquisition and are amortized over their beneficial periods. Valuation of Long-Lived Assets Long-lived assets are evaluated for impairment whenever events or changes in circumstance indicate that the carrying value of the assets may not be fully recoverable or that the useful life of the assets is shorter than the Company had originally estimated. When these events or changes occur, the Company evaluates the impairment of the long-lived assets by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Company recognizes an impairment loss based on the excess of the carrying value over the fair value. No impairment charge was recognized for either of the periods presented. Leases The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, and operating lease liabilities in the consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term. Revenue Recognition The Company derives revenue principally from the sale of semiconductor capital equipment. Revenue from contracts with customers is recognized using the following five steps pursuant ASC Topic 606, Revenue from Contracts with Customers : 1. Identify the contract(s) with a customer; 2. Identify the performance obligations in the contract; 3. Determine the transaction price; 4. Allocate the transaction price to the performance obligations in the contract; and 5. Recognize revenue when (or as) the entity satisfies a performance obligation. Identify the contract(s) with a customer. The Company generally considers written documentation including, but not limited to, signed purchase orders, master agreements, and sales orders as contracts, provided it has approval and commitment from the customer, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collection is probable. Collectability is assessed based on management’s assessment of the customer’s creditworthiness, historical payment experience, as well as other relevant factors. Identify the performance obligations in the contract. Performance obligations are accounted for separately if they are distinct. A good or service is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and the good or service is distinct in the context of the contract. The Company’s performance obligations generally include sales of tools and spare parts. In addition, customer contracts can contain provisions for installation, training, software updates, most-favored pricing for spare parts, and other items which have been deemed immaterial in the context of the contract. Determine the transaction price. The transaction price for the Company’s contracts with customers may include fixed and variable consideration. The Company includes variable consideration in the transaction price to the extent that it is probable that a significant reversal of revenue will not occur in the future based on the Company’s historical experience with similar arrangements. Allocate the transaction price to the performance obligations in the contract. For contracts that contain multiple performance obligations, the Company allocates the transaction price to the performance obligations on a relative standalone selling price basis. The Company defers 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 . The Company recognizes revenue from tools and spare parts at a point in time, when the Company has satisfied its performance obligation. The Company’s sales arrangements do not include a general right of return. For shipments made to a customer that has not previously accepted a specific type of tool (“first tools”), revenues are recognized when the tools are accepted by the customer. For shipments made to a customer that has previously accepted a specific type of tool ("repeat shipment"), revenues are recognized upon shipment or delivery because the Company can objectively demonstrate that the tools meet all the required customer specifications. The Company’s warranties provide assurance that its products will function as expected and in accordance with certain specifications. The Company’s warranties are intended to safeguard the customer against existing defects and do not provide any incremental service to the customer. They are not separate performance obligations and are accounted for under FASB ASC Topic 460, Guarantees . Contract liabilities include payments received from customers prior to the transfer of control of certain goods which are recorded as advances from customers, and spare parts sold together with its tools which are recorded as deferred revenue. The Company does not have contract assets. Cost of Revenue Cost of revenue primarily consists of: direct materials, comprised principally of parts used in assembling equipment, together with crating and shipping costs; direct labor, including salaries and other labor related expenses attributable to the Company’s manufacturing department; allocated overhead cost, such as personnel cost, depreciation expense, expenses associated with supply chain management and quality assurance activities, inventory provision, as well as shipping insurance premiums. Research and Development Costs Research and development costs relating to the development of new products and processes, significant improvements and refinements to existing products or the process of supporting customer evaluations of tools, and the development of new tools for evaluation by customers during the product demonstration process, are expensed as incurred. Shipping and Handling Costs Shipping and handling costs, which relate to transportation of products to customer locations, are charged to selling and marketing expense. For the years ended December 31, 2023, 2022 and 2021, shipping and handling costs included in sales and marketing expenses were $1,582, $1,507, and $923, respectively. Borrowing Costs Borrowing costs attributable directly to the acquisition, construction or production of qualifying assets that require a substantial period of time to be ready for their intended use or sale are capitalized as part of the cost of those assets. Income earned on temporary investments of specific borrowings pending their expenditure on those assets is deducted from borrowing costs capitalized. All other borrowing costs are recognized in interest expense in the consolidated statements of comprehensive income (loss) in the period in which they are incurred. Warranty For each of its products, the Company generally provides a standard assurance type warranty ranging from 12 to 36 months and covering replacement of the product during the warranty period. The Company accounts for the estimated warranty costs at the time revenue is recognized. Warranty obligations are affected by historical failure rates and associated replacement costs. Utilizing historical warranty cost records, the Company calculates a rate of warranty expenses to revenue to determine the estimated warranty charge. The Company updates these estimated charges on a regular basis. Warranty obligations are included in other payables and accrued expenses in the consolidated balance sheets. The following table shows changes in the Company’s warranty obligations for the years ended December 31, 2023, 2022 and 2021, respectively. Year Ended December 31, 2023 2022 2021 Balance at beginning of period $ 8,780 $ 6,631 $ 3,975 Additions 7,969 5,379 5,026 Utilized (6,915) (3,230) (2,370) Balance at end of period $ 9,834 $ 8,780 $ 6,631 Government Subsidies ACM Shanghai has received seven special government grants. The governmental grants contain certain operating conditions, and the Company is required to go through a government due diligence process once the project is complete. Unearned government subsidies received are deferred and recorded as other long-term liabilities (note 13) in the consolidated balance sheet until the criteria for such recognition are satisfied. 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) were $1,740, $1,201 and $11,260, 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) w ere $533, $306, an d $200, respectively. Stock-based Compensation ACM and ACM Shanghai grants stock options to employees and non-employee consultants and directors and accounts for those stock-based awards in accordance with FASB ASC Topic 718, Compensation – Stock Compensation. Stock-based awards granted to employees and non-employee consultants and directors are measured at the fair value of the awards on the grant date and are recognized as expenses either (a) immediately on grant, if no vesting conditions are required or (b) using the graded vesting method, net of estimated forfeitures, over the requisite service period. The fair value of stock options is determined using the Black-Scholes valuation model when there are service and performance condition attached or the Monte Carlo valuation model when there is market condition attached. Stock-based compensation is charged to the category of operating expense corresponding to the service function of the employees and non-employee consultants and directors. Income Taxes The Company accounts for income taxes using the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable values. In evaluating the ability to recover its deferred income tax assets, the Company considers all available positive and negative evidence, including its operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. In the event the Company determines that it would be able to realize its deferred income tax assets in the future in excess of their net recorded amount, it would make an adjustment to the valuation allowance that would reduce the provision for income taxes. Conversely, in the event that all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period such determination is made. Tax benefits related to uncertain tax positions are recognized when it is more likely than not that a tax position will be sustained during an audit. Interest and penalties related to unrecognized tax benefits are included within the provision for income tax. Basic and Diluted Net Income per Share of Common Stock Basic and diluted net income per share of common stock is calculated as follows: Year Ended December 31, 2023 2022 2021 Numerator: Net income $ 96,852 $ 50,564 $ 42,921 Less: Net income attributable to non-controlling interests 19,503 11,301 5,164 Net income available to common stockholders, basic $ 77,349 $ 39,263 $ 37,757 Less: Dilutive effect arising from stock-based awards by ACM Shanghai 1,841 584 108 Net income available to common stockholders, diluted $ 75,508 $ 38,679 $ 37,649 Weighted average shares outstanding, basic (1) 60,164,670 59,235,975 57,654,708 Effect of dilutive securities 4,705,873 6,105,796 7,702,008 Weighted average shares outstanding, diluted 64,870,543 65,341,771 65,356,716 Net income per share of common stock: Basic $ 1.29 $ 0.66 $ 0.65 Diluted $ 1.16 $ 0.59 $ 0.58 (1) The results for 2021 have been adjusted to reflect the three-for-one stock split effected in the form of a stock dividend in March 2022. See Note 2 for details. Basic and diluted net income per share of common stock is presented using the two-class method, which allocates undistributed earnings to common stock and any participating securities according to dividend rights and participation rights on a proportionate basis. Under the two-class method, basic net income per share of common stock is computed by dividing the sum of distributed and undistributed earnings attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. ACM did not have any participating securities outstanding during the three-year periods ending December 31, 2023. ACM has been authorized to issue Class A and Class B common stock since redomesticating in Delaware in November 2016. The two classes of common stock are substantially identical in all material respects, except for voting rights. Since ACM did not declare any dividends during the years ended December 31, 2023, 2022 and 2021, the net income per share of common stock attributable to each class is the same under the “two-class” method. As such, the two classes of common stock have been presented on a combined basis in the consolidated statements of comprehensive income (loss) and in the above computation of net income per share of common stock. Diluted net income per share of common stock reflects the potential dilution from securities, including stock options, that could share in ACM’s earnings. Certain potential dilutive securities were excluded from the net income per share calculation because the impact would be anti-dilutive. The number of potentially dilutive shares that were not included in the calculation of diluted net income per share in the periods presented where their inclusion would be anti-dilutive were 3,651,337, 1,795,340 and 98,800 the years ended December 31, 2023, 2022, and 2021, respectively. Comprehensive Income (loss) The Company applies FASB ASC Topic 220, Comprehensive Income , which establishes standards for the reporting and display of comprehensive income or loss, requiring its components to be reported in a financial statement with the same prominence as other financial statements. The Company’s comprehensive income (loss) includes net income and foreign currency translation adjustments and is presented in the consolidated statements of comprehensive income (loss). Statutory Surplus Reserve The income of ACM’s mainland China subsidiaries is distributable to their shareholders after transfers to reserves as required under relevant mainland China laws and regulations and the subsidiaries’ Articles of Association. As stipulated by the relevant laws and regulations in mainland China, mainland China subsidiaries are required to maintain reserves, including reserves for statutory surpluses and public welfare funds that are not distributable to shareholders. A mainland China subsidiary’s appropriations to the reserves are approved by its board of directors. At least 10% of annual statutory after-tax profits, as determined in accordance with mainland China accounting standards and regulations, is required to be allocated to the statutory surplus reserves. If the cumulative total of the statutory surplus reserves reaches 50% of a mainland China subsidiary’s registered capital, any further appropriation is optional. Statutory surplus reserves may be used to offset accumulated losses or to increase the registered capital of a mainland China subsidiary, subject to approval from the relevant mainland China authorities, and are not available for dividend distribution to the subsidiary’s shareholders. The mainland China subsidiaries are prohibited from distributing dividends unless any losses from prior years have been offset. Except for offsetting prior years’ losses, however, statutory surplus reserves must be maintained at a minimum of 25% of share capital after such usage. ACM Shanghai estimated a statutory surplus reserve of $30,060 and $16,881 based on an accumulated profit as of December 31, 2023 and 2022, respectively, which is included in the statutory surplus reserve in the consolidated balance sheets. Noncontrolling interests A noncontrolling interest is recognized to reflect the portion of subsidiaries’ equity which is not attributable, directly or indirectly, to ACM Research. Consolidated net income on the consolidated statements of comprehensive income (loss) includes the net income attributable to noncontrolling interests. The cumulative results of operations attributable to noncontrolling interests are recorded as “noncontrolling interests” in the Company’s consolidated balance sheets. Financial Instruments The Company periodically invests in equity securities, and maintains an investment portfolio of various holdings, types, and maturities. For equity investments that do not have a readily determinable fair value, the Company classified them as long-term investments, and records them using either: 1) the measurement alternative which measures the equity investments at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes; or 2) the equity method whereby the Company recognizes its proportional share of the income or loss from the equity method investment. The equity method is utilized when the equity investments are common stock or in substance common stock, and the Company does not have the ability to control the investee but is deemed to have the ability to exercise significant influence over the investee’s operating or financial policies. For equity investments that have a readily determinable fair value, the Company classified them as short-term investments, and records them at fair market value on a recurring basis based upon quoted market prices. Realized and unrealized gains and losses resulting from application of the measurement alternative, the impact of the application of the equity method to the Company’s equity investments, and recognition of changes in fair market value, as applicable, are recognized as non-operating income (expenses), net in the co ndensed consolidated statements of comprehensive income (loss). The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction betwee |
