ACM Research, Inc (ACMR) Q4 2019 Earnings Call Transcript

ACM Research, Inc (ACMR -2.82%)
Q4 2019 Earnings Call
Mar 19, 2020, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen. Thank you for standing by and welcome to the ACM Research fourth-quarter and fiscal-year 2019 earnings conference call. [Operator instructions] As a reminder, we are recording today's call. If you have any objections, please you may disconnect at this time.

Now I'll turn the call over to Mr. Gary Dvorchak, managing director of The Blueshirt Group. Mr. Dvorchak, please go ahead.

Gary Dvorchak -- Managing Director of The Blueshirt Group

Good morning, everyone. Thank you for joining us on today's call to discuss fourth-quarter and fiscal 2019 results. We released results after the U.S. market closed yesterday.

The release is available on our website as well as from our newswire services. There's also a supplemental slide deck posted to the Investor portion of our website that we will reference during our prepared remarks. On the call with me today are our CEO, Dr. David Wang; our CFO, Mark McKechnie; and Lisa Feng, the CFO of our operating subsidiary, ACM Shanghai.

Before we continue, please turn to Slide 2. Let me remind you that remarks made during this call may include predictions, estimates 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 of the date of this call. ACM is not obliged to update you on any revisions to these forward-looking statements. Also certain of the financial results that we provide on this call will be on a non-GAAP basis, which excludes stock-based compensation.

You should refer to our press release for our non-GAAP results and reconciliations between GAAP and non-GAAP amounts. With that, let me now turn the call over to Dr. David Wang, who will begin with Slide 3. David?

David Wang -- Chief Executive Officer

Thanks, Gary, and welcome everyone to today's call. 2019 marked another year of growth and achievement for ACM Research. We made meaningful progress in our mission to become a major supplier of capital equipment for the semiconductor industry. We delivered great operational results and ended the year in a solid financial position.

Let me review some of our accomplishments in 2019 as shown on Slide 3. First, our financial performance was excellent. We grew our topline by more than 44% to $107.5 million and delivered non-GAAP earnings of $1.17 per share. We generated $9.4 million in operational cash flow and ended the year with $58 million of cash with an additional $60 million in reserve cash from proceeds of the private equity funding into ACM Shanghai.

Second, we showed our production expertise. Throughout the year, our manufacturing team ran our second factory. With two facilities running, we were able to ship 115 million of equipment production of more than 100 million is an important achievement. It demonstrates our ability to scale operations, which is one of several critical factors for winning new business.

Third, we expanded our customer base to five major IC manufacturers, a key advantage is that we are near some of the newest and the most advanced fab in the world. In September, we delivered our first tool to a new local China DRAM player. That brought our total to five major front-end customers. In addition to this new DRAM customer, we are now supplying to SK Hynix, the No.

2 DRAM player in the world, YMTC the emerging 3D NAND player, Huali and Huahong Wuxi, a growing local foundry and SMIC are strategically important China foundries. Fourth, we expanded our market opportunity by introducing new products and making R&D progress on other products in our roadmap. Let me review our progress during the year. First, in Q1 we introduced few new tools for advanced metal plating as shown on Slide 5.

The Ultra ECP ap or Advanced Wafer Level Packaging is a back-end assembly tool that delivers better plating performance with a more uniformed metal layer as much area. The Ultra ECP map or Multi Anode Partial Plating is a front-end fab tool that delivers world-class plating for copper interconnect applications. This is becoming more critical as the world migrate to 40 nano and below. Our ECP tools have estimated TAM of 500 million.

This adds to 3 billion TAM for our core market in single-wafer cleaning tools. Our ECP tools are off to a great start. We delivered four of them in 2019. The four delivers including both revenue and the first tool evaluation.

Next, Tahoe. Let's turn to Slide 4. Our first Tahoe customer achieved very encouraging results in the production environment late last year. They confirmed that our Tahoe delivers equivalent performance to competitors, but with just a friction of the sulfuric acid use.

This tool is on track for acceptance in the first half of 2020 and we believe repeat order will soon follow that. We are in advanced discussions with the rest of our customers and are optimistic this will lead to several first tool orders later in the year. We see the environment advantage of Tahoe is a great calling card. We will begin discussions with new potential customers in Taiwan, North America, and Europe.

Next, TEBO. We have made great technical progress with TEBO during 2019. In Q4, we -- our lead TEBO customer confirmed that we met their requirements for damage-free removal of both big and small particles of 3D patterned structure. As a result, our TEBO tool was qualified for several production cleaning steps with higher particle removal efficiencies for fine particles without damages.

We expect to see repeat order from this leading customer this year. Yesterday we announced another new product, the Ultra SFP ap shown on Slide 6. The main is stress free polishing for advanced packaging. This tool combines ACM proprietary SFP electro-polishing and CMP technology into one platform.

We believe this is the first of its kind in the world. The Ultra SFP ap incorporates a building electrolyte recycle and reuse system. It reduces amount of [Inaudible] by 80% versus conventional CMP. We delivered our first tool during the fourth quarter of 2019 to a leading Chinese wafer-level packaging customer.

We expect to recommend revenue this year upon customer acceptance. In general, we are focused on broadening our product line. We are committed to gaining share in $3 billion plus TAM for the single-wafer wet cleaning tools. We estimate that our SAPS, Tahoe, and TEBO tools cover more than 50% of this market.

We believe our share of cleaning market would grow as our customer achieve scale production and as ACM gain additional customers. We are also adding new products in adjacent markets through expanding our opportunities to address even more of the international total wafer fab incremental spend. We are -- we estimate the combination of a new ECP and SFP products add another $700 million to our TAM. Moving on, I will now discuss some of the more strategic efforts we are making to build the foundation to achieve ACM longer term objectives.

First, we raised capital in the U.S. the follow on equity offering added $25 million to our balance sheet. We are deploying the proceeds to invest in the customer development in new regions, including in North America, Europe and the Southeast Asia. We also began a significant marketing push in those regions to support our growing direct sales efforts.

Second, we entered into our framework agreement to acquire land rights in the Lingang region of Shanghai, 30 miles from ACM headquarters. By middle year we expect to complete a definitive agreement for the land. We expect to begin construction of a new R&D center and a factory later this year and start initial production at that facility by the end of 2022. Finally, we are gearing up for our Shanghai stock market listing.

We are pursuing the listing for two reasons. First, we want to raise our profile with regional customers and our supply chain. Second, we want to raise local capital in our primary market of China at attractive valuation. To meet the requirement for the listing, we added several independent strategic local investors.

We sold 8.3% of the outstanding share of ACM Shanghai to those investors at $675 million pre-money valuation. This reached $60 million. We are on the track to submit our application for the listing in the middle 2020 and to price the transaction by end of the year. Before I turn over to Mark, I would like to update you on how the coronavirus situation has impact our operations and outlook.

I'm proud and thankful to report that more than 90% of our staff are back to the work at both our Shanghai's fab facility, which are shown on Slide 7. We took early action in February before employee return from Lunar New Year to make sure no one took unreasonable risk to rush back to work. We also took steps to ensure safe workplace upon return. At this point, Shanghai appears to be stabilizing with the number of new reported COVID-19 cases falling.

Our production lines are now back to normal starting and our supply chain does not appear to be a issue. We are working to increase our manufacturer capacity to propel for heavy loading in Q2 and Q3. We have been in a constant contact with our customers, in particular YMTC. As many of you know, YMTC is the first factory, and its center of operations are in Wuhan, and they are fully committed to scaling production.

YMTC and all of our customers, in fact, continue to run their fabs uninterrupted through the Lunar New Year and after. We have a local service team member in Wuhan to provide close support to YMTC. They have been on-site supporting YMTC during the challenging times. We are monitoring the situation on a day-by-day basis.

We have shipped a number of the YMTC tool delivered from the first quarter into the second quarter, but otherwise, I'm now pleased to say our operations with YMTC appear to be recovering as the city begin to relax its locked down. Meanwhile, other customers in less affected city have been managing -- have already returned to work. We expect the business to return to normal operations during Q2, with the constraints become less of the factor on our business. As we are looking ahead, we remain optimistic.

Let me share our current outlook as shown on Slide 8. Q1 revenue and shipments have been impacted by the virus. Although, part of our business shift from Q1, our internal forecast are strong for Q2 and Q3. And include significant demand for demo tools.

We have a good visibility in Q3 due to firm orders and customer forecast as well as number of tools awaiting acceptance. Accordingly, our full year 2020 outlook is unchanged. We expect revenue to be in the range of $130 million to $150 million, as also we announced on January 13th. This represents 30% annual growth at the mid-point.

Our outlook is based on a couple of important assumptions. First, the virus situation continue to steadily improve in China and stabilizes in the rest of the world. Second, low end of the revenue range, assuming muted DRAM recovery and EBITDA revenue contribution from new customers. To conclude my faction, I would like to thank our customers, partners and shareholders for their continued support and confidence in ACM Research.

I especially want to thank our employees for their hard work and dedication during challenging time. Our entire team is focused on what we can control, we're investing in R&D to enhance our current products and develop new products. We are building our global sales and marketing infrastructure in order to penetrate new customers in new regions. We are scaling scale of production capacity to fulfill the wave of new demand we are seeing coming.

As we grow, we are committed to assort more balance between the current profit and the investment growth. We believe that growing fast with the profitability, we deliver the maximum value to our shareholders. And so, I will now turn the call over to Mark, who will discuss the financial results in more detail.

Mark McKechnie -- Chief Financial Officer

Thank you, David, and good day, everyone. Q4 was another strong quarter ending 2019 on a high note with good profitability. For the full year, we grew our business significantly with increased market share, good customer exposure and expanded production at our second factory. We added several new key products, including our ECP tools for advanced metal plating.

We closed the year with $58 million of cash on our balance sheet, up from $27 million a year ago. And now to put some detail around our full 2019 results. Unless I note otherwise, I will refer to non-GAAP financial measures. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release.

First, highlights of our results for the full year shown on Slide 9. Revenue was $107.5 million, up 44%. We break out our 10% customers on an annual basis and will provide occasional color on quarterly costs. As you can see on Slide 11, for 2019, we had 3 10% revenue customers, which I will now describe.

First, Huali and Huahong Wuxi accounted for 26.5% of revenue versus 24.2% in 2018. They grew by 58%, a good contributor of growth as we expanded penetration from Huali Shanghai fabs to additional factories of Huahong and the Wuxi. YMTC was our largest customer at 27.5% of revenue versus 39.6% in 2018. Our revenue from YMTC was unchanged year-over-year as expected, YMTC ramped its wafer production from 5,000 per month to 20,000 per month during the year.

Even though the wafer starts increased significantly, the number of tools was about the same due to subscale utilization of some of our tools at the initial 5,000 wafer per month level. SK Hynix accounted for 19.8% of revenue versus 23.8% in 2018. Revenue from SK Hynix was up 20% year-over-year. SK Hynix was a big contributor in the first half and fell off in the second half due to challenging DRAM market conditions.

SMIC and JCAP were larger revenue contributors in 2019 as compared to 2018, but less than 10% customers for both years. Total shipments were $115 million versus $95 million in 2018. Gross margin for the year was 47.3%, compared to 46.2%. This was above our normal expectations of 40% to 45% due to a favorable product mix.

We expect gross margin to also continue to vary on a quarterly basis due to product mix and manufacturing utilization. Operating income was $21.3 million, compared to $9.8 million. Operating margin is 19.9% versus 13.2% a year ago. Net income attributable to ACM Research was $21.5 million for the year versus $9.9 million.

2019 net income included a benefit of 2 items, which ACM considers onetime in nature. This includes a tax valuation allowance release or benefit of $4 million for the year and a realized gain or benefit of $1 million from the effective foreign currency fluctuations on our operating results. Net income per diluted share was $1.17, compared to $0.55 in 2018. This includes the net benefit as discussed above of 25% -- $0.25 per share for the tax and currency items.

For the fourth quarter, shown on Slide 10, revenue was $24.6 million, up 18% from the fourth quarter of 2018. Total shipments were $25 million versus $35 million in the fourth quarter of '18 and $43 million in the third quarter of year 2019. Keep in mind, third quarter 2019 shipments had been neutrally strong due to the acceleration of a number of shipments from the fourth quarter. Gross margin was 50.7% versus 49.6% in the prior year period.

Operating income was $4.5 million, up 39% from $3.2 million in the year-ago period. Operating margin was 18.3% versus 15.5% in the prior year period. Net income attributable to ACM Research was $4.6 million versus $2.9 million in 2018. This includes the benefit of $2.3 million from a tax valuation release and the impact of foreign currency fluctuations on our operations.

Net income per diluted share was $0.23, compared to $0.16 in 2018. This includes an aggregate benefit of $0.05 for the tax and currency items for the quarter. Now I'll review the balance sheet. The cash balance was $58.3 million at the end of 2019.

Cash was up $11 million from the end of last quarter, and up $31.1 million from the end of last year. The increase for the year was driven by positive free cash flow and our capital raise in August of 2019. We held $59.6 million in restricted cash at year end. This is from the proceeds to ACM Shanghai for its 2 private equity funding rounds.

Restricted cash will be unrestricted when we submit our China IPO application. Short-term borrowings at year-end were $13.8 million, down from $15.7 million at the end of Q3 and up from $9.4 million at the end of 2018. Total inventory was $44.8 million at year-end. Finished goods inventory grew to $19.3 million at year-end, up from $18.6 million at the end of the third quarter and $16.5 million at the end of 2018.

We view the increased finished goods inventory as a positive indicator as it reflects the deployment of additional first tool systems to potential customers. Cash flow from operations was $14.2 million for the fourth quarter and $9.4 million for the year. Capital expenditures were $0.2 million for the quarter and $1.1 million for the full year 2019. To conclude, we are executing on our strategy.

We are participating in the growth of major new IC fabs. We are ramping production, and we continue to develop and deliver innovative new products. We are positive on our opportunities in China and the expansion outside of China. We're committed to achieve our mission to become a major player in the semiconductor equipment market.

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

Questions & Answers:

Operator

Certainly. [Operator instructions] Our first questions comes from the line of Donnie Teng from Nomura Securities. Please go ahead.

Donnie Teng -- Nomura Instinet -- Analyst

Thank you, management, for taking my question. Congratulations on a very strong 2019 result. And my first question is regarding to our shipment and the sales outlook this year. So, I calculated the accumulated shipment sales since third-quarter 2017, and I found that we probably still have left $30 million of the backlog.

So I'm wondering whether if our sales momentum this year if largely intact is mainly driven by the backlog or we are also seeing a very strong shipment growth this year? This is my first question. Thank you.

David Wang -- Chief Executive Officer

OK. Hi, thank you. So then I will go first. Maybe I will give a remark and then more. Actually, like you've pointed out, yes, there's a deferred revenue last year and for this year, and we estimated also $30 million were record revenue this year, obviously.

So by our projections, obviously, we'll see more shipment this year, much more than last year. I also kind of see in my mind even more will be same as deferred revenue through the 2021. So to answer your question, yes we see more shipments better more than last year. Hey, Mark anything to add there if you have?

Mark McKechnie -- Chief Financial Officer

Yes, the only thing I would add -- thanks, David, and thanks, Donnie, for the question. So yes, if you look at the revenue opportunity of the finished goods inventory, so finished goods inventory ended the year at $19.3 million. We reported that, and so that's carried at cost. So you could kind of do a quick conversion to the revenue value of that.

It's about $36 million or so. And, yes, as David said, we expect to grow shipments and we see that, obviously, that adds some visibility to our revenue as we get accepted to take revenue on those products.

Donnie Teng -- Nomura Instinet -- Analyst

OK. Great. And my second question is regarding to our growth outlook. Could you tell us what kind of a customer or applications are still going strong this year despite of coronavirus? I think as you mentioned is YMTC is still on track. So I think YMTC is growing very strong and for Huahong they have Wuxi fab and it's ramping up, as they mentioned in the earnings call.

But I'm curious about SMIC, is because SMIC spent most of their capex on 14 nanometer capacity, like out of the $3 billion capex they spent $2 billion there. So I'm wondering if SMIC is also very important growth driver for us and whether our gross from SMIC is mainly from their 14 nanometer or just purely from their 8-inch in Tianjin or other fabs? Thank you.

David Wang -- Chief Executive Officer

OK. Thank you for questions. Actually, like you mentioned we have continued demand from YMTC and also we see the demand from the family from [Inaudible], their 22 nano fab and also their Wuxi Huahong fabs. And we also see from initial property investing on some type of transaction from SK Hynix, right, second half this year too.

As a matter to the SMIC, yes, they get a lot of R&D research for the nano and this year renminbi. And with revenue participate in that renminbi, also beyond that also we have their demand from the Beijing 12-inch fab too. So I expect in this year revenue from SMIC should be increased more than last year.

Donnie Teng -- Nomura Instinet -- Analyst

Got it. So basically for SMIC it is like both from like 14 nanometer in Shanghai, as well as a 12-inch fab in Beijing.

David Wang -- Chief Executive Officer

Yes, that's as I see that. Yes.

Donnie Teng -- Nomura Instinet -- Analyst

Got it. And my last question is regarding to a DRAM customer. So as you know, I think coronavirus is causing some uncertainties on end demand for sure. Under the most bearish case, do you think that our sales from DRAM customer can be still maintained stable compared with 2019 in terms of absolute U.S.

dollar amount or --

David Wang -- Chief Executive Officer

This moment, I cannot say very clear. As I mentioned, we do see some technology upgrade, and this is another real expansion for the capacity. It's more like they transition from certain technology to certain advanced nodes. They need more of our tool, right.

So we see that orders were coming in, as I said, the second half. And as a matter of their real capacity expansion, this moment, I should say, we're cautiously watching and carefully waiting, and we're still waiting for customer sign right now.

Operator

Thank you for the questions. [Operator instructions] The next questions comes from the line of Suji Desilva from ROTH Capital. Please go ahead.

Suji Desilva -- ROTH Capital Partners -- Analyst

Hi, David. Hi, Mark. And good to know your staff is safe and back to work there.

David Wang -- Chief Executive Officer

Thank you, Suji.

Suji Desilva -- ROTH Capital Partners -- Analyst

Yes, first question on the gross margin, can you talk about the factors that drove that above target, what the pricing elements are there and whether those will persist or revert to normal in the next few quarters?

David Wang -- Chief Executive Officer

OK. So, Suji, as I said, yes, last quarter, our gross margin is actually beyond our range, which is 40% to 45%. It's really a matter of combination of the tool and combination of the technology as well. I still feel since we're growing our self in the future, we still believe, even this year, or maybe for next one year, we still consider 40% to 45% is our normal range, right? Obviously, some year can be higher, some year can be lower, but I still think about the ranges, we are -- this is what we're thinking right now.

Obviously, beyond a couple year later, as we have more advanced tools accepted, and when we're moving that gross margin to the next level. So that's our assessment right now. Mark, anything you want to add on that?

Mark McKechnie -- Chief Financial Officer

No, I think you covered it well. It's every quarter, just our product mix and customer mix. You can have some variants. It doesn't take a lot of tools to shift the gross margin one way or the other.

But yes, we are very confident in our long-term model.

Suji Desilva -- ROTH Capital Partners -- Analyst

OK. It's helpful color there. And then on the 20 -- we're in the 20 guidance for revenue, can you talk about the mix of that? That would be a non-SAPS as you diversify your revenue stream from the core SAPS revenue?

David Wang -- Chief Executive Officer

Yes. Actually, so Suji I can see that as we have more product on the line right, you can see that we are have a toggle as being introduced in the market today -- I mean, this year, last year, and we see there are probably multiple customer interested and to this powerful product because of the large quantity of their [Inaudible] and which is real protected environment. And also we see the positive repeat order coming for the existing customer for Tahoe. Beyond that, I can see that they also have their plating tool and we are probably seeing more of a customer buying tool for their both back-end and also front-end.

So that all add together probably you are seeing about their new product, which is beyond the fabs. This year, we'll add additional $15 million to $20 million more sale. And so that's I see their growth potential, which is our new product gaining additional customer and give us new revenue-driven stream.

Operator

Thank you for the questions. Next questions comes from the line of Christian Schwab from Craig-Hallum. Please go ahead.

Christian Schwab -- Craig-Hallum Capital Group LLC -- Analyst

Hi, great. Congratulations on extremely solid execution in this challenging time. Two quick questions, how many tools -- first one is how many tools is the opportunity for the Tahoe after acceptance there?

David Wang -- Chief Executive Officer

OK. Great question. I think we see a few -- I mean, at least three more customer interested in the Tahoe. And that's new customer, right.

Possibly, we'll have customer give us conditional deal or first two deals. And then we do have repeating orders come from the existing customers, which is our first time Tahoe customers, right? So we're expecting probably about four and two. And if we're working -- I mean, lucky, we may add another one so that we see the four or five tool this year for the Tahoe deliver. But obviously, not all of this will recognize revenue by end of this year, right.

So that really depends on how we deliver tools and how we can be qualifying for the new customer and that will account for the revenue this year.

Christian Schwab -- Craig-Hallum Capital Group LLC -- Analyst

OK. Great. And then my second question, I think the big fund, the National IC Industry Investment Fund is about to kick off its big second phase of capital investment. It -- to the local chip guys in China. Is that supportive of your solid outlook for this year or could there actually be upside to your estimates as that begins to flow in the marketplace?

David Wang -- Chief Executive Officer

Yes. Actually, as mentioned, I feel [Inaudible] is really boosting for their -- actually, their fiber building and fiber expansion plan. As we mentioned a couple times, China customer and they're really under multi-year expansion plan, either you called it YMTC or Huali Huahong Group and all the SMIC and other -- also other new DRAM customers too. So they have a multiyear expansion plan, and obviously this is the new founding injection into their -- our customer side and what -- that may be improving our visibility and give us more of an opportunity.

Beyond that, it's also [Inaudible], I should say, power device fab is also gaining the support in some -- those funds. So we see that expansion of new fab will give us a new opportunity too.

Operator

Thank you. Next question comes from the Patrick Ho with Stifel. Please go ahead.

Patrick Ho -- Stifel Financial Corp. -- Analyst

Thank you very much, and congratulations, and glad to hear everyone well. Maybe first off in terms of the supply chain. You mentioned on the prepared remarks that it's fine and everything is going well. Can you discuss any potential disruptions that you did have over the last few months, and whether that's part of the reason why you're pushing out some of the system deliveries into the second and third quarters.

And what gives you confidence that it's now resolved where you don't have to use, I guess, second or third source suppliers?

David Wang -- Chief Executive Officer

OK. Great. Actually, just for the supply chain EBITDA line first, at this moment, I should say probably our major supply and probably 70% come from outside China. In that pouring, I call the import from China in which probably most of them from Japan and some are also from Korea.

And we do have about less than probably 10% from U.S. and 10% from Europe. That's our supply chain distribution. In the last two months, three months, we didn't see any supply chain delay, right? Until that time obviously China got to suffer.

We do have seen some of our machine shop and gather people not on time return to the job. But at this moment, all our supply in China for machine shop have been on the line already. So as I see that is our major tool pushing from the Q1 to Q2 is obviously you see that is -- in the Wuhan, our customer YMTC, they do have manpower or they subcontract. They cannot go through the Wuhan restrictions, so that's why some tool we suppose ship to the YMTC in the Q1 was pushed to the Q2.

That's the major reason, right? So, obviously, we will watch carefully for our supply chain now since the coronavirus has kind of spread out and -- however, we're lucky to see Japan and Korea that is stable and hopefully in a few months, we are going to see U.S. and Europe get stable. So we are, so far, cautious watching. We feel probably OK for a real long -- I call it, for imported components at this moment.

Patrick Ho -- Stifel Financial Corp. -- Analyst

Great. That's helpful. And maybe a question for you, Mark, in terms of capex for this year, especially as you get the third facility signed on and begin the process there, can give a little bit of color on how much you think potentially you're going to invest in capex for 2020?

Mark McKechnie -- Chief Financial Officer

Yes. Hey, Patrick, thanks for the question. So the capex for 2020 is just normal run rate operations, $2 million to $5 million is what we're looking at, adding a second floor to production at our second factory and some other upgrades. So that's kind of our normal run rate.

We did talk about the land for our new production in R&D site out there in Lingang. So if we reach agreement on that, we could see putting some money down for that, and we might even spend some on the construction side there this year. So, depends on exactly when it starts, but that land could be on the order of $10 million and maybe $5 million to $10 million of spending on construction, depending on when it starts.

Operator

Thank you. OUr next question comes from the line of Charlie Chen from Morgan Stanley. Please go ahead.

Charlie Chen -- Morgan Stanley -- Analyst

Hi, David, Mark. Nice to meet you online. So, my question -- so first of all, congratulations for your great results and great execution during this kind of environment. My question is really about your overseas customers' opportunity.

Can you please give us some color whether you will be able to enter the sub-7 nanometer logic foundry opportunity? So, I guess, it is ready to your chance for 3 nanometer? And also for the current 7 nanometer and 5 nanometer baseline, do you think customer could change the baseline for you to use your higher performance products? Thank you.

David Wang -- Chief Executive Officer

OK. Charlie, thank you. By the way, thank you, I have not seen China. One day, I should really do.

Anyway, so thank you for the question. And actually, you mentioned about the top tier customer. ACM has been real working very hard, and as this moment, heavily engaged with a two of top three, a guy in the industry. So, let me give you the first -- our preparation, right? We believe as ACM want to be the vendor for the top tier guy, you have to get a certain size, which is at this moment we are also moving about one employee and $100 million revenue this year even more higher.

So also we are having strong balance sheet ready for this, I call it, penetration process. So we have about currently $100 million cash and we'll also get more from the China IPO in hopefully end of this year. So as I see that is, we're in the right spot and the size to be able to supporting big guys demand, big guys, I call it, requirement. So as the map come to the next line of technology.

With our technology TEBO and SAPS and Tahoe, we definitely -- we have confidence those technologies will be needed for the top tier guy to enhance their yield and reduce the kind of spending, especially sulfuric acid and also most importantly for their -- as a smaller geometry coming is 7, 5, 3 nano and yield improvement is critical for their economical ramping up. So we have very strong confidence. And as a matter, I should say that is we're working very hard and we're -- this is a matter of time and hopefully, we'll can bring one of these two customers this year and happy even more, right, to have two together. But we're hoping to bring one over this year and possibly bring another one next year.

So that's our strategy put on. And third, we also hire high power, actually, sales force and both in Taiwan also in North America. There's one additional announcement what we assume very high power to help our sales in the U.S. and North American market.

So with that all said, ACM will be very positive and we're being -- working hard and to penetrate those top tier customers. Mark, anything you want to add on that?

Mark McKechnie -- Chief Financial Officer

David, no. I think you summarized it pretty well. I mean, we're -- really everything we do here at ACM is to become a major player, broaden our product line, developing the balance sheet, our capacity plans, and we're putting some serious resources in place to realize our goals.

Operator

Thank you. [Operator instructions] Next question comes from the line of Mark Miller from Benchmark. Please go ahead.

Mark Miller -- Benchmark -- Analyst

Thank you for the questions. You mentioned in your situation with respect to the coronavirus, but I'm just wondering, what's the situation with some of your major customers? Are they back to normal?

David Wang -- Chief Executive Officer

OK. Thanks, Miller. As I said is -- I mentioned they're -- our customer YMTC in the Wuhan, they're -- actually they never stopped manufacturing even in the Luna New Year timeline. Obviously, they're in the, I call it, full production today.

As a matter of -- if they want to install a new tool and they are waiting for 3D to real -- so the people can move in, right? Hopefully, those kind of things can happen again too. With that confirmation, then probably we can install, we can have our people move into Wuhan to install this tool. And I see that even the worst case, I still have a service guy, about 20 service guys in Wuhan and that is still possible. You saw the tool and may be a little bit slow pace, but that's the worst case situation.

In other cities, like Beijing and our customer SMIC in Shanghai, Huali, Wuxi, and SK Hynix, and also Huahong -- Wuxi, they are so far pretty open right now, and they're -- we can have our engineers sent there. We can have our -- visiting to those customer, but that's all becoming normal right now.

Mark Miller -- Benchmark -- Analyst

Just was wondering, the smartphone production supposed to be down around 12% year over year this quarter may also be softer in the second quarter. Are any of your customers adjusting their production schedules you know about?

David Wang -- Chief Executive Officer

This moment, I should say, our major customer, we have not seen any slowdown yet. And they're -- there are some trends there to deliver time based on their [Inaudible] on our plan or on our production schedule, right? As a matter of -- our DRAM customer, as I mentioned, they're still moving to the new advanced mode. They're still buying further buyer tool to expand in the new generation technology. So for the capacity wise, we're still in a cautious watching right now and we're -- we have not gotten a clear sign yet.

Mark Miller -- Benchmark -- Analyst

I'm sorry if I missed this. What was stock based compensation in the fourth quarter?

David Wang -- Chief Executive Officer

Hey, Mark. [Inaudible] answer that?

Mark McKechnie -- Chief Financial Officer

Yes. I can look it up. It's on the table in our earnings release.

Mark Miller -- Benchmark -- Analyst

In the presentation slides?

Mark McKechnie -- Chief Financial Officer

Yes, it's in the table in the earnings call, but yes, stock based compensation here looks like it's $650,000 for the quarter and $3.6 million for the year. We actually had a big jump. The reason that it was high in, I believe, the third quarter was some of the options we granted to our China IPO employees regarding the China IPO. There was a bump for that.

Mark Miller -- Benchmark -- Analyst

Dave, you indicated tax and effective foreign exchange increase were positive by debt benefit of $4.7 million for the year. What were they for the quarter in terms of how do they add on this quarter?

Mark McKechnie -- Chief Financial Officer

Yes, for the quarter, it was about a nickel. So you had -- if you adjusted relative to 14% tax rate, you have about $1.7 million on the tax. We had a partial valuation release in Q3, and we did the full release for the year. So it's about $1.7 million delta in Q4.

And then we actually had a foreign exchange loss from operations of about $600,000. So, that was a headwind to our earnings, but net-net we reported $0.23 non-GAAP earnings in Q4, and there was -- apples-to-apples, it would be a nickel lower. So it would have been like a $0.17 number if you took out those one-time items.

Operator

Thank you. [Operator instructions] Next question comes from Charlie Chen from Morgan Stanley. Please go ahead.

Charlie Chen -- Morgan Stanley -- Analyst

Thanks for taking my follow-up question. So David, I know it's a little bit sensitive, but also related to your potential China IPO. Given the circumstance of China, U.S. pension and your big exposure to China customer like YMTC, SMIC, do you consider potential restriction on your technology export to your China customers from the U.S.

government? And how is the company going to address these potential risks? Thank you.

David Wang -- Chief Executive Officer

OK. Well, good question Charlie. And basically the technology we're selling in most markets right now is, I think, wafer technology, right? Wafer cleaning. Those technologies actually were developed in the last 10 to 15 years in Shanghai.

So, based on our talking with our lawyer in the U.S., that is not in the restriction category of the export technology category right now. However, we do see some kind of either 25% the immunity rule, right components, if you import and use U.S. components. That 25%, as I heard, probably, down to 10%.

With that challenge yes, we do have seen some challenges there. If that happens, we will have to real ship in the product or we have to find a alternative choice of supply chain to replace those components, right? That is so far our strategy try to protect our investors' interest and also make the company continue to grow in this kind of a dynamic environment.

Charlie Chen -- Morgan Stanley -- Analyst

OK. Thanks. And my next question, if I may, is about your value and pricing versus your key competitors. Sorry, I didn't know about this.

But do you need to process some discounts versus Japan or U.S. vendors when you approach your customers?

David Wang -- Chief Executive Officer

You mean our pricing from -- I make sure of the question. You mean our purchase pricing components or our selling price to the customer?

Charlie Chen -- Morgan Stanley -- Analyst

Your selling pricing to the customer, and if you can give us a rough market share in China?

David Wang -- Chief Executive Officer

OK. Well, I mean, pricing is always kind of challenge, right? And obviously, we constantly get pressure from customer and lower the pricing. However, I think our strategy of trying to sell product is by our product quality and value added the specials have really improved, and also for other excellent, you know, better service for our customer, say local customer in Korea, and in China, potentially in Taiwan. So we offer better quality and value-added products.

Again, obviously, we're looking for reasonable pricing and for the customer. So that's our strategy right now. To answer your question, yes, we're trying to really sell the value added and moreover consider cost of their ownership not just by selling price. So that's our strategy.

Charlie Chen -- Morgan Stanley -- Analyst

OK. And your market share in China? Mark, yes, please.

Mark McKechnie -- Chief Financial Officer

Yes. Hey, David, if you don't mind I would just add. Yes, I would just add to that is, look, like we're a small company with -- but growing bigger with some big aspirations. So, David and the team, every one of our products have some innovations backed by patents and we have to do a little better on the performance side.

So, we cut our teeth with SK Hynix proving that the yields at the steps, the Tahoe product similar performance, but we're going to reduce the amount of sulfuric acid use. So we always have something innovative to drive the customers to use our products and we feel that we offer a bit more and we can get a good price for that.

Charlie Chen -- Morgan Stanley -- Analyst

Thank you.

David Wang -- Chief Executive Officer

Yes, maybe, Charlie, I want to add one more word here. I do believe the company was sustaining R&D arm and sustaining our operation or give a certain profitability of the company. We are not real pushing pricing down to get market share. We rather maintain certain pricing.

We leave out some market share to other competitors coming. We feel that more win-win situation, and that's our strategy.

Operator

Thank you. We have a last question from the line of Quinn Bolton from the line of Needham & Company. Please go ahead.

Quinn Bolton -- Needham and Company -- Analyst

Hi, guys. Thanks for squeezing me in here. First question, Mark, just a clarification on the timing of the restricted cash. Did you say that you have access to that restricted cash or it becomes unrestricted upon the filing of the STAR market transaction or on the listing, a successful listing of that transaction?

Mark McKechnie -- Chief Financial Officer

Yes. Hi, Charlie. Yes, so I'm glad you asked that. So yes, Quinn, we do -- we did say that on the call that when we submit the application, we're going to unrestrict the cash as opposed to when we achieve the listing, yes.

Quinn Bolton -- Needham and Company -- Analyst

Great and then second question from me, just can you guys give us any sense of the number of tools or the dollar revenue that may have shifted from Q1 to Q2 as a result of the Coronavirus effects?

David Wang -- Chief Executive Officer

OK. Quinn, it's a good question but as we set the rule general earnings call, we do put the -- not normally give guidance for the coming Q or next Q, right? The reason for that is because one tool and if it is delivered in Q1 versus Q2 will cause fluctuation of sometimes 10% to 15%. That gives us real projection on the earnings for the next quarter is very difficult. That's why we say this moment and maybe for wire, we're not going to give the clear projection for the coming quarter.

However, if we see our revenue, say maybe quarterly come to $50 million, $60 million, or $70 million per quarter, then maybe that time we can give more clear. In that case, one tool gets delay or gets up not much impact to our final projection accuracy. So, I really hope you understand that and we're in another situation. However, as you can see that is maybe Q1 is our lowest quarter in the whole year, and we can see strong Q2, Q3 demand, and we don't know Q4 or Q2 is so far the highest, I think, right now, but we don't know Q4 right? Maybe Q4 will be higher than Q3 or maybe you know Q4 can be higher than Q3, it depends on the management agreement.

So that's our assessment for this year's revenue.

Operator

Thank you. With that, I would like to hand the call back to management, Mr. Yang -- Mr. Wang for closing remarks.

David Wang -- Chief Executive Officer

OK. Thank you, operator, and thank you all for participating on today's call and for all your support. This concludes the call and you may now disconnect it.

Operator

[Operator signoff]

Duration: 58 minutes

Call participants:

Gary Dvorchak -- Managing Director of The Blueshirt Group

David Wang -- Chief Executive Officer

Mark McKechnie -- Chief Financial Officer

Donnie Teng -- Nomura Instinet -- Analyst

Suji Desilva -- ROTH Capital Partners -- Analyst

Christian Schwab -- Craig-Hallum Capital Group LLC -- Analyst

Patrick Ho -- Stifel Financial Corp. -- Analyst

Charlie Chen -- Morgan Stanley -- Analyst

Mark Miller -- Benchmark -- Analyst

Quinn Bolton -- Needham and Company -- Analyst

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