Aehr Test Systems (AEHR) 2009 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the AEHR Test Systems Fourth Quarter Fiscal 2009 Conference Call. (Operator Instructions). This conference call is being recorded today, Tuesday, July 28, 2009.

I would now like to turn the conference over to Tony Rossi of the Financial Relations Board. Please go ahead, sir.

Thank you, operator. Good afternoon, and thanks for joining us to discuss AEHR Test Systems' results for the fourth quarter of fiscal 2009.

With us today from AEHR Test are Rhea Posedel, Chairman and Chief Executive Officer, and Gary Larson, Vice President of Finance and Chief Financial Officer. Management will review its operating performance for the quarter before opening up the call to your questions.

I'd now like to turn the call over to Gary Larson. Go ahead, Gary.

Thanks, Tony, and thank you to everyone for joining us today.

Before we begin, I'd like to make a few comments about forward-looking statements. Please be advised that, during the course of our discussion today, we may make forward-looking statements that involve risks and uncertainties relating to projections regarding industry growth and customer demand for AEHR Test's products, as well as projections regarding AEHR Test's future financial performance. Actual results may differ materially from projected results and should not be considered as an indication of future performance.

These risks and uncertainties include, without limitation, world economic conditions; the timing of the recovery of the semiconductor equipment market; the Company's ability to maintain sufficient cash to support operations; acceptance by customers of AEHR Test's technologies; acceptance by customers of the systems shipped upon receipt of a purchase order; resolution of Spansion's bankruptcy action; the ability of new products to meet the customer needs or performance described; the Company's development and manufacture of a commercially successful, wafer-level test and burn-in system; and the potential emergence of alternative technologies, each of which could adversely affect demand for AEHR Test's products in fiscal year 2010.

We refer you to our most recent 10-K and 10-Q reports and other reports from time to time filed with the US Securities and Exchange Commission for a more detailed description of the risks facing our business and factors that could cause actual results to differ materially from projected results.

The Company disclaims any obligation to update information contained in any forward-looking statements to reflect events or circumstances occurring after the date of this conference call.

Now I'd like to introduce our Chairman and CEO, Rhea Posedel.

Thank you, Gary. Good afternoon, and welcome to our conference call for the fourth quarter of fiscal year 2009.

The semiconductor manufacturers saw their business drop significantly during the fourth quarter of calendar 2008 to the first quarter of calendar 2009 as a result of the worldwide economic meltdown. Their response was to freeze capital spending. As a result, the semiconductor capital equipment sector is experiencing the largest contraction I've seen in my 30-plus years in the business. This, coupled with Spansion, our largest customer, going bankrupt in our third quarter has led to another difficult quarter for AEHR Test.

Revenue for our fourth quarter was $1.2 million, flat with the prior quarter. Revenue for the fiscal year ended May 31, 2009 was $21.4 million, a year-over-year reduction of 45%.

The pro forma net loss for fiscal 2009 was $1.9 million. The pro forma numbers exclude the AR and inventory write-offs, mostly caused by the Spansion bankruptcy.

Some good news. Industry tracking surveys are now saying that the equipment sector bookings have bottomed out and have even improved somewhat over the last few months.

Importantly, we see some positive signs that our business may be starting to recover as well, as we have booked three new ABTS orders since our last conference call. In mid-July, we announced booking a follow-on ABTS logic burn-in system to iST, a new high-pin-count logic ABTS burn-in system to a leading aerospace company. Also, we received an order from a new Chinese customer for a mixed-signal, logic and analog version of our ABTS L-36 system platform. We continue to be encouraged by the interest levels we see for our new ABTS product family.

A new market segment that we are also targeting with the ABTS is high-power logic burn-in applications, requiring individual temperature control per device. We believe that this market will continue to grow as feature sizes shrink to 45-nanometer and below, causing burn-in leakage currents and power to increase.

Another large target market for the ABTS platform is for a parallel test and burn-in of DRAMs and flash memories. Even though the memory market is in the tank today, we are starting to see a recovery in memory ASPs and hope to see capacity expansions in late calendar 2010.

Another bright spot was our announcement at the semiconductor wafer test workshop in June of a new wafer pack contactor technology with finer-pitch capability to 85 micrometers. This fine-pitch contactor development was a result of our partnering with a leading probe company for full wafer applications for our FOX systems. This new wafer pack contactor technology is significant because it allows us to expand the target market for our FOX-1 and FOX-15 systems by addressing finer-pitch applications for wafer-level burn-in and test of DRAMs and microcontrollers.

We are also working aggressively to sell our FOX-1 tester and FOX-15 wafer-level burn-in systems. In the last few months, we have seen a rebound in the interest for our FOX-15 system for automotive IC applications and for producing known good die. As the number of die increases in stacked packages, the cost model should tilt in our favor. We believe, long term, more customers will need to purchase wafer-level burn-in systems as a cost-effective process for producing known good die.

Our strategy during the downturn is to conserve our cash and win as many production accounts as possible with our new FOX and ABTS products. This will allow us to expand our customer base and grow market share. We are optimistic about our opportunity to achieve this goal, as we have the strongest competitive product portfolio in our history. Combined with the expense-reduction actions we have taken over the past two quarters, we believe we will have sufficient working capital to run our operation until semiconductor capital expenditures turn around.

There could also be some upside this fiscal year if Spansion's business continues to grow and they purchase additional FOX-1 system upgrades and wafer packs for their Austin fab. Spansion has jettisoned their money-losing wireless business, and they have scaled down to a level where they are now generating cash. We are hearing that Spansion expects to come out of bankruptcy this year, by yearend, as a billion-dollar, embedded flash company. The good news last quarter was that we booked a small FOX-1 upgrade order from Spansion. We are hopeful to receive some wafer pack and/or FOX-1 system upgrade orders over the next three to six months.

Another potential upside when Spansion exits bankruptcy would be the payments of a portion of the Spansion accounts receivable that we had previously written off.

At this time, I expect the next couple of quarters to be difficult for AEHR Test. Most industry experts are saying that the semiconductor manufacturers aren't going to add sufficient capacity until sometime in 2010. With all the uncertainty in the economy and with our customer base, we are unable to provide guidance at this time.

With that said, we believe AEHR Test is in a favorable position to grow market share during this downturn, enabling us to return to a growth trajectory when the industry recovers. We have exciting new technology with our FOX full-wafer test and burn-in systems and wafer pack contactors, and we feel confident that we can continue to win new accounts with our new ABTS products, which address new market segments for parallel test and burn-in of packaged, integrated circuits.

Now I'd like to turn the call over to Gary, and he'll discuss the fourth quarter and yearend financials in more detail.

Thanks, Rhea. Net sales were $1.2 million in the fourth quarter of fiscal 2009, compared with $10.9 million in the fourth quarter of fiscal 2008. The decrease in net sales for the fourth quarter of fiscal 2009 resulted primarily from a decrease in net sales of the Company's wafer-level products.

Gross loss was $1.5 million for the fourth quarter of fiscal 2009, compared with gross profit of $5.4 million in the year-ago period. The difference was primarily the result of a $1.5-million provision for excess and obsolete inventory and the significant decline in net sales.

SG&A was $1.4 million in the fourth quarter of fiscal 2009, compared with $2 million in the prior-year period. The decline in SG&A expense was primarily due to expense-reduction initiatives we have taken over the past two quarters.

Fourth quarter 2009 R&D expense was $1.1 million, compared with $1.6 million in the fourth quarter of last year. R&D spending varies from quarter to quarter, depending on the level of development of new product.

Net loss for the fourth quarter was $4 million, or $0.48 per share, compared with net income of $6.5 million, or $0.74 per diluted share, a year ago.

The pro forma net loss in the fourth quarter of fiscal 2009 was $2.2 million, or $0.26 per share, compared to pro forma net income of $6.7 million, or $0.77 per diluted share, in the same period of the prior year. In determining the pro forma, or non-GAAP, net loss in Q4, the following items were excluded -- a $1.5-million provision for excess and obsolete inventory, $0.2 million in severance, and a credit of $0.3 million for the settlement of cancellation charges accrued in the third quarter of fiscal 2009. Of the above three restructuring and asset-impairment items, all but the severance payment are noncash. The noncash total of these items is $1.3 million. Additionally, one more noncash, pro forma item in Q4 is the stock-compensation expense of $0.3 million.

Our cash, cash equivalents, and short-term investments stood at $4.4 million at May 31, 2009. This is a decrease of approximately $3 million from our end of last quarter. We continue to remain free of debt. We expect that our cash consumption rate will decline in the first quarter of fiscal 2010.

We're now ready to answer your questions. Operator, please go ahead.

Thank you, sir. (Operator Instructions). Geoffrey Scott, Scott Asset Management.

A couple questions. Your claim against Spansion is a claim against Spansion Inc., US. Is that correct?

The large majority of our claim against Spansion is in the US bankruptcy action. Yes. And then we do have a claim also in the Japanese courts against Spansion Japan, but it's a smaller claim.

How much smaller is it?

$3 million to $4 million, in that range. The claim that we filed in the US courts against Spansion is approximately $18 million.

So $18 million against Spansion Inc. and $4 million against Spansion Japan?

Roughly, yes.

Okay. You said that there was a FOX-1 upgrade. Was that for Spansion Japan or Spansion Austin?

Actually, it was for Spansion Sunnyvale.

For Sunnyvale?

Sunnyvale has an R&D center where they do development, and they have a couple of FOX-1 systems there. It's possible that upgrade would also, later on, be purchased by the Austin fab.

Okay. Have you heard anything about claims against Spansion Japan -- when those will be resolved?

We've not heard anything formally. I know that claims have been submitted there. They actually had an earlier cutoff in Japan than they did in the US. But we're not getting much feedback as far as the process there.

Yes, I'm getting no feedback. How many of your FOX-1 machines are in Japan rather than physically in the United States?

I think somewhere around 25 in Japan and maybe 6 in the US.

And those are in Sunnyvale?

Sunnyvale and fab 25 in Austin.

In Austin. Okay. For yearend, are you going to have any discussions with the auditors over a going-concern inclusion?

Since our audit is still ongoing and will be until our 10-K gets filed in late August, I don't have any answer for you there.

Okay. I guess, for Rhea, what are the prospects for additional FOX-15s?

I mentioned that we've seen increased activities on the automotive front. And that's good news. And I think that there is a possibility that, over the next quarter or two, we could see an additional FOX-15 from an automotive -- or we're hopeful we're going to see an additional FOX-15 order from an automotive IC manufacturer.

Would that be the same one who took the first 15?

Possibly; yes. We are talking to a couple of them, but that's a strong possibility, I'd say.

So a second order from that first customer would be the most likely?

Correct. I think they see their demand increasing, and they realize that the FOX-15 is able to save them money in doing burn-in for automotive applications.

Okay. There was a press release from Spansion. I think it was today. Did you see it?

We did. Fortunately, it supports what we were saying.

It said that their cash position had improved very substantially.

Correct.

Does that give you some sort of hope going forward that you'll be able to sell more goods into Austin?

I think that's true. Well, it's not just the cash. I think the important part of the press release -- it said their business was strengthening. So I think -- our systems were used on their 65-nanometer technology, and Austin is doing both 90 and 65. So I think, as they move more to 65-nanometer flash, then I think you'll see more of their wafers going on the FOX-1. So, as I said, we're hopeful that we'll see some additional wafer pack contactor orders and, as a minimum, FOX-1 upgrade orders over the next three to six months for fab 25 in Austin.

Do they have an -- I guess, do they have a choice between shipping the machines from Japan back to Austin, or would Austin opt to buy new equipment from you?

That's a good question. I'm not sure they can get the systems out of Japan because it's a different legal entity. And I was told they can't move product -- equipment from Japan. So, again, we're hopeful that they'll have to buy new equipment for the Austin fab. But, if that changed, then, I guess, they could take the equipment from -- or they'd have to pay for the equipment that's in the Japanese fab. It's basically two different companies.

Yes. I just haven't heard much about what the forecast is for the Japanese company going forward - how much it is going to be able to do, how much it intends to do, how much it would like to do.

We haven't either. The only thing we've heard is that they've gone to a significant layoff to try and minimize their cash burn.

Yes. I just wondered whether or not -- if in fact Japan was going to decrease its activity substantially, whether or not it would have excess machines that would be available to sell to Austin, which would take you out of the new equipment business for a bit.

For a bit. Yes. I don't know.

Okay. I'll hop back in. Thank you.

One other thing, Geoff, I can add is that there still would be wafer pack contactor business because the wafers that Austin is producing have a different layout, typically, than the ones that are produced in Japan. So there would still be purchases of wafer pack contactors.

Okay. At least there's some good news. Thanks.

Some good news.

Thank you. (Operator Instructions). Management, it looks like there are no further questions. I'll turn the call back over to you.

I'd like to thank you for joining us this afternoon. We look forward to next quarter's conference call. Thanks again. Bye.

Thank you. Ladies and gentlemen, that will conclude today's teleconference. We do thank you for your participation. And, at this time, you may disconnect. Have a nice day.