Aehr Test Systems (AEHR) 2010 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Aehr Test Systems second quarter fiscal 2010 conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) For participants using speaker equipment, it will be necessary to pick up your handset before making your selection. This conference is being recorded today, Wednesday, January 6th of 2010. I would now like to turn the conference over to Lasse Glassen of the Financial Relations Board. Please go ahead, sir.

Good afternoon and thanks for joining us to discuss Aehr Test Systems' results for the second quarter of fiscal 2010. By now you should have all received a copy of today's press release. If not, you can call my office at 213-486-6546, and we'll get a copy to you right away. 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 the call to your questions. I would now like to turn the call over to Gary Larson. Gary, please go ahead.

Thank you. And thanks to everyone for joining us today. Before we begin I would 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 products as well as projections regarding Aehr Test future financial performance. Actual performance 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 technologies, acceptance of product shipped upon a purchase order, ability to meet customer needs or performance described, the Company's development and manufacture of a commercially successfully wafer level test and burn-in system, and the potential emergence of alternative technologies, each of which could adversely impact demand for Aehr Test product in calendar 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 would like to introduce our Chairman and CEO, Rhea Posedel.

Thank you, Gary. Good afternoon, and welcome to our conference call for the second quarter of fiscal year 2010. Revenue for the second quarter was $1.6 million, up 30% on a sequential quarter basis. There are several highlights for this past quarter that I would like to bring to your attention. First, shipments were over $1 million higher compared to the prior quarter, as we shipped a FOX-15 wafer level burn-in system on schedule to Micronis. We look forward to getting acceptance and recognizing this FOX-15 system shipment as revenue for our third quarter.

Another highlight during the quarter was receiving over $1 million in orders for FOX-1 system upgrades from Spansion. These upgrades mostly consisted of power supply and pin driver boards to provide the capability to test 300-millimeter wafers. This order is significant for us because we believe it means that Spansion is investing in using our FOX-1 strategy for full-wafer flash tests in a single touchdown for their Austin fab. It is important to note that Spansion has announced that they expect to emerge from bankruptcy sometime in early 2010 time frame as $1 billion embedded flash company. We are hopeful that what he receive wafer pack, FOX-1 upgrade or system orders as their business expands over the next few quarters.

We are excited about the opportunities we see for the ABTS product family this coming year. The quoting activity the past few months has been quite high. For burn-in of high-power ICUs requiring individual temperature control per device, it's a competitive space, but we believe the ABTS system offers cost savings and performance advantages that will allow us to penetrate and grow share in this growing market segment for high-powered logic burn-in above 10 watts per device. We believe this market will continue to grow as I see fabs feature size shrink to 45 nanometer and below, causing device leakage current and power to increase significantly at burn in temperatures.

Another recent highlight was our participation in Semicon Japan during the first week of December. Even though the number of inhibitors was off about 40% year-over-year, we had a high number of leads interested in our ABTS and FOX products. Many Japanese IC producers are starting to add capacity, so I think we have an excellent chance to penetrate some major, during this upcoming year. It was also helpful that none of our Japanese competitors were exhibiting at the show.

We are seeing some major activity from our MAX burn-in products. We booked and shipped a MAX3 system to a leading defense company during the prior quarter. We have a large installed base of MAX3 and 4 burn-in system, and we are hopeful we can benefit from additional capacity bays as the semiconductor industry grows capacity in 2010. Moving forward, we continue to aggressively market our FOX-1 full wafer parallel tester and FOX-15 wafer-level burn-in systems. We are making inroads into a number of accounts where we are seeing interest levels for a variety of applications such as sensors, automotive ICs, and NIMS, to name a few. Capital is still tight, but we are hopeful to convert some of these prospects to orders this calendar year. Over the long term, more multichip module and stacked die module producers will need known good die to produce high-yielding modules.

We believe our FOX-15 system with the capability to burn in and test 15 wafers in parallel at temperatures to 170 degrees Celsius is a cost effective tool for producing known good die. We are glad that calendar 2009 is behind us and are hopeful that 2010 will be a better year for Aehr Test. The industry trend lines are up for 2010, and we see some of our customers getting to a point where they need to add additional capacity. As a result, we saw high level of quoting activity at the end of last year, and are hopeful many of these quotes will turn into orders.

Our strategy continues to be focused on penetrating as many production accounts as possible, with our new ABTS and FOX products. This will allow us to expand our customer base and grow market share. We are confident in our ability to achieve this goal as we have the strongest competitive product portfolio in our history with the FOX-1 and FOX-15 systems, full-wafer contactor technology with our new ABTS family of products.

We are starting to feel a little better about our outlook moving forward. Based on our recent FOX-1 system upgrade orders and the expected revenue recognition of the FOX-15 system shipment we believe the worst is behind us, and that revenue for a third quarter will be up over the prior quarter.

In closing, we believe Aehr Test is in the favorable position to grow market share during this recovery period enabling us to return to a growth trajectory when our industry gets back to normal spending levels. We have exciting technology with our FOX full wafer test and burn-in system and wafer pack contractors. We feel confident that we can continue to win new accounts with our ABTS products, which address growing market segments for high-power logic burn-in and parallel test of memories. Now I would like to turn the call over to Gary, and he will discuss the second quarter in more detail. Gary.

Thanks, Rhea. As Rhea mention he'd, net sales were $1.6 million in the second quarter of fiscal 2010. This compares to $9.2 million in the second quarter of fiscal 2009. The decrease in net sales for the second quarter of fiscal 2010 resulted primarily from a decrease in net sales of the Company's wafer level products. Gross profit was $349,000 for the second quarter of fiscal 2010, or 21% of net sales. This compares with gross profit of $4.6 million, or nearly 50% of net sales in the year-ago period. The lower gross profit and gross profit margin were the results of the significant decline in net sales.

SG&A was $1.6 million in the second quarter of fiscal 2010, compared with $1.8 million in the prior year period. As discussed in prior calls, we've implemented a number of expense reduction initiatives over the past several quarters. Second quarter 2010 R&D expense was $1.1 million compared with $1.6 million in the second quarter of last year. R&D spending varies from quarter to quarter depending on the level of development of new products. Net loss in the second quarter of fiscal 2010 was $2.2 million, or $0.25 per share, compared with net income of $0.9 million, or $0.10 per diluted share a year ago. Pro forma net loss in the second quarter fiscal 2010 was $1.4 million, or $0.16 per diluted share compared to pro forma net income of $1.1 million or $0.13 per diluted share in the same period of the prior year.

In determining the pro forma, or non-GAAP net loss in the second quarter of 2010 we've excluded noncash stock compensation expense of $0.8 million, and for the prior year we've excluded $0.3 million of the same noncash stock compensation expense. During the second quarter of fiscal 2010, the officers of the Company voluntarily forfeited certain high-priced stock options, resulting in the immediate recognition of the unamortized portion of the stock compensation expense of $0.5 million. More than 100,000 shares were returned to the available option pool.

Our cash and cash equivalents increased to $5.1 million at November 30, 2009, compared to $2.7 million at the end of the first quarter. Increase was primarily due to $3.3 million in net proceeds received in September, 2009 from the sale of a portion of the Spansion bankruptcy claim to a third party. Additional upside for Aehr Test would be the receipt of some compensation for our remaining Spansion bankruptcy claim which totals about $7 million. We continue to remain debt-free.

This concludes our prepared remarks. We're now ready to answer your questions. Operator, please go ahead.

Thank you, sir. We will now begin the question-and-answer session. (Operator Instructions) And our first question is from the line of Jeffrey Scott with Scott Asset Management. Please go ahead.

Good afternoon, guys.

Hi, Jeff.

Hi, Jeff. Happy new year.

And to you. Couple questions. For the FOX-15 to Micronis, you've already received all the cash for that, have you not?

We've not received all of it. We have received a substantial portion of that.

Is that most of it, Gary?

It's the majority of the amount due, yes.

But it wasn't received in last quarter.

It wasn't received as of November 30?

Correct. It was not received as of November 30, but it has been received as of today.

Okay. Thanks for clarifying that, Rhea. Semicon Japan, you talked about the level of interest over there. Was that with existing or new accounts?

I think -- I would say new accounts in the sense that we haven't sold to these accounts in many years. So we have sold to these accounts maybe 10, 15 years ago something of that sort. But, yes, there are new opportunities for us. We showed an ABTS system, a small version of it, so there was interest in applications for the ABTS, then we also had wafer packs that we carted over for the FOX-15. So there was interest in both products.

But there are people that know who Aehr Test is, you don't have to start from scratch with them?

That's correct. As I mentioned, we were the only wafer-level burn-in manufacturer in the show.

Is the level of interest such that would you expect orders during calendar 2010?

I would hope so, that we would expect to see some business out of Japan in the next calendar year -- in this calendar year.

Okay.

And that would be new accounts for us and account that we haven't -- or accounts that we haven't sold into for a long time.

Right. Okay. On the -- you said the quoting activity was high for the ABTS. Is that people, for instance, TI used to be a big customer of the Mac system.

Yes.

Are they looking at moving to an ABTS instead of capacity additions in MAX?

I think long term they are looking at moving to the ABTS, but probably -- the plan is to get it qualified first, but I think if they have immediate capacity needs, they would probably just buy additional MAXs.

Do you have problems going back and manufacturing the old MAXs?

No.

You remember how to do it?

We remember how to do it. It's always -- the biggest difficulty is getting any ICUs that maybe are obsolete, but as far as knowing how to do it we can still do it.

Parts have to be a little bit difficult to procure, don't they?

That's correct. We still have some in inventory. We believe we have a lot of the critical parts in inventory, but that -- depending on how many we sell, there could be an issue. But we'll work through that. We've done that over the years with MAX.

Okay. You talked about possible FOX-1 upgrades and wafer packs for Spansion. The wafer packs you carry at zero dollar value, do you not?

That's correct.

Can you tell us how many there are in there?

How many wafer packs?

Yes.

I don't think we want to go in that kind of detail but the real question is how many of the wafer packs would Spansion be needing on a forward-looking basis.

Okay, can you answer that one, Gary? You're good at asking questions yourself, so you might as well answer it.

One of the problems with the wafer packs that we have written off in inventory is that they're custom designed for each wafer so even if -- so Spansion would have to need the same one that they canceled a year ago. So it's possible. But there are some common parts that we can use for additional wafer packs. The main thing for us was to get them using the system and upgrading the systems and start investing in FOX 1 technology again, and that's what they started to do. So they upgraded a few systems, and hopefully they will upgrade a few more, then start buying some wafer packs, either wafer packs from our inventory or new ones, either way. So I don't think we'll be able to sell all the wafer packs that we've written off in our inventory, because they are custom designed for unique wafers. Some of the parts we can still use. But the systems I think we'll be able to utilize.

Okay. Is there any word on the -- what's happened to the machines that are in Japan?

Not yet. I mean, I -- the systems are still sitting over there, but, I mean, the way we look at it, even if they sell them to another company, or they sell them back to Spansion in the US, it's still an up side for us. We're going to get more service, and the systems haven't been maintained, and support and things of that sort. So if they move a number of systems here, it would help us, because then they would need more wafer packs. Either way, it's an up side.

Have you heard anything about the timing on a resolution of Japan?

No, we haven't. The US bankruptcy seems to be pointing towards first quarter of calendar '10, and I just asked that question about the Japanese action of our president over in Japan, and he said there is no information at all forthcoming on the status of the bankruptcy action. So we don't have any insight into the timing of that.

Okay. Good luck. I will let somebody else hop on.

Thanks.

Thank you. (Operator Instructions) One moment, please. And there are no further questions in the queue at this time. Please continue.

This is Rhea. I would like to thank you for joining us this afternoon, and happy new year to everyone, and we look forward to next quarter's conference call. Thanks again. Bye.

Bye-bye.

Ladies and gentlemen, this concludes you the Aehr Test Systems second quarter fiscal 2010 conference call. This conference will be available for replay, and you may access the replay system at any time by dialing 1-303-590-3030, or 1-800-406-7325, and enter the access code of 4195810 followed by the pound sign. Thank you for your participation. You may now disconnect.