Aehr Test Systems (AEHR) 2010 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Aehr Test Systems Fourth Quarter Fiscal 2010 Earnings Conference Call. (Operator Instructions.) And I would now like to turn the conference over to Lasse Glassen with Financial Relations Board. Please go ahead, sir.

Good afternoon, and thanks for joining us to discuss Aehr Test Systems results for the fourth 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 area code 213-486-6546 and we'll get one 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. Now I would like to turn the call over to Gary Larson. Please go ahead, Gary.

Thank you, Lasse, and thanks 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 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 state of the semiconductor equipment market; acceptance by customers of Aehr Test technologies; acceptance by customers of the systems shipped upon receipt of a purchase order; the ability of new products to meet customer needs or performance described; the Company's development, manufacture, and marketing 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 Systems products in fiscal year 2011.

We refer you to our most recent 10K and 10Q reports and other reports from time to time filed with the U.S. 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 you to our Chairman and CEO, Rhea Posedel. Rhea?

Thank you, Gary. Good afternoon, and welcome to our conference call for the fourth quarter and fiscal year 2010. Net sales for the fourth quarter were $3.6 million, nearly three times greater than those of the same quarter of the prior year. For the full year results, net sales were 11.7 million, a decrease of approximately 45%, compared to net sales of $21.4 million for fiscal year 2009. Despite the lower net sales, we were successful in reducing our net loss to less than $500,000 in fiscal 2010, which is a significant improvement from the prior year.

And importantly, we ended the year on a stronger financial footing. I am pleased that we increased our fiscal 2010 year-end cash balance to 7.8 million, up from 4.4 million at the beginning of the fiscal year.

A major highlight during the fourth quarter was the acceptance of--by Micronas of their second production FOX-15 wafer-level burn-in system. This is important for Aehr Test as it is evidence of Micronas' commitment to their wafer-level burn-in strategy. We are hopeful that as their automotive IC business grows, Micronas will purchase additional FOX products during this current fiscal year.

Another fourth quarter highlight was that we shipped several FOX-1 wafer pack contactors, supporting Spansion's growing embedded Nor flash business. I am encouraged that Spansion has resumed buying wafer pack contractors again after a year long dry spell. I am also pleased that during the fourth quarter we booked an order from a top tier test lab for ABTS high power logic burn-in system. We are targeting the high power logic burn-in market up to 70 watts per device with their new ABTS L56I system. This order is an important win for Aehr Test because it is our first order of an ABTS system that supports individual temperature control per device. This should increase our visibility and creditability with other potential customers in this new market segment.

We are partnering with WELLS-CTI in using their iSocket thermal management technology in this high power ABTS system. Our field data shows the ABTS system offers both higher capacity and cost saving advantages, which should allow us to gain share in the high power logic burn-in market. This is a growing market because as process feature size continues to decrease, device burn-in leakage current and power increases.

Our challenge in fiscal 2011 is to grow revenue for both ABTS package device and FOX wafer test and burn-in systems. Since we are starting a new fiscal year, I'd like to share some of the key opportunities we are targeting in fiscal 2011. Last quarter, we announced the booking of a high power version of our MAX 4200 burn-in system with individual device temperature control to a major Japanese consumer electronics IC producer. I am pleased to report that our engineering team executed the plan and we shipped this first system on time. We will record revenue for this system when we receive customers' acceptance. We hope to receive follow-on orders this fiscal year once our system has been qualified for production.

Another opportunity in fiscal 2011 includes follow-on orders for a low cost ABTS platform for low to medium power logic devices. Last quarter, we announced selling a special ABTS system to a major Japanese integrated device manufacturer for burn-in of their micro controller ICs. We expect follow on production orders for this new ABTS system after we ship the first system, which is currently scheduled for early second quarter this fiscal year.

Additionally, having booked our first ABTS L56I system this past quarter, we expect additional orders to follow from customers that have requirements for high power logic burn-in. A leading candidate is a top tier IC manufacturer where we are in the final phase of product qualification. Assuming this qualification is successful, we expect them to start placing orders for the ABTS L56I in the first half of calendar year 2011.

I have mentioned in previous conference calls that the ABTS is a flexible platform that can be configured into various products. The largest market segment we are targeting with our ABTS product is for production, test, and burn-in of DDR3 and DDR4 DRAMs. This is a high volume opportunity and we are in the early stages of the sales cycle with a leading Taiwanese memory manufacturer. Although we are coming in late against our Asian competitors, our challenge is to configure and qualify our ABTS system in a timely manner to meet our customers' requirements.

In addition to Micronas, we are also making inroads with other leading automotive IC producers on various wafer level burn-in projects, mostly for micro controllers and sensors. We hope to report at least one new customer for our FOX-15 system this fiscal year.

And finally we are encouraged with the potential business we see for our FOX-1 full wafer parallel tester and its wafer pack contactors. Now that Spansion has exited bankruptcy, we believe their business will grow, which would increase their requirements for additional wafer packs and possibly FOX-1 testers in the future.

Given the opportunities that I just outlined, we are confident in our ability to expand our business in fiscal 2011. Our strategy continues to be focused on penetrating as many production counts as possible with our new ABTS and FOX products. This will allow us to expand our customer base and grow market share. We will continue investing in R&D over the next few quarters to accelerate new product development initiatives, which we expect will help the company achieve our growth objectives. We have unique technology with our FOX full wafer test and burn-in systems and wafer pack contactors. We feel confident that we'll continue to win additional new accounts with our new ABTS products, which address growing market segments for high power logic burn-in and memory parallel tests in burn-in.

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

Thanks, Rhea. As Rhea mentioned, net sales were 3.6 million in the fourth quarter of fiscal 2010. This compares to 1.2 million in the same quarter last year. The increase was a result of our recognizing revenue for the second Micronas FOX-15 system, as well as for several Spansion wafer pack contactors which shipped in prior quarters. Gross profit was $1.8 million for the fourth quarter of fiscal 2010, or 50% of net sales.

Moving on to look at operating expenses, SG&A was $1.5 million in the fourth quarter of fiscal '10, up slightly from 1.4 million in the prior year period. Fourth quarter R&D expense was 1.3 million, compared with 1.1 million in the fourth quarter of last year. R&D spending can fluctuate from quarter to quarter depending on the development phase of new products. Net loss in the fourth quarter was $0.8 million, or $0.09 per diluted share, compared with a net loss of $4.0 million, or $0.48 per diluted share a year. Pro forma net loss in the fourth quarter of fiscal 2010 was $0.6 million, or $0.07 per diluted share, compared to a pro forma net loss of 2.2 million, or $0.26 per diluted share in the same period of the prior year.

In determining the pro forma, or non-GAAP net loss, in the fourth quarter of 2010, we've excluded the gain on the sale of the Spansion bankruptcy claim of $0.1 million, and non-cash stock compensation expense of $0.03 million.

Turning to the balance sheet, our cash and cash equivalents increased to $7.8 million at May 31, 2010, from 4.4 million at May 31, 2009. The increase resulted primarily from the cash received in our sales of Spansion bankruptcy claims for third parties, partially offset by operating spending. We continue to remain debt free. As Rhea said earlier, we believe that Aehr Test is in a favorable position to expand our market share and grow our revenue in fiscal 2010--2011. I noted that in our fourth quarter we recognized revenue for the Micronas system and several wafer packs which shipped in earlier quarters. As a result, although we expect shipments in our first quarter of 2011 to exceed those of the preceding quarter, we do not expect net sales to increase sequentially. However, we do expect our first quarter net sales to increase when compared with the same quarter of the prior year.

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

Thank you, sir. (Operator Instructions.) And our first question comes from the line of Geoffrey Scott with Scott Asset Management. Please go ahead.

Good afternoon.

Hi, Geoff.

Hello, Geoff.

One of the major announcements that was--that came out last week was TI's purchase of Spansion Japan. I'm surprised you didn't make any reference to it in your prepared remarks. Is this good or bad for Aehr?

Yes, that's a good--it's a good question. Basically, I mean, we don't have any insight into exactly what's in TI's mind or Spansion's. But in our best interest it would be for TI to use the FOX-1s. However, TI isn't a flash producer. So most likely I believe that TI will probably put the systems up for sale. But whatever the outcome is, I think it's a positive for us. I mean, the worst case scenario is to have the systems just sitting over there and not being used. So even if TI uses them, it's good for Aehr Test. If TI puts them up for sale or they work out an agreement where Spansion continues to use them, it will still be good because we'll get service revenue, upgrade revenue, things of that sort.

And the press release said that TI intended to operate one of the two facilities.

Correct. One is--.

--Shutter the other and move some of the equipment to the United States.

I think they're going to move the equipment from the 300 millimeter, the new fab, to the U.S. And there's an older Fujitsu fab that was sitting there that I think they'll continue to operate that provides flash wafers to Spansion. But I don't know what their long term strategy. And the test floor sits in the middle between the two fabs. But I--.

--You don't know what they're going to do with any of that test equipment?

I don't. So most likely I believe TI will probably--since they don't produce flash would probably offer that equipment for sale.

Okay. Would they come back to you to try to get it done or would they try to do it independently?

I believe they would come back to us and ask us if we wanted to buy the equipment, but I think they would try and do it independently.

Okay. In the last call, you mentioned that TI had--I think had some interest in the ABTS system.

That's correct. So one of the things that we need to do is qualify the system for their production applications.

You have not sent anything to TI for testing?

No. It just means that we're in a qualification process.

Okay. So they have one of your machines?

No, they don't have one. But it doesn't mean that we can't qualify it here.

Okay. For fiscal 2011, can you give us a target revenue for the year?

No. What we have said is that we expect year-over-year the revenue will grow, but we didn't give any guidance as far as the magnitude of that.

I know you didn't and you have in the past. But it seems to me that you have an obligation to investors to be a little bit more forthcoming in terms of at least annual numbers. We've been hanging around for an awful long time waiting for better results. And as time goes on, I think you need to listen up a little bit and help us out in understanding what your goals are for the year.

No, I mean, that's a fair statement. I think we need things to firm up a little better here before we can make that kind of a guesstimate or forecast.

I mean, can you get to $20 million revenue for the year?

You mean, could we ship $20 million, if we could book it? Yes.

The question is can you book it. I know you can ship it if you get orders, but can you get that kind of orders?

We're not prepared at this time to give guidance at that level, Geoff. Sorry.

As I said, Gary, I think you really need to be a little bit more forthcoming. Thanks very much.

Okay. We'll try and keep you updated if--as we continue to book orders.

Thank you.

Thank you. Our next question comes from the line of John Nelson with State of Wisconsin Investment Board. Please go ahead.

Hi. I just wanted to check and see if you could make any comments regarding Spansion because it's been such a key customer over such a long period of time. Now that they're out of bankruptcy, are they on any kind of replacement cycle that would indicate that they need to purchase a significant amount of new equipment over the next year or two?

A brief background about Spansion. So Spansion was in the mobile communication market, which they exited for the most part, and now they're in embedded flash market, as they call it, which means flash that goes into stationary products as opposed to hand held products. But from our--in what I read in the marketplace, it seems like they're growing market share and their business is increasing. And there has been I would say a significant demand increasing from them for additional quotes for wafer packs or new devices. So we see their business starting to improve at least for our products, the sections that we serve. So mostly we're seeing their need is in the wafer pack contactors. This is a custom part of our system that makes contact in wafers. So as they develop new products, we should hopefully see some wafer pack business over the next few quarters and that could drive additional business--additional FOX-1 business.

Is the fact that you've been doing business with them and you have your product in with--more or less embedded in their manufacturing process, does that give you much or very little advantage over competition for the wafer pack contact--contactor?

We--for--they're using our FOX-1 for their 65-nanometers and below technology. We believe that the FOX-1 and its contactors [to us] offers cost saving advantages over their tester approach. So they could either use testers and conventional probe technology or FOX-1. So we believe it offers cost advantages. And the fact that we have an installed base of testers there, helps them--or helps us get additional wafer pack business from them.

Okay. Have you--I mean, and again, since you are expanding the customer base significantly, is there much need to ramp up the SG&A from current levels for the coming year?

We don't see any significant increase in that area.

Okay.

I mean, we believe we could go through this year with minimum increases in SG&A except for maybe rep commissions, things of that sort, that are kind of variable.

Okay. Well, very good. I look forward to a better year coming.

So do we.

Thank you.

All right, John. Good to have you on the call.

Thank you. (Operator Instructions.) One moment, please. And we have a follow up question from the line of Geoffrey Scott with Scott Asset Management. Please go ahead.

A quick follow up, please.

Yes.

The top tier test lab that's getting the L56I, is that in Taiwan?

Yes.

Okay. The--going back a couple of calls, you said that Micronas might be able to take as many as five FOX machines. They've taken and accepted the second. Is five still a reasonable target?

I think that was something I said a long time ago. So you have a memory.

Okay. It wasn't the last one. It was a couple of calls ago. Like I said, I've been around for a long time, Rhea.

Yes. But I think--yes, initially when they came to talk to us, they priced the system based on taking five systems, so over some period of time. So I would assume it's a possibility, not over this next fiscal year. But if you look over some timeframe, it's possible.

Okay. Thank you.

Thanks, Geoff.

Thank you. And there are no further questions in the queue at this time. I would like to turn it back to management for any closing remarks.

Hi. This is Rhea. I'd like to thank you all for joining us this afternoon and we look forward to next quarter's conference call. Thanks.

[Thanks].

Thank you. Ladies and gentlemen, this concludes the Aehr Systems Fiscal 2010 Earnings Conference Call. If you would like to listen to a replay of today's call, please dial 303-590-3030, or 1-800-406-7325, and enter the access code of 4328722 followed by the pound sign. We thank you for your participation, and you may now disconnect.