Aehr Test Systems (AEHR) 2011 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Aehr Test Systems second quarter fiscal 2011 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions). This conference is being recorded today, Thursday, January 6, of 2011.

And 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 2011. 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 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'd 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 related to projections regarding industry growth and customer demand for Aehr Test products, as well as projections regarding Aehr Test 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, manufacturing 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 products in calendar year 2011.

We refer you to our most recent 10-K, 10-Q, 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. Rhea?

Thank you, Gary. Happy New Year, everyone, good afternoon, and welcome to our conference call for the second quarter of fiscal year 2011. Net sales for the second quarter of fiscal 2011 were $3.6 million, up 65% on a sequential quarter basis, compared to net sales of $2.2 million in the first quarter of fiscal 2011. The net loss for the quarter was $759,000, or $0.09 per diluted share, which is an improvement from the prior quarter's loss of $1.5 million, or $0.17 per diluted share.

During the second quarter, we benefited from a significant increase in shipments of our FOX-1 WaferPak contactors for full-wafer sort-testing of NOR flash. In March, we announced receiving about $2 million in FOX-1 WaferPak contactor orders from a leading NOR flash producer. This is good news because WaferPaks are consumables, and new orders are driven mostly by new wafer designs.

We had a number of other highlights during the second quarter that I'd like to bring to your attention. First, Spansion, a leading NOR flash producer, is growing its market share now that they have exited from bankruptcy. In December, we announced booking another $3 million in orders for multiple WaferPak contactors. We believe these new WaferPak orders validate the cost savings advantages of using our FOX-1 tester, which can test a full wafer with thousands of die in a single touchdown. Most importantly, these recent orders show that Spansion is committed to using their large installed base of FOX-1 testers located in Austin and Japan.

Second, we are pleased to announce today that we booked over $1 million in WaferPak contactors for multiple new designs for [Micronis]. This automotive customer continues to see the growing demand for automotive sensors, and they believe our FOX-15 wafer-level burn-in system is a cost effective solution for burn-in. We hope to see additional WaferPak contactor orders for these new designs over the next few quarters, as the worldwide automotive business continues to strengthen.

Third, in November, we announced an order from a leading US military defense customer for our newly configured ABTS L72. The ABTS L72 is a highly flexible system with a high number of channels and power supplies per burn-in board. And with the added capability of a pattern generator per slot, our customer can do reliability testing on up to 36 different devices at one time. The ABTS L72 is an ideal system for qualification and reliability applications, particularly for the requirement to process many small lots.

And finally, we are pleased to report that we shipped a cost-optimized ABTS system for low to medium power logic devices. As you may recall, last March, we announced the sale of a special ABTS system to a major Japanese integrated device manufacturer for production burn-in of high-end microcontroller devices. I'd like to give a special thanks to our engineering team. They did an excellent job developing this system to an accelerated delivery schedule. We expect to get system acceptance, and recognize revenue in our third fiscal quarter. We also expect to spin-off other new ABTS products using this new low-cost platform.

We are encouraged by the increase in WaferPak contactor orders from our FOX customers, and the quoting activity we are seeing for our FOX-1 and FOX-15 systems the past few months. We are seeing interest in our FOX products from a broad range of customers and applications, such as wafer-level burn-in for automotive microcontrollers and sensors, as well as VCSELs and flash devices. We believe with such a high number of potential customers, we are hopeful we can penetrate one or more new FOX-1 or FOX-15 accounts over the next few quarters.

We are also encouraged by the activity we see for our ABTS family of products for package device test and burn-in. The ABTS is a flexible platform that can be configured to address multiple markets. A large market segment we are targeting with our ABTS product is for production test and burn-in of DRAMs and flash devices. Another large ABTS target market is for burn-in for high-power logic requiring individual temperature control per device. We expect this high-power logic market to continue to grow as the power levels for complex logic ICs increase for each new process node.

In closing, based on the activity we are seeing for ABTS and FOX products, and our recent increase in WaferPak bookings, we believe that our third quarter net sales will be higher than the prior quarter. 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 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 systems and WaferPak contactors. We feel confident that we can continue to win additional new accounts with our new ABTS products, which address growing market segments for high-powered logic burn-in, and memory parallel test and burn-in.

Now I would like to turn the call over to Gary who will discuss the second quarter financials in more detail. Gary?

Thanks, Rhea. Before I get into the second quarter, I wanted to clarify, our $2 million WaferPak order that Rhea referred to was actually in August, but we just picked that up. So it was not in March as was stated earlier. My apologies for that.

Now to the second quarter numbers. As Rhea mentioned, net sales were $3.6 million in the second quarter of fiscal 2011, that compares with $1.6 million in the same quarter of last year. The increase was driven primarily by shipments of FOX-1 product. Our shipments in the second quarter of 2011 were actually higher than the reported revenue number, as the ABTS system shipment to the Japanese customer must be formally accepted before we recognize revenue.

Gross profit was $1.4 million for the second quarter of fiscal 2011, or 38% of net sales. That compares to gross profit of $0.3 million, or 21% of net sales, in the second quarter of last year.

Moving onto operating expenses, SG&A was $1.5 million in the second quarter of fiscal 2011, down slightly from $1.6 million in the prior-year period. Second quarter R&D expense was $1.2 million compared with $1.1 million in the second quarter of last year. R&D spending can fluctuate from quarter to quarter depending on the development phase of new products.

Included in Other Income for the second quarter was a $0.6 million dividend received from ESA, a Singapore firm in which we hold a minority interest, and that is an infrequent dividend, so there is no schedule for anything with regard to follow-on dividend. Net loss in the second quarter was $759,000, or $0.09 per diluted share, compared with net loss of $2.2 million, or $0.25 per diluted share a year ago.

Pro forma net loss in the second quarter of fiscal 2011 was $521,000, or $0.06 per diluted share, compared to a pro forma net loss of $1.4 million, or $0.16 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 2011, we have excluded the gain from the non-cash stock compensation expense of $238,000.

Turning to the balance sheet, our cash and cash equivalents were $5.1 million at November 30, 2010, compared to $7.8 million at May 31, 2010. The decrease was primarily due to our operating [losses], and 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 2011.

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

Thank you sir. We will begin our question-and-answer session. (Operator Instructions). We have a question from the line of Jeffrey Scott with Scott Asset Management. Please go ahead. Good afternoon.

Hi, Jeff.

Hello, Jeff, how are you?

Well, thank you. The $3 million order that was noted in the December press release, how much of that was shipped in the second quarter?

Very little of that was shipped in the second quarter.

Okay. The L72, is that exact machine capable of being shipped to other customers or do you have to make adaptations to it?

We would expect to ship that to other customers with similar applications. It is a very flexible system. Initially we shipped an L36, which had 36 burin-in board, so this is a double oven, double-capacity system. So it is more cost effective and can test and burn-in more different device types that an L36. We expect to sell a number of those to other customers, as well.

The L72s?

Correct.

Will that -- the contact who took the first one take more?

Say that again.

The customer to whom you shipped the first L72, is it your expectation that he will take more?

It is not -- it's a defense manufacturer, so I look at it more quality and reliability. So more, one every few years kind of thing.

Okay. The higher quoting activity. Is the quoting activity to existing customers or new customers?

I would say to new customers. Some existing customers, but new -- all of them are mostly new customers for ABTS. Some customers were MAX customers early on.

When one of your customers asks for a quote, where are they along in the purchase decision? Are they typically quite far along, or are they still comparing your machine to an alternative product?

I would say in general, they are fairly far along. They usually don't ask for quotes unless they have a requirement. So in general, they first have a requirement, then they get a quote, then they go out and get budget approval. Typically it would work like that. Or sometimes they have the budget approval first. But generally, they go out for a quote, get budget approval and submit the budget and hope that it is going to be approved.

But by the time they ask for an official quote, have they generally made the decision that they want to buy an Aehr Test product machine?

They have the initial quote, and it usually goes out to us or other people. Hopefully we can influence how the quote goes out so the spec is written around our system. In general, they usually go out to multiple suppliers. In most cases, unless we are doing some partnership or custom work with our customer, which we do sometimes.

Okay. What is an average conversion of quotes to orders? Is there any such thing as 50%, or 25%, or 75%?

Yes, I would say it's like 25% to 35%. Maybe a third of our quotes get converted to orders.

And how many quotes are out there for FOX now?

How many quotes?

Yes. Are talking about one or two quotes?

We are talking about 10s, in that range. Different companies, so it could be multiple systems from the same company.

Right. But you have 10 different companies that have received quotes from you?

For different products, yes. At least.

On the FOX side?

I'm just saying on ABTS and FOX, it's over 10. 10s number.

Okay. But is it still your expectation that sometime during this fiscal year you are going to get another FOX customer?

That is our objective.

Okay. I'll let somebody else--.

We are focusing our team on that and we are committed to do that.

Okay. I will let somebody else hop on.

Thanks, Jeff.

Thank you. (Operator Instructions). One moment please for our next question. And at this time, I would like to turn the conference back over to management for closing comments.

Hi, this is Rhea, and I would again like to wish everyone a Happy New Year, and thanks for listening to today's conference call and we look forward to reporting our results next quarter. Thanks again.

Ladies and gentlemen, this does conclude the Aehr Test Systems' second quarter fiscal 2011 earnings conference call. If you'd like to listen to a replay of today's conference, please dial 303-590-3030, or 1-800-406-7325 with an access code of 4395104#. We thank you for your participation, and at this time, you may now disconnect.