Aehr Test Systems (AEHR) 2011 Q3 法說會逐字稿

Good afternoon ladies, and gentlemen. Thank you for standing by. And welcome to the Aehr Test Systems second quarter fiscal 2011 earnings conference call.

(Operator Instructions).

This conference is being recorded today, Thursday, March 31, 2011. I would now like to turn the conference over to Lassa Glassen. Please go ahead, sir.

Good afternoon, and thanks for joining us to discuss Aehr Test Systems results for the third 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 you one 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 it's operating performance for the quarter, before opening the call to your questions. And now, I will turn the call over to Gary Larson. Please go ahead. Gary?

Thank you, Tricia, 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's product, 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 perform as described, and the Company's ability to maintain sufficient cash to support operations, the impact of the Japanese earthquake and tsunami's upon the Company's operations, the Company's development, manufacture and marketing of 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 product 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 to differ materially from projected results. The Company disclaims any obligation to update information contained in any forward-looking statement, 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, and good afternoon, and welcome to our conference call for the third quarter of fiscal 2011. Net sales for the third quarter of fiscal 2011 were $4.2 million, up 19% on a sequential quarter basis, compared to net sales of $3.6 million in the second quarter of fiscal 2011. The operating -- loss for the quarter was $920,000, which was an improvement from the prior quarter's operating loss of $1.3 million.

Before going deeper into the third quarter results, I'd like to provide a few words about the impact of Japan's earthquake on our business. First, I'd like to say we are all saddened by the loss of life and damage by the horrific earthquake and tsunami in Japan earlier this month. Fortunately, none of our employees, or their families had any injuries. Our FOX-1 system and WaferPak contactors at our TI's Aizu factory were not damaged, and the systems are ready to be returned into production. Also, most of the customers in Japan that we are targeting for our ABTS and Fox products are located south of Tokyo, which was impacted less by this disaster than regions further north.

We are hopeful that the customers we are targeting, will still move forward with their CapEx purchases this year. With that said, during the third quarter, we benefited from an increase in shipments of our FOX-1 WaferPak contactors for wafer sort testing of NOR flash. These shipments were both contactors for -- existing and new designs, which indicates to us that our customer is achieving ongoing cost and throughput benefits with the FOX-1 full wafer contact solution. In addition to this, we had a number of highlights, that I'd like to bring to your attention. First, Spansion, a leading NOR flash producer continues to invest in upgrading their FOX-1 full wafer parallel testers, in buying WaferPak contactors for new devices.

On March 21st, we announced booking over $2 million in orders for FOX-1 WaferPak contactors and system upgrades. Most importantly, with these recent WaferPak orders, Spansion is now returning to service most of their FOX-1 testers at TI's facility at Aizu, Japan and Fab 25 in Austin. Secondly, we were very, very pleased to report that we booked a new FOX-1 wafer level burn-in customer. Today, we announced that a leading telecommunications company purchased a FOX 15 WaferPak cartridge to run for product qualifications on Vixo laser diodes. We expect additional WaferPak orders and a purchase of a FOX 15 system from this customer, as the wafer level burn-in process is qualified, and the customer moves into production volumes.

Third, in March 17th, we announced ABTS L36 order from a military aerospace division of a leading US-based microcontroller mixed signal IC producer. The ABTS L36 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 a reliability testing on up to 18 different device types at one time. Importantly, this is another new customer for our ABTS product. The ABTS product family is an ideal system for qualification and reliability applications.

And finally, we are pleased to announce that we received acceptance earlier in March, on a special ABTS system that we shipped in November of last year, to a major Japanese IDM for production burn-in of high-end microcontroller devices. The customer acceptance took somewhat longer than we expected, but the good news is that we will be able to recognize revenue in our fourth quarter. We believe that our customer is pleased with our system performance. Importantly, we expect to start receiving follow-on orders this quarter.

We remain encouraged by the activity we see for our Fox products. We are seeing interest from a broad range of customers and applications, such as wafer level burn-in for automotive microcontrollers and sensors, as well as VCSELS, laser diodes and flash devices. With this number of active prospects, we are hopeful that we can penetrate another new FOX-1 or FOX 15 account over the remainder of this calendar year.

We're also seeing an increase in activity for our ABTS family of products, for package device test and burn-in, that ABTS is a flexible platform that can be configured into various versions to address multiple markets. A large market segment we are targeting, 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.

Looking ahead to the fourth quarter, we expect net sales will be similar to the third quarter, while our bottom line results are expected to improve on a sequential quarter basis, due to favorable product mix and cost reduction initiatives. Our strategy continues to be focused on penetrating as many production accounts as possible, with our new ABTS and FOX products. We have the new unique technology with our FOX systems and WaferPak contactors. We feel confident we can 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 test and burn-in. Now like to turn the call over to Gary, who will discuss the third quarter financials in more detail. Gary?

Thanks, Rhea. As Rhea mentioned, net sales were $4.2 million in the third quarter of fiscal 2011. This compares to net sales of $5.2 million in the same quarter last year. But you have to keep in mind, that in the third quarter of last year, the Company sold the remainder of it's Spansion US bankruptcy claim for net proceeds of approximately $4.6 million. Of that, $2.7 million was revenue related to cancellation charges. So on a pro forma basis, we had a significant increase on a quarterly -- on a year-over-year basis.

Excluding the impact of the sale on the Spansion claim, last year's third quarter pro forma net sales were $2.5 million. Compared with the pro forma sales number, our third quarter of fiscal 2011 showed an increase of 73%. Gross profit was $1.6 million for the third quarter of fiscal 2011, or 38% of net sales. This compares to gross profit of $4.0 million in the third quarter fiscal 2010, or 77% of net sales. As noted earlier, the $2.7 million in gross profit related to the Spansion bankruptcy claim.

Moving on, to look at operating expenses, SG&A was $1.5 million in the third quarter of fiscal 2011, down from $1.7 million in the prior year period. Second quarter R&D expense was $1.0 million, compared with $1.5 million in the third 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 third quarter was $946,000, or $0.11 per diluted share, compared with net income of $1.5 million or $0.18 per diluted share a year ago. Pro forma net loss in the third quarter of fiscal 2011 was $723,000 or $0.08 per diluted share, compared to a pro forma net loss of $1.5 million or $0.17 per diluted share in the same period of the prior year.

In determining the pro forma or non-GAAP net loss in the third quarter of 2011, we have excluded the gain from the non-cash stock compensation -- we have excluded the non-cash stock compensation expense of $223,000. In determining the pro forma, our non-GAAP net loss in the third quarter 2010, we've excluded the gain on the sale of the Spansion bankruptcy claim of $3.3 million, and non-cash stock compensation expense of $324,000.

Turning to the balance sheet, our cash and cash equivalents were $3.8 million at February 28, 2011, compared with $5.1 million at November 30, 2010. The decrease is primarily due to our operating losses. We continue to remain debt free. This concludes our prepared remarks. We are now ready to answer your questions. Operator, please go ahead.

Thank you, sir.

(Operator Instructions).

We do have a question from the line of Jeffrey Scott with Scott Asset Management. Please go ahead.

Good afternoon, guys.

Hi Jeff.

Hello, Jeff.

For the FOX 15, the new customer.

Yes.

They have bought contactor boards, correct?

A contact, a WaferPak, a full wafer contactor.

Okay. Where are they going to use that?

They are going to do the qualification in one of our systems, so we'll will rent it to them, as they do quals.

That's one of your systems you have in --

In our engineering lab.

In Fremont?

Yes, that's a good question yes.

Okay. How long will that qualification process take?

It will take, I'm guessing, probably a few months.

And so, when would --

From deliver -- once we finish the WaferPak, so the overall process maybe is -- four months to five months, something like that.

So something like two to three months to produce the WaferPak, and then a couple of months to --

Say, three months to produce the WaferPak, and one or two months to do the quals.

So you'd be talking about a purchase order, sometime in the mid summer time frame?

You mean this summer?

Yes.

It's possible, but I would probably say in the fall.

Okay.

Also, as they ramp their capacity, then they would need to -- they could continue to use our system, if their capacity as well, but as they continue to ramp capacity, then they will need to buy a system. And that's probably something -- an event that's probably going to happen at the end of this fiscal -- calendar year, sorry.

But in the meantime, you will be renting your -- the FOX 15 that you have on your floor?

Correct.

Okay. The machines that TI is using in Japan, did you say they are up and running again now? Or they are just ready to go up and run?

I think they are -- what I said was, they are ready to run. And I believe they are starting to run them. I mean, they were running devices or wafers before the earthquake. And then they, TI shut down the factory because of power, and I believe, in checking our systems, they were -- they weren't damaged. So I believe the power is going to come on, probably in April, and they will start running them again.

Jeff --

It's an electricity, the supply issue as opposed to -- ?

There was no damage, I don't believe.

Jeff, this is Gary, one of the announcements that TI made was, that in their Aizu factory, they were going to be starting production basically now, and they expected to be in full production by mid April, so.

Okay. Question on the -- on your relationship with NASDAQ these days. Where do you stand?

We have changed our listing, we transferred to the capital markets, and we are a customer in good standing with NASDAQ.

Are you going to try to get back to where you were, or are you happy staying on the Capital Market?

There's really not a significant difference from the investor's standpoint, the ticker is the same, and there's no real difference other than the size of the other members of the market. So if we qualify to reenter the global market, we would be happy to transfer back up, but that's not something that we're anticipating happening near term.

Okay. You said that fourth quarter revenue looked similar to just reported third quarter.

Yes.

Anything you'd like to share about fiscal 2012 with us ?

Right now, we are putting together our plan for next fiscal year. So I mean, again, I think we've said that we are encouraged by what we see, in terms of activity. And I think that we talked earlier in other conference calls, about penetrating new accounts in Japan, that would expect to see follow-on business. So I think we are -- overall, I would expect that things would improve next year over this year. Just because our run rates are up higher than it was -- they were this -- if you look at the beginning of this year, we started at a low shipment rate per quarter, and we've increased that every quarter so far. And the projections -- that the semiconductor industry will continue to grow this year. So I think we are optimistic in fiscal 2012.

Okay, thank you.

Thanks Jeff.

(Operator Instructions).

And at this time, there no further questions in queue. I'd like to turn the call back over to management for any closing comments.

This is Rhea, and I would like to thank you for joining us this afternoon, and we look over to next quarter's conference call. Thank you, bye.

Bye-bye.

Thank you. Ladies and gentlemen, this concludes the Aehr Test Systems third quarter fiscal 2011 results conference call. If you would like to listen to a replay of today's conference, please dial 303-590-3030, or 1-800-406-7325 followed by passcode of 4426864. Thank you for your participation. You may now disconnect.