Aehr Test Systems (AEHR) 2012 Q2 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Aehr Test Systems second-quarter fiscal 2012 earnings 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). This conference call is being recorded today, Thursday January 5, 2012. And I would now like to turn the conference over to Ms. Marilyn Meek. Please go ahead, ma'am.

Thank you. Good afternoon, and thanks for joining us to discuss Aehr Test Systems second-quarter fiscal 2012 results. By now, you should all received a copy of today's press release. If not, you can call my office at 212-827-3746 and we will get one to you right away. With us today from Aehr Test Systems are Rhea Posedel, Executive Chairman, Gayn Erickson, 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. Please go ahead, Gary.

Thank you, Marilyn, and thanks 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'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's 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 ability to maintain sufficient cash to support operations, the Company's 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 2012.

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 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 Executive Chairman, Rhea Posedel. Rhea?

Thank you, Gary. Good Afternoon, and welcome to our conference call for the second quarter of fiscal year 2012. Let me begin by saying, I am pleased to announce that on Tuesday, Gayn Erickson was appointed CEO of Aehr Test. I am in excellent health, and was planning to work until I was 70, but with the acquisition of Verigy by Advantest last year, Gayn became available. We are fortunate to have hired a senior executive with 23 years of semiconductor test and general management experience. With Gayn's strong marketing and engineering background from a top-tier test company, we are confident that he will do an outstanding job, and has the management skill set needed to take Aehr Test to the next level. I will remain with the Company as Executive Chairman, and will work with Gayn on strategic plans to grow the Company. Since Gayn just started this week, I will be giving today's conference call. Gayn will, however, say a few words at the conclusion of my talk.

On a positive note, net sales for the quarter were $3.9 million, 8% higher compared to the second quarter of fiscal 2011. We had several highlights that I would like to bring to your attention. First, we are very pleased to report that our valuation ABTS-L 56-I burn-in system passed its qualification at a leading IDM. Most importantly, we expect to receive an order to record revenue for this evaluation system this quarter. This would be a major win for us, because it is a production account, and we believe this customer could order significant numbers of ABTS-L 56-I systems over the long-term. Their target application is for burn-in of high-power logic devices, requiring individual temperature control per device.

Second, last month, we report announced selling a high-powered ABTS burn-in system with individual device temperature controls, to one of the world's largest IC manufacturers. Their target application is for reliability testing and qualification of 2X nanometer technology, including mobile and tablet processors. This is another major win for our ABTS product family, and we hope to see follow-on orders after the delivery and acceptance of the first system. Third, we shipped three additional ABTS burn-in systems to a leading Japanese microcontroller producer, and we expect to receive a follow-on order from their Singapore production site this quarter. This customer is a production account for us, and we believe they will purchase higher quantities of systems as their capacity ramps in the second half of calendar 2012.

Fourth, we designed and have shipped the first article of four new FOX-15 WaferPak cartridge designs to a leading automotive provider of magnetic sensors. This is important because we hope to see follow-on orders for production quantities of WaferPaks, as their sensors are qualified by automobile manufacturers later this calendar year. There is also an upside that an additional FOX-15 system would be needed to support their capacity as a high number of these new WaferPak cartridges are ordered.

Fifth, we completed an evaluation WaferPak cartridge design and got acceptance from a large communication company. This was an engineering challenge for us, as we had to contact and apply power to stress over 12,000 Vixel devices per touchdown. We are currently selling wafer level burn-in services to this customer, but we believe there is a good possibility that they could become a new FOX-15 customer as their volumes increase. Finally, we are pleased to have announced that we have shipped our 100th WaferPak Contactor. This is a major accomplishment, since our WagerPak Contactors are complex designs for full wafer test and burn-in, usually for high die-count wafers and extreme temperatures, up to 170 degrees C. Since is a new WaferPak design is needed for each new device type, this has become a significant business segment for us.

Our strategy to grow revenues, long-term, by focusing on penetrating production accounts with our families of ABTS and FOX products is starting to bear fruit. We are most encouraged by the inroads we are making with our ABTS products in penetrating major accounts. If the orders for our evaluation systems happens as we expect this quarter, then we will have sold our ABTS system to three of the five world's largest semiconductor manufacturers. This would be a major accomplishment, and we believe it will give us a strong customer base to grow our business on, long-term. Importantly, we believe there is a potential for these customers to order multiple ABTS systems this calendar year.

We are also pleased to report that already this quarter, we have added an additional two new customers, a US automotive IC producer and a Japanese logics fab to our growing ABTS customer list. Importantly, there is continued interest in our FOX products for wafer level burn-in to produce known good die for automotive microcontrollers, sensors and Vixel devices. We are chasing a number of opportunities, and we are hopeful that we will announce a new FOX account this fiscal year. Looking ahead, we believe our business will start turning up in a couple of quarters out, as we ship and recognize revenue for the new ABTS orders we have received the past few months.

After running Aehr Test for over 34 years, I believe we have our strongest product portfolio ever, with the our ABTS and FOX products. Most importantly, we have sold our ABTS and FOX products to a broad base of customers, including ABTS systems to two of the world's largest semiconductor companies. We are confident that we can continue to win additional new accounts with our new ABTS products, which address the growing market segments for high power logic burn-in, and memory parallel test and burn. We also remain very positive about the growth potential for our innovative FOX systems and WaferPak Contactors, for lowering the cost of wafer sort testing of flash wafers. And wafer-level burn-in for producing known good die. With our new ABTS and existing FOX production accounts, we believe we now have a solid platform, which to grow our revenues on long-term.

In closing, I would like to mention that developing our FOX wafer-level burn-in systems was a major challenge. Many competitors, most of them many times larger with more resources, have tried to produce wafer-level burn-in systems and weren't successful, and we believe we are the worldwide market leader in this space. We are extremely proud of our R&D team under perseverance and innovative technology breakthroughs, to make wafer level burn-in a reality. We have been granted 37 US patents, with most relating to our FOX wafer-level burn-in product invention.

I would like to give a special thanks to all of our employees and former employees who have supported me and the Company. It has been an honor to work with you over the past 34 years. Before turning the call over to Gary who will discuss the second quarter financials in more detail, Gayn like to say a few words. Gayn?

Thank you, Rhea. I am very pleased to be joining Aehr at this time and excited by the many opportunities we have to grow our Company. I actually respected Aehr Test leadership in the semiconductor test and burn-in space for many years, and I'm impressed by the technology, the products, and the people that I have seen here at Aehr so far. As you mentioned earlier, the successful evaluations and qualifications of the new ABTS system is really a great endorsement of the Company's new product family. It is impressive that Aehr has emerged from this recent industry downturn with new, highly competitive products, and also customers that are top-tier semiconductor manufacturers, in Korea, Japan, China, Europe, in addition to the traditional strength we have had here in the US.

There are new opportunities in test that are developing out of the shift in the semiconductor industry, from an IT/computing-dominated applications space, to consumer, mobile and automotive applications. I feel that Aehr is in a great position to capitalize on those opportunities. I look forward to working with Rhea and the Aehr Test team to profitably expanding our Company, while continuing to satisfy our customer needs. And an offer, if there are any shareholders or potential investors who would like to set up some time to talk with me personally, or I can answer any questions, I would be happy to set some time aside and to meet with you in the near future. Again, thanks, Rhea.

Thanks, Gayn. Gary?

Thank you, Rhea. As Rhea mentioned, net sales rose 8% to $3.9 million in the second quarter of fiscal 2012, compared to $3.6 million in the second fiscal quarter of last year. Gross profit was $1.1 million for the second quarter of fiscal 2012, or 29.2% of net sales. This compares to gross profit of $1.4 million for the second quarter of fiscal 2011, or 37.9% of net sales. The lower gross profit margin was primarily related to a change in mix of products. As Rhea mentioned, we shipped three early production systems to the Japanese microcontroller producer. While manufacturing those systems, we incurred one-time startup and higher initial material costs. We expect to improve the margins on follow-on shipments of those systems.

Taking a look at operating expenses, SG&A was $1.5 million in the second quarter, about the same as the SG&A expense in the prior-year period. Second-quarter R&D expense was $1 million, down about $0.2 million from the second quarter of last year. R&D spending can fluctuate from quarter-to-quarter, depending on the development phase of new products. In the first six months of fiscal 2011, operating expenses were reduced by $155,000, related to partial proceeds from the expansion Japan bankruptcy claim. In the first six months of fiscal 2012, we recorded a gain of $990,000 from the sale of our interest in ESA Electronics, a Singapore private company. In the second quarter, we reported a net loss of $1.4 million or $0.15 per share, compared to a net loss of $767,000, or $0.09 per share in fiscal second-quarter 2011. Included in the results for the second quarter of fiscal 2011 was the receipt of a dividend payment of $600,000, related to a long-term investment recorded in other income.

Turning to the balance sheet, our cash and cash equivalents were $3.1 million at November 30, 2011, compared with $4.0 million at May 31, 2011. Although we have access to a $1.5 million line of credit, we've not yet borrowed against that line. We expect that our operating results in the third quarter of fiscal 2012 will improve when compared with the preceding quarter.

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

(Operator Instructions). And we have a question from the line of Geoffrey Scott. Please go ahead.

Good afternoon, and welcome, Gayn.

Thank you.

I hope you enjoy yourself. A couple of quick questions. Actually, first, a comment. Rhea, you could have knocked me over with a feather after that press release. A couple of questions. This is the first press release I can remember, or first conference call that didn't have a sales projection, revenue projection for the next quarter compared to the year previously.

Right.

All Gary said was that operating results would improve.

What we expect is to see sales in a -- fairly similar to this most recent quarter. But, the important part to us was, we do expect the operating results to improve.

All right, so that would be sales down from last year third quarter?

We are just saying sales, we expect to be similar to the preceding quarter.

Which would be lower than the third quarter of last year?

Correct.

Okay. The press release referring to the latest ABTS system, was that a domestic shipment, Rhea?

Not a shipment yet, but it's an order.

Is it going to a domestic customer?

It is an international customer. We will leave it at that.

An international customer?

Yes.

Okay. Thanks very much. I will hop off.

All right, thanks, Geoff. Please stop by and I would like to have you meet Gayn if you're out here.

I will certainly take advantage of it. I would love to. Thanks.

Thanks.

Thanks, Geoff.

Thanks for all your support, Geoff. Over these years.

(Operator Instructions). One moment please. And I show no further questions at this time. Please continue.

Well, this is Rhea. I would like to thank you all for joining us this afternoon. Happy New Year to everyone, and we look forward to next quarter's conference call. Thank you very much. Bye.

Ladies and gentlemen, if you would like to listen to a replay of today's conference, you may dial 1-800-406-7325, and enter the access code of 4499152. Thank you very much for your participation. You may now disconnect.