Q3 2020 Atomera Inc Earnings Call
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Good afternoon, and welcome to the Edinburgh third quarter 2020 earnings call. All participants will be in listen only mode should you need assistance. Please signal our conference specialist by pressing star zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then the one key on your Touchtone telephone to withdraw your question you press the pound key.
This event is being recorded and will be available for replay for approximately one week I would now like turn the conference over to Mike Bishop. Please go ahead.
Thank you and good afternoon, I'd like to ship with the company's Investor Relations joining me on today's call Scott vivo, Adam as President and CEO and Frank Lorenzo.
Adam as CFO.
If you are joining by telephone. Please go to the events and presentations section of our Investor Relations page on our website to follow a slide presentation that accompanies our remarks.
That presentation will remain available on our website after the call.
After prepared comments by Scott and Frank We will open up the call for your questions.
Before we begin I would like to remind everyone that during today's call. We will make forward looking statements.
These forward looking statements whether in prepared remarks or during the Q and a session are subject to inherent risks and uncertainties. These risks and uncertainties are detailed in the risk factor section of our filings with the Securities and Exchange Commission.
Specifically in the company's prospectus supplement filed with the FCC on September 2nd 2020.
Except as otherwise required by federal Securities laws at American disclaims any obligation to update or make revisions to such forward looking statements contained herein or elsewhere to reflect changes and expectations with regard to those events conditions and circumstances.
Also please note that during this call we will be discussing non-GAAP financial measures as defined by SEC regulation G.
Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in today's press release, which is posted on our website now I would like to turn the call over to our President and CEO Scott Vivo go ahead Scott.
Thanks, Mike well.
Welcome to our Q3 update call Adam.
Adam Air continues to make excellent progress on customer and R&D development. Despite the continued drag from Corona virus restrictions.
Today seven months after the pandemic shutdown began our work with customers continues with wafer runs test results reserve reviews and detailed technical meetings still this is the customer facilities have not restarted for the most part this has not hurt our relationships since our team primarily does engineering design.
Emulation and analysis that can be shared with customers remotely we.
We still have access to specialized tools and facilities and as needed under socially distance conditions.
All of our customers that are still in full operation.
Programs, which were launched before the crown virus shutdown have not been affected and we are successfully starting new runs during the shutdown.
The semiconductor industry anything has accelerated over the last few months, making our perspective customers financially capable of even more extensive R&D work.
The pipeline chart shown here is intended to give investors an idea of our progress with customers. This quarter. Our chart does show in a downward tick, but it should not be construed as bad news in Q1 of this year one of our customers who had two projects underway decided to branch one project into two.
Becoming the first customer to have three engagements active with Admera right.
Recently, they decided to consolidate back those two programs into a single one to focus efforts on getting to market more quickly.
From our side, we view this as a positive development since the basis of the decision was to get to production sooner a stance, we are 100% aligned with.
The remainder of our customers also continue to move forward indeed since several of our existing customers have multiple engagements underway.
We now have 25 engagements with the same number of customers of last COVID-19, we have several other new prospects not currently in our pipeline who are also interested in working with our technology.
As mentioned last quarter. The current of our shutdown is somewhat affecting new customer acquisition, because it's not easy to visit most customers face to face we have not been able to hold our typical multi hour in person technology review sessions with potential customers.
In the past we found these meetings are the most effective means for adding customers to our pipeline for.
For a variety of reasons. It is just more difficult to convince the potential customer to sign up for a multiyear assume call and it's harder for our sales team to gauge reaction for follow up.
We are anxious to start traveling for in person meetings again, but because our team has been so busy in the last few months, we have dial back on efforts to aggressively seek new customers.
Naturally given the choice of where to expand our limited engineering resources, we have been prioritizing engagements, which have a better chance to advance into phase four over adding new customers into phase one.
At American remains committed to working with customers to joint development agreement.
We are advancing our efforts on this new format with several large companies those with multiple production notes and multiple technology and product divisions and approach the integrate development licensing component and manufacturing requirements, but we continue to be slowed down by the uncertainty and logistical constraints put in place by the current of virus there.
In the last three months, we have been in negotiations with the first of our customers with whom we hope to Institute a JD.
Drafts have gone back and forth multiple times and we believe we are getting very close to conclusion.
Technical discussions both on our MSP film and the details of equipment equipment installations have been active.
Unfortunately as of this earnings call. The formal contract officially start the program has not been finalized.
My checks with other industry players, who have negotiated with this entity indicate that although this company execute quickly and technology are extended legal negotiation experience is not unusual.
Work continues with each of our three existing license partners results from our tea CAD simulations and wafer runs show gains moving us closer towards the result that will ultimately take us into production.
All three are still excited about the competitive advantage at Americas, MST can bring to them.
Recently, we learned that one of our partners a cam had a fire in one of their semiconductor fabs, which may affect the completion schedule for our latest integration wafer revenue, but we are still uncertain of the impact.
Other than that all of our licensees continue to progress forward in partnership with Adam era.
I wanted to take a few months to talk about one of the major technological and market achievements. We had in this last quarter, which is the recent released the beta customers of our MSP CAD version 1.0.
The cat is a very complex software tool used by all leading semiconductor manufacturers to sort out the deep electrical immaterial physics of semiconductors.
Synopsis developed this modeling platform to simulate semiconductor processing device operation and interconnect characterization for technology development and manufacturing.
At American developed our own tea CAD modules working closely with synopsis, which show how MSP can be integrated into a customers design and helps predict improved electrical results.
The key dead that Teekay development process is complex and involves mathematical modeling of the physics, followed by calibration with actual silicon results than the models are optimized to the result in further calibration is executed until the model consistently predicts the performance of MST integration in real time.
Silica.
The charts on this page show, how well our tea CAD simulations are matching our measured results.
With this level of precision Adam Air and our customers can reliably predict electrical performance, allowing them to conduct what if analysis much more quickly than running silicon.
We've been using tea CAD for internal R&D and four bespoke customer projects for some time now but.
But this quarter, we have gotten to the point, where we have made a version 1.0 release to our first beta customers for their own use reflecting our confidence in the results customer should expect.
Feedback thus far has been excellent.
The cat is important because the customers use it to optimize process modules and integration by fully exploring the process parameters.
Which can reduce the number of experimental wafers and development cycles.
We believe this will help to speed our time to successful results of customers.
Once the customer has a process design ready for production. They can again use the CAD to capture and analyze the impact of process variation on device performance to increase robustness and thus improve yield.
After incorporating feedback from our early market beta release, we plan to make MST cat available to a much wider audience. So customers can experiment with MST on processes, we havent targeted up to now.
We believe this should have the effect of increasing our market reach.
RF front end components connecting five jeep products to the new networks rolling out across the world.
This is the type of market transition, which allows new technologies like ours to get a foothold and start expanding.
We are pleased to report that last week. Our engineers started the first work of depositing MSP on 300 millimeters wafers using the state of the art EPPY deposition tool in our new facility.
We had originally expected the vendor installation to be completed and the tool turned over to us in August, but an issue arose with the exhaust conditioning and abatement process, which required changes to both the equipment and the facility.
Lead time on the specialty venting equipment cause the installation time to be delayed.
A formal approval procedure, where both the facility and equipment must go through an extensive safety and compliance to specification test.
Must be signed off prior to acceptance bite at a mirror only at that point, where we take full possession of the tool and start paying on the lease.
Although our engineers have now been trained on the equipment and started some initial experimentation full acceptance has not been achieved we.
We do expect it to happen soon.
Regardless of the installation delay we continue to be excited about the opportunities. The 300 millimeter tool open to Adam era today greater than 65% of the revenue in the semiconductor industry is driven by 300 millimeters wafers.
When this new tool is online we will have the ability to work with our customers on more frequent wafer size accurate integration runs.
We will be able to accommodate more customers running more experiments and we'll be able to take the time to get a physical calibration. So fewer runs will be necessary before customers can get to the results they are targeting.
We will finally have the ability to just see the market with MST blanket wafers, enabling easier experimentation by a wider set of potential customers and we will even have the ability to help customers who need a transitional wafer supply.
They moved from development with MST to pilot runs to early production.
Because this will be a state of the art EPPY tool. It will also allow us to make process improvements that can directly transition to our customers production facilities when complete.
Since the more advanced tools.
Since the more advanced nodes used 300 millimeter. This tool will also help us to more directly addressed the higher royalty segment of the market.
So we have many reasons to believe that this new tool will help to accelerate Adam errors time to revenue.
Finally, I am pleased to refer you to add marriage, New website, which came online earlier today, we believe it does a much better job of giving investors and potential customers information on Adam errors technology, and how it can be applied as a toolbox to solve many of the most come problems in the semiconductor industry today.
Reflecting the complex quantum engineered technology, we offer to the market. The website does skew to the technical sort of it seems particularly dense in any one area feedback would be appreciated and we will work to continuously update and improve the content.
During this past quarter, Adam Air has continued to make strong progress across many different areas of our business. The morale of our team is high and our newest engineers are starting to make significant contributions to achieve our goals.
During the quarter, we took the opportunity to strengthen the balance sheet with a minimally dilutive low cost offering that well positioned and well capitalizes the company for our next phase of growth.
As always we have carefully conserving our cash while aggressively pursuing areas of greatest strategic importance.
Although the pandemic is caused some disruptions with our new tool in customer negotiations very few of our activities have slowed customer results are improving and we are now better positioned to the company to make the transition to production than ever before.
Now I will turn the call over to Frank to review our financials.
Thank you Scott at the closer to the market today, we issued a press release announcing our third quarter of 2020 results.
This slide shows are summary financial results and I will now review them in more detail.
Our GAAP net loss for the three months ended September 32020 was three $6 million or 19 per share compared to a loss of 3.1 million also 19 per share in the third quarter of 2019.
The larger net loss in Q3 2020 was due to an increase in gap operating expenses of $354000 from $3.2 million in Q3, 2019 to three $6 million last quarter combined with $50000 less of gross margin.
We did not recognize any revenue in Q3 2020, while in Q3 2019, we had $254000 of revenue.
Net loss per share was unchanged due to an increase in weighted average shares outstanding from $16.6 million in Q3, 2000 $19 million to $19.3 million in Q3, 2020, which offset are higher net loss.
Our press release and this slide containing reconciliation between our gap and non-GAAP results.
Has has generally been the case for Adam era, the biggest difference between our gap and non-GAAP expenses as stock compensation, which is a non-GAAP.
Not cash item and was $829 and Q2 2022.
Compared to 798000 and Q2 2019.
Since stock compensation expense did not change significantly between the periods the factors affecting gap and non-GAAP expenses are basically the same.
Non-GAAP adjusted EBITDA in the third quarter was a loss of $2.7 million compared to a loss of 2.4 million in Q3 2019, reflecting the same factors I discussed about our GAAP results.
Non-GAAP research and development expense was $1.7 million in Q3, 2020 compared to $1.5 million in Q3, 2019, reflecting an increase in engineering head count and higher outsourced fabrication and test spending.
Non-GAAP G&A expense was $841 in Q3 2020 as compared to 686000, and Q3 2019, primarily due to hire legal expenses for filing and maintaining patents.
Lastly, non-GAAP sales and marketing expenses were unchanged.
On a sequential basis are GAAP net loss in the third quarter of 2020 was three 6 million compared to a three 8 million net loss and Q2 of 2020 as a result of lower operating expenses.
GAAP net loss per share was 19 in.
In Q3 compared to 21 per share in queue to reflecting both the smaller loss and a higher share count.
Non-GAAP adjusted EBITDA, two $7 million in Q3, 2020 compares to 3.1 million in queue too.
Reflecting lower operating expense.
Cash balance at September 32020 was 25 $3 million compared to $18 million on June 30th.
On September 2nd we entered into an aftermarket or ATM equity program.
During Q3, we received net proceeds of $8.5 million from the ATM program.
And to date, we have received.
Total net proceeds of $13.5 million on gross sales or $14 million.
This is based on total sales to date of 133 million shares at an average price of $10 53 per share.
Excluding the ATM operating cash use was $2.5 million in Q3.
Down from $2.9 million in queue too.
As of September 30th 2020, we had 21 million shares outstanding.
As Scott mentioned in his remarks, we are still in negotiations with our most advanced J D. A candidate.
This jada will include payment for the license is granted to our customer.
The timing an amount of revenue recognition from that contract will depend on the final terms, which may include milestone based payments.
Because of these uncertainties are guidance is that we do not expect to recognize any revenue in Q4 and consistent with our past practice, we only provide revenue guidance for the current quarter.
Due to the delay and acceptance of the new 300 millimeter EPPY deposition tool, we are lowering our full year 2020 guidance for non-GAAP operating expenses to a range of 12 to 12.
Two $5 million.
With that I will turn the call back over to Scott for a few summary remarks before we open the call up to questions.
Scott.
Thanks Frank.
As you've heard on this call while the coronavirus has caused some minor delays our business has continued to advance in our efforts at customers are being rewarded are hard work and MST USP RFS, Hawaii and on the GDA show excellent promise for early breakthrough in our new MSP CAD and 300 millimeter tool.
He gives us the ability to get customers through the integration process and to market more quickly than ever before.
The technical breakthroughs enabled by our quantum engineering achievements continue to gain notoriety in the industry and we are building on their success inside at a mirror, both our management and engineering teams are optimistic content us to continue building on the results achieved up to today and I look forward to sharing the results of those efforts with you in the future.
<unk> operator, we will now take questions.
We will now begin question and answer session to ask a question you May press star than the one.
At this time on your Touchtone telephone if you're using a speaker phone. Please pick up your handset before pressing the keys to withdraw your question press the pound key.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Cody Acree with the capital your line is open.
Thank you very much for taking my question.
I guess, just one clarification slide you said, Frank I'm, sorry, excuse me.
Your cash generation from the ATM. The slow was what was the number.
It was eight and a half million dollars in Q3, and 13 5 million total through today.
Alright, Thank you very much.
And.
Yes, Scott.
Just as as you.
You look at at your various customers I know that your your guiding 220 revenue this quarter because of that single customer shingles.
Program that that you don't have a lot of visibility closure too, but could you just talk about your visibility with your remaining engagement base.
How are those progressing what has what installed because of covid.
Guess, just just any remaining physical that would be helpful.
Yeah.
We continue to have.
The customers in the pipeline and we continue to move forward with them.
I think that I disclosed pretty much all of the.
Slow down that we see that can be attributed to covid.
Any any other delays really are just.
Kind of the normal operating business of.
Running wafer runs that take a long time get getting results analyzing those results and turning them around.
And so we continue to be optimistic about a few of our customers that we think will get into.
License opportunities with.
Hopefully in the near term.
But we don't have much more visibility we can provide on that right now.
Great. Thank you and lastly, the.
The Akm's fire you.
You said you didn't know what that was what impact that may or may not have.
Was that fire in the shower that you're doing work in.
Yeah. So the fire was in a facility that has multiple fabs in which we are we were involved so the fire happened late last week, we haven't gotten official word from AKM on the impact to us or when they're going to be.
So I think they would have probably closed on all of their.
And then.
We aren't sure when they're going to start up.
The five that were unaffected and what the impact will be two hour set of wafers that were scheduled to come out.
Some time next year and the first half of next year based on that but.
Hopefully, we'll be learning about that in the next week or so.
Alright, great. Thank you guys.
Thank you and as a reminder, if you would like to ask a question. Please press the star than the one key on your Touchtone telephone.
And I should know further questions I will now turn the call over to Mister Bibeault for closing comments.
Thank you all for attending today's.
Presentation, we're very pleased to be able to share with you some of the excitement we're feeling inside at a mirror.
Don't forget the check out our new website www dot <unk> dot com.
Where you can look for news articles and blog posts to keep you up to date on our progress and you can just check out the great new explanations of all of our technology that we've been able to put in there.
Should you have additional questions. Please call, Mike Bishop won't be happy to follow up.
Forward to seeing some of you during our scheduled marketing activities such as the Craig Hallum Alpha Select conference on November 17th.
We thank you again for your support and look forward to our next update call.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
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