Q2 2021 Atomera Inc Earnings Call
We have had a lot of inbound questions about how our tea CAD product is doing and its success with customers. The first cohort of customers who've adopted MST cat are finding it is assisting them greatly and narrowing down the wafer and needed before achieving success.
I think this is best illustrated with an example.
1 of our customers have their wafer on underway with the integration steps that we mutually agreed with the best suited for their devices.
2 months after the wafer started MST cat helped us identify and even better ways to integrate our technology that would add to the device's performance. We shared it with a customer who got very excited and contributed some of their own ideas about how it can be improved even further.
So we ran peak out again and sure enough there idea did make it better.
And then last week, we found another innovation to optimize the device yet again that was subsequently proven on MST cat.
We are now talking with a customer about starting wafers to demonstrate these latest innovations.
Why is this remarkable.
Well just a few years ago. Each of these 3 innovations would've needed silicon runs that typically takes 6 to 9 months.
We ran these 3 tech tea, CAD simulations, and just a month and a half.
As a matter of fact, we still haven't even gotten the results from the first wave for run.
And we already have a very specific plan for making the next wave for run much more successful.
And this is the power of MST cat.
And the hands of Smart integration engineers. This tool can help us do fewer wafer around that will be more successful and so therefore get us to production more quickly.
So how does this relate to the engagement chart well it today, its becoming standard that our phase 1 customers want to develop a detailed tea CAD stimulation before finalizing a plan to run MST wafers.
So customers are staying and phase 1 longer than in the past.
But we believe this will lead to customers going through phase II and phase III faster than ever before.
This should also make engagement contracts easier since both sides will be able to exactly define what success looks like it.
It may appear that additional work and the planning phase will add time, but a more focused set of targets established upfront will lead to faster progress for your phase 3 and 2 production and that's great news for our customers for Adam era and for our investors.
Since we're talking about customers I'd like to clarify our J D as in general and our current engagement in particular.
By now you're all familiar with our standard customer flow usually this involves and 1 process node, where we work with customers to achieve a targeted performance spec by integrating MST and basic 3 leading to a decision to go to production.
MST and then installed and their fab, which is paid for and then we go through process qualification and base 5 before production begins.
I'd like to emphasize that this phased approach as a model and many customers do not follow.
<unk> through steps, 1 and the 1 through 6 steps and border, but they do have to perform all of the functions shown here for they can go to production.
J D A's are done differently.
So I removed the base numbering to avoid some confusion.
Generally speaking, we believe most J D. H will involve integration beginning and continuing while MST is installed and a customer fab.
By combining installation and integration at the same location development efforts will be expedited sensible logistics of MST wafer handling are much more efficient.
Also because we believe the customer will understand that must be better and have more buy in and urgency on the program.
It's our belief that M. S T J D. A engagements like the 1 shown here are more likely to get to production quickly.
That being said the J D and we're working on today is somewhat unique.
1 Central Engineering group is pre qualifying M. S. T. So they can confirm it meets the Companys specifications and will subsequently and make it available to their various business units for adoption.
At that point, our business unit will integrate MSP and other products and then complete process qualification on that product line. When they are ready to go to production.
Because the technology is already installed they will be able to move directly from integration for qualification.
As in the prior J D. A example, the integration work should definitely be much quicker than a typical engagement and and MSP, you'll be offered to multiple different product lines simultaneously, creating a much bigger revenue opportunities and a single process node and engagement.
We would love to replicate this type of unique J D. A with large customers throughout the semiconductor industry.
Today, and a marathon and discussions with multiple customers about both types of J D eggs.
Our development organization has accomplished a lot during the last quarter, especially in our MST technology focused areas.
Having demonstrated industry, leading performance and several critical specifications for power analog devices, using MST SP, our attention shifted to optimizing for device reliability and manufacturer ability.
And the last few months, we've completed that task, making it easier for designers to adopt these technologies and bring them to production.
This is a very large opportunity because the initial focus for MST SP is and power management, which is the largest market segment of general purpose analog Ics.
We can now start the process of rolling this technology out to a wider set of users not just boundaries and IBM and IBM, but also for the many fabless semiconductor companies in this space.
This quarter, we have also demonstrated significantly higher performance using MST on RF, Soi wafers, which will enable more advanced and efficient implementations over the next generation of <unk> cellular RF chips.
But our technology clearly applies to areas beyond the more than more market segments.
This quarter, we put the industry on and noticed that our capabilities span for the bleeding edge with our white paper on MSP for advanced nodes I recommend looking out for the white paper, although it covers some sophisticated transistor concept, it's not a difficult read and give some good insights into the type of discussions we have with customers at the advanced.
Notes.
The executive summary of the deaths and.
The industry goes to smaller and smaller process geometries, like 2 or 3 nanometers or below.
The need to control those opened diffusion becomes even more critical.
The industry has tried to use carbon but our white paper makes the case that MSP is a significantly more effective method of controlling diffusion across a number of different interfaces, even for very thin MST film implementation.
And although the paper and targeted at manufacturers of 3 D transistors, like nano sheets and gate all around structures.
The benefits. We described also apply to work going on and memories Cmos image sensors and and other advanced products.
Development and the most advanced nodes require operation and ultra clean environment to deliver 300 millimeter wafers to customers at very high levels of purity, which requires sophisticated cleaning and inspection equipment, along with a state of the art epic tool.
Although we havent been deposits MST using.
The epic tool for months the facility has struggled to meet their contamination and specifications.
Now new support equipment is being added that will finally resolved. This issue within this quarter, we expect to reach formal acceptance and start paying for the lease on our new F B tool facility.
This tool and the advances we have demonstrated in the last quarter will allow us to promote MST to a wider market.
And we're working to do so much more aggressively therefore.
I am pleased to welcome Jeff Lewis, who has taken the reins of our business development and marketing efforts.
Jeff is a longtime semiconductor veteran and brings strong expertise and transistors and memory and EBITDA. He already is implementing strategies, which will increase <unk> visibility and drive faster conversion from integration to revenue.
As you can see at a merit has accomplished a lot during the last 3 months and I believe we are positioned for continued strong execution over the second half of the year.
As COVID-19 restrictions lift around the world, we will be getting on the road and strengthening our personal contact with customers to make sure at the forefront of every company's mind.
Since industry profitability is at an all time high customers that are looking to spend that money.
And our competitive advantage and Adam era is offering very compelling solutions do that using MST.
So the potential for some very big wins is excellent.
Now Frank will review our financials.
Thanks Scott.
At the close of the market today, we issued a press release announcing our second quarter of 2021 results.
This slide shows our summary, financials, which I will discuss now and more detail.
Our GAAP net loss for the 3 months ended June 32021 was $3.7 million, which was <unk> 17 per share.
And the second quarter of 2020, GAAP net loss was $3.8 million for 21 per share.
Each of the components of our Opex were basically unchanged from the same period from 2020 with total GAAP operating expenses declining by $69000.
We did not recognize revenue on either of those periods.
Weighted average shares outstanding were $22.5 million and Q2, 'twenty, 1 compared to $17.8 million and the prior year period.
Sequentially, our GAAP net loss in Q2 increased to $3.7 million from $3.6 million and Q1 due to revenue declining by $400000, which more than offset a $296000 per quarter on quarter decline and GAAP operating expense.
Lower expenses resulted from the timing of changes and our executive team.
Net loss per share increased to <unk> 17 per share and Q2 compared to <unk> 16 and.
And Q1.
Weighted average shares outstanding of 22, and a half million and Q2 compares to $22.1 billion and Q1.
The press release and this slide contain a reconciliation between GAAP and non-GAAP results.
Non-GAAP adjusted EBITDA was a loss of $2.9 million and.
And <unk> 13 per share and both Q2 and Q1 of this year.
The non-GAAP operating expense of $2.8 million, and Q2, and $3.3 million and Q1 for.
For a total of $6.1 million non-GAAP operating expenses and the first half from 2021.
In Q2 of 2020, non-GAAP adjusted EBITDA as well as non-GAAP Opex with 3.0 million.
Our cash balance.
At June 30 of this year was $34.3 million compared to $36.7 million at March 31.
For $2.4 million decline reflects $2.7 million of cash used in operating activities offset by cash inflow of $354000 from financing activities.
During the first half of this year, our cash use and operating activities was $6.6 million and total cash balance declined by $3.6 million as operating cash use and was partly offset by $3.1 million with cash from financing activities.
And as of June 32021, we had $23.1 million shares outstanding.
As Scott mentioned in his remarks work with our JV EBITDA customer remains on track and.
And we hope to successfully complete the milestones remaining and that contract and the next few quarters.
However, we don't have enough visibility to forecast the timing of achieving those milestones for the timing of closing on other customer agreements and we're negotiating.
So our guidance is for zero revenue in Q3.
And consistent with past practice, we're not providing revenue guidance beyond this current quarter.
Our $6.1 million of non-GAAP operating expenses and the first half of this year indicate a run rate below the plan and where it's at.
Based on my earlier annual expense guidance.
The lower run rate is primarily views of delay and commencing payments on the new IP.
However, we do expect to begin making those payments.
This quarter and we have not changed our plans to add engineering head count for this year.
We also expect that sales and marketing expenses will increase going forward as we rollout our offerings to a broader set of customers.
I had previously guided non-GAAP operating expenses would be and a range of 14 to $14.5 million for the full year.
Which would imply about $8 million from the second half for sure.
We don't expect to reach that level. So we're reducing the range of our full year, our full year non-GAAP operating expense to a range of $13.2 5 for $13.75 million.
With that I'll turn the call back over to Scott for a few summary remarks before we open the call up for questions.
Got it.
Thanks, Frank as I shared earlier, we have a very we've had a very strong quarter of execution.
We're making great progress on our key focus technologies with assistance from our increasingly sophisticated and mesquite cat <unk>.
Customers continue to show strong interest and start wafer runs with us even in the face of severe capacity restrictions and their fabs and our new white paper on the dopant blocking for advanced 3 D applications is gaining interest and the industry and we are bringing those ideas to customers working and other advanced areas.
Inside at Amira, our engineers are energized since every day they realize the huge benefits MST can bring the industry.
The enthusiasm and fresh idea for fresh ideas from our new executives.
Our share to help us gain even more traction and upcoming quarters, leading to more commercialization opportunities around the industry.
Mike we can now take questions.
Thanks Scott.
So we will now open the call to the Q&A session. If you have a question you may click on rates and on the rate of 10 button at the bottom of the zoom window on.
Alternatively, you may typing your question on the Q&A window also at the bottom of the zoom window.
<unk>.
Alright, So why don't we go to questions and.
It's Richard Shannon.
Yeah.
From Craig Hallum.
Do you have for questions.
Go ahead, if it and Mike can you hear me, Yes got you.
Excellent and probably 2 questions here first 1 and Scott and I jumped on the call just as it would starting so I may have missed your specific language here, but it sounds like and what are the issues here and the industry about getting access R&D way for sound like you've seen a little bit of loosening. There can you can you expand on matching and is there any consistent theme around.
And those customers free seeing these restrictions loosening of bits by node by customer type by phase of customer et cetera can you just give us some more flavor there. Please.
Yeah I think.
For all of our customers and we're talking about customers and the integration phase as we mentioned at.
The interesting thing is that for projects that are ongoing.
And the Fabs Theyre seeing benefits. They are seeing you know really good potential and so they're more willing to to start new wafers and definitely to continue wafers that had been running and the fab, but starting up new program. So it's been much harder. So it's not so much related to the process node or and the wafer size or anything.
And it's more related to.
When we have programs that have been underway and they are starting to see the good results from net of those they get excited and they want to keep them moving even if they have to fight for the wafers to get them and the factory. So that's that's kind of what we're seeing out there.
Okay fair enough and the other question for me on the on JD is.
I think last call you said that you had you worked and any what you see for.
The specific language language users late stage discussions with any new J D. As out there I didn't hear you say anything regarding that this these and these prepared remarks can you kind of is there any way any statements you can make regarding progression with with any customers, who you have been in discussions with on the JD is yeah.
Yeah, I think it's a it's always challenging for us to talk about timing I think.
Long time investors and lived through the very difficult negotiations that we had before we finalize this last J D. A.
And so I I don't really want to make any predictions, but I will say, yes, we do have discussions ongoing with a number of companies I think some pretty interesting projects with some large companies that we really hope that will convert.
And we're not predicting timing, but you know they could happen.
It could happen anytime.
Okay Fair enough 1 more question and on and I'll jump on line here and before I ask that I'll say on your comments on the.
T category interesting I'll, probably follow up with you offline on on that 1 the 1 I did want to ask you about is related to the.
And our leading edge.
The work that you've been doing here your blog posts and paper were interesting the extent to which I can actually understand it is not being and device engineer.
But it kind of begs the question of Av.
How long have you been and work on this node and is there any thought process investors should have that is going to come to fruition faster than what we've seen with other product areas nodes et cetera that you've been working on it right. Yeah. I mean, that's a good question because.
So when we talk about our focused technologies and we're not only working and focus areas, but and the focus areas. That's what we're specifically taken a a product or a process and tried to do something.
Specialty innovative there and bring that is more of a full solution to the customers as opposed to just.
Using MST and for the improvement.
Process, the customer has and so on are.
On our.
Focus areas, we are working with customers and that all different stages.
And.
And it will really there the timing for them going to production will depend on you know really when they want to take that.
And thank the production because they are and the legacy nodes there.
It's kind of they take them on a.
Schedule, it's different with every customer.
On the more advanced nodes, you know that everyone that it is only 3 leading foundries that are.
Semiconductor companies that are developing and those advanced nodes and you know they have a lot of incentives to get them to market as fast as humanly possible.
That being said when they start.
Working with our new material they typically will.
Yes.
They'll put it in.
And note that they are working on at the time and that might be out of generation or it might be up to generate.
So I can't really give much insight into where.
And so customers are looking at this technology.
But I would say the thing we've always been excited about about getting integrated into the bleeding edge is that it tends to be something that's adopted by all the companies and the industry and then you become a part of the standard semiconductor roadmap that every company implements and the future.
That's what happened with high K metal gate back and around 2010, or 2011, and that's what happened with the strength.
Strange silicon back in 2000, and our 2001 and today all companies run those technologies and all of the different process nodes.
Okay. That's helpful perspective, that's all for me Scott I'll jump on the line. Thank you.
Thanks Richard.
Thank you Richard.
And there are some questions coming in on the on the Q&A chat here and there a little bit of and Echo.
Talk to you about the J D a partner and and.
And how long the phases are going to take so I'll. Just go ahead and ask some of the questions.
Is that.
How long will phase for cake and once it's up and.
And what's the upfront and how long do you anticipate each run of wafers to take and the customer's fab and <unk>.
And the past we've said that.
And each 1 would be about 6 to 9 months as well.
Once it's installed and the and the customer's fab how low do you anticipate that day.
Yeah, and and actually it's a it's.
Good insightful question because.
So.
Logistically when someone would run wafers with us.
6 to 9 months, so let's talk about.
And I think the fastest run we ever had and you want to do with 6 months.
From when they started the wafers until we actually got the test data and.
And in the middle of that process. They had to take the wafers out of their factory package them up send them to us we had to especially clean and prepare our tool to be able to deposit on to those wafers packaging them up and sending them back on their side. They had to go through a lot of procedures to and <unk>.
Sure There was no contaminants on those wafers and then get them in line and that probably took a month and a half of that 6 month period to happen now.
A R. J D day partner has this installed and their tool so literally that hold a month and a half they would just take the wafer and put it and the tool takes 20 minutes or so to do the MST deposition and maybe a half an hour and then they have them back out running and the line. So at a minimum you're talking about a month and.
And I have of.
<unk> and the time to flow through the fab, that's really attractive, but I I would think that because they can schedule the way for us much more.
Reliably right. They know they'll know exactly when the wafers are coming into line to go on the next step that they'll be able to schedule them to get it down from maybe.
Maybe for months or so so I'm talking about a 30% improvement and throughput to be able to get those.
Wafers out before they'd have silicon results.
For the J D E and particular for the J D and we have right now they're going to the.
The first part of the JD 8 is about characterizing MST to meet kind of company goals and company goals will.
And we'll help them to figure out the best way of integrating MST inside their particular fab. It will also help them.
And really their engineers to understand how to.
To run it better and faster for that particular situation and so.
So I believe there'll be even more advantages that they get a.
And then the for months now.
And talk about before and so once they are ready to start integrating it into.
And to the products that would go into production I think that process will happen.
And a much faster than we normally would expect maybe maybe it will be 1 year or.
And I still think about a year or 2 year and a half for that.
Last part of integration and and the process qualification to be completed.
And then we're getting.
Some questions about how long phase for it's going to take and when and when do you anticipate going into phase 5 and I know, we address that and to prepared comments and maybe expand on on.
How you see that transition rolling forward for the GTA partner.
Yeah faith for.
I'm, a very constrained about what I can talk about the timing on that that would fall underneath the customers' confidential information, they're very sensitive and understandably. So that they don't want their plans and shared with the industry.
I would say that as.
As I mentioned and the JD is on track.
And we're hopeful that the base for will be completed on a.
You know a very reasonable timeframe, but I can't really give a lot more insight into what that would look like.
Okay.
Well it appears at this time.
We don't have anybody.
2 asking further questions.
And if you want to go ahead and make the closing comments Scott. Thanks, so much.
Hum.
Well, thank you Mike.
Well, let me just say I want to thank everybody for attending today's presentation. We're pleased to be able to share with you. The results for the last 3 months and to get a feel for some of the excitement we're feeling here inside at a mirror.
Please continue to look for our news articles blogs.
And things on our website to keep you up to date on our progress.
You can sign up for them, along with Investor alerts on our website at Emera Dot com.
And should you have any additional questions. Please feel free to follow up with Mike Bishop who will.
And we'll be happy to help you. So thanks again for your support and we look forward to speaking with you again on our next update call.
Yeah.
Yeah.