Q3 2021 CyberOptics Corp Earnings Call
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[music].
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Good day, ladies and gentlemen, and welcome to the Ciber optics third quarter 2021 earnings call. Today's conference is being recorded at this time I turn the conference over doctors, Djibouti Kulkarni, President and CEO of a fiber optics. Please.
2021.
This strong growth was driven by sales of T. D. M. R. S sensors.
It was 81% year over year to $3 6 million.
Okay.
Demand from OEM customers and system integrators involved with high end electronics and semiconductor inspection and metrology applications.
He is continuing to drive the sales growth of our <unk> sensors.
<unk> sensor sales are forecasted to post strong year over year growth in the fourth quarter of 2021.
Sales of semiconductor sensors.
Our vehicles those layer products.
Least 92% year over year to a record seven $4 million in the third quarter of 2021.
Ongoing demand for semiconductor capital equipment is driving the sales growth of this yield and process improvements sensors.
Sales of semiconductor sensors are forecasted to record strong year over year growth in the fourth quarter of 2021.
Sales of inspection and metrology systems rose, 12% year over year to $14 9 million.
In the third quarter of 2021.
Within this product category sales of SKU 3000, Multifunction inspection systems increased 9% year over year to $7 4 billion.
Of this $4 $5 million was derived from sales of <unk> systems for many <unk> inspection and metrology.
Additional mini and micro OLED orders are anticipated going forward, making us believe the long term growth outlook for linear in micro OLED inspection and metrology applications remains very promising.
Third quarter system sales also benefited from customer acceptances of $4 $9 million of Treaty Amex 3000.
<unk> memory module inspection systems.
Although <unk> sales are forecasted in the fourth quarter due to normal sales variability.
We see our I MX Lainez mono cyber optics key long term growth drivers.
Sales of inspection and metrology systems are forecasted to post strong year over year growth in the fourth quarter of 2021.
We received a new order for the next 3000 in October.
Our current backlog of 3000 systems to $3 2 million.
These orders are expected to be recognized as revenue in the first half of 2022.
During this year's third quarter, we received our first purchase order for <unk> 3000.
Metrology and inspection system from large integrated device manufacturer.
Incorporating our <unk> nano resolution <unk> sensor.
<unk> thousand was selected by this particular IDM.
Due to its ability to perform 100% <unk> inspection two to three times faster than alternative solutions.
Delivery of the WEX systems revenue are scheduled for the first quarter of 2022.
I should add that customer demonstrations are continuing for both the <unk> system and then the resolution centre for wafer and advanced packaging applications.
We believe both products are positioning cyber optics to capitalize upon significant longer term growth opportunities.
Fiber optic backlog at September 30 of 2021 totaled $44 2 million compared to $45 2 million at the end of this year's second quarter and.
$17 7 million at the end of third quarter of 2020.
We are forecasting sales of $19 million to $23 million for the fourth quarter of 2021 ending December 31.
Reflecting strong year over year sales growth.
Shipments of some SKU 3000 systems will be deferred to the first quarter of 2022 due to customer delays in obtaining needed equipment from other suppliers for a complete full line solutions.
We expect to start maybe 'twenty two with a strong first quarter performance based on the outlook for the continuation of favorable market conditions.
Targeted SMT and semiconductor capital equipment markets.
As well as our backlog of orders for FQ3000, <unk> 3000 systems.
Thank you now Jeff Bertelsen will review, our third quarter performance in greater detail. Thanks.
Thanks to the bone.
Our gross margin percentage in this year's third quarter was almost 46%.
Up from 42% in the year earlier period.
Other than our original forecast at the start of the quarter.
The improvement in gross margin percentage over the prior year and our forecast at the start of the quarter was mainly due to a more favorable sales mix.
Record sales of high gross margin semiconductor sensors for a key driver behind the improvement in our gross margin percentage.
Sales of semiconductor sensors represented a larger percentage of our revenue in the third quarter of 2021 on a year over year basis and were better than our forecast at the start of the quarter.
Gross margins on a SKU system products were also better than expected due to a more favorable mix of sales for demanding higher end applications.
Gross margins for other inspection and metrology system sales also exceeded our expectations.
Our gross margin percentage in the fourth quarter of 2021 is expected to be flat to up about one percentage point from the level in the third quarter of 2021, given that we are not expecting any sales of lower gross margin Amex 3000 systems in the quarter.
Although we have largely avoided issues due to part shortages limited availability of cargo space and delays in ocean freight have made it more difficult to move equipment around the globe.
Limitations, resulting from the global freight situation have been factored into our Q4 revenue guidance.
Total operating expenses for the third quarter of 2021 increased 17% year over year to $7 6 million.
The increase was due to higher third party channel commissions, resulting from the significant year over year increase in sales higher accruals for incentive compensation, given our improved financial performance and higher compensation costs for new and existing employees.
Depreciation and amortization expense totaled $603000 in the third quarter of 2021 and stock compensation came to $328000.
Total operating expenses in this year's fourth quarter are expected to be about $300000 lower on a sequential quarterly basis, when compared to the third quarter of 2021 due to reduced channel commissions and incentive compensation accruals.
Our effective income tax rate for the third quarter of 2021 was 10%, which included about $400000 of excess tax benefits from stock option stock option exercises investing of restricted shares.
We are forecasting an effective income tax rate of about 15% for the fourth quarter of 2021.
Cash and marketable securities totaled $33 5 million at the end of this year's third quarter up from $32 million at the end of the second quarter and $30 6 million at the end of 2020.
We believe our capital resources are adequate for achieving our growth objectives.
Thank you we would now be happy to take your questions.
Thank you, ladies and gentlemen, if you'd like to ask a question.
You may do so by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure that mute function on your phone is turned off so the signal can be read by our equipment.
Star one for questions, we'll pause just a moment to assemble the phone queue.
Okay.
We will take our first question from Craig <unk> with Craig Hallum Capital Group. Please go ahead.
Alright. Thanks.
That's on the good results here I guess, maybe just starting off on the commentary around Q4.
The impact of the SKU deferrals into Q1 are you able to quantify how much that is and just to be clear. This was a result of some other equipment from a different supplier correct. This has nothing to do with you.
That is correct, Greg in the amount of about $2 $5 million.
And as due to other suppliers.
So given that and some amex and it sounds like a little even W X recognition in Q1.
Do you want to even go out on a limb and tell us what youre sort of expecting I'm guessing at the very least probably sequentially up versus Q4, but it sounds like youre going to start off fiscal 'twenty two on a pretty high note.
Yes, I mean, we.
We feel good about how about fiscal 'twenty, two and particularly how the first quarter is going to start out.
And certainly a good chunk reason for that is due to the backlog that we have with as you pointed out and that is W. Ex FX or F.
SKU rather and.
Also some some good sensor backlog so we do feel.
Very positive about the first quarter right now and.
And we do think we will see strong year over year growth in the first quarter.
Okay.
That's that's great and then on gross margin.
Obviously, it's great to see that that mix was a positive driver there, but just kind of feels like looking back the last three or four quarters.
You've sort of kind of hit a new level it seems like and I'm not sure how much of that is just you.
Due to mix versus obviously, a higher top line, but you know it.
It just it feels like that gross margin level has sort of crept up here and I'm not sure what you're viewing sort of is the new level on a more normalized mix, but just curious how you're viewing that as we.
As we go into <unk>.
Fiscal 'twenty two as well.
Yes.
Certainly I think we've done well on the gross margin front.
Certainly wafer cent has had a.
A terrific year.
Up above 58% year over year sold so that is certainly a big part of it.
Even within the <unk> category I think when you look at some of those applications those are the.
More favorable applications from a gross margin perspective in that.
Certainly as we look at.
2022.
There is a good opportunity for that trend to continue so I.
I think from a gross margin perspective things certainly have been clicked.
Clicking along and and.
It is from a quarter to quarter perspective always going to be dependent heavily on revenue mix.
But but yeah I think just given the mix that we're seeing this year, we feel pretty good about it and where we're going.
Yeah.
Makes sense I've I've got tons of others, but I guess I'll ask just one more and then I'll cede the floor.
Can you give us maybe a little bit of an update on what youre seeing from in excess.
The acceptance and adoption level of mini Leds and I think the commentary was you expect to see.
Additional orders going forward I don't know if you meant additional orders this year or just in the go forward periods, but just kind of curious to see how youre looking at that opportunity.
Sure. So Greg I mean, we certainly have benefited from many really scaled up that has already happened.
And continues to happen related to efficacy.
When consumer product Gardner Orange.
Four months ago.
Another one is going to get you on soon.
Thats, where most of the things that have happened to date have gone.
Certainly I mean consumer electronics is a huge area the medium duty display technology.
<unk> truly differentiated technology that has superior performance.
Comparable price points.
The initial traction that technology is getting has been terrific. So no reason to believe that more and more consumer products wound group meeting a need out.
And so we feel pretty good about the overall opportunity and our position in that we certainly have the first mover advantage in that area excuse system as well.
This is going to ask what is ignore inspection system that has been qualified for all of these friction steps that are needed.
And we are benefiting from it so over the next five to 10 years. We believe this is Joe.
Growth opportunity for us and clearly we are seeing orders as we speak right now just about every quarter and that will continue in my opinion given.
The current product planning to get scaled up in medium duty right now.
That's great to hear I'll leave it there thanks for all the color.
Thanks, Chris.
As a reminder, star one for questions well go next to <expletive> Ryan with Colliers. Please go ahead.
Thank you.
Hey, guys just continuing on the led you did four 5 million in sales in Q3, Jeff just refresh me what what's been your year to date.
Ali Mini Leds sale and are there systems still in backlog.
Yes, so year to date.
Mini led revenue is has been $6 9 million and there is $2 1 million in backlog.
Okay.
Timber 30.
Obviously wafers.
Uh huh.
Pretty significant contributor you talk about year over year any sequential.
Color you can provide us on wafer sensor mode.
Yes.
I can comment on that and just we had.
Obviously at a terrific wafer <unk> quarter in Q3.
We do expect strong year over year growth in Q4, but it will be down sequentially wafer sense lobby.
Okay.
And on the new order for the metrology system <unk> 3000.
That a competitive situation can you provide some detail behind that order.
Sure Thanks to the launch.
Greater device manufacturer.
Tom.
In a way.
The total evaluation as usual.
Looked at competitive systems really chose <unk> because of its speed, it's two to three times faster than the <unk>.
<unk> competitor.
That was a huge value to them I mean anytime you gain.
10, or 20% and speed that is a significant differentiation then you start talking about <unk> and speed that essentially slashes catheter.
Anthony explained by a factor of two to three two is really a big deal for them to gain.
Speed advantage and all the other critical metrics that competitive way to configure the system. So the overall like the performance of the new in this area. We have never sold any wafer level inspection system.
I'm pretty good at that.
The top 10, idms and Dillard chose us over competitive systems.
Good to go.
The long term.
Do you have a sense, whether this is going to be sort of any valuation situation or do you think there is.
Opportunities for follow on as.
As we get into the second half of next year.
So certainly there will be a lot more opportunities with current customers who have <unk>.
Given this order for WEX, we will certainly keep buying more WEX vehicle.
As we have discussed in Gabon stake. This whole video is only 25 to 30 customers that matter.
After that.
Really becomes.
The smaller the market so getting.
This customer would it be one definitely even though it's adopted.
So every customer is a huge win in the long term in this area.
These are the liard working with many of those are doing demos and events.
Getting consistently the feedback that <unk> significantly better obviously, we are new in this area so everyone.
<unk>.
On the new company and new technology.
Liberty is fairly good in the SMT space and even in the semiconductor space on credibility has been fairly with established because of our partnership with Gilead for a few years now so those factors that are helping us we are getting traction.
This is pretty good about getting the VW X system.
Along with it we are also setting our Netherlands center, some select system integrators.
In Asia it is difficult.
So the system in local languages and stuff like that.
So that also is getting good traction right now.
So overall, we feel pretty good about.
Operationally in wafer level and advanced packaging inspection idiots.
Well, that's good to hear and congratulations on the.
Strong execution. Thank you.
Thanks, Thanks <expletive>.
As a reminder, star one for questions or comments please star one.
We'll take our next question from Jason Schmidt with Lake Street. Please go ahead.
Hey, guys. Thanks for taking my questions I, just wanted to clarify if the supply chain constraints.
In Europe, and new to be pushed out of Q3.
Nothing of real significance, Jason I mean, there were a few few sensor sales that got pushed out.
But.
Largely we've avoided.
Any big push out due to.
Our own supply issues so.
There really wasn't anything of consequence.
Okay, and then just understanding how tight the supply chain is out there have you seen any significant change in your lead times.
Yes, I mean, there are certainly lead times have gotten pushed out for certain types of components.
There is no question about that so things are tight.
We're spending a lot of time on it we're constantly in dialogue with our suppliers.
And lead times have gotten longer for some components.
Fortunately, we've managed through that pretty well right now without any significant issues from a parts perspective.
But it is tight out there no doubt.
Okay, and then just the last one for me and I'll jump back in queue can you just update us on how we should think about the potential third memory customer coming online if theres been any change in your thought process in regards to the timetable there.
Well certainly we continue to talk to them continue to buy an excuse systems for other applications.
So far we haven't received any order quarter MX, otherwise, we would have disclosed it.
But we believe long term David given the.
<unk> auto line, the existing to limited customers seem to be getting.
If it makes systems.
And given the whole commodity memory.
The market is.
Looking at each other very carefully what vagaries in productivity zone, because it's such a competitive area.
Do think long term, we will get the number of customers, but so far it hasn't happened.
We are optimistic as it happens.
Okay.
Thanks, a lot guys.
Thanks, Jason Thanks, Jason.
Darwin for questions.
We'll take our next question from Eric Slate with Acme analytics. Please go ahead.
So both Jeff and nice quarter.
Yes.
I like it under under promise and over deliver and that's again right. So here's my question.
When we look at 19% to $23 million for the fourth quarter.
What would that have looked like 21% to 25 does that makes sense.
I think certainly we've identified.
Two two.
$2 $5 million worth of.
Push outs essentially so you can.
Adjusted the range for that I guess, given given the nature of your question.
Got it and on the memory side I think Jeff we talked about this this isn't really capacity.
Additions.
Capacity this is more replacing existing equipment, but memory youre selling into is that correct.
Yes, I mean, a lot of it is we're either replacing manual inspection or there is other type of equipment that.
It doesn't work as well that we're replacing so it's a combination of both.
And then so that customers are adding new capacity, so theres some of that too.
Now on the many micro.
Have you added any new customers and what are your total customers and the many micro now.
Yes, we have not added any new customers or not in the past quarter. So the total customer count stands at nine.
Nine okay.
You disclosed a benign how many or I guess sought elephants.
While most big companies.
Yes, most of the customers are sub cons.
All of our larger consumer electronics companies. So I guess, that's what I can tell you.
Okay.
Alright, well congrats again the weather is gorgeous here about 75 degrees good ways I'm going to do my second session and thanks for the great quarter.
Okay. Thanks, Eric.
Robert and now I will talk to you.
Ladies and gentlemen, as a reminder, star one for questions, we'll pause just a moment to re assemble the queue.
It appears we have no further questions at this time I would like to turn the conference back to your presenters for any additional or closing remarks.
Thank you.
Thank you for your interest and questions. We look forward to updating you at the end of Q4.
January and February Thanks again.
Right.
Yes.
Ladies and gentlemen. This concludes today's conference. We appreciate your participation you may now disconnect.
Yeah.
Sure.