Q1 2022 Atomera Inc Earnings Call
I think we're ready to begin.
Hello, everyone and welcome to Adam Air's fourth quarter fiscal year 2022 update call.
Like to remind everyone that this call and webinar are being recorded and a replay will be available on <unk> IR web site for one year I'm, Mike Bishop with the company's Investor Relations.
As in prior quarters, we're using them and we will follow a similar format with participants in a listen only mode.
We will open the call with prepared remarks from Scott BMO, Adam errors, President and CEO and Frank Lorenzo Adam Arrow's CFO , then we will open the call to questions.
You are joining by telephone you may follow a slide presentation to accompany our remarks on the events and presentations section of our Investor Relations page on our website.
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&A session are subject to inherent risks and uncertainties.
These risks and uncertainties are detailed in the risk factors section of our filings with the Securities and Exchange Commission specifically in the company's annual report on Form 10-K filed with the SEC on February 12 February excuse me February 15 2022.
Except as otherwise required by federal Securities laws, <unk> disclaims any obligation to update or make revisions to such forward looking statements contained herein or elsewhere to reflect changes and expectations with regards 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'd like to turn the call over to our President and CEO Scott Depot go ahead Scott.
Good afternoon, and welcome to <unk> first quarter 2022 update call.
I'm sure you've noticed the momentum that's been building over the course of this year and I hope to share some details of that with you today than.
Then after providing some insight into the latest industry trends and how they affect us I will turn the call over to Frank to briefly review the numbers and outlook.
As you recall, we entered into a joint development agreement in January of last year was a large market leading semiconductor provider.
The goal of the agreement was to install <unk> capability in their fab and to work with our R&D team to validate MSP performance benefits, while simultaneously proving that it can meet their manufacturer ability requirements. This.
This opportunity arose because one of this customers business units had found mst's capabilities compelling.
And subsequently referred us to their R&D arm, whose job it is to vet incoming technologies.
This customer invested a lot, including production tool resources engineering time and money into the initiative and working together, we were able to install the MST technology in their fab.
Two weeks ago, we were proud to announce that we have successfully met or exceeded all of the requirements of the JV, resulting in two important outcomes. One is obviously the milestone payment from the customer which are recognized as revenue in the first quarter, but the more important step is the ability to work with the customers business units.
The eventual production.
As you know Adam areas number one goal is to ship MSP based products, resulting in royalty payments.
A successful outcome to this jada was necessary. So we can start moving those business units forward on MSP integration and towards commercial royalty bearing production.
Comparing the phases in this JV with our standard business model is not appropriate since be used we'll have to go into integration before moving into qualification and later into production.
We will continue to provide updates as best we can but as our followers know theres a high degree of confidentiality demanded in this industry and this customer is especially sensitive.
Further as everything in this JV has taken a bit longer than our initial expectations, we're not guiding to a timeframe on these next steps.
However.
Since they completed the time consuming at the installation process and will not have access I mean, we will not have to send wafers to Adam era for MST deposition future integration process cycles should be shortened.
And Argo, Adam era announced that we had entered into our second J D. Eight this time with a large semiconductor foundry who's been working with us in phase III for a number of quarters.
After extensively reviewing our technology, our tea CAD simulations MST enabled wafers and the impact MST can have on their designs. This customer decided to enter into a joint development agreement without a mirror the purpose of which is to define exactly what steps will be taken.
With high priority and with a full set of resources to take MST based products into production. If the results of our latest experiments meet their expectations.
And our business, we expect each engagement to differ and therefore, each J D. A to have unique properties. So I'd like to note that this JV is different from our first in some important ways.
First it's not being administered by a central R&D group, but by one specific technology area. So we believe this customer has the ability to move faster than our prior JV partner on a first product.
Second this contract was structured to smooth the path towards product position. After we pass the next milestone. So there is no revenue associated with signing but the customer has committed to prioritize our wafers and dedicated team who can help move the process to production quickly.
And it clearly spells out the revenue expectations coming in the later phases of J D.
That said if we're successful on this JV EBITDA, we believe the customer will move expeditiously towards commercialization.
The all the legal and contract delays should be behind us.
So with these two J D is underway I'd like to take a step back and review where we are.
We have 19 customers in 25 engagements in our pipeline.
Of which we have two J D A's and five paid licenses.
We've had one new customer move into phase III offset by another engagement that was consolidated as a customer combined two programs into one.
Two of our announced customers our foundries.
Which will help us make MST available to a wide set of fabless companies targeting many different applications.
This has been a goal of <unk> for the last year.
And we're making good progress in that direction.
Unfortunately, I can't go into the exciting details of each engagement because we are working on some high potential areas, which can provide significant competitive advantage to our customers, making them, especially sensitive to confidentiality.
I can say that we are getting very promising results, which has led these customers to deeper engagement and hopefully to more <unk> and licenses.
The pace of the activity in our facility has increased over the past six months and our goal as always is to move each customer towards commercialization as quickly as possible.
We believe the advancements in our <unk> program will spur competitive pressures on all of those in our pipeline to move faster.
Last quarter, our technology was recognized by some important third parties, which has resulted in several key marketing initiatives.
Towards the goal of moving customers faster at America created MST CAD simulation software rich rides on top of Synopsys is industry, leading centaurus tea CAD tools.
Last month's Synopsys hosted a joint webinar.
On how the MFC tool set can be used to model MSP.
Mst's optimize transistor performance.
Working working together with Synopsys, we have already helped industry players gain a much better understanding of how MST can be integrated into their semiconductor manufacturing process.
This webinar has directly led to several incoming inquiries about using MST and new customer design.
Also we submitted a paper showcasing the results of our MST SP technology to a very prestigious <unk> power conference the <unk>.
Sps E conference as the Premier International Forum for technical discussions on all aspects of powered devices. Although thousands of papers were submitted ours was one of only a few selected for the conference in May.
There is no doubt that our submission will expand interest in MST SP with the key players in the power semiconductor industry, where we know we will attend this important conference in May.
Our work on RF, Soi technology, which is critically important to <unk> cellular continues to consume a lot of our time and resources because of its great commercial potential.
We hope this area will be one of the earliest to adopt MSP and to bring it to production considering the significant improvements we can bring to designs.
Likewise, we continue to believe our technology has excellent potential in memory and for advanced nodes.
Now I'd like to address some recent developments in the semiconductor industry, which I believe create an exceptionally favorable environment for Adam era.
Although the big headlines tend to focus on how TSMC, Samsung and Intel are competing to bring the three nanometer or two nanometer nodes market.
The industry has recently been recognizing the importance of the legacy nodes and in particular Fabs running 200 millimeter wafers.
Given the chip supply shortfalls, it seems obvious that the industry needs to add capacity in this area and 200 millimeter fab capacity is forecast to grow 21% to mitigate the supply imbalance.
But there are a few problems.
First the vast majority of 200 millimeter line have been operating and fully depreciated fabs, which can be very attractive financially when operated near capacity limits.
Building, new Fabs is very expensive and 200 millimeter equipment, which has had very limited production over the last decade is in short supply and is priced at a premium.
This situation will play a substantial margin margin pressure.
On these companies for many years until they can be phrased that very expensive build costs. So these new fabs.
Can't easily get equipment and when they can be associated capex costs will drive lower profitability than they've experienced in the past.
MST can help solve these problems for both the fab owners and their fabless customers by allowing them to shrink die and.
And thus boost throughput with only a minor increase in tool costs.
200 millimeter epic tools are available and MSP will allow operators to continue utilizing their depreciated fabs with the associated good economics.
Foundry capacity is forecast to stay tight while industry wide capex is forecast to grow by 24% from 2022, primarily in 300 millimeter wafer fabs.
To deal with the capacity Crunch and pay for the Capex Fabs are raising prices on their wafers up to 20% now and industry insiders say that price rises are not transitory they're permanent.
And this situation is fabless semiconductor mix will tell you the need to get more die per wafer is imperative.
MST provides a path to get these improvements that is both easily implementable and at a more reasonable price than most other alternatives.
Adam era is spreading this message to industry players and we believe that it will lead to widespread adoption over time.
We remain laser focused on getting the first player into production. We believe will drive the Domino effect has been predicting for some time.
As I've said in the past, we believe industry conditions have reached a point, where both near and long term structural changes will provide exceptional opportunities for Adam era.
And our Q4 call I said that we're entering into 2022 with strong momentum and I think you will agree that it has continued with a new licensee successful execution on our first JV and the opening of a new J D. On the technical development side. We also continue to make good progress is.
<unk> by important third parties in the industry.
We still do have more J D. As in licenses in our pipeline, which I believe will help to illustrate our gathering momentum as we move through the year.
Now Frank will review our financials.
Thank you Scott.
At the close of the market today, we issued a press release announcing our results for the first quarter 2022.
This slide shows our summary financials.
Our GAAP net loss for the three months ended March 31, 2022 was $4 1 million or.
Or <unk> 18 per share compared to a net loss of $3 6 million or <unk> 16 per share in the first quarter of 2021.
In Q4, 2021, GAAP net loss was $4 $2 million or <unk> 18, a share.
Revenue in Q1 2022 was $375000.
Compared to $400000 in Q1 2021.
We did not recognize any revenue in Q4 of last year.
GAAP operating expenses in Q1, 2022 were $4 3 million.
<unk> to $4 million in Q1 2021.
$4 1 million in Q4.
non-GAAP net loss for the first quarter of 2022 was $3 3 million.
Compared to losses of $2 9 million in Q1, 2021, and $3 4 million in Q4 2021.
non-GAAP operating expense last quarter was $3 $6 million compared to $3 4 million in Q4, and $3 3 million in Q1 2021.
The $400000 of revenue that we recognized in Q1 of last year at 100% gross margin since it consisted solely of the grant of a manufacturing license to our first JV in customer.
In Q1, 2022 or $375000 of revenue consisted of a journey a success fee.
Which involved at Amira engineering costs and the integration license revenue.
Which included cost of MST deposition and wafer delivery.
Our cash balance at March 31, 2022 was $24 $5 million.
$28 7 million at the end of 2021 <unk>.
A decline of $4 $2 million during the quarter.
As we've discussed on previous earnings calls our cash usage is typically highest in the first quarter of each year due to annual payments, which are expense throughout the year on our income statement.
As of March 31, we had $23 4 million shares outstanding.
Scott mentioned in his remarks, we've signed a new JV EBITDA, which we believe will lead to us recognizing license and engineering services revenue and more importantly, we will accelerate our path to commercializing commercialization.
Delivery partner.
We are not yet in a position to predict the timing of when we may reach these revenue generating milestones under the J D.
And consistent with our past practice I'm not guiding revenue beyond the current quarter.
So our guide for Q2 revenue is Europe .
On our last quarterly update call in February my guidance for non-GAAP operating expense for 2022 was a range of $15 two five to $15 $75 million.
Although we are slightly behind our hiring targets, we remain focused on adding engineering head count and we are not changing our previously stated guidance.
With that I'll turn the call back over to Scott for a few summary remarks before we open up to questions Scott.
Frank.
As you've heard in this call we continue to gather steam here at Adam era and are quite excited about some of our near term developments as well as the underlying macro environment, which is creating favorable long term conditions for MSC to be widely adopted across more and more applications as we work with more customers and unveil new capabilities of our <unk>.
Acknowledging our Tam is constantly expanding.
We believe our recent successes are only the beginning of momentum, which will continue throughout the year and will establish <unk> as a technology licensing leader in the semiconductor industry.
I truly look forward to sharing those successes with you in the future Mike.
We can now take questions.
Thank you Scott.
If you wish to ask a question. Please click on the Q&A button at the bottom of the zoom window, then feel free to type in your question I will do my best to aggregate, the incoming queries and relay them to management alter.
Alternatively, you can click the raise hand button and we may call in your life.
And right now our first question comes from Richard Shannon of Craig Hallum, Richard You made on mute and turn on your camera.
Okay.
Great. Thanks, Mike and Scott Thanks for getting me on here Congratulations on your <unk> announcement today I think my first couple of questions are on that topic.
I guess Scott first question here is lucky to describe this a little bit better.
You described how this a little bit different than the first year data, that's going through central engineering versus the new one the scope.
Through our business units, maybe you could help us describe how this moves faster to the first product here then in the other way is it just simply because it's not going through the central engineering pipeline or is there. Some other reason for that.
Yeah. So.
One of the generally when we engage with the customer we're engaging with one specific business unit thats thinking they have a problem and they want to use MSP to solve it.
They will implement that and they'll take it to production.
Fairly focused effort.
That's how this current J D a customer.
Our JV that we announced last year. We initially started working with the customer like that one of the business units looked at our technology that hey, this looks very interesting.
But in that very large company.
They have a policy that no new technology can be brought in by our business unit has to be vetted by the central Engineering group or other people can use it. So it went through the Central Engineering group now the good news about that is.
From that first J D. A central engineering group a lot of work and now they've kind of given us their seal of approval for the rest of the company and those business units can now adopted and move very quickly to production.
But going from the beginning of the GTA to getting into production is probably a little longer because the central Engineering group had done. This work now the good news is they are ready to go to production or they could possibly go to production quickly with a number of different business units with new JDM, We announced today is pretty focused around one specific business.
And if all goes well there'll be driving that specific one to get into production and hopefully we will get adopted by other business units inside their company.
And to that last comment there Scott I was sort of as my follow on question. The potential here and do you have any engagement or potential engagement with other business units or if this company also a central engineering with them as well.
Yes, as a matter of fact, we've.
We've been working on I mentioned in my remarks, we've been working with this company in phase III for awhile, they've tried a number different things with our technology and they decided to focus on this one area first but.
We do have a number of other areas that we have been talking with them about and as the real potential to expand beyond into those once we have established success in this first area.
Okay.
There any characterization you can give for the second GDA you've described as a major so get your foundry any other any way you can describe them location technology focus anything I suspect not but just wanted to see if there's anything else you can characterize yeah. I can tell you that we did ask and try to.
To say a lot more than we did in kind of negotiated for that but ultimately.
Ultimately they werent very comfortable with it and they may be more comfortable when we get to the later stages of licensing, but we'll see.
Okay, well, we'll look forward to that day.
Maybe jumping over to the first <unk> here.
Obviously, great to see the next steps down there in the money coming in the door.
Just wanted to get some of your best characterization and visibility into how long. The next steps are going to take I know, it's not immediate is going to take a few quarters I don't know maybe you can describe what's your expectations are now.
And is there any limitations with this customer in terms of getting wafer runs and doing the analysis on them, obviously with very tight capacity or do you think thats there won't be a limitation for you.
I think.
Right now I wouldn't say that getting wafers as the limitation with.
Where we stand right now as we've kind of had the central engineering groups say Hey, This is good technology. It does what they say it does so that meets the performance requirements and.
And we also have tested it and determined that we can take it into high volume production because.
That's one of the things that we're testing for.
But now we have to convince individual business units that they want that they should use it and then go through a process of integration with them and we're just at the very beginning of those stages ideally, we'll be able to convince a number of different business units, but I can't give much insight into that now because it's just too early early stages.
<unk>.
Okay.
I will say one more thing is that.
We installed MST and the factory at that first J D a customer and because of that if a new business unit wants to try our technology. They can do it really quickly.
They can literally take wafers off their line and put them into the southern machine Thats in the same factory get MST on there and test it in the same day as opposed to what.
Normal customers they have to take their wafers packaged them up.
Send them over to US we do a lot of contamination checks a lot of set up it takes a lot of it takes about a month to go through that whole processing and then incoming inspection in their side again, but for this first JD customer literally in one day they can do it.
Should speed up everything to be able to get.
Towards the production quicker.
Okay. That's helpful.
Scott You said a couple of times in this call and obviously in past calls as well, what's your priority to get the first customer across the finish line and get into phase six and get to wafers out the door in a production sense here.
I'm not sure. If this is the right way to ask the question to that end here, but the best way I thought to answer. This please change if necessary, but do you think we're going to get a customer we're moving to.
Phase five this year.
And is that the right way to describe the process by which the J D or probably the first JD customer announced is that the right way to ask that question ultimately getting to the answer that we think is.
Oh, It will obviously be great news for <unk> wafers in production.
Yeah, I'm not going to predict anybody will get to phase five right now is it possible yes.
For the the JD customers they'd have to go through some integration work. So just at a high level, let's think about it like they're developing a product and they are a central engineering group has said Hey, this is a good ingredients for your product, but before they would start taking production obviously, they're going to.
We're going to insert the ingredient and run a bunch of tests and make sure it.
Works well in it.
It doesn't cause any errors and all those other things.
Once they're done with that they'll start going towards the process of entering it into production phase five is entering in production. So theres still has to be some work on that integration effort.
And we can I don't like to covenant based numbers in this case, because it isn't really linear but let's just say they have to do integration phase work and then they can get into the <unk>.
The qualification phase five work.
After that.
But as I said again the entry integration work can go pretty quickly if they use their internal tool.
Right right. Okay. That's helpful.
You made an interesting.
Set of comments regarding 200 millimeter capacity out there and I think a couple of different technology areas, which my understanding.
Ending is their focus mostly if not entirely on that capacity. Once you have talked about before being RF Soi and I think a good a decent chunk of industry capacity in five volt analog is also there.
Is this tight capacity.
Is is is that is that creating any headwinds for actually adopting because it's so tight they can't even do the work to to implement your technology, even though there is seemingly a lot of benefit there or is that actually accelerating it.
Well, let me just stop it stop at that point, Yes, no I think I would say at this time last year I would say there are quite a few headwinds very big trouble getting some access to fabs and everything.
This year, even though I don't see you know the industry is not seeing signs that the capacity crunches behind us certainly still going out I think.
People are saying at least at the end of the year.
We are seeing more interest and willingness to run R&D wafers, because it's just been some time that they've been prioritizing production and now they've got to get back onto the RMB bandwagon.
Their innovation going so I don't see it as a major holdup for US. This time at this time getting into those.
200 millimeter fabs.
Okay I'm sure I'll follow up on that topic offline. There seems a very interesting dynamic there. One last question for me and I'll jump out of line or there's a bunch of other questions here, just kind of big picture long term one of the six product or technology or as you've talked about on last call.
Before that one of them was talking about advanced nodes here, which is a big topic of discussion across the semi industry here.
Any commentary on engagement, there and specifically I guess my key question here is.
Are you do you expect to be able to intersecting only at.
Node introductions or major major variations of those introductions.
Possibly intersect that old nodes that are getting a refresh in some manner yeah.
Uh huh.
I don't know.
And to that question, Richard but I will tell you that we've had.
Customers that have talked to us about yield enhancement on existing nodes that are in production do you still advanced nodes, but.
But doing work there. We also are talking to some about.
Something that would come out in the next generation the bleeding edge.
And I also want to say that when we talk about advanced nodes internally. We also kind of throw the memory guys into that category, even though memory tends to be like.
A little bit bigger line width.
They are still pushing the envelope on.
How they are building wafers and are looking for solution. So I think we have a number of opportunities both for.
For new process nodes coming out and <unk>.
Ideally to enhance some existing months.
Okay fair enough I appreciate that characterization I will jump out of line and thanks, a lot Scott. Thanks, Alright, Thanks Richard.
Thank you Richard our next question comes from Cody Acree of the benchmark company.
Ask your question.
Great. Thanks, guys.
I appreciate you taking my questions and my Echo my congratulations on the new J D.
Can you walk us through Scott here.
Your expectations on.
Or and how we think about license fees coming in from this J D. A.
Is it.
Given the foundry situation.
Youre not going through something like central researchers central development.
Is there a different timing schedule.
That you would expect or.
The first <unk> signed.
Model to follow.
I don't think the first JV signed with the model by the way it's Cody.
Good to hear from you in.
Let me let me just say I don't think that the first J D. As a model I actually think most of our <unk> are a little bit one off kind of.
Unique each one of them. This particular JV a as I mentioned we.
We don't have revenue at the signing but les.
Later on down the line, we do have these milestones defined now the first milestone requires us to get good results on some work that we're doing together right now, but the whole point of the <unk> kind of grease. The skids that if we get good results on that next one.
Very confident.
Then they know what licenses have to be executed when how much they cost and they also have committed to dedicate a certain amount of engineering resources and and high priority production runs and other things and the reason why we're doing this is because we are dedicating a lot of effort to it.
And we.
We don't want things to be slowed down by the contractual negotiations or any kind of misunderstanding between the team. We wanted to make absolutely sure. They know if we're going to make this super high priority then.
This is what we expect from you and and so we've got this now signed and in place and I think a really good step for us.
Excellent.
So as you look at the breadth.
The engagement.
What are the deliverables that you have committed to and is it a matter of a single wafer run.
So we're talking months or are there larger developments at hand.
Yeah.
I got to be careful here not to give too many details, but I would say.
On the results of one or more wafer runs that have been defined.
One thing about our technology and any new process development technology in semiconductors, it's very rare that you kind of do the first one it's a home run you got to.
It's an iterative process. So there is contemplation of that in this.
And this agreement and were looking for.
We're looking for a signal that indicates that with a little with a little bit more tweaking, we're going to get to the promised land that we're all hoping to get to so so.
So yes, there's a few rounds.
A number of I'd say, a few shots on goal here before we.
No and it's the first time improve spectacular then the milestones will be hit earlier enough.
If we have to do another one that will take a little longer.
And and.
And how broad is the engagement with the foundry.
Cross processes or customer.
One is focused pretty focused on a specific.
Product area specific process.
But as I mentioned.
I mentioned, we have spoken to a number of other organizations inside this company and with if we get good results on one I think we will see have the ability to expand into a number of other businesses.
So.
You.
You are getting.
Access to <unk>.
A larger customer base or do you think it's.
Just different processes within the foundry.
Yeah different different processes within the foundry, which will be focused on different applications and so forth.
Okay.
So what is the.
The interaction with the foundry customers.
Yes.
The evaluation of the foundry customers yeah.
So far so far its been limited.
We are increasing our outreach to fabless customers, all the time and starting to talk to them as.
As a matter of fact, we have one fabless licensee.
And so.
That's something that we're building up as a capability and it is one exciting thing about working with foundries.
When we go to a fabless customer I would say in most cases are quite interested in our next question is where can I try running some wafers on this and so it's important to be able to have a foundry that you're working with can point them towards the <unk>.
Make that definitive next step.
Okay.
Your your interaction with the wafer customer through your founder you said it has been limited to.
Yeah.
So there is no.
As part of the J D a.
An evaluation by the customer.
The foundry customer.
So that you can move to a potential <unk>.
License.
Volume license fee.
Yeah actually.
So although the interaction with the end customer will be very interesting and helpful for us.
The foundry owns the process, we're going to define all of the performance parameters of the process. They go out and sell that process to their end customers.
So if we can meet all the requirements of the foundry process then.
We will be able to get rollout to customers.
Now if we were able to go out and engage with those customers directly obviously, you always learn a little bit more by going to the primary source, but ah, but it's not absolutely mandatory for us to be successful in that.
Okay.
Scott.
Can you talk about.
Progress with some of your early.
Licensees sure.
Yeah.
All of our licensees with one exception continued to work with US continue to move forward towards.
Getting technology into production.
Talked a lot about about.
One of them today.
With the existing J D. I mean, our first JD customer.
We had another licensee that started in.
Starting in February and obviously, we're going very hot and heavy with them.
One of our licensees AKM move out of use the name.
We're still on quite limited.
<unk> worked with them because theyre fab burnt down there using third party fabs right now as they figure out how to rebuild and get started again on their R&D work, but we have been talking with them and we do have an assurance that when they get their stuff back together there'll be restarting their work on MST.
Our other licensees, we continue to have great.
<unk> and interaction hopefully it would be.
Moving forward to production with them.
So you would expect that SCE micro is.
Moving forward.
Yes.
If you had to handicap.
One of your.
Your current engagements.
Two volume revenue.
Richard as timing of this year, but whether it's timing this year or next.
Which do you think gets there first.
Yes, it's a little bit hard to two guests actually I would say.
We have more than one license fee.
And our JV partner that could be one.
Okay.
Okay.
<unk>.
What's going on in China.
Are there.
Any implications to your engagements.
No ramifications for our engagement right now in China, we didn't have.
Although we have started to do some work in China with talking to Fabs over there.
A couple of years ago, we slow down that effort based on some.
Concerns about IP and other things and so today, although the environment is.
It is very volatile over there its not really affecting us in any way.
Okay.
And.
<unk>.
Frank.
You mentioned your Opex that you've got open reqs.
But you are trying to fill what's the process there and what.
Are your expectations of getting that Opex spend.
Hmm.
Yes.
I've been saying for a couple of quarters were.
We feel like were.
Reaching some limits on our capacity with the number of customers that we're working with and we can do more with more.
Engineers, so that's where our hiring is focused in adding more.
Engineering head count it's not.
Q4 is a difficult time to hire and we will.
Ben.
I'm trying to wrap up our efforts to.
Bring on more staff, but.
The reason that I havent sort of data any change on our.
On our expense guidance, we think there's plenty of work for.
Worked for folks to do.
And were actively hiring there so.
We've not.
Added any new head count during Q1, which we would've liked to do but our plan all along was to.
See these head count more kind of loaded toward.
For the second third and fourth quarter, just kind of easier to give people in the pipeline.
And that.
In that timeframe, but as you know.
It's a very competitive environment right now to higher sale.
<unk>.
It just takes a real conservative effort.
To get it done.
So yes.
That would probably be the single factor I think that could cause us to maybe understand versus our guidance is if we're not.
Stable to higher.
We're holding the line on that.
And I guess, what is the process of hiring.
Talent.
So does your needs.
Hum.
Some of our best.
Hiring recently, just came through word of mouth and network effects as the folks that are on here.
We've got and <unk>.
The team in.
In the Phoenix, Arizona area, which is kind of a center of excellence for that that's where <unk> historically been.
Lot of Fabs and there also.
Has been a lot of.
There have been some significant sites therefore, both.
Assam and applied and so there are alumni from those.
Those Oems as well as some of the companies in the past Fabs there one.
Intel and on semi.
Motorola that are sort of hurdle places to hire.
We've done some recruiting out of.
Universities as well, but.
The two places we found the most folks is.
Some with technical recruiters and some just with.
The network effects from our team, but I think the latter is really the most successful.
But in this market <unk> got to also take some rifle shot approaches and we will.
Pursue both ways.
With jobs posted on our site.
Recruiters and word of mouth, I think pretty typical for the way most engineering organizations.
We try to grow.
And lastly, Scott would you agree with Frank's comment that Youre kind of maxing out your.
Your ability to respond to customers.
Yes, I found out that we.
We could use we could use a number of additional people I think our opportunities are bigger than our ability to service them right now which is.
You know and.
Correct that is not going to be another.
20 people its only a small group of people but.
We really need to do that.
Okay. Thank you guys.
Thank you Cody.
Yes.
And Scott and Frank we haven't number of questions coming in from today's attendees on the Q&A window. So I will just go ahead.
Asked some of the some of the relevant ones.
So the first one that comes across.
Comparison from the second J NDA, we just announced two the first one is do you think the timeline with the founder J J D will all the same timeline that was the first JV a or will it takes out there.
Yes, I don't think it will follow the same timeline as Earth J D. A <unk> honestly, let's go back and look the we announced that we were in the negotiation.
Negotiation phase and it ultimately to almost a full year before we can finally announced the startup of the J D.
And then it took us another year to get to the point, where we would we have done all met all of their technical specifications. I personally think that was pretty slow and we should be doing better than that with.
With other customers.
So I am hopeful that this next JD will move faster.
Yeah.
Alright.
And then.
For the second <unk> Theres.
There's just some clarification.
The question is could you state that the royalty rates are already negotiated.
And if you're successful in the next step.
You know.
That's a great question and.
I have heard a number.
Of questions coming in from investors about that.
I wanted to so when renegotiate licenses of people, we negotiate kind of our standard upfront licenses and we tell them about the range in which we expect to be getting royalties. When they are in production. We have had that discussion with a lot of customers. The amount, we're asking for with royalties is.
It's reasonable it's lower than some other technologies that we know of that have been licensed into the semiconductor industry.
And the range should work for most companies that being said almost everyone doesn't want to negotiate the license rate until they can see the final benefit that theyre going to get on.
There.
On their production. So if we can bring them a massive savings for example on the amount of data that they can get for wafer maybe they can get 30% more die per wafer and it increases their gross margin by.
10%, obviously, they're going to be willing to give us more royalty then if we can bring them only a very modest improvement. So they all want to wait until later in the process before we finalize the royalty rates and.
That is true so summarized.
We have not negotiated final royalty rates with anyone yet.
But we have socialized them with many people and we think the levels that we're asking for a fair and entirely justifiable.
All right.
And when we expect phase four.
Phase four integration license with the foundry.
J D.
Yes, we can answer the when question because.
As we mentioned, it's hard to predict but we can say that the <unk> does include provisions for a manufacturing license, which would involve installation at some point in the future we met some milestones.
Alright.
And going back to the first and Jay can you comment on any specific business units with the first J D E and the timeline of moving that phase five.
Yes. Unfortunately, I, just really cant talk about any potential be used or what the timeframe would be the timeframe I can't answer even if I knew.
That would be used because it's too early in the process, but.
I think I said in my remarks that customer in particular is hyper <unk>.
Sensitive to confidentiality they will be listening to this call and will be checking to see what I'm, saying and so I can't really reveal any details about <unk>.
What they'd be doing with the technology.
Okay, Thanks, Scott and maybe to Frank.
We got a question about getting more color on that $75000 integration play.
Yes.
I would just say that from the license that we announced.
In the first quarter and it's in the range of license fees that we've been paid for.
<unk> licenses in the past.
And so we'll look forward to continuing the successful.
Wafer runs we've done integration licensee with the hope to.
Get that too.
Two things for.
Okay.
Okay, Scot I think.
And that concludes the questions that I've got prepared you may.
Go ahead with the closing comment.
Alright.
Well.
Want to say, thank you to everyone who has attended today's presentation. It was great to be able to share with you. Some information on our recent successes and give you a feeling of the enthusiasm we're experiencing inside out tomorrow.
Please continue to look for our news articles and blog posts to keep you up to date on our progress which are available along with investor alerts on our website at <unk> Dot com.
We look forward to seeing some of you during our scheduled marketing activities, including the Craig Hallum institutional Investor Oppenheimer emerging growth and the Stifel Cross sector insight conferences coming up later this quarter.
Should you have additional questions. Please contact Mike Bishop will be happy to follow up thanks again for your support and we look forward to our next update call.
Thank you everyone and this concludes today's call.