Semitool F2Q09 (Qtr End 3/31/09) Earnings Call Transcript

Apr.28.09 | About: Semitool Inc. (SMTL)

Semitool, Inc. (SMTL) F2Q09 (Qtr End 3/31/09) Earnings Call April 28, 2009 5:00 PM ET

Executives

Geoff High - Pfeiffer High Investor Relations, Inc.

Ray Thompson - Chairman and Chief Executive Officer

Larry Viano - Vice President and Chief Financial Officer

Larry Murphy - President and Chief Operating Officer

Analysts

Graham Tanaka - Tanaka Capital Management

Benjamin Pappas - D.A. Davidson

Edwin Mok - Needham & Company

Operator

Welcome to the Second Quarter Earnings Conference. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Thank you.

I would now like to turn the call over to Mr. Geoff High of Pfeiffer High Investor Relations. Please go ahead Sir.

Geoff High

Thank you, Anglia. Good afternoon and welcome to Semitool's second fiscal quarter conference call. Presenting on behalf of the company will be Chairman and Chief Executive Officer, Ray Thompson; President and Chief Operating Officer, Larry Murphy and Vice President and Chief Financial Officer, Larry Viano.

I would like to remind everyone that matters discussed during this call may include forward-looking statements that are based on management's estimates, projections and assumptions as of today's date and are subject to risks and uncertainties that are disclosed in Semitool's filings with the Securities and Exchange Commission.

The company's business is subject to certain risks that could cause actual results to differ materially from those anticipated in its forward-looking statements. Semitool assumes no obligation to update forward-looking statements that become untrue because of subsequent events. A webcast replay of today's call will be available at semitool.com for 90 days after the call.

In addition, a telephone replay will be made available for 48 hours beginning approximately two hours after the conclusion of this call. Details for listening to today's call or webcast are available in today's news release.

With that I will now turn the call over to Ray Thompson. Ray, please go ahead?

Ray Thompson

Thank you, Geoff. These are for sure challenging and uncertain times, while our customers are in no mind for increasing capacity, they are as much as at any time looking for ways to accomplish new, enabling and lower cost processes.

Let me assure you, there is still perhaps more than ever plenty of opportunity out there. Much of it, specifically suited to Semitool's core strength. We are pursuing those of which we believe to be important to our future.

A close examination of the cost structure presented in our second quarter financial reflects the aggressive steps we are taking to address this current market environment.

We'll have Larry Murphy provide you with some highlights of these efforts in a moment, but first we'll have Larry Viano discuss the numbers. Larry?

Larry Viano

Thanks, Ray. Looking at our revenue composition over the past 12 months, approximately 77% of sales came from Raider, while 22% came from batch tools. From a geographic perspective, 28% of sales came from North America, while 31% came from Europe and 41% were generated in Asia.

As second quarter revenue came in, in below our prior forecast due to order push-outs, one of which has come in during the current quarter.

Our second quarter results includes restructuring cost of $1.5 million or $0.03 per share. Our quarterly run rate for operating expenses is now approximately $70 million or roughly $10 million below where it was two quarters ago.

We will continue seeking opportunities to lower our breakeven point which now stands at approximately $34 million.

Strong collections during the quarter and continued reduction and expenditures helped further enhance our cash position, which at March 31, with $31.4 million, up from the $12.8 million at the end of the fiscal 2008 and $26.7 million at the end of the first quarter.

Turning to guidance, we expect third quarter revenue to be in the range of 30 to $35 million and anticipate a loss per share of between 4 and $0.08. We do expect to be cash flow positive from operations.

Third quarter shipments are expected to range from 27 to $32 million. Due to continued core visibility in our industry, we are not at this time providing an update to our full year revenue forecast, which were or which obviously, will be below our prior guidance.

I will now turn the call over to Larry Murphy. Larry?

Larry Murphy

Thanks, Larry. Technology buyers made up a large portion of our sales activity during Q2. As many customers are focused on next generation product technology. Second quarter technology orders included a tool for electric pumping applications from our customer in Japan, a tool for through stoke (ph) and wheel plating from the U.S. largest customers and copper damascene inflating tools from our Taiwanese memory customer.

Last week, we learned we expense related for 32 nanometer copper plating applications that are key founded in Asia.

We expect technology buyers to continue unless re-plating, TSV and copper for memory during the next few quarters followed by a rampant sales as customers moved to production.

We continue to build on a leadership position in the copper memory markets, 13 of the world's memory sales now utilize our Raider tools needed production or development applications.

We also are working on joint development projects related to sub 32 nanometer applications with the world's top three memory device manufactures.

In addition, we are engaged with the top foundry companies in the world on copper plating for advanced applications.

We're currently pursuing opportunities in the foulard, photovoltaic sector and ship to power production tool for this application after the end of the second quarter.

Solar PV is outside our traditional end markets and we are approaching it cautiously. However, we believe our successful entry into this sector should lead to some large commercial opportunities in the coming year. As Larry mentioned, we have further improved our cash position and are effectively managing our cost structure while we are waiting to rebound in capital spending.

While it's too early to forecast the near-term direction of our industry, we've been encouraged by the improvement in coating volume, which has increased significantly in the recent months after bottoming out in December.

We're now ready to take your questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of Graham Tanaka with Tanaka Capital Management.

Graham Tanaka - Tanaka Capital Management

Yeah. Hi guys, just, if you could just ramp up today on what happened in terms of push-outs, or whether there're any cancellations or push-outs in the quarter? And also a little bit more about the order that was maybe I guess deferred into there or the shipments that were deferred into the current quarter? Thanks.

Ray Thompson

Yeah Graham, there were four tools that we saw during the quarter. Two of those, excuse me, one of those is probably cancellations. Don't have which cancellation at this point yet. And the other is the one that did go out, went through an Asian memory customer and it's already shipped.

Graham Tanaka - Tanaka Capital Management

And were these all in memory or there is some foundry or logic or both?

Ray Thompson

Foundry and memory.

Graham Tanaka - Tanaka Capital Management

Foundry and memory, okay.

Ray Thompson

Yeah.

Graham Tanaka - Tanaka Capital Management

And then what was the through-silicon via activity during the quarter?

Ray Thompson

We received one order in the quarter for our TSV application, Graham in Asia, actually that was in U.S., I'm sorry.

Graham Tanaka - Tanaka Capital Management

Great. Thank you.

Ray Thompson

Sure.

Operator

Your next question comes from the line Benjamin Pappas with Davidson.

Benjamin Pappas - D.A. Davidson

Housekeeping items, one is can we get the depreciation and amortization for the quarter?

Larry Viano

Yes, for the quarter it was 3.3 million.

Benjamin Pappas - D.A. Davidson

Okay, great. And then...

Larry Viano

Ben that also includes option expense reduction on cash.

Benjamin Pappas - D.A. Davidson

Okay, that was about 300 probably?

Larry Viano

300, exactly.

Benjamin Pappas - D.A. Davidson

Okay. And then the margin for next quarter, should we look at it kind of like your fiscal Q1 at a similar revenue level would have been on that (ph)?

Larry Viano

Actually, we think margins next quarter are going to be an improvement over this quarter, but they're still are going to be in the low 40s.

Benjamin Pappas - D.A. Davidson

Low 40s, okay. So then, you won't get into the 42.5 range at the midpoint revenue guidance?

Larry Viano

We're going to be -- let me remember, it's going to be 42 to 43.

Benjamin Pappas - D.A. Davidson

Okay. And then if you could talk about the competitive environment, specifically in copper memory, just what you're seeing there, that would be helpful?

Larry Viano

As you can imagine, lot of the investments in copper memory's been delayed as a result of the memory pricing, but now we've seen some improvement on the flash light obviously recently. But we have one competitor in that space and we're doing very well. Particularly, as they migrate down to the final notes, certainly it's up 50, but in the 3x nodes we're doing extremely well with yield, with particle performance and cost of ownership and a we mentioned earlier we are in now 13 of the memory fabs that are either moved it into production or doing R&D work in that space and that's significantly more than our competitor.

Benjamin Pappas - D.A. Davidson

Okay. Out of those 13, do you kind of know how many are in production versus development?

Ray Thompson

Yes, about a third of those, maybe slightly less than a third of those would in production.

Benjamin Pappas - D.A. Davidson

Great. Thanks so much guys.

Operator

(Operator Instructions). Your next question comes from the line of Edwin Mok with Needham & Company.

Edwin Mok - Needham & Company

A few questions, first, is on margins. So, given that you guys have taken cost redemption step, if I take the midpoint of the guidance, it will be $32.5 million which is constant relatively first quarter, for the December quarter, how do I look at gross margin for the coming quarter? Should I expect a margin with a higher percentage because you've done some cost reduction?

Larry Viano

Well we're expecting margins like I said to improve over the quarter, that we're in that we just reported on, Edwin. But they won't report, won't move into the upper 40s this quarter. They should be in the 40, 42 to 43% range.

Edwin Mok - Needham & Company

I see, so this really is quite similar to what you guys reported in December quarter. Can I ask why is it because that you already have realized cost saving on that quarter and on your manufacturing side or recent tank (ph) accounts?

Larry Viano

Well, it's more than just, we have done a fair amount cost reduction above the line. It's probably in the range of $3 million in the last six months, but it's the sales mix and so that's going to bring the margins down.

Edwin Mok - Needham & Company

I see. So you expect to see any further improvement going down the road?

Larry Viano

Yes we do. Even at these volume levels, we should improve.

Edwin Mok - Needham & Company

Great, thanks. And then I have a question regarding I guess the last call and everybody asked this question. But regarding kind of DRAM end market. So I understand some of your customer looking at controlling their line and specifically one of your customer in Taiwan and a joint venture areas looking through that. And I'm just curious have you guys looked at order to a maker and have -- take a look at, see when they expect to start converting that into copper? Give us a sense if that's going happen aggressively in the second half of this year or is more to 2010?

Ray Thompson

When you say other DRAM markers, you are talking about in Taiwan?

Edwin Mok - Needham & Company

Yeah, both Taiwan like partnership as well as right our peers as also in terms of high (inaudible)?

Ray Thompson

Yeah, I'm going to talk about customers specifically, but in Taiwan we haven't actually mentioned, they are going to happen this year. Where we've seen the beginning of orders and we'll be starting to deliver tools this quarter next into for DRAM manufacturing in to Taiwan.

I think the other consorting that you've mentioned, I think they've actually slowdown their investment into Taiwan specifically. So that means to be played out, but we will be shipping our copper plating tools to DRAM manufacturing in Taiwan this quarter and next.

Edwin Mok - Needham & Company

Great. And then one more question, maybe you've already touched in. In terms of the clean product lines and you guys have some traction on the clean product, on the foundry side? I was wondering if, do you see any uptick in orders as a result of leasing one of the big foundries inside and can you talk around in 45 nanometer range? I'm wondering if you have any color on that, it'll helpful? Thank you.

Ray Thompson

Yes. We are having a lot of good work going on in the foundries space for cleans, right now most of that is about two generations out to that one. So that we probably won't be turning to production orders till probably January type timeframe of next year. But we are trying to migrate that down technology node. So we can go into current production opportunities, but right now that's probably a good nine months out.

Edwin Mok - Needham & Company

I see, so it's not this ramp, it's kind of the next no ramp drivers. It sounds like next year again something new?

Ray Thompson

Exactly.

Edwin Mok - Needham & Company

I see, great. I think that's all I have. I'll circle back with all the questions. Thank you.

Ray Thompson

Thank you.

Operator

There are no questions at this time. I would now like to turn the call over Mr. Ray Thompson.

Ray Thompson

All right. Thank you all of you for joining us. Solar, photovoltaic, polysilicon, fragmenters, surface texturing, copper interconnect, chip staking, TSV plating, lead-free bumping, FEOL and BEOL plating, LA defabrication (ph), 22 and 35 nanometer plating, custom sub-assembly fabrication, even in this business climate, our opportunity platters as far as we've ever seen it.

Thank you for joining us. We look forward to speaking with you in three months. Stay tuned.

Operator

That does conclude today's conference. You may now disconnect your lines.

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