Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Executives

[Llhasa Glassen] – Financial Relations Board

Rhea Posedel – Chairman, Chief Executive Officer

Gary Larson – Vice President of Finance, Chief Financial Officer

Analysts

Jeffery Scott – Scott Asset Management

Aehr Test Systems (AEHR) F2Q10 Earnings Call January 6, 2010 5:00 PM ET

Operator

Welcome to the Aehr Test Systems second quarter fiscal 2010 conference call. (Operator Instructions) I would now like to turn the conference over to [Llhasa Glassen] of the Financial Relations Board.

[Llhasa Glassen]

Good afternoon and thanks for joining us to discuss Aehr Test Systems results for the second quarter of fiscal 2010. By now you should have all received a copy of today’s press release. If not, you can call my office at 213-486-6546 and we’ll get a copy to you right away.

With us today from Aehr Test are Rhea Posedel, Chairman and Chief Executive Officer and Gary Larson, Vice President of Finance and Chief Financial Officer. Management will review its operating performance for the quarter before opening the call to your questions. I’d now like to turn the call over to Gary Larson.

Gary Larson

Thank you Llhasa and thanks to everyone for joining us today. Before we begin I’d like to make a few comments about forward-looking statements. Please be advised that during the course of our discussion today, we may make forward-looking statements that involve risks and uncertainties relating to projections regarding industry growth and customer demand for Aehr Test products as well as projections regarding Aehr Test’s future financial performance.

Actual results may differ materially from projected results and should not be considered as an indication of future performance. These risks and uncertainties include without limitation, world economic conditions, the timing of the recovery of the semiconductor equipment market, the company’s ability to maintain sufficient cash to support operations, acceptance by customers of Aehr Test technologies, acceptance by customers of the systems shipped upon receipt of a purchase order, the ability of new products to meet customer needs or performance described, the company’s development and manufacture of a commercially successful wafer level test and burn-in system, and the potential emergence of alternative technologies, each of which could adversely affect demand for Aehr Test products in calendar year 2010.

We refer you to our most recent 10-K and 10-Q reports and other reports from time to time filed with the U.S. Securities and Exchange Commission for a more detailed description of the risks facing our business and factors that could cause actual results to differ materially from projected results.

The company disclaims any obligation to update information contained in any forward-looking statements to reflect events or circumstances occurring after the date of this conference call.

Now I’d like to introduce our Chairman and CEO, Rhea Posedel.

Rhea Posedel

Good afternoon and welcome to our conference call for the second quarter of fiscal year 2010. Revenue for the second quarter was $1.6 million, up 30% on a sequential quarter basis. There are several highlights for this past quarter that I’d like to bring to your attention.

First, shipments were over $1 million higher compared to the prior quarter as we shipped the FOX-15 wafer level burn-in system on schedule to Micronas. We look forward to getting acceptance and recognizing this FOX-15 system shipment as revenue for our third quarter.

Another highlight during the quarter was receiving over $1 million in orders for FOX-1 system upgrades from Spansion. These upgrades mostly consisted of power supply and pin driver boards to provide the capability to test 300 millimeter wafers. This order is significant for us because we believe it means that Spansion is investing in using our FOX-1 strategy for full wafer flash test in a single touch down for their Austin fab.

It is important to note that Spansion has announced that they expect to emerge from bankruptcy sometime in early 2010 time frame as a billion dollar embedded flash company. We are hopeful that we will receive WaferPak FOX-1 upgrade or system orders as their business expands over the next few quarters.

We are excited about the opportunities we see for the ABTS product family this coming year. The quoting activity of the past few months has been quite high for Burn-in of high power IC’s requiring individual temperature control per device. It’s a competitive space but we believe the ABTS system offers cost saving and performance advantages that will allow us to penetrate and grow share in this growing market segment for high power logic burn-in above 10 watts per device.

We believe this market will continue to grow as IC fab’s feature sizes shrink to 45 nanometer and below causing device leakage churn and power to increase significantly at burn-in temperatures.

Another recent highlight was our participation in Semi-Con, Japan during the first week of December. Even though the number of exhibitors was off about 40% year over year, we had a high number of leads interested in our ABTS and FOX products.

Many Japanese IC producers are starting to add capacity so I think we have an excellent change to penetrate some major accounts during this upcoming year. It was also helpful that none of our Japanese competitors were exhibiting at the show.

We are seeing some major activity from our MAX burn-in products. We booked and shipped a MAX 3 system to a leading defense company during the prior quarter. We have a large install base of MAX 3 and MAX 4 burn-in systems and we are hopeful we can benefit from additional capacity buys as the semiconductor industry grows capacity in 2010.

Moving forward, we continue to aggressively market our FOX-1 full wafer parallel tester and FOX-15 wafer level burn-in systems. We are making inroads into a number of accounts where we are seeing interest levels for a variety of applications such as sensors, automotive IC’s and NIMS to name a few.

Capital is still tight but we are hopeful to convert some of these prospects to orders this calendar year. Over the long term, more multi-chip modules and stack die module producers will need to produce high yielding modules. We believe our FOX-15 system with the capability to burn-in and test 15 wafers in parallel at temperatures to 170 degrees Celsius is a cost effective tool for producing good die.

We are glad that calendar 2009 is behind us and are hopeful that 2010 will be a better year for Aehr Test. The industry trend lines are up for 2010 and we see some of our customers getting to a point where they need to add additional capacity.

As a result, we saw high levels of quoting activity at the end of last year and are hopeful many of these quotes will turn into orders. Our strategy continues to be focused on penetrating as many production accounts as possible with our ABTS and FOX products. This will allow us to expand our customer base and grow market share.

We are confident in our ability to achieve this goal as we have the strongest competitive product portfolio in our history with the FOX-1 and FOX-15 system, full wafer contactor technology and our new ABTS family of products.

We are starting to feel a little better about our outlook moving forward. Based on a recent FOX-1 system upgrade orders and the expected revenue recognition of the Micronas FOX-15 system shipment, we believe the worst is behind us and that revenue for the third quarter will be up over the prior quarter.

In closing, we believe Aehr Test is in a favorable position to grow market share during this recovery period enabling us to return to a growth trajectory when our industry gets back to normal spending levels.

We have exciting technology with our FOX full wafer test and burn-in systems and wafer pack contactors. We feel confident that we can continue to renew accounts with our new ABTS products which address growing market segments for high power logic burn-in and parallel test of memory.

Now I’d like to turn the call over to Gary and he’ll discuss the second quarter in more detail.

Gary Larson

As Rhea mentioned, net sales were $1.6 million in the second quarter of fiscal 2010. This compares to $9.2 million in the second quarter of fiscal 2009. The decrease in net sales for the second quarter for fiscal 2010 results primarily from a decrease in net sales of the company’s wafer level products.

Gross profit was $349,000 for the second quarter of fiscal 2010 or 21% of net sales. This compares with gross profit of $6.4 million or nearly 50% of net sales in the year ago period. The lower gross profit and gross profit margin were the results of significant decline in net sales.

SG&A was $1.6 million in the second quarter of fiscal 2010 compared with $1.8 million in the prior year period. As discussed in prior calls, we’ve implemented a number of expense reduction initiatives over the past several quarters.

Second quarter 2010 R&D expense was $1.1 million compared with $1.6 million in the second quarter of last year. R&D spending varies from quarter to quarter depending on the level of development of new products.

Net loss in the second quarter of fiscal 2010 was $2.2 million or $0.25 per share compared with net income of $9.9 million or $0.10 per diluted share a year ago.

Pro forma net loss in the second quarter of fiscal 2010 was $1.4 million or $0.16 per diluted share compared to pro forma net income of $1.1 million or $0.13 per diluted share in the same period of the prior year.

In determining the pro forma, or non-GAAP net loss in the second quarter of 2010, we’ve excluded non cash stock compensation expense of $.8 million and for the prior year we’ve excluded $.3 million of the same non cash stock compensation expenses.

During the second quarter of fiscal 2010 the officers of the company voluntarily forfeited certain high priced stock options, resulting in the immediate recognition of the unamortized portion of the stock compensation expense of $.5 million. More than 100,000 shares were returned to the available option pool.

Our cash and cash equivalents increased to $5.1 million at November 30, 2009 compared to $2.7 million at the end of the first quarter. The increase was primarily due to $3.3 million in net proceeds received in September 2009 from the sale of a portion of the Spansion bankruptcy claim to a third party. Additional upside for Aehr Test would be the receipt of some compensation for our remaining Spansion bankruptcy claim which totals about $7 million.

We continue to remain debt free. This concludes our prepared remarks. We’re now ready to answer your questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first call comes from Jeffery Scott – Scott Asset Management.

Jeffery Scott – Scott Asset Management

For the FOX-15 you’ve already received all the cash for that have you not?

Gary Larson

We’ve not received all of it yet. We have received a substantial portion of that.

Jeffery Scott – Scott Asset Management

Is that most of it Gary?

Gary Larson

It’s the majority of the amount due, yes. It wasn’t received in last quarter.

Jeffery Scott – Scott Asset Management

It wasn’t received as of November 30?

Gary Larson

Correct. It wasn’t received as of November 30, but it has been received as of today.

Jeffery Scott – Scott Asset Management

SEMICON Japan, you talked about the level of interest over there. Was that with existing or new accounts?

Rhea Posedel

I would say new accounts in the sense that we haven’t sold to these accounts in many years. So we have sold to these accounts may 10, 15 years ago, but yes they are new opportunities for us.

We showed an ABTS system, a small version of it so there was interest in applications for the ABTS and then we also had WaferPaks that we carted for the FOX-15. So there was interest in both products.

Jeffery Scott – Scott Asset Management

But there are people who know who Aehr Test is that you don’t have to start from scratch with them.

Rhea Posedel

That’s correct. And as I mentioned, we were the only burn-in manufacturer in the show.

Jeffery Scott – Scott Asset Management

Is the level of interest that you would expect orders during calendar 2010?

Rhea Posedel

I would hope so, that we would expect to see some business out of Japan in this calendar year, and that would be new accounts for us or accounts that we haven’t sold into for a long time.

Jeffery Scott – Scott Asset Management

You said the recording activity was high for the ABTS. Is that people for instance, TI used to be a big customer of the MAX system. Are they looking at moving to an ABTS instead of capacity additions in MAX?

Rhea Posedel

I think long term, they are looking at moving to the ABTS but the plan is to get it qualified first. But I think if they have immediate capacity needs, they would probably just buy additional MAX’s.

Jeffery Scott – Scott Asset Management

Do you have problems going back and manufacturing the old MAX’s?

Rhea Posedel

No.

Jeffery Scott – Scott Asset Management

You remember how to do it?

Rhea Posedel

I remember how to do it. The biggest difficult is getting any IC’s that maybe are obsolete, but as far as knowing how to do it, we can still do it.

Jeffery Scott – Scott Asset Management

So parts have to be a little bit difficult to procure don’t they?

Rhea Posedel

That’s correct. We still have some in inventory. We believe we have a lot of the critical parts in inventory. But depending on how many we sell, there could be an issue, but we’ll work through that. We’ve done that over the years with MAX.

Jeffery Scott – Scott Asset Management

You talked about possible FOX-1 upgrades and WaferPaks for expansion. The WaferPaks you carry are zero dollars in value, do you not?

Rhea Posedel

That’s correct.

Jeffery Scott – Scott Asset Management

Can you tell us how many there are in there?

Gary Larson

How many WaferPaks?

Jeffery Scott – Scott Asset Management

Yes.

Gary Larson

I don’t think we want to go into that kind of detail, but the real question is how many of the WaferPaks with expansion we’ll be needing on a forward looking basis.

Jeffery Scott – Scott Asset Management

Okay, can you answer that one?

Rhea Posedel

One of the problems with the WaferPaks that we have written off in inventory is that they’re custom designed for each wafer. So Spansion would have to have the same one that they cancelled a year ago, so it’s possible.

But there are some common parts that we can use for additional WaferPaks, so the main thing for us was to get them using the system, upgrading the system and start investing in FOX-1 technology again and that’s what they started to do.

So they upgraded a few systems and hopefully they’ll upgrade a few more and then start buying some WaferPaks, either WaferPaks from our inventory or new ones; either way. I don’t think we’ll be able to sell all the WaferPaks that we’ve written on in our inventory because they are customer designed for unique wafers.

Some of the parts we can still use, but the systems I think we’ll be able to utilize.

Jeffery Scott – Scott Asset Management

Is there any word on what’s happened to the machines that are in Japan?

Rhea Posedel

Not yet. The systems are still sitting over there. But the way we look at it, even if they sell them to another company or they sell them back to Spansion in the U.S. it’s still an upside for us because we’re going to get more service. The systems haven’t been maintained, support and things of that sort. So if they move a number of systems here it would help us because there would be more WaferPaks. Either way, it’s an upside.

Jeffery Scott – Scott Asset Management

Have you heard anything about the timing or the revolution of Japan?

Gary Larson

No we haven’t. The U.S. bankruptcy seems to be pointing towards first quarter of calendar 2010 and I just asked that question about the Japanese action of our President over in Japan. He said there is no information at all forthcoming on the status of the bankruptcy action. So we don’t have any insight into the timing of that.

Operator

There are no further questions at this time. Please continue.

Rhea Posedel

I’d like to thank you for joining us this afternoon and Happy New Year to everyone and we look forward to next quarter’s conference call. Thanks again.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Aehr Test Systems F2Q10 (Qtr End 9/30/09) Earnings Call Transcript
This Transcript
All Transcripts