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Mattson Technology (NASDAQ:MTSN)

Q1 2012 Earnings Call

April 25, 2012 5:00 pm ET

Executives

Laura Guerrant-Oiye -

David L. Dutton - Chief Executive Officer, President and Director

J. Michael Dodson - Chief Financial Officer, Executive Vice President of Finance and Secretary

Analysts

Edwin Mok - Needham & Company, LLC, Research Division

Patrick J. Ho - Stifel, Nicolaus & Co., Inc., Research Division

Christian D. Schwab - Craig-Hallum Capital Group LLC, Research Division

Benedict Pang - Caris & Company, Inc., Research Division

Graham Yoshio Tanaka - Tanaka Capital Management, Inc.

Amit Dayal - Rodman & Renshaw, LLC, Research Division

Operator

Good day, ladies and gentlemen, and welcome to Mattson Technology's First Quarter Financial Results. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Laura Guerrant. Please begin.

Laura Guerrant-Oiye

Thank you, and good afternoon, everyone. Thank you for joining us today to discuss Mattson Technology's financial results for the 2012 first quarter, which ended April 1, 2012. In addition to outlining the company's financial results for the first quarter, we will also provide guidance for the second quarter of 2012.

On today's call are Dave Dutton, Mattson Technology's President and Chief Executive Officer; and Mike Dodson, the company's Chief Financial Officer.

Before turning the call over to Dave, I'd like to remind everyone that information provided in today's conference call contains forward-looking statements regarding the company's future prospects including, but not limited to, anticipated market position, revenue, margins, earnings per share, tax rate and fully diluted shares outstanding for future periods.

Forward-looking statements address matters that are subject to a number of risks or uncertainties that can cause actual results to differ materially. Such risks and uncertainties include, but are not limited to, those described in today's news release and in the company's Forms 10-K, 10-Q and other filings with the SEC. The company assumes no obligation to update the information provided in this conference call.

And with that, I'd like to turn the call over to Dave. Dave?

David L. Dutton

Thank you, Laura, and good afternoon, everyone. Thank you for joining us for our first quarter 2012 financial results conference call. In today's call, I will give you an overview of the business. Then Mike will provide the financial results and progress to our cost improvement program. And last, I will close with our business outlook and guidance.

The first quarter of 2012 was a solid start for Mattson Technology as we delivered results that were at the top end of our guidance. Our revenue grew 21% versus the fourth quarter of 2011. In the first quarter, we saw a strong demand from foundry and demand customer. We are currently expecting 2012 wafer fab equipment CapEx spending to be flat to slightly down. In 2012, foundry spending is forecasted to remain strong due to the 20-nanometer capacity build up. We expect our NAND business to soften in Q2 as our customers digest recent capacity adds with a return to more aggressive spending later in the year. With this current view, we are expecting our revenue growth to be above the industry average for the year. With our revenue growth and our cost reduction programs, we expect the end result will be a profitable 2012.

I will now review our progress in each product area starting with our Etch products.

Etch grew stronger in 2011, and according to Gartner, an independent research firm, Mattson Technology moved up from #8 to #5 in the Etch market with a market share of 1.2% in this $4 billion market. Our paradigmE Etch recently won an acceptance at a leading semiconductor manufacturer for production at their advanced foundry facility, and at a major CMOS image center manufacturing in Asia. The paradigmE is now in volume production in foundry, NAND, DRAM, packaging and image sensor. Looking further in 2012, we plan to add at least 2 new Etch applications to the paradigmE portfolio for sub 20-nanometer manufacturing capability. This should further extend our third available market, which we'd expect to drive incremental revenue gains going forward.

In strip, we gained 5% market share in 2011, garnering 24% and the #2 position in this little [indiscernible] market. Our Suprema system delivers a broad capability to our customers from bulk strip to the demanding special strip in processes required for advanced high-K metal gate and three-dimensional structures. This broad application capability based on a context flexible low cost platform is the reason why Mattson Technology has the widest established customer base in strip as compared to any other competitor.

As we have previously discussed, our RTP business has historically been dominant in the DRAM sector and the reduced DRAM spending in 2011 affected our overall results.

During the last 2 years, our RTP has gone through a complete transformation expanding into the NAND and foundry areas. This strategic shift is led by the introduction of our Millios millisecond annealing tools and the Helios XP, both of which are targeted at the leading edge of the foundry/logic market, where we previously have negligeable position.

In the first quarter of 2012, we shipped the Millios millisecond annealing system to our third customer for this foundry's leading edge production ramp. In just the last month, we shipped a follow-on Millios for a major customer for its advanced foundry manufacturing line.

In our Helios product line, we shipped a third Helios XP rapid thermal annealing system to a leading foundry customer for their advanced production line. Note that Helios XP and the Millios combined are now positioned at 5 major foundry/logic customers for the most advanced application and we expect this new RTP product portfolio to drive our renewed growth in this market.

Our new positions helped the first quarter of 2012 get off to a solid start in order to expect it to be another growth year for Mattson Technology. Combined with our cost reduction program, we expect 2012 to be the year in which we return to profitability and begin to deliver the returns to our shareholders from the investments in our growth initiatives.

And now, I will turn the call over to Mike to provide an update on the improvements to our financial model and Phase 2 of our cost reduction structure. Mike?

J. Michael Dodson

Thank you, Dave. Again this quarter, the company has been working hard to improve its financial performance as evidenced by the reduced net loss to $400,000 excluding restructuring charges. In addition, we increased cash by $4.5 million. During the first quarter, the company initiated Phase 2 of the cost reduction program. In total, we have identified cost reduction activities that will reduce the annual spending run rates by approximately $10 million by the end of the year.

First, I would like to discuss the financial results for the first quarter of 2012. Net sales from the first quarter were $50.5 million, representing an increase of $8.8 million or 21% compared to $41.7 million from the prior quarter. This sequential increase in sales was primarily driven by higher sales of Etch and strip systems for production of NAND and foundry devices. The gross margin in the first quarter was 33.5%, which is a slight increase compared to 33.3% in the prior quarter. Gross margins were slightly higher over the prior quarter despite the downward pressure due to the growth in deferred revenues resulting from the 21% increase in sequential sales. This downward pressure is due to accounting -- the accounting requirement to defer a portion of all system sales. This negative effect on gross margin during the quarter was offset by better absorption of labor and fixed overhead costs and higher levels of production, as well as lower installation in warranty costs.

As we discussed on the call last quarter, the company remains focused on improving gross margins from 2012. One key contributor to improve gross margins on an ongoing basis is the production of all of our systems in-house. The transition from outsourcing our system production to internal production was completed in the fourth quarter of 2011. Another ongoing gross margin improvement program is to reduce the material cost included in our systems. These efforts focus on cost reductions in our supply chain, as well as engineering designs to reduce material and component costs.

Another benefit to our gross margins during 2012 will be an improved mix of our system sales through the remainder of the year as we expand our higher-margin RTP position in the foundry areas. The combination of these efforts is targeted to improve our 2012 gross margin by 4 to 5 percentage points compared to the prior year's gross margin of 30%.

Operating expenses, excluding restructuring charges, were $17.5 million in the first quarter, which represented an increase of $600,000 over $16.9 million compared in the prior quarter.

On the last call, we had discussed that we expected certain discrete quarterly savings in the fourth quarter of 2011 that would not repeat in the next quarter, but additional new cost savings will be realized to offset this impact. This would result in flat operating expenses quarter-over-quarter. After realizing the expected cost savings during the quarter, the actual increase in operating expenses in the first quarter over the prior quarter was primarily due to charges incurred related to an agreement in the final stages of approval with the Bureau of Industry and Security for paying them of $250,000 in connection with certain self-reported expert violations, as well as related legal fees.

Related to this agreement, there is a suspended talent fee of $600,000 if there's a new export violation in the next 12 months. We believe that we have the necessary processes in place to avoid any additional violations and penalties. Also contributing to the higher run rate of operating expenses during the quarter were higher than usual seasonal professional fees incurred in connection with our annual audit and SEC filings.

As we outline in great detail in the prior call, a cost reduction program was commenced in the fourth quarter of 2011, which will augment the company's transition from a period of investments to a phase in which we reap the rewards of those investments.

The key components of Phase 1 included: renegotiating our lease for the facility next in Pennsylvania; consolidating our Millios products from Vancouver, Canada to a facility in Dornstadt, Germany; moving outsource spare parts logistics and call center operations in-house; the reductions in force, the elimination of certain contractors and the renegotiation of certain contracts.

As previously discussed, Phase 1 is expected to realize a cost reduction on an ongoing annual basis of $6 million that we are on track to be fully implemented by the end of the third quarter. Estimated one-time costs resulting from these actions in the range of $3 million to $3.5 million, of which $2.5 million was incurred through the first quarter of 2012. This estimate may vary as certain plans are finalized and updated cost information becomes available.

In addition, we expect to incur approximately $2 million in capital expenditures to support the Millios consolidation in the Dornstadt facility, much of which would have been needed to the investment in the Vancouver facility had the Millios production remained there.

Recognizing that Phase 1 of the cost reduction program was not going to achieve a desired result of lowering the cash flow breakeven point to the $40 million quarterly revenue run rate, we have established Phase 2. This phase, which was initiated in the first quarter,includes a reduction in force, lower level of investments and customer evaluation systems, renegotiating key contracts of outside service providers, production material cost savings, additional reduction in outside contractors and reduced spending in discretionary areas.

Phase 2 is expected to realize cost reductions on an ongoing annual basis of approximately $4 million, and we believe this program will be fully implemented by the end of 2012.

Estimated one-time cost for this phase is a range of $700,000 to $800,000, of which the majority is expected to be severance.

In summary, excluding restructuring charges, we expect the operating expenses in the second quarter to be approximately $1 million lower than the first quarter coming in at $16.5 million, plus or minus $200,000. With the successful implementation of both Phase 1 and 2, we expect to leave the year with an operating expense run rate of $16 million in the fourth quarter. This run rate represents an annualized savings of $8 million in operating expenses. The remaining $2 million in reduced costs will be realized in lower cost of sales by the end of the year as well.

Interest in other income and expense netted to income are just over $400,000 and primarily represented foreign exchange gains primarily related to our formed denominated balances at our U.S. operations. Excluding a significant non-cash adjustment in the prior quarter, interest in other income and expense netted to income of just over $500,000 and primarily represented similar foreign exchange gains.

Related to income taxes, we recognized a net tax provision of $239,000 in the first quarter or lower than our estimated range of $400,000 to $500,000. The lower tax provision was primarily due to a more favorable mix of taxable income in foreign jurisdictions. On a perspective basis, we expect the tax provision to be flat in the second quarter with the first quarter. And due to expected discrete releases of tax reserves in the back half of the year, we expect the annual tax provision to be approximately $600,000 for 2012.

Our net loss in the first quarter was $1.1 million, including the restructuring charges or a 2-point loss per share. Excluding the restructuring charge of the $700,000, the first quarter net loss would have been $400,000 or a loss of $0.01 per share. This compares to a net loss from the prior quarter of $4.2 million or a $0.07 loss.

Our weighted average share count for the quarter was 58.4 million shares.

Now moving to the balance sheet. We ended the first quarter with working capital of $55.8 million, which was slightly down from $56.2 million at the end of the prior quarter. Cash balances at the end of the first quarter were $37.4 million and represented an increase of $4.5 million over the prior quarter. The increase in our cash balances was primarily driven by strong collections of accounts receivable during the quarter, that despite an increase in revenues, resulted in a $5.4 million reduction in accounts receivable from the prior quarter. Including advanced billings in the calculation, the DSO for the first quarter was 41 days compared to 60 days in the prior quarter. We expect DSO to increase next quarter given the expected customer mix and timing of our shipments.

Now I will turn the call over to Dave, who will provide second quarter guidance and elaborate further on our business results and prospects. Dave?

David L. Dutton

Thanks, Mike. In our view, the macro economy is just a continued demand for electronic handsets and tablet growth. In addition, the emerging Ultrabook market is expected to refresh IC demand later in the year. Currently, we are expecting 2012 CapEx to be flat to down as compared to 2011. As previously mentioned, we are expecting a near-term softening in our NAND business, which will be partially offset by an increased level of our foundry business due to the ramping of 28-nanometer and below technologies.

Our new position in foundry for RTP and Etch will progressively increase each quarter as our customer will add capacity for the applications being run on our systems. Mattson's position in NAND and foundry provide critical enabling technologies that allow our customers to manufacture increasingly sophisticated chips required in advanced devices that are fueling the mobility revolution.

Now turning to our guidance. Our guidance for the second quarter of 2012 is as follows; we expect second quarter revenues to be in the range of $40 million to $50 million. We expect margins to be in the range of 33% to 36%. Earnings will be in the range of a loss per share of $0.06 to a profit of $0.02. Cash will be $35 million, plus or minus $3 million.

In closing, the first quarter of 2012 resulted in a 21% revenue growth, closing to nearly breakeven results. We are progressing this plan to substantially reduce our breakeven and leverage our new positions to drive revenue growth and return to profitability. We have extended our Etch in the foundry and engaged our paradigmE in advanced dual pattern Etching and certain critical Etches in a three-dimensional memory. In addition, we have also established our Millios at 3 foundry/logic customers and delivered our first follow-on orders for the Helios XP in the foundry area. We remain fully committed to our annual cost reduction program of approximately $10 million and are on track to be profitable in 2012 while ensuring the long-term growth of Mattson Technology.

And with that, I'd like to thank you very much for listening to our business and financial updates. We are now open for your questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] We have a question from Edwin Mok of Needham & Company.

Edwin Mok - Needham & Company, LLC, Research Division

Based on the question regarding the foundry softness that you said, and you mentioned on the prepared remarks that you expect that to recover in the second half. Can you explain why you -- what drove that? Is that a certain particular product that got moved around? Or is it a customer that would be using some of the hardware that caused the softness in [indiscernible] second quarter? And how do you have confidence it will come back in second quarter?

David L. Dutton

Well, first of all, Edwin, it was NAND's softness we talked about.

Edwin Mok - Needham & Company, LLC, Research Division

Yes, that's right. Sorry about that.

David L. Dutton

Yes, okay. Yes, so what -- I mean, we're seeing our customers have put in a lot of capacity and we are seeing some reuse as our customer shifts some of their convergence to logic and take existing NAND out of other areas and move them in and especially in the RTP and the strip areas. So we see that could cause some fundamental softness, and so we're just being cautious and trying to guide a little cautious especially as you look at, for us, just a couple of tools can cloud -- cause quite a significant swing in our top line.

Edwin Mok - Needham & Company, LLC, Research Division

And what's -- [indiscernible] and then NAND will come back in the second half?

J. Michael Dodson

Well, we believe NAND will come back in the second half partly due to, we think, increased demand again as I think you see is still -- like handsets are still strong, tablets are doing okay. Even Ultrabooks, a lot of those are FFDs, sit will start to feed NAND drive. Plus there is a conversion towards the 1x technology to stay on track where we need to start to be driven towards the end of the year. So we think investment in 1x plus increasing build for as we go later into the year. Any normal seasonal build will drive NAND capacity additions.

Edwin Mok - Needham & Company, LLC, Research Division

Great. And then for -- on the foundry area, you mentioned that it will remain strong in the coming quarter. Do you see that string extending in the second half especially for you guys given that you have this new RTP product qualified. Do you expect your business with the foundry customers to come to increase over the next few quarters?

J. Michael Dodson

I mean, we have 2 things. Currently, our view currently is we are seeing still strengthening from our foundry customers looking into the second half. And second, our new positions, as I mentioned, essentially progressively get stronger as our customers move forward. And so we're seeing and expecting our foundry positions to continue to contribute incrementally more each quarter as we go through the year.

Edwin Mok - Needham & Company, LLC, Research Division

Great. That was helpful, and then while seeing we get it to a product. On the RTP side, you mentioned that between the Helios XP and Millios you guys have now 5 foundry customer that you guys have positioned with, right? Can you just -- I want to know exactly on your remain -- you kind of mentioned that you have a second order for Millios. Are those products for the 20-nanometer RAM that we are starting to see from some of the foundries? Or are those products more advanced like 28-nanometers? And the reason I was asking all this is what is happening right now. So that's customer ramp in that buy more equipment more for 20-nanometer might be more just what the development to a purpose of the purchase only?

David L. Dutton

Right. So just in general, our core strength penetration for foundry and those 5 customers is 20 nanometer. And so, we're starting to see business as that expands. And so we're seeing some initial placements due to that from development. Now it's starting to follow-on into the early production phases for 20. But on top of that, because of our strengths, we've been gaining position backwards into 28. And so, that's what we're starting to see unfold as some of that business is moving forward. And so, we're getting also some follow-on orders and beginning new expansions on 28-nanometers. So we will -- we believe we will be able to catch some of the 28-nanometer ramp and help expand our growth as well.

Edwin Mok - Needham & Company, LLC, Research Division

I see so, just to be clear then, so it sounds like your penetration on the foundry, especially on the leading Etch, you guys aren't really making good progress there. In terms of the foundry customer, at least some of them are indicating that there were increase capital spending this year. Are you seeing any benefits from that in the second quarter?

David L. Dutton

Yes. That's what -- yes, we have are -- we have seen strengthening in the second quarter due to that, yes. I think that a -- and then that's where [indiscernible] we said about helping offset what we see as potentially some NAND slowing.

Edwin Mok - Needham & Company, LLC, Research Division

Great. And then I have 2 more questions then I'll go away. So first thing, remember gross margin, it was, I guess, flattish or up modestly for the quarter. Guidance imply a higher gross margin. So it sounds like that that's for revenue, the margins of the low marginal as a result of deferred revenue as impact there. Is there a way you can quantify that? I mean, that if you didn't have the deferred revenue, how much higher gross margin would you have to expect for the quarter?

David L. Dutton

We don't go into that much detail, Edwin. But it's fair to say it did put down a little pressure and we would have been stronger, but it's just the mechanics of accounting that increases the deferred revenue. We did see that offset entirely by our federal absorption of fixed labor and overhead costs and better warranty and installation.

Edwin Mok - Needham & Company, LLC, Research Division

But I -- you mentioned your guidance implied, do you expect lower level [indiscernible] is that correct?

David L. Dutton

Yes. In Q2, the guidance that we've given 33 to 36. Obviously, with our guidance of $40 million to $50 million, we won't be under that same pressure.

Edwin Mok - Needham & Company, LLC, Research Division

I see. Okay, great. And then lastly, on the cost saving plan thing [ph] so we'll know more details on the Phase 2. So did you guys actually, from what I remember the last quarter, you guys talked about this Phase 2 cost and it won't come in 2013. Did you actually -- I'm sorry, [indiscernible] a little bit there. And in terms of the restructuring charge, If I total it correctly, it's somewhere around 4.2 or so, right? I mean, over restructuring charges while we shape it back for the rest of the year?

David L. Dutton

Yes. What we have, Edwin, we've gotten more clarity on our Phase 1 and Phase 2. We do believe that we can implement all of those within this year. So we feel comfortable with that as we get into the year. We -- and the range that we had 700,000 to 800,000 as it relates to Phase 2. And the $3 million to $3.5 million as it relates to Phase 1 are what we're expecting to be the 1x.

Edwin Mok - Needham & Company, LLC, Research Division

And those, when do we expect those charges?

David L. Dutton

Well, we've incurred $2.5 million so far so you look at a potential $1 million more on Phase 1 and at $700,000 to $800,000 on Phase 2, and you can just evenly spread that over the remainder of the year. Maybe a little bit front end loaded but not...

Operator

Our next question is from Patrick Ho of Stifel, Nicholas.

Patrick J. Ho - Stifel, Nicolaus & Co., Inc., Research Division

Dave, can you give a little bit of color in terms of the Etch business in terms of -- I know you targeted initially noncritical applications. First, can you give a little bit of color on some of the, I guess, specific application wins? And secondly, do you see yourself migrating to enter the, I guess, the more critical layers that some of your competitors have a dominant position in?

David L. Dutton

I think as you pointed out, we entered Etch on just a few layers which and what, your term noncritical. And we've been moving up a ladder and we're now, from just a few applications, we're now in over 16 applications in Etch, and we continue to move further into the critical sector. What we're seeing also is there's a set of Etches that are developing for advanced integrated circuits for doing three-dimensional devices, such as Vertical NAND. And also, for helping extend lithography due to the EUV is late so we're still using 190 -- 93-nanometer wavelength. And so things like dual patterning trim etches are very, very critical and our technology that we're now bringing out in the market really delivers strongly in those at a very good cost of ownership, about 30% better. And so we're seeing expanding traction in what, I guess, you'd call a semi-critical etching is our next phase to build on, and we think will really help drive us into one of the top contenders in etching as we move forward.

Patrick J. Ho - Stifel, Nicolaus & Co., Inc., Research Division

Great, that's helpful. Dave, I know this is a big picture in industry question, but given your exposure to the DRAM market historically, how do you see the second half potentially playing off on an industry basis, particularly as you mentioned you're seeing the PC refresh cycle ultra books coming out. How does that play out for Mattson if that segment turns?

David L. Dutton

So we think if that segment turns, again that helps drive NAND as I mentioned earlier because it's still a lot of FFE demand that ultra books bring So -- and you have tablets, they're strong. I think as advanced like mobile DRAM, which is key and advanced DRAM for the ultra books, you could start to see some requirement for capacity later in the year as I think just technology upgrade of existing capacity is just about covering the DRAM big growth today when you add ultra books on top, we could see some extra capacity and we're obviously going to welcome that and welcome back some old DRAM business hopefully.

Patrick J. Ho - Stifel, Nicolaus & Co., Inc., Research Division

Right. And now final question for me. In terms of your product mix and the potential impact to margins, are you doing anything with your respective products in terms of both, I guess, components, the supply chain or trying to even get the much more common platforms, using more common parts to help in that product mix and especially on the margins front?

David L. Dutton

Yes, absolutely. Unfortunately, it hasn’t come through yet, Patrick, but both in Etch and strip, we have moved both of those products up about 15% over the last year in margin effectiveness and it hasn’t translated just as we -- because we were still essentially thinking of some operational margin issues, but I think you have seen the power of these. Both of these move up as we start to move through the year. And there is a very tracked and heavy program going on in both utilizing same parts, reengineering parts that are very aggressive supply chain-focus to gain as much cost down as we can.

Operator

Our next question is from Christian Schwab of Craig-Hallum.

Christian D. Schwab - Craig-Hallum Capital Group LLC, Research Division

As we look at the RTP products into the foundry, we're now shipping into 5 different foundries, is that correct?

David L. Dutton

Yes.

Christian D. Schwab - Craig-Hallum Capital Group LLC, Research Division

Okay. So up from 3 last quarter?

David L. Dutton

Yes.

Christian D. Schwab - Craig-Hallum Capital Group LLC, Research Division

As we look at that ramp over the next year and a half, what do you -- can you quantify what you think that opportunity is?

David L. Dutton

I think that opportunity, as we ramp over the next, I guess, for the next 18 months, let's say, I mean that opportunity continues to improve, but it really starts to bring our RTP, which is running right now at roughly $7 million to $10 million per quarter. It's such that as you go forward, it really gets to the point where it should close to double that as we go into 2013. And that puts RTP back on really the level where it was in strong contribution in the DRAM area. So like I've mentioned, it's been a pretty brutal transformation but it -- there's been a lot of technology that has been invested in and brought into these products to really allow them to strongly deliver and really help enable some very key problems that were the leading edge of the foundry area.

Christian D. Schwab - Craig-Hallum Capital Group LLC, Research Division

Fabulous. And as we looked at Etch in the broadening out of the customer base as well as into new applications, I think you guys did roughly $50 million of revenue in Etch in 2011, was that in the ballpark?

David L. Dutton

That's a good ballpark.

Christian D. Schwab - Craig-Hallum Capital Group LLC, Research Division

Okay, perfect. And again, same type of question. As you look out over the next 4 to 6 quarters, can you give us some granularity of what you kind of expect that ramp on a quarterly basis or how much more you expect to ship on top of that?

J. Michael Dodson

Well, we think there's some -- I think there's 2 things that we have going on at Etch. One is Etch is extending further into the logic side as logic -- by logic I mean foundry. It's really getting more advanced and a lot of our application, which were kind of more noncritical have become as I mentioned, semi-critical. And so that, those penetrations, which are now starting to unfold, I mentioned a few on the prepared remarks, will increase our revenue drive, we think by about 25% over what the run rate has been as you get out kind of later in 2012 and on into 2013. So I think we're going to see a little later in the year where Etch starts to unfold more strongly. And then some of these new applications, which are 4 leading-edge sub-20s, as we get into 2013, they will incrementally add on top and actually open up probably about another 20% available market for us to extend and build our Etch further.

Christian D. Schwab - Craig-Hallum Capital Group LLC, Research Division

So if I'm going to do that math back of the envelope, what kind of would you expect to be generating at some point in 2013 quarterly revenue at $75 million plus or minus?

David L. Dutton

If everything would go well on the new business, it's doable. We've done it in the past.

Operator

Our next question is from Ben Pang of Caris & company.

Benedict Pang - Caris & Company, Inc., Research Division

First, regarding change in your [indiscernible] between what you just reported in January?

David L. Dutton

No. I think we're looking about the same, which is kind of flat to slightly down, and which means as the year goes forward, I think we'll see a slight increase in spending as again in the second half.

Benedict Pang - Caris & Company, Inc., Research Division

But did you expect I guess NAND to be stronger? And that's kind of weaker but offset by foundry? I just want to see if there are any real changes in these segments?

David L. Dutton

We -- I think that you're just playing out about -- we are seeing a little stronger foundry. NAND, we expected it to go into over supply. I mean, seasonally, about this time of the year, NAND and memory, if you go back to talking about DRAM, both the price weakens about this time of the year, but also with a lot of capacity coming on. Most of the analysis we've been watching in doing on our own. Have -- we've been expecting NAND to go into oversupply, kind of the middle Q2 and Q3. So we were preparing for that. And I think it is about what we expected.

Benedict Pang - Caris & Company, Inc., Research Division

Okay. And in terms of your ability to outgrow the industry, which product is giving you the most momentum in 2012?

David L. Dutton

In 2012, I think near-term the RTP products helps us. And then as we get late in 2012 and onto 2013, Etch really starts to become the driver.

Benedict Pang - Caris & Company, Inc., Research Division

Okay. And in terms of the lead time or the visibility for the different products, are they pretty much all the same now or is RTP still longer?

David L. Dutton

No, they're pretty much the same now. So all our products, we have about 1 quarter reaction time a little less.

Benedict Pang - Caris & Company, Inc., Research Division

So, I guess on the strip products, is that still shorter than that or it is now 1 quarter?

David L. Dutton

No, no. Actually yes, I mean the strip products are a pretty fast response, about 2 months.

Benedict Pang - Caris & Company, Inc., Research Division

Okay. And the final question for me. In terms of your market share in Etch, when I look at your ability to gain share going forward, is it broad-based? Or do you expect 1 or 2 of the applications that you guys are serving to actually drive the market share?

David L. Dutton

No. We figured if broad-based, we're seeing -- just starting to extend into the foundry area and some of those applications, which are slightly different and more different in some cases than in the NAND area, and also, like I mentioned CMOS image sensors, which is also getting there. And some of the Etches are as tough as the three-dimensional Etches we're doing in some of like the Vertical NAND in building, Etching these lenses in a three-dimensional fashion. So that's pretty tough and that we see that expanding as we go forward as well.

Operator

[Operator Instructions] Next question is from Graham Tanaka of Tanaka Capital.

Graham Yoshio Tanaka - Tanaka Capital Management, Inc.

A lot of things going on across trends. If you could just maybe summarize for us, you did give a little bit of market share data at the beginning, major markets. Market share change is expected maybe this year versus last year, and then what's possible next year?

David L. Dutton

Yes, sure. I'll try and give some flavor on that. I think our market share changes across the board were pretty well what we expected. Etch, we hit right where we expected to. We like to see that growth. And again, we're expecting to drive growth again this year. Strip, we expected to drive the gains we did and we think the strip market grew a little bit more than we thought, is probably one area, but share gain and the position we wound up in #2 was right where we expected, and what we're seeing is continuing to gain share as our strip broadens. It just -- overall, it's still the most flexible product out there. And then in RTP, I mentioned because of DRAM lessening, we did expect to see a [indiscernible] drop in share and we did see that. And at the same time, I think our focus on the new positions, we're expecting to drive share gains up again in RTP and basically come back up in the double digits and we expect to regain the #2 position in RTP. In strip, we're expecting to see about the same share gains this year as we did last. And in Etch, not quite as strong as share gains, but just because we're getting big feet -- you're growing bigger every year from a very small number, but we are expecting to grow share in there and start to get close to 2%.

Graham Yoshio Tanaka - Tanaka Capital Management, Inc.

It's at 2%?

David L. Dutton

It will be under 2%, but getting close. If you round it up, you'd round up to 2%.

Graham Yoshio Tanaka - Tanaka Capital Management, Inc.

Yes. So I was hoping to maybe get a fix on -- you gave us a good read on what's going on this next quarter or this quarter and into the second half. Just wondering what your general expectations are for 2013 by a major product area or maybe even end market within what kind of [indiscernible] Macro CapEx spend 2013?

David L. Dutton

Yes, I think, Graham, I mean, 2013 is too far out there for me to give maybe give macro numbers and CapEx spend and they're projected by Gartner and those type of people. And that might be best referred to. I think for us, if -- we feel if the market continues to grow year-over-year and there certainly from a macro product, it looks like it should, then we expect this healthy further gains Etch because of the new positions I talked about. Really RTP's blossoming due to 20-nanometer strength and continuing to build out there. And those 2 will drive, I think, our -- one of our strongest years ever. And then strip's just continuing to be the solid backlog

Graham Yoshio Tanaka - Tanaka Capital Management, Inc.

And what has happened in general on ASPs?

David L. Dutton

ASPs, we see holding pretty strongly flat. We work hard with our customers to deliver them good support and deliver them other features or abilities. So that we're able to continue to give them value for a good pricing.

Graham Yoshio Tanaka - Tanaka Capital Management, Inc.

So as you look at the trace costs, GAAP or spread, the SG cost on a GAAP, do you -- what's happened there in terms of cost is from the materials relative to pricing?

David L. Dutton

Well, for us as I mentioned earlier, we have a lot of programs internally because our margins are not as strong as some of the others in the industry. We continue to drive costs down. And so, we're working to increase, of course the GAAP and other improved margin by lowering costs and working hard to maintain ASPs.

Operator

Our next question is from Amit Dayal of Rodman & Renshaw.

Amit Dayal - Rodman & Renshaw, LLC, Research Division

Most of my questions have been asked. Just one thing on housekeeping aspect, I guess. You have mentioned provisions for taxes for 2012. Could you please go over that again?

David L. Dutton

The taxes? Yes, the taxes we incurred a provision of roughly $250,000 in Q1. We expect that provision to stay the same in Q2. And then for the whole year, $600,000 is a very mall provision in Q3 and Q4 as we just have some reversals on some tax positions out there in Q3 and Q4. And our taxes, with all of our NOLs and everything, is really the result of foreign jurisdictions and what we need to do in those more statutory purposes. So it really doesn't get impacted that significantly by our level of profitability level.

Operator

Thank you, and no more questions at this time. I'd like to turn the call over to Mr. Dutton for any final remarks.

David L. Dutton

Thank you, Tyronne. That does -- thank you, and once again, thank you for joining our first quarter 2012 conference call. We look forward to seeing you at various investor events over the next quarter and to updating you on the progress in the next quarter's conference call. Thank you very much.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect and have a wonderful day.

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