Atomera Incorporated (NASDAQ:ATOM) Q3 2023 Earnings Call Transcript

Atomera Incorporated (NASDAQ:ATOM) Q3 2023 Earnings Call Transcript November 1, 2023

Mike Bishop: Hello, everyone, and welcome to Atomera’s Third Quarter Fiscal Year 2023 Update Call. I’d like to remind everyone that this call and webinar are being recorded, and a replay will be available on Atomera’s website for 1 year. I’m Mike Bishop with the company’s Investor Relations. As in prior quarters, we are using Zoom, and we will follow a similar presentation format, with participants in a listen-only mode. We will open with prepared remarks from Scott Bibaud, Atomera’s President and CEO; and Frank Laurencio, Atomera’s CFO. Then we will open the call to questions. If 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 15, 2023, and its quarterly report on Form 10-Q filed today with the SEC. Except as otherwise required by federal securities laws, Atomera disclaims any obligation to update or make revisions to such forward-looking statements contained herein or elsewhere to reflect changes in 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 also posted on our website. Now I would like to turn the call over to our President and CEO, Scott Bibaud. Go ahead, Scott.

Scott Bibaud: Good afternoon, everyone, and welcome to Atomera’s Third Quarter 2023 Update Call. During this past quarter, we’ve made great progress on a number of different fronts, both in customer and technology areas, and I’d like to bring you up to date on some of those activities. Our standard customer pipeline does not do justice to how active we’ve been with customers over the last 3 months. It seems that our business development, our technology teams are on the road almost every week to service the growing number of opportunities and applications that MST can address. Much of that is happening with our Phase 3 customers, so it’s hard to show the progress on this chart, but I’ll give you more details as we go along. One thing we had hoped to show on today’s call is that our Phase 4 customers had grown by 1 to reflect the installation of MST on a tool in MST — in ST’s factory.

Unfortunately, up to today, it has not happened, but we do expect it to happen very soon and have been working diligently with ST on other parts of the development process. In past calls, I’ve discussed the path to production with ST, but I’d like to expand on the details here. Since completion of the license agreement in April, ST’s engineering team, with some assistance from us, has been developing their new manufacturing process, which will include MST. This effort is primarily happening via computer simulations and our MSTcad is an indispensable component of that effort. After the installation of MST onto their EPI tools, ST will build wafers using MST and test the results, which is called silicon validation. Using this methodology, ST will create a fully optimized manufacturing method.

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Q&A Session

And when it is complete, they will freeze it creating a process development kit or PDK. From that point forward, when a new chip design is started by an ST development engineer, the chip will be based on the transistor characteristics provided in the new PDK, which will include MST. Wafer-level qualification, which is the process of finalizing their manufacturing flow across corner conditions to ensure it meet specifications will be happening in parallel with ST’s new chip designs. When process qualification is complete, any finalized chip designs will enter production and start generating royalties. All their subsequent chip designs will be based on this new PDK and will add to the royalty stream, so the revenue potential will just continue to grow.

As we’ve spoken about before, it’s difficult for us to forecast the volume of these designs because they will be executed for many different applications and market sectors. When we first announced this transaction, we estimated ST would go to commercialization in 1.5 years to 2 years. Despite the longer-than-anticipated time to complete equipment modifications, we still believe that timing holds true. It is important to recognize the significance of this milestone to our company. It validates not only our technology, but also our business model, and we are as impatient to see it completed as I’m sure you are. Now that we’ve covered ST, let me provide updates on other customers. I’m pleased to report that experiments with our JDA 1 customer have shown excellent technical results that we believe solve a significant problem they are facing.

The specific issues we have been — we have addressed are targeted at one of their largest BUs. At this point, our focus has shifted to finding a business solution that will work well for both of us. But given the strength of our technical offering, I am confident we will find a commercial structure for them to adopt MST. Likewise, with our JDA 2 customer, recent silicon test results, combined with MSTcad simulations have led us to start a new round of experiments to hopefully reach a performance level triggering the license agreements contemplated as part of the JDA package. It will take several months for those results to come out, but we hope with a lower level of fab utilization the industry is experiencing these days, we will get fast throughput.

We are also seeing interest in our higher voltage technology offerings, MST, SP and SPX. There is no doubt that our ST license announcement has stimulated interest in these technologies across the industry. Recently, our MSTcad was adopted by a very large analog and power manufacturer, which we believe is an excellent first step towards licensing our overall MST technology to them for production. We continue to see good momentum for both MST SP and SPX. More good news in the RF department. Our MST solution for RF SOI has been evolving over the last year due to new MST film formulations and integration techniques, which we have demonstrated to customers using simulations from MSTcad. During the last 3 months, we’ve gotten new silicon test results that validate the improvements predicted by MSTcad, improvements that are not possible without MST and are badly needed by designers of RF front ends for cellular products.

We believe this solution will be something that all RF SOI designers will want to use once they understand the benefits. And we’re confident of this because the first few customers we’ve explained it to have been quite excited to get started. I’m hopeful this will lead to several new licenses and partnerships in the future. Similarly, in the advanced nodes market, our offering has gotten significantly stronger in the last 3 months. The key to advancing in this market is through ecosystems and partnerships since the technology is so complex and expensive to prove out in silicon. We are working to establish and nurture those types of relationships today. Two weeks ago, we announced that Atomera was part of the Southwest Advanced Prototyping Hub led by Arizona State University, which has recently received funding through the CHIPS and Sciences Act.