Atomera Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 2, 2023

There are 5 speakers on the call.

Operator

Everyone, and welcome to Atomera's 2nd 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 IR 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 Lorenzo, Atomera's CFO.

Operator

Then we will open the call to questions. Atamerica. 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. These forward looking statements, whether in prepared remarks or during the Q and 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 the company's annual report on Form 10 ks filed with the SEC on February 15, 2023.

Operator

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 regard to those events, conditions and circumstances. Also, please note that during this call, we will be discussing non GAAP financial measures as defined by ATOMARE Regulation G. Reconciliations of these non GAAP financial measures to the most directly comparable GAAP measures are included in today's Ares' press release, which is posted on our website. Now, I would like to turn the call over to our President and CEO, Scott Bibaud. Go ahead, Scott.

Speaker 1

Thanks, Mike. Good afternoon, everyone. Welcome to Atomera's Q2 2023 update call. We had a great quarter, continuing to build strong relationships with our customers, performing wafer runs for those in Phase 3, executing on compelling new R and D and building momentum with newer customers. I look forward to telling you about the developments.

Speaker 1

Capitalizing on the momentum generated by our 1st commercial license deal in Q2 with STMicro, We've been busy meeting with new and existing customers to emphasize the urgency of adopting and taking MSC to production. We've made good progress, both of those semiconductor companies already in our engagement pipeline and generating interest from new customers. Efforts continue with our first JDA partner and this quarter we've been collaborating with them on the demonstration and testing of MST solutions We continue to engage with the central engineering unit for the purpose of bringing much needed solutions to their business units with whom we are also speaking. We believe these steps bring us closer to signing a license with a BU for a production project. Likewise, We continue to work with our 2nd JDA customer on efforts focused around optimizing performance in their application, so we can initiate the milestone payments and associated licenses defined in the JDA agreement.

Speaker 1

Meetings with the JDA customer and our other licensees about the The specifics of MST integration in their devices, our TCAT analysis, planning and executing wafer runs We described the steps remaining for commercialization in detail last quarter. Shortly after ST signed the license agreement, Atamera. Work began using MST CAD to create a new optimized design flow integrating MST into ST's devices. As described before, ST and Atomera are cooperating closely to achieve the greatest possible performance and cost improvements using MST with the primary design responsibility for this effort being ST with Atomera in a supporting role. The first revenue milestone under the contract will be triggered when ST installs our technology on an epi deposition tool in one of their fabs.

Speaker 1

The TCAD work that's already commenced will run-in parallel with ST's manufacturing of MST wafers. The installation process is largely dependent on their EPI tool vendor. Due to logistics delays on the tool modification, We are currently expecting this to happen early in Q4. Once installation is complete and ST has successfully dialed in the tool, Atamerica. When SG has completed their work, they will start wafer level qualification Create a high volume, high yield manufacturing process, which will trigger another milestone payment and grant them the right Atomeris' technology.

Speaker 1

At that point, ST will enter volume production and we can expect to start seeing royalty payments. Our announcement of the license agreement with ST has definitely made waves in the industry. We've had excellent meetings with a number of potential customers who design and build analog and power products and who are interested in working with us on MST. Some have already begun the process by commencing TCAD work with us and we hope to add several new customers on this front in the near future. Work on RFSI continues to show very good promise in cellular handsets.

Speaker 1

Because of the large and expanding number of cellular frequency bands and the RF front end on mobile phones is becoming an increasingly complex and expensive piece of technology, which leverages advantages that specialized RF SOI substrates can provide. But those substrates also have some serious drawbacks related to dopant movement under the buried oxide layer. MST can help to solve those problems by enabling lower cost and less complex front ends, which should provide an excellent market for Atomera's technology. We are working with a number of customers on this today and expect to work with more in the near future. I want to spend a little bit of time talking about how MST can provide a real benefit smaller lithography nodes.

Speaker 1

One of the biggest challenges in semiconductors is to keep lowering power consumption as the nodes get smaller. A phenomenon that prevents them from doing so is something called random dopant fluctuation or RDF, which are variations in concentration of the implanted dopants and the impact of those variations becomes more significant as the nodes get size get smaller. It's the demon that few people understand, increasing the cost and power consumption of advanced logic, DRAMs and most other semiconductor devices. One of the most effective ways to improve power consumption is to lower the minimum voltage of transistors in each node. Atamerica.

Speaker 1

To do so, you have to be able to manufacture each transistor with as little variation as possible. And one of the big drivers of variation is RDF. So to successfully scale to lower voltages, RDF must be controlled. Our analysis shows that in the latest gate all around transistors, a single dopant atom diffusing into the channel Networks. A big focus of our R and D activities today is around proving this capability in the 2 to 4 nanometer range.

Speaker 1

In DRAMs, one of the most challenging limits on scaling is in the manufacturing margin of the critical circuits responsible for reading the memory bit, which are called sense amps and typically make up 10% to 12% of the DRAM chip area. Since DRAM capacitors leak, the margin on these sense amps define how long the capacitor can leak before becoming unreadable. So this establishes the refresh interval and resulting power consumption. By improving the variability of DRAM Sense Amps, MST can help manufacturers make them smaller and use less power. In this chart, we show a 50% improvement of variability between matched transistors that use MST.

Speaker 1

Another way of looking at this is that an MST transistor can be a quarter the size of a normal transistor at the same sigma VT. Again, MSC's ability to control random dopant fluctuation is what drives this very significant improvement in variability. The growth of AI has led to applications that are dramatically more memory intensive. So these type of power consumption improvements for DRAMs are particularly important, which is why we're starting to see very strong interest from players within the memory segment for using MST. Atomera's world class team of engineers and scientists continues to find ways of leveraging MST to advance the state of the art in semiconductors.

Speaker 1

Recently, the IEEE Spectrum featured a segment on Atomera's founder and his efforts early in his career to bring another key material advance to market, the Erbium doped fiber amplifier. That invention went on to become one of the foundational technologies enabling the Internet age. His technical leadership continues to drive our team to achieve a similarly groundbreaking result for today's semiconductor industry. There's no doubt that Atomera is seeing wider interest across more applications than ever before. With our recent announcement of the ST licensing deal, we have seen tangible proof that customers are standing up and taking notice, and we believe this will accelerate our time to revenue with more licensees.

Speaker 1

Although it has been difficult for us to provide much public insight into specific opportunities, I can tell you that the team is busier than ever. Our travel spending has doubled this year and that is because we see promising opportunities with new and existing customers around every corner and we're enthusiastic about closing them. With that, I'll ask Frank to now review our financials.

Speaker 2

Thank you, Scott. At the close of the market today, we issued a press release announcing our results the Q2 of 2023. This slide shows our summary financials. Our GAAP net loss for the 3 months ended June 30, 2023 was $5,200,000 or $0.21 per share compared to a net loss of $4,500,000 or $0.20 per share in the Q2 of 2022. In Q1 of 2023, our GAAP net loss 23, which was an increase of approximately $913,000 from $4,400,000 of OpEx in Q2 2022.

Speaker 2

The biggest driver of the year on year increase was a $759,000 increase in R and D expenses, $423,000 of which was due to higher spending with our contract foundry TSI Semiconductors, where we've processed a substantially higher number of wafer lots than in recent years and we absorbed price increases for wafers and engineering services. The other main factor was payroll costs, which increased by $209,000 in Q2 2023 compared to the Q2 of last year, reflecting new hires that came on board last July. General and administrative expenses increased by $108,000 and sales and marketing increased by less than $50,000 Sequentially, our GAAP operating expenses increased by $192,000 from $5,200,000 in Q1 also due to higher spending at TSI. Non GAAP net loss in Q2 2023 was $4,300,000 versus $3,600,000 in Q2 of 2022 $4,200,000 in Q1 2023. The differences between GAAP and non GAAP operating expenses in all the periods we've presented are almost entirely due to non cash stock compensation expenses, which were $1,000,000 in Q2 of 2023, dollars 927,000 in Q1 $859,000 in Q2 of 2022.

Speaker 2

Our balance of cash, We used $3,900,000 of cash in operating activities and we raised $10,800,000 of net proceeds from sales of approximately 1,400,000 shares under our ATM facility at an average price of $8.15 per share. This compares to a very limited ATM activity in Q1. So we feel we are carefully balancing liquidity and dilution. As of June 30, 2023, we had 25,800,000 shares outstanding. Moving to our guidance, we still expect non GAAP operating expenses for 2023 will be in the range of $16,250,000 to In April of this year, TSI increased its prices, while at the same time their cycle times got substantially faster.

Speaker 2

We benefited from this through more cycles of learning, but the price increase and faster wafer processing combined to increase our R and D expenses. Also, our travel to customers has snapped back to above pre COVID levels, such because we're responding to greater customer interest, which should lead to additional licenses and faster commercialization. As Scott mentioned, we expect that ST will install MST in their tool in early Q4, which will trigger the 1st revenue milestone at that time. ST's commercial license is already influencing other major players to move more quickly to evaluate and install MST. Each commercial license involves upfront license fees with a list price over $3,000,000 and results in recurring royalty revenue when the customer goes to production.

Speaker 2

So while our lack of revenue during the first half of the year is disappointing, In the big picture, we're confident that our investments in headcount, wafer processing and sales activities beyond the current quarter. So for Q3, we're guiding to 0 revenue, though we may see some early recurring revenue for MSTCAD licenses during this quarter. With that, I'll turn the call back over to Scott for a few summary remarks before we open up the call to questions. Scott?

Speaker 1

Thanks, Frank. Once again, this quarter, the Atomera team has built strong relationships by working closely with customers to develop a deeper commitment to MSC. Energy. We believe our large number of engagements, our deep material and semiconductor expertise and the solutions MST provides to some of the industry's hardest problems will ultimately be rewarding to shareholders. I hope to share more successes on Atomera's Park and announce more licenses and deals in the months ahead.

Speaker 1

Mike, we will now take questions.

Operator

Your question. I will do my best to aggregate the incoming queries and relay them to management. Alternatively, you can click the raise hand button and we may call on you to ask

Speaker 2

Adam and Mary question live.

Operator

And right now, our first question comes from Richard Shannon of Craig Hallum. Richard, if you would kindly unmute and you may begin.

Speaker 3

Great. Thanks, Mike. And Scott and Frank, thanks for taking my questions. I think the first one for Scott here, just to Start on STMicro. Appreciate the detail on the progress here.

Speaker 3

And I'm sure you're a little disappointed in the timing here of the tool progress here. I guess my first question is, is this something very specific to STMicros or industry wide issue? And what's your confidence in that being done by early Q4?

Speaker 1

Yes. Quick answer is, it is an industry wide problem. It's related to logistics issues that started in COVID and continued through today.

Speaker 2

And

Speaker 1

Even in March, they've been working to pull this in. So there's some chance that they'd be able to pull it in, but it's really not in their hands. It's their vendor and they're America. I think there's a chance it could happen in late Q3, but right now our expectation is it will be at the very beginning of Q4 Air and there's some chance that could move, but my belief is that all the urgency is there to get it done now. One thing I would like to point out though is and we talked about this in the NSCAD.

Speaker 1

We're doing a lot of work with them today. So we're doing the development work that's necessary to happen in parallel with the wafers getting up and running. So even though the installation has been delayed a bit, I'm not sure it has an impact on the overall schedule yet.

Speaker 3

Okay. All right. That's fair enough. You answered my follow on there. My only other question related to STMicros, and I asked you this last Obviously, with just hours or days after really engaging on this on your license with them.

Operator

But if you get a sense

Speaker 3

of what the TAM for their smart power products Air. I may be able to find any good answer to that in the last quarter. I'm wondering if you've got any more detail that help us frame that a little bit better.

Speaker 2

I don't think we have anything new from what we provided kind of last quarter, which is that the group, which was about $1,100,000,000 and therefore about a quarter of the total revenue for STMicro. But beyond that, we don't have any we can't really provide any more granularity on the TAM.

Speaker 3

Okay. Fair enough. And Scott, let me jump to a topic here of advanced nodes and appreciate all the detail here. And in Past few calls here sounds like activity is picking up here. You made a specific comment about doing work on nodes between 2 and 4 nanometers.

Speaker 3

Obviously, 3 and 2 are ones upcoming, but there's one foundry out there that has what they call a 4 nanometer node. I'm not sure it's actually 4, but maybe 5. But if you were intersecting with 4 nanometer seemingly could happen fairly soon. I guess I wanted to I didn't want to talk you up and maybe even want to be talked down here about expecting Kind of the progress there and the potential timeframe for intersection with advanced nodes, but a 4 nanometer node may come up in the not too distant future. So I want to get

Speaker 1

America's website. Yes. So Richard, first let me make a clarification. We're working on MST film implementations that would be at the range the total size of 2 to 4 nanometers. Of course, anybody who's working on those very small nodes Would want to be working with an MSD film that was very, very thin like that.

Speaker 1

So I my reference was not to a specific node like a 4 nanometer node or a 2 nanometer node, but its implementations that would be small enough to be appropriate in that kind of range of nodes. So obviously, we haven't made any kind of on FinFET node or an upcoming gate all around node, but that's something that we're working very hard to achieve.

Speaker 3

Okay. Okay, fair enough. Thanks for that clarification. Glad I asked that question. Wouldn't want that thing to proliferate beyond the call.

Speaker 3

So thanks for that. Let's hear one or two more questions, I guess, I think both for Scott here.

Operator

In the

Speaker 3

last few calls and frankly for more than just a year or 2, you've been talking about the ATOMER. One of your statements made, I think it was roughly 3, 3.5 years ago, you talked about engaging with customers who had A fairly sizable share of the total market for RF SOI. It seems like engagement has widened since then. Would you want to update what that percentage looks like today? I mean, I think it was a majority even back then.

Speaker 3

Is it or something where you said that. I think what

Speaker 1

I said back then was that we were working with the majority of the installed base of RFSOI device manufacturers. And that's still the case. I talked in this call about expanding that further. We have started working with more Since I made that comment and we continue to work with all the ones we were working with back then. So yes, American players in the RFSOI space.

Speaker 1

So I'm very hopeful that that will turn into some licenses and revenue for us in the near future.

Speaker 3

Okay. All right. Fair enough then. Maybe just last quick question, I'll jump out of line. Just on DRAM, I You've talked about this a little bit in the past.

Speaker 3

It seems like your comments are a little bit more forceful and certainly well placed not only from an AI dynamic, but just from a I think DRAM has been known to begin slowing down in many different ways here in the past. It sounds like you have a dramatic effect. Would you characterize the work here with DRAM makers to have accelerated meaningfully in the last 6 months or so, especially since it looks like a lot of the DRAM makers have plenty of capacity available for testing. How would you characterize the change in engagement with those guys?

Speaker 1

I definitely would say that's the case, Richard. We have been talking to DRAM manufacturers for years. We've had these variability results that I showed today. This is some new data, but we've had data in the past that Adam. But I'm not sure if it's driven by AI because AI is Absolutely driving D Ray Manufacturers start to figure out how to solve some problems.

Speaker 1

They can see a tsunami of demand coming there and they're going to need some solutions on power consumption and other things. But we certainly have seen an uptick in interest from our technologies in the DRAM space in the last 6 months. And so we're hopeful that leads to something good.

Speaker 3

Well, certainly would be a big market if that were to happen.

Speaker 4

So it

Speaker 3

seems like there'd be a wholesale change if that were adopted even by 1. So that'd be very interesting to see. So Excellent. Well, I appreciate the time guys. I will jump at a line.

Speaker 3

Thank you.

Speaker 1

All right. Thanks, Richard.

Operator

All right. Our next question comes from Cody Acree of Benchmark. Cody, go ahead.

Speaker 4

Thanks guys for taking my questions. Maybe

Speaker 2

can you just

Speaker 4

Scott, go back to the STMicro implementation. You mentioned some of the delays. Can you talk more about that those delays? And are those something that you expected? Are those new findings this quarter?

Speaker 1

No. I think when we announced the SC deal back in May, we said that They had to convert their tool. There were just some logistics issues having to do with parts that are long lead items and then just getting some people to do the actual work. And at the time, we didn't know what date that was going to be scheduled. We were hopeful it could be scheduled Anything to do with our technology or ST's commitment or anything.

Speaker 1

This is just a case where you need some parts that are in short supply and are not going to be available for a little while.

Speaker 4

And I guess With that, those delays, I guess, can you talk about what you're doing with subsequent engagements to make sure that you're streamlining the process, Esther James?

Speaker 1

Yes. I mean, this one is a little bit of a unique situation. For the most part, People have EPI tools and it's a very minor change to switch over to Switch the tool over to support our technology, does not require any kind of major operations. They typically have to change A few different gas spigots that they put into the tool and then they can run MST. In this case, it's a little bit of it.

Speaker 1

I don't want to America. I'll explain the details of what it is because it's confidential, but it involves an unusual tool setup that It's a little bit harder to just modify quickly than what we would normally see. So I don't think it's a systemic problem. We've had people do tool conversions very rapidly within weeks in the past. And in our labs in Phoenix.

Speaker 1

We can do a tool conversion in a day or 2. So,

Speaker 3

this is

Speaker 1

not a systemic problem.

Speaker 4

And can you talk about the single atom dopant Impact. Yes. That sounds like more of a newer issue that has come up.

Speaker 1

Yes. So, our analysis shows gate all around transistors, which are, as you know, they're going to be adopted by the foundries at very small process nodes, probably in the 3 and 2 nanometer level. Those transistors are highly doped in their source and drain regions. And the challenge is that with random dopant fluctuation, some of those dopant atoms can move out into the channel. But in this case, the channel is so small That 1 or 2 atoms moving into the channel increases the concentration of dopants in that channel significantly.

Speaker 1

And they want the channel to be as clear of dopants as they can possibly make it. So by implementing MST, which really improves the chances that they won't see random dopants going into the channel. We can bring a big improvement and reliability from that perspective and performance.

Speaker 4

And Frank, you talked about The engagement commitments that you're involved with, What does that plan for spending impact your outlook?

Speaker 2

Yes. Like I said, We're not changing sort of the full year guidance to be sort of around the mid-sixteen million which we gave at the beginning of the year. One of the things that we saw at the beginning of the year was There was price increase that was imposed by TSI. We're sort of now used to that. We also had quite a Number of lots that we're waiting in the queue because what we have been talking about in years past, at times their Cycle times were slow and then there was also contention with commercial business because of all of the constraints that existed in the supply chain.

Speaker 2

So during the first half of the year, we were able to really clear a lot of backlog of running wafers that we have been planning on doing And we got, I would say, a head start on lots that we're going to be analyzing in the second half of the year. So while I'd say the first part of the year is really front end loaded in terms of TSI spending, I didn't change our full year guidance because I think this will not revert back to the levels that they But it's going to be more normalized for the year. So, yes, in terms of what's driving the headcount, some of it is the TSI costs and we've had We added a couple heads last year and we still have open positions that are in our budget and are reflected in the full year guidance that we

Speaker 4

So if you have the personnel today, what do you think your spending Could it look like or what's an optimal level of spending that you're looking for?

Speaker 2

Well, I mean, So the full year has us at about $4,200,000 a quarter. And I think It's hard to say whether that's optimal, because obviously as the business scales, it's certainly likely that we would add additional headcount. But if you go back about 12 or 18 months, we were Mentioning that we were feeling constrained in terms of human resources to do the work that we needed to do to support customers. I'd say, we're still a little bit understaffed relative to the work that needs to be done, But it's not as severe as it was in the past. So I think we'll continue to provide annual guidance and yield The spending will increase, but I don't see anything happening at a step function rate.

Speaker 2

I think what the TSI Price increase does show though is we save in the big picture a lot of money by not owning our sort of mini fab, that's very prohibitive thing to do. But we rely on a number of vendors on the outside where we have to continually try to keep them honest because it is it does have an impact on us If there are price increases in some of these providers.

Speaker 4

And Scott, I guess, you mentioned the signing and the progress of Vesti Micro encouraging others to move forward. Can you give us any color there as So what that might have spurred and are you also looking at greater engagement within STMicro expansion of that engagement? Yes.

Speaker 1

So I think we've spoken about this Cody before. The guys we work with are incredibly technically sound very, very thorough in their analysis of our technology and make decisions. But in fact, In the end, a lot of them afraid of being first movers. So when we can go into a customer and say, hey, here's SC Micro, very well respected company And we're going to go to production with them. That seems to immediately like cause a reaction on people's parts like, oh, okay, Now I really have to get serious.

Speaker 1

We've seen this, this past quarter. Well, of course, when we made the SD announcement, we proactively reached out all of our customers who are in the power and analog spaces. And we said, You better start taking this seriously. And I think that had a very positive effect and we have started working with some of them as I said in my commentary. But it also works with other folks like who just want to see that we will be in production and that forces them to think they need to be there as well.

Speaker 4

And any expansion of the STU engagement?

Speaker 1

Okay. Not that we can announce yet. ST has a number of different business units where our technology would be interesting outside of the one that we're working on. And obviously, that's something that we'll hope to do with them over time. But we can't announce anything now.

Speaker 4

Great. Thank you, guys. Appreciate the help.

Operator

Okay. And it looks like Richard Shannon has a follow-up question.

Speaker 3

Thanks, Mike. Scott, just one quick follow-up from me. Supporting Certain areas that you talked about initially like ARC SOI and obviously power gets a little bit bigger are one thing. But when you talk about leading edge nodes and DRAM, you're talking about really large markets. How do things have to change from a headcount resource R and D wafer sort of view to make that a reality, especially as you get close to that point in time where some sort of contractual license agreement would

Speaker 1

Airline? Yes. If we hit on all of those simultaneously, I do think we'll have to expand headcount a little bit. But I do but it may impact our R and D budget more than just on a headcount basis. One of the challenges that we have in the market, especially for the most advanced nodes is that The potential customers are used to working with the equipment manufacturers like Applied Materials or ASM or Tokyo Electron.

Speaker 1

And when they come in and talk about an improvement, they want to see a lot of data, wafers run

Speaker 3

We could do a

Speaker 1

lot of epi work to prove the technologies that like the chart that I showed on this page earlier was actual silicon tested data. It's not simulation. We do a lot of simulation work and we do a lot of advanced work that we can on the EPI tool with lots of advanced metrology outside. But If we continue doing more and more work with these advanced nodes guys, I think we're going to have to start contracting with outside companies to do expensive wafer level type of work that could start to drive up some of our costs. We don't see that.

Speaker 1

I mean, we don't have any of that right now in our headlights, Richard. I mean, the most part our customers understand that We could give them so much data and at some point they have to take over and start running their own wafers to generate the rest. But to be competitive, I think we will have to take on more of that over time.

Speaker 3

Okay.

Speaker 1

But I still for the most part, I still feel very strongly in this engagement this business model that we've established that we will be able to leverage our relatively small team and small burn to generate enormous business opportunities, Even if it goes up a little. Right. Okay.

Speaker 2

Perfect. That was my only follow-up question. That's all for me. Thank you, Scott. Yes.

Speaker 2

If I could just continue on that because I saw a question kind of in the chat that I thought it ties Very closely to what Richard was just asking, someone was questioning, what do we run wafers for at TSI? We've worked with TSI for over 7 years. And as Scott was saying, it's not always easy to go and build a complete device and test the benefits of MST on it and TSI gives us a very cost effective way to do that. And that has the benefit that we've been able to prove out Technologies like MST SP and SP X for kind of power devices and See the impact on the full device and have silicon data. It also helps us to keep our Epi tool calibrated.

Speaker 2

So we want to run wafers periodically and see how devices run with MST over time. So There's a lot of benefits there in terms of both our own internal R and D work and then trying to simulate in silicon things that customers are doing. But in the future, as Scott was alluding to, when you get to really advanced geometries, that's harder for us to do in house and those are areas where in the future there could be cost. I alluded to that in the last earnings call that as we participate in kind of advanced node ecosystems, those can be more expensive

Operator

And Frank, just so on the Q and A chat, there's a number of Good questions that have come in. So, let me just there's a couple that maybe you could answer relatively quickly. First is the expected quarterly cash Earn going forward given the increase in headcount and cost of wafer runs?

Speaker 2

Yes. I mean, the guidance we give is always non GAAP operating expense because that because we're not giving forward revenue guidance beyond the current quarter. But we expect for the year, like I said, 16.25 to 16.75, Which implies $4,000,000 to $4,250,000 of operating non GAAP operating expense, very close to cash per quarter, and I would stand by that for the second half of the year.

Operator

And how much is left on the at the market facility?

Speaker 2

Right. When we established the ATM facility, it was a $50,000,000 facility And we started using it in the middle of 2022. We've done on that. So there's 32 point $7,000,000 remaining on that after the end of last quarter.

Speaker 1

Okay. And then

Operator

We got a question here that asks how did the relationship with Arizona State University come about And if there's any other color there, whether other universities were under consideration or what's the nature of How did that generally how the relationship come about?

Speaker 1

Yes. Okay. So this started a while ago back in probably 2017, 2018 shortly after we went public. We needed to get access to a 300 millimeter EPI tool on a more regular basis. Up to that point, we had leased it.

Speaker 1

It's very expensive to lease And the problem is that you get it and it takes a little while to get it calibrated and you can use up almost all your lease time just getting it calibrated and ready to run some wafers and then you lose it and So we were looking around the world for places to be able to Maybe buy a tool and put it in and there's just not that many available. This has to be kind of a world class clean room and I want to just say that we work with lots of universities. We've had a long term relationship with UC Berkeley, with Notre Dame, with University Pennsylvania with a little bit with Georgia Tech, with University of Texas Austin, with ASU. So we're doing some R and D that puts us in touch with a lot of folks out there in the university space. So it wasn't necessarily that we were out looking for universities, but we did as you know, we have an EPI installation 200 millimeter in Arizona.

Speaker 1

And we heard about this other facility that ASU had and so we approached them about actually about using their facility there. And over time, that worked out to the point where we were able to actually lease an empty tool in that facility, which is Excellent for us. It's got 2 chambers. It's got a 300 millimeter chamber and a 200 millimeter chamber. And so we can run both we for simultaneously in there and it allows us to do some of the very advanced work that I talked about for like the 2 nanometer to 4 nanometer work that I was At ASU, we have developed a good relationship with the university.

Speaker 1

We're doing research our customers that we bring in to work with us on things there. But overall, I think it's a positive relationship.

Operator

All right. Thanks. And outside of ST and the JDAs, looking at the engagement pipeline that we publish, the comment here is that there's not been any movement in the pipeline. And so can you kind of provide a little bit more detail as potentially moving customers along the pipeline and

Speaker 1

the level of activity there? Yes. I share your frustration with that. I think In the COVID time frame, we saw a slowdown in We had a lot of activities going on, but we didn't see a lot of people moving through the phases. We're really getting much more active with customers and with new customers.

Speaker 1

And I think that we'll start to see growth in the pipeline. I will say that in Phase Phase 1 is more like the beginning of the funnel. For someone to enter into Phase 1, they have to sign an NDA with us, which in some cases can be a really big hurdle and they have to be actively planning on doing a wafer run with us. And so Sometimes, we rotate people out of Phase 1 because we had lots of discussions with them and then it became less active. But we always have Try to upgrade the quality of the people that we have in there.

Speaker 1

So I think we'll start to see that grow more in the near future. Of course, Our bigger focus is trying to get people in the later stages to move further along into Stage 4 and hopefully into Stage 5. And so we'll keep really focusing on trying to make that happen more than just growing the numbers in the pipe.

Operator

And of course, there's more requests for detail on the JDA relationships. Or their business units.

Speaker 1

Yes. I saw this question about JDA. 1 was about discussions with central engineering group versus the business units. I want to emphasize, we speak with both, right? We talk with the guys in the business teams to understand what their challenges are, what their process knows, what they're trying to achieve in the market.

Speaker 1

And a lot of times, they will give us some guidance on what they need to do work on. We go off, we do simulations and we do some experiments. Well, usually we do simulations and we come back and share that with them and then they say, okay, work with the central Aaron Group, do some experiments, you guys work together on the experiments and then we'll look at the results and see what the next steps are. And so that has really been happening continuously. It's a dialogue between us and the central engineering group and the business units.

Speaker 1

Groups are kind of administering the relationship of setting up experiments and testing or reviewing the results with us. But I know it's frustrating that you guys can't see the results and I feel like people say nothing has happened in the last tests and experiments. And I guess the way that we can most judge that, it will be bad if we stop being asked to do experiments.

Operator

Okay. And one final question here before we adjourn. There was We announced a license with a foundry partner a while back and last update was that they were waiting for the 2nd run data. Wondering if you could provide an update with that.

Speaker 1

Yes. We don't have that data yet. And I don't think I'm in a position to really give schedules on that, but I can tell you that we have Looked at the results of the first run and have been working with them on defining a next run and then

Operator

Okay. And I think that wraps up the questions here. So I'll turn back to you, Scott, for closing comments.

Speaker 1

Research. I'm happy we're able to share with you some of our recent progress and our potential in some new technology areas. Please continue to look for news, articles and blog posts to keep you up to date on our progress, which are available along with investor alerts on our website, atomera.com. We are planning to attend a number of investor conferences in the coming months. So, please look out for those announcements as well.

Speaker 1

Should you have any additional questions, please contact Mike Bishop, who will be happy to follow-up. And thanks again for your support, and we look forward to our next update call.

Operator

Thank you. This concludes the Atomera webinar.

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Key Takeaways

  • Atomera’s first commercial license deal with STMicro triggers two key milestones: tool installation on ST’s epi deposition system expected in early Q4 and subsequent wafer qualification to unlock high-volume production and future royalties.
  • The STMicro announcement has accelerated customer interest across analog, power, RF SOI and memory segments, with multiple new Phase 1 and Phase 3 engagements and ongoing work under two separate JDAs aimed at production-ready MST integration.
  • R&D efforts focus on MST films in the 2–4 nm range to control random dopant fluctuation, a challenge in advanced logic and gate-all-around transistors, and on DRAM sense amps where MST showed a 50% improvement in variability, promising significant power and area savings.
  • In Q2 FY2023, Atomera reported a $5.2 million GAAP net loss (–$0.21 per share), used $3.9 million of cash in operations, and raised $10.8 million via its ATM facility; it now guides to zero revenue in Q3 and non-GAAP OpEx of $16.25–$16.75 million for the year.
  • Supply-chain delays in STMicro’s EPI tool upgrade, driven by vendor logistics, have pushed installation into early Q4, but parallel TCAD development work is underway to maintain overall commercialization momentum.
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Earnings Conference Call
Atomera Q2 2023
00:00 / 00:00