Atomera Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 13, 2024

There are 5 speakers on the call.

Operator

Okay, we'll start. Hello, everyone, And welcome to Atomera's 4th Quarter and 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, we will follow a similar presentation format with participants in a listen only mode.

Operator

We will open with prepared remarks from Scott Bibaud, Atomera's President and CEO and Frank Lorenzo, 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 and A session, are subject to inherent risks and uncertainties.

Operator

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, and its quarterly report on Form 10 Q filed with the SEC on 1, 2023. Except as otherwise required by federal securities laws, 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. And with that, I'd like to turn the call over to our President and CEO, Scott Bibaud.

Operator

Go ahead, Scott.

Speaker 1

Good afternoon, and welcome to Atomera's 4th quarter and full year 2023 update call. I believe that when we look back at 2023, we will consider it the catalyst year, where our first major business deal that drove our success was announced. And our Q4 will be where the execution of that mission became most obvious. In addition, we have seen excellent results from customers and partners and strong advances in R and D that will ultimately result in more commercial licenses. We will dive into the details, but first, let me give you a view of the industry status and how to flex Atomera.

Speaker 1

As you know, 2023 was not the strongest year in the semiconductor industry, characterized by negative growth cutbacks in CapEx plans and some slowdown in spending. As is usually the case in this type of environment, we saw increased interest in new design activity and plenty of fab capacity to run R and D lots. As we enter 2024, we are seeing much more optimism as growth prospects driven by new artificial intelligence capabilities start to emerge. We are happy to see this since our customers' cash flow will improve, but we still expect to see modest fab utilization rates, which benefits our business development prospects. This is really the ideal time for customers to adopt MST.

Speaker 1

Obviously, the big news of the quarter was the installation of our technology at STMicro's Fab in Agrate, Italy. In case you are new to the Adam Aronnade, in April of last year, we announced a commercial license agreement with STMicroelectronics that was important for our company in several ways. First, it validates our business model and the value that MST brings to customers when they truly appreciate its capabilities. 2nd, It is certainly an important signal to industry participants when a large respected IDM decides to take MST to production. Although their decisions are primarily on technical criteria, engineering management always feels more comfortable if other leading companies are going down the same path that they are considering.

Speaker 1

We have always represented customers route to production with MST in 6 phases, as shown here. For ST, Phase 4 includes both installation and productization. This slide shows a rough approximation of where we are in that process with the grayed out boxes representing items that have been completed. Last year, we were waiting for some equipment modifications to happen at ST before we could start the install. We felt quite certain the installation would happen a short period after our last quarterly update call and it did.

Speaker 1

Let's look at the remaining steps in more detail. Our progress since our last update call has been truly remarkable. Since last May, The ST engineering team has been developing their new manufacturing process using TCAD, which also includes their own simulation tool called MST CAD. In early November, after their Epi tool upgrades were complete, we provided ST with the critical IP necessary to start making MST wafers, which triggered the revenue milestone we announced on November 14. Although we have always guided that an installation can take up to 3 months, The ST Epi team was able to get trained on our technology to the point that they could grow high quality MST on their wafers, which allowed us to pass all their acceptance criteria before Christmas.

Speaker 1

This accomplishment completed the formal installation of MST technology at which triggered a second revenue milestone. In January, we spent more time with their team helping to both the epi deposition process and the MST design integration. ST has now started manufacturing MST wafers in their own fab, which will be used for electrical lots providing silicon validation. Because this entire process is in house, their cycles of learning in this stage should be quick. When ST is satisfied that they have created a fully optimized transistor and manufacturing process development kit, or PDK, they will freeze it.

Speaker 1

Just to be clear, we consider this entire effort from installation through PDK to be part of Phase 4. For a chip designer, a new PDK is like getting the latest and greatest software with all the newest features. In my experience, engineers will hold off on new chip designs until this PDK becomes available, creating a pent up demand for new design starts. So in this case, we expect that multiple chips will be developed in parallel with ProcessQual, and some may even tape out prior to the QUAL being complete. For the next several years, new chip designs will be taped out based on this PDK and will enter production and start generating royalties.

Speaker 1

It's difficult for us to forecast the volume of these designs because they will be in many different applications and market sectors and will ramp at different rates. But as you can imagine, over time, The percentage of MST based designs in their fab will increase significantly. When we first announced this transaction, we believed STM could get to commercialization in a year and a half to 2 years. Despite the delay in starting installation, we believe that timing still holds. Although much of this execution is out of our control, we are laser focused on doing everything we can to ensure ST's production ramp of MST is as successful and as rapid as possible.

Speaker 1

Our other top priority as a company is getting more customers onto the same path to production. So now, let me provide some updates there. As you can see from our customer pipeline, we are showing growth in Phase 4 reflecting the SD installation, But there is a lot more going on under the hood. In the last call, we spoke about the excellent results we had with our JDA 1 customer and its applicability to one of their largest BUs. Development efforts continue, but we are still working on putting together a business arrangement which will meet both our needs.

Speaker 1

I can assure you this is a very high priority for us, but the end of year holidays slow down those discussions, and we are working to get this program moving more quickly. We continue to be excited about the experiments with our JDA II customer, which are still making their way through the fab. Good results here should pave the way for a license agreement in this area. In addition, We are also in discussions with this customer about starting work in another area as well. A trend we are seeing in the higher voltage semiconductor area is providing a tailwind to our MST offerings.

Speaker 1

Chinese companies have started to enter in to the low end of this segment, which has caused some of the more established players to focus on differentiating their technology to be higher performance. MST is uniquely suited to deliver performance improvements with our SP and SP X technologies. And in Q4, we signed an MST CAD license agreement with a large manufacturer to start working on it, which shows how momentum for both MST SP and SPX is growing. Interest in our RF SOI technology also remains strong, and we have multiple different customer wafer runs underway. Recently, we were invited to give a paper coauthored with SOYTECH and San Jose State University at the upcoming IEDM conference in March, which will provide details on how MST on an RFSOI substrate can enhance performance of both RF switches and LNAs.

Speaker 1

The IEDM conference, which happens every December, is a great forum for us, and it is focused on the latest gate all around and nanosheet transistors. Interest in the use of MST for these devices has been spreading and has created excellent opportunities for new engagements and partnerships. At the geometries being used in these advanced nodes, New challenges are being raised, which demand more control at the atomic level than it has ever been necessary. Atomera's diffusion control, reduction of random dopant fluctuation, and improvement in surface roughness scattering are viewed as potential provide the control needed for these nodes. In Q1, our team has been busy working with multiple advanced node manufacturers, which should ultimately lead to new business.

Speaker 1

The same features driving interest in advanced nodes is also stimulating demand in the memory space, And our work with those customers continues to be active and exciting. Finally, we get a lot of questions about How MSD is related to the fast evolving developments in artificial intelligence and I can tell you it's extensive. Last quarter, I spoke about how AI will drive demand for more and different kinds of memory, which MST can help deliver. Another area where MST will bring huge value is in chiplets. As you may know, AI algorithm demands have become so huge, it's difficult to meet them with single chip solutions.

Speaker 1

The industry has reacted to this problem by creating a new architecture which collects a number of smaller chiplets on a silicon interposer. The beauty of this architecture is that each chiplet can be developed in the optimum process technology for its role and the fact that MST provides performance boosts at all these different nodes brings enormous value, which should become a new driver for MST adoption. I believe we will look back at 2023 as the year when we turned the corner commercially. Our first production license with ST, followed by the great progress we have made in Q4, will be looked upon as the trigger for Atomera's success. In addition to ST, we have made serious customer and technical advances in each of our target product segments.

Speaker 1

One thing that has become even more apparent this quarter is that, as customers start to understand our technology more, They come up with new ways of using MST that we haven't even imagined, which will become a strong growth driver for our technology horizontally across existing customers as our penetration increases. MSD is truly an amazing tool And the brilliant team here at Enmera is hard at work on covering its potential and delivering it into the hands of future licensees every day. This is the type of execution that leads to a successful enterprise And I can tell you I'm more optimistic than ever about our potential. Now Frank will review our financials.

Speaker 2

Thank you, Scott. At the close of the market today, we issued a press release Revenue in 2023 was $550,000 all of which was recognized in Q4 and resulted from installation and acceptance of our MST technology at ST's fab. Our GAAP net loss for the year ended December 31, 2023 was $19,800,000 or $0.80 per share compared to a net loss of $17,400,000 or $0.75 per share in 2022. GAAP operating expenses were $21,200,000 in 2023, which was an increase of approximately $3,400,000 from $17,800,000 in 2022. The biggest driver of the year on year increase was a $2,500,000 increase in R and D expenses, approximately $1,400,000 of which was due to higher spending on foundry services, metrology and other outsourcing and $739,000 of which was due to higher payroll and related costs.

Speaker 2

General and administrative expenses increased by approximately $634,000 reflecting higher payroll expenses as well as higher legal fees. Sales and marketing expense increased by approximately $251,000 Other income net in 2023 increased by $802,000 as compared to 2022, mainly due to the higher interest rates on cash and short term investments. Turning to our quarterly results, Q4 2023 GAAP net loss was $4,600,000 or $0.18 per share compared to a net loss of $4,300,000 in Q4 2022, which was also $0.18 per share. In the Q3 of 2023, GAAP net loss was $5,000,000 or $0.20 per share. The lower net loss in Q4 compared to Q3 was due to our Q4 revenue.

Speaker 2

While GAAP operating expenses were basically flat at $5,300,000 in Q4 of 2023 compared to $5,400,000 in the preceding quarter. As R and D expenses declined due to the winding down of activities at TSI, offset by increases in G and A and sales and marketing. Non GAAP net loss for 2023 was $16,600,000 in comparison to a loss of $14,100,000 in 2022. And as with our GAAP results, This was primarily due to increased R and D expenses. The differences between GAAP and non GAAP operating expenses in all periods presented are primarily due to non cash stock compensation expenses, which were approximately $4,000,000 in 2023 $3,400,000 in 2022.

Speaker 2

Our balance of cash, Cash equivalents and short term investments on December 31, 2023 was $19,500,000 compared to $21,200,000 at the end of 202320,400,000 at the end of Q3. During the last year, we used $14,600,000 of cash in operating activities, And we sold approximately 1,800,000 shares under our ATM facility at an average price of $7.97 per share. Of those amounts, approximately 320,000 shares were sold in Q4 at an average price of 7.37 As of December 31, 2023, we had 26,100,000 shares outstanding. As Scott mentioned, we met the first two milestones under the ST license agreement during Q4, resulting in $550,000 of license revenue. The next grant of license rights to ST will be our distribution license, which will enable them to both manufacture and sell products with MST.

Speaker 2

Those sales will result in royalty payments to Atomera. While we are not able to share the financial details of the ST contract, the terms are consistent with our target model. Under this model, total upfront license fees have a list price of over $3,000,000 with payments increasing as we grant additional rights. As Scott explained in his remarks, timing of entry into Phase 5, which is when we will recognize revenue on the grants of the distribution license is largely under ST's control. Accordingly, I'm not providing guidance on the timing for recognizing that revenue.

Speaker 2

I expect that our Q1 2024 revenue will consist only of ratable recognition of MSTCAD licensing. Moving to our expense guidance. Our non GAAP operating expenses for 2023 were $17,100,000 And we expect that in 2024, our non GAAP OpEx will be in the range of $17,000,000 to $18,000,000 While this is a wider range than I've provided in previous calls, this is due to the uncertain financial impact of moving from TSI Semiconductor to a new foundry. Our work with TSI wrapped up in January of this year. And as a result, our R and D expenses in Q4 declined from prior quarters in 2023.

Speaker 2

We're making good progress in talks with possible replacement providers for foundry services, but nothing has been finalized yet. While the interruption in foundry work will cause Q1 twenty twenty four R and D expense to decline Further from Q4, we expect to incur some one time fees as we transition to a new foundry And we will update our guidance when we have more visibility. With that, I will turn the call back over to Scott for a few summary remarks before we open up the call to questions

Speaker 1

Scott thanks Frank As you can see, we made great progress towards commercialization this past quarter and in 2023. We are doing everything in our power to get SD to production quickly, but we also have an incredibly valuable portfolio of other potential customers we are working to take into the commercial stage. Our team is confident that it is only a matter of time where we can announce license deals that will further solidify the potential of Ameris' business for the future. Mike, we will now take questions.

Operator

Okay. Thanks, Scott. If you wish to ask a question, please click the Q and A button at the bottom of the Zoom window, then feel free to type in your question. I will do my best to aggregate the incoming queries and relay them to management. Alternatively, you can click raise your hand button and we may And right now, our first question comes from Richard Shannon of Craig Hallum.

Operator

Richard, please go ahead.

Speaker 3

Thanks, Mike, and thanks, Scott and Frank, for getting me on your call here. Congratulations on the great success ending last year here. Maybe a couple of questions related to STMicro here about the timeframe to product prioritization of 1.5 to 2 years here. Sounds like you're talking about some very interesting work with them. I don't want to get out ahead of my skis here, but is there any reason to think that that time frame could be at the lower end Just because of all the engagement you've been having.

Speaker 3

I don't want to read too much into it, but just want to get your thoughts there, Scott.

Speaker 1

Yeah. As I say, we can't predict the timing of it. They haven't actually given us a schedule that they're trying to hit. However, I will say the progress we've made in just the last couple of months, and we did since we did the installation is really quick in our experience. And, you know, they they have the possibility of moving very fast.

Speaker 1

You know, once MSC is installed inside someone's fab, they can They can literally crank up the engines and turn out these new wafer experiments very quickly. So There is some chance I would say, I would say I'm still holding to the, you know, one and a half to 2 years from our announcement date last May, but there's a chance it could be on the earlier end.

Speaker 3

Okay. When you say you haven't gotten a schedule from STMicro, when do you expect that? And what kind of any way you can characterize what that means? Is that a normal process of bringing up any semiconductor process or is this there any specifics to Atomera that create I don't know. But deviations from the normal, I guess.

Speaker 1

I don't think there's anything that's a deviation from the normal in this case. That being said, I am not privy to what they consider a normal development time frame for an analog product like this. I know that You know, for some of our customers, they may have done a lot of that development work in phase 3, and when they get to phase 4, they have most of done. But as people remember for ST, they did their Phase 3 work a long time ago, kind of put it on the shelf, and now they're They're taking this and they're doing it for a brand new process node. So they do have some work to try to, I mean, I think they're going to get very good results on their first run, but their goal is to spread MST in a lot of places so they can get good results across more and more components in their designs.

Speaker 4

Okay. Fair

Speaker 3

enough. And a follow on question on the topic of SD Micro here. And we've talked about this since the day that you announced this back in April of last year. We talked about I guess I'll refer to it as a halo effect of driving other companies to want to adopt MST. Maybe you could just characterize any of the discussions having.

Speaker 3

And I guess the key for me is, do people need to see this in production and actually chips coming out the factory before they pull the trigger? Or do you think this can be A, an accelerator and a catalyst for them.

Speaker 1

It's definitely already an accelerator and a catalyst. In conversations with customers now, you know, we're discussing our business model and what we'd like to see from them. They say, yes, I recognize that ST is doing it. And, you know, and then we go on from there. But that's great because in the past, they could say to us, nobody's ever done this before.

Speaker 1

So why do you think we should do it? So it's really a big game changer.

Speaker 3

Okay. Well, great to hear there. You talked about this last quarter in terms of and now you have a I think you used the word license for MST cab with a large analog Fracture. Is this an example of of this halo effect, or is it separate, and and even started before s ST was publicized?

Speaker 1

I think it's definitely an example of the halo effect of course we were trying to convince these guys before we announced ST and And we actually did do work with them, but seeing ST has caused them to take it to the next level, and I hope that The MST CAD is the 1st step in kind of moving along to doing an actual installation and license. Although, you know, we haven't announced that yet, but that's what we hope is the trajectory.

Speaker 3

Okay. Well, you kind of co opted my follow on question on this topic, which is what are those what are those next steps here, both internally that you could characterize Plus any, you know, public events, so to speak, like a license, as you just mentioned.

Speaker 1

Yeah. I mean, if you look at what I talked about for the productization effort for ST, standard TCAD that adds the MST stuff into it. So, you know, for any of our customers, it would be, In the semiconductor industry, I would say the majority of manufacturers are They want to see actual physical results on a piece of silicon before they make a decision. But for some of the players in the industry, They want to run simulations first and then make their decision to move to silicon. And so I think it's really good that they're doing both paths.

Speaker 1

We're prepared to support them on both paths and it shows the seriousness. It's not a small deal to dedicate a few engineers And a few very expensive Synopsys TCAD seats to working exclusively on integrating MST into your process technology and so we hope that goes someplace good.

Speaker 3

Okay. And I'm assuming that since you described this as a Large analog manufacturer that this is something they would install and use internally as opposed to working with somebody else, like perhaps a Current engaged Atomera customer. Is that fair?

Speaker 1

Yeah. I I I don't think they would work with an engaged Atomera customer. I think every company in the globe today is, even if they're an IDM, they're probably fab light. They use some outside foundry as well as inside capacity. So these guys could go in either direction, but yeah.

Speaker 3

Okay. Two quick questions and I'll get a line here. I'm sure there's a couple others ask, want to ask questions here. But just related to JDA 1 here, Sounds like you've made some progress in discussions with the with some business units there, but it didn't detect anything that was imminent, and you're just hopeful. I don't want to put words in your mouth, so maybe you can just characterize the dynamics there.

Speaker 3

And and, do you think you're you've gotten past, I know that at this point in certain other learning cycles, you've gone through them with them, I think, over the last 2 I think it's been more than 2 years. Correct?

Speaker 1

I mean, we've done a lot of stuff with them. We've shown them a lot of data. And by the way, we are continuing to do technical work with them show them even more results of things that can be done with MST. We started in discussions with them on the business side in, you know, kind of in the Q4. And no, we haven't completed that yet.

Speaker 1

I don't think that's that unusual. And obviously, we can't give details of exactly where we are on those discussions, but these are the types of things that takes some time. And over the Christmas holidays, we certainly didn't slow down. But, you know, every big company has got A lot of things happening at the end of the year with goal setting and reorgs and, you know, compensation discussions and everything, and so I definitely feel like they were a bit distracted at the end of the year, and so in January, we started to really try to get it ramped back up and hopefully we'll make better progress now.

Speaker 3

Okay. Fair enough. And last question, I'll jump out of line here. You signed a license with, an unnamed fabless RF customer, I back in, like, 2018 or something like that. I haven't heard much about them since.

Speaker 3

Yet you talk every quarter about what sounds like some great engagement and RFSOI in general. Maybe just characterize what the specific customer has been doing since since that announcement or recently, and did that does that overlap with any of the commentary on RFSOI that you had mentioned today in the past? Yes.

Speaker 1

Sorry. It definitely overlaps. We're still working with that customer. We're still doing development with them, and we hope that that turns into something Very good. In the future, I probably could have done a better job in my prepared remarks of connecting that particular customer with our RFSOI work, but that is something that is continuing and we're quite excited about.

Speaker 3

Okay. Fair enough. I will jump in online, Scott. Thank you.

Speaker 1

All right. Thanks, Richard.

Operator

Thanks, Richard. Our next question comes from Cody Acree of Benchmark. Cody, go ahead.

Speaker 4

Yes. Thanks for taking my questions and congrats on the progress this year. Frank, if we can just be real clear On your guidance for Q1, you said, ratable STMicro license. Can you just be clear on what you're expecting for the Q1?

Speaker 2

Oh, yeah. No, I was not referring to STMicro. I was talking to license revenue from MST CAD. So, yeah, that's, and then those are not large amounts. So I didn't go into details, but I think in the past, the largest we've had of revenue from a single in a quarter from MST CAD was under $10,000 So, this is a larger engagement, but it's still kind of in that range.

Speaker 2

Yes, that's separate from STMicro.

Speaker 4

Okay. Thank you for that Clarification. Any impact on your delay with TSI? I understand the R and D push, the lumpiness that that will come in next year, but, or later this year. But is there any business impact on that delay?

Speaker 2

We don't see any business impacts from the delay. None of our wafers that would go to a customer of any kind, whether it be Well, certainly with ST, they're now installed and doing everything in quick turns in their fab. But for customers that would have been I'm sending wafers to us for MST deposition. That never flows through TSI either. TSI is was solely a vehicle for us to be able to do internal R and D testing.

Speaker 2

And so it has no impact on customers. In terms of Longer term R and D, yeah, prolonged inability to work with a foundry would have some impact on us, but we're not seeing that. We actually had much higher spend in the 1st 3 quarters of 2023 than we had had in previous years with TSI. Now part of that was price increases and kind of faster turnaround. But we were able to, as we kind of got into Q4, anticipate that they were winding down and run quite a few wafers that we can use for additional internal testing and for TCAD calibration.

Speaker 2

And so that's keeping us plenty busy now. And we are very close in discussions with signing up a new foundry. So we don't anticipate that that's going to hurt us commercially at all.

Speaker 4

Excellent. Thank you. And Scott, maybe can you talk a bit more about this engagement with MST SP and SP X, the new engagement that you mentioned in your prepared remarks?

Speaker 1

Yeah. I'm not sure what else I can say about it. We yeah. So Maybe you can just talk about what what it means to license MST CAD. So Our our MST CAD is a software package that sits on top of Synopsys' TCAD software and and it gives people to analyze the performance that MST could bring.

Speaker 1

This particular customer wants to do kind of a comprehensive analysis of how MST could get added into their product line. And so that means it's a fairly big installation for them. And so we, we're charging them on a monthly level to be able to use it, and we're providing quite a bit of support to them. Now that What's frequently the case for customers who are who are experts in higher voltage technology is they aren't going to use our MST SPX or SP packaged product but they will look at how we do that And then they'll use the tricks we figured out to how so that MST can make their product better. So we'll train them on how to how to put all of the tricks in the trade into their development, and then they can change their existing designs to get higher performance levels out of I talked a little bit about this trend where higher voltage ships is going to China.

Speaker 1

We're seeing that more and more. And so, definitely, many of the players are trying to either make their existing portfolios higher performance or lower cost they can compete better with those, with the Chinese fabs.

Speaker 4

I see. Thank you for that, Scott. And then lastly, Just you mentioned some increased interest in DRAM around the chiplet strategy. Are you seeing engagements in the DRAM that our material or is this just more, roadmap plausibility?

Speaker 1

No. We've been talking to DRAM manufacturers For a little while now, we don't have anything to announce there yet, but we definitely are still in discussions with a number of companies there. It's not specifically related to chiplets, but it is something that I think would be used in chiplets, just like any memory technology. But We're talking to people about DRAM. We're talking to people about other memory architectures, and we're even doing some work on how MST could help to change memory architectures to make them more responsive to the needs of AI memory demands.

Speaker 1

So, again, a number of things that we're working on in R and D that we haven't announced yet, but that we hope will turn into something soon.

Speaker 4

Would you characterize these as fairly early stage yet?

Speaker 1

Our work with DRAM manufacturers is not early stage, but Some of the other work, I would say, is earlier stage, yes.

Speaker 4

Okay. Thank you, guys.

Operator

All right. Thanks, Cody. And a couple of questions on the Q and A line here. Scott, you mentioned Soitech in the prepared comments. Are you and the question that came in is, are you involved with Soitech's Technology Smart SIC going into production with STMicro this year?

Speaker 1

Yeah. So, We have been working with SOYTEC for a number of years. As you guys know, we've been talking about RFSOI and the benefits we bring there for a long time, and most, I would say, a good percentage of that RFSOI that's delivered to the market is delivered by Swaytech. So, we have been Working with them to ensure that our product works well with theirs. We have not announced any kind of a partnership with them or any kind of engagement with a joint customer, like the question you're asking about STMicro, but We certainly hope that, any customer who would be using RFSOI would be very interested in working with both us and SOWY Tech.

Operator

All right. And one for you, Frank. There was a comment about the increase in sales and marketing expense in the Q4. Do you want to address that?

Speaker 2

Yes, I think This kind of applies actually across all areas of operating expense. But as you saw, we had the $550,000 of revenue in Q4, which is an important milestone. One of the things that impacts our expenses across all departments is the annual bonus that we accrue as we achieve certain milestones. And so with an important milestone like that in Q for, that certainly increased the amount of bonus accrual in the quarter. Otherwise, the sales and marketing can be very Spotty.

Speaker 2

There's a lot of travel. We certainly spent a lot of time this year traveling to customers. But I wouldn't read anything more into that, other than just travel and overall across the company, accrual of bonuses, which is not always Linear every quarter.

Operator

Okay. And there's a request for an update about the CHIPS Act and the news that we put out last year. And I was wondering, Scott, if you could provide an update on the CHIPS Act.

Speaker 1

Yeah, of course, we talked last year about what a, I mean, we think the CHIPS Act really provides a tailwind for us in many ways, and especially the establishment of the new National Semiconductor Development Center that they're talking about. So, we have gotten involved in a lot of that, as you know, our announcement was about our involvement out in Arizona with Arizona State University. But the other thing about the CHIPS Act is to, you know, in the early rounds of RFQs that Chips Act has been putting out. It's been about people building fabs. 1st, the big companies building fabs, and then some medium sized companies.

Speaker 1

We really eligible for those, but we are doing a lot of work to get engaged with the government at different levels, so we could be eligible for work on the CHIPS Act in other areas. And so again, nothing to announce there, but I will tell you that that's something that we're working on.

Operator

Okay. And I see Richard Shannon has his hand up. Richard, did you have another follow-up question?

Speaker 3

I did, Mike. Thank you. Scott, I'm going to re ask, Cody's last question on a different topic. He kind of maturity of work in the DRAM space. And thanks for that answer here, but I'll turn around and throw it at the advanced nodes And and I want to get you updated on and and ultimately characterizing the situation there relative to DRAM or other dynamics and how they're How that workflow is consistent with work you've done in other areas like power and RFSOI, etcetera.

Speaker 1

Yeah, I think it's interesting. It's not exactly the same type of work that we're doing in power and RFSOI. Let me let me address a few things. 1st, in, in the advanced nodes, The sizes that you're working with are so small that it really has required us to do new R and D to prove our capabilities to prove that we can develop a film and deliver it at the tiny process geometries that they have, And when we do that, if it can still be effective. And so we have done that, and we did that working in conjunction with, with some of the advanced node customers who've really guided us towards what they would need if we were able to bring them some solutions.

Speaker 1

We've also, I think, in the past, we've put some papers out and maybe even some white papers about Some other things that are very useful, one of which is the surface roughness scattering improvements. This is quite technical, but there are different scattering mechanisms that happen in transistors when they're sending electrons across them and they impede the mobility of electron flow. As you get to very, very small process geometries, One of the most difficult scattering mechanisms that's gotten very, that's gotten a lot worse is the surface roughness. We actually proved that MST is a very rare solution, or at least improvement to surface roughness scattering, and so that's something that's garnering attention from a lot of industry participants. And then, actually earlier in the fall, we put out a white paper, And I talked a little bit on the earnings calls about random dopant fluctuation.

Speaker 1

Again, at very small process nodes, you can imagine if you have a feature on your transistor that's only several silicon atoms wide, and you have Dopant fluctuation and a few dopants moving into the wrong place is a real problem. So one of the big advantages of MST is that we can help to tamp down that, surface roughness scattering. I mean, sorry, that, random dopant fluctuations.

Speaker 3

Which dopant fluctuation.

Speaker 1

And that is also true for, I mean, almost all of those things are also true for the memory, makers. Now the memory makers are not dealing with the same incredibly tiny, geometries that we'll they're working with at advanced nodes, but they are having similar problems with the, you know, the areas that I just talked about. So let me let me answer one other little part of your question. One of the interesting things about our solutions in those areas is that some of them can be implemented on a blanket wafer, meaning that we can make an MST wafer that doesn't have to get integrated into the rest of the process flow. It would be kind of on the starting wafer that they use to run things.

Speaker 1

When we start talking about something like that, first of all, it has the potential to be easier to integrate, and therefore faster time to revenue. Secondly, it gives us an opportunity to partner with some players in the industry who are wafer providers, and if we were able to do that, then that might give us a real easy channel into getting success at some of the semiconductor manufacturers. So, where people use much lower temperature manufacturing processes, they can use these type of solutions, and that's true for the most advanced nodes and for sometimes an RFSOI as well.

Speaker 3

Okay. Great. Good color there, Scott. I think I'll absorb that one and get out of

Operator

the queue again. Thank you.

Speaker 4

Okay.

Operator

All right. So one last question from the Q and A line here, and that is about MST at STMicro and if it's going to be used in more than the smart power products?

Speaker 1

Yeah, nothing to announce there yet, obviously. STMicro is a big company. I think they're learning about our technology, and one of the things they can do with this new installation in their fab is just try it out on other technology. So, we would be delighted if they, if they tried something else out and decided that it was good for them. And we will certainly be encouraging that type of behavior.

Operator

Alright. Well, if you want to proceed with any closing comments, Scott.

Speaker 1

Sure. Alright. Well, I want to just thank you all for joining us today. I'm pleased to have shared with you our efforts towards commercialization and technology development this past year. Please continue to look for our news, articles, and blog posts, which are available along with investor alerts on our website atamerit.com.

Speaker 1

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

Operator

Thank you, Scott. And this concludes the Atomera conference call.

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Key Takeaways

  • STMicro’s Fab in Agrate installed and validated Atomera’s MST technology, triggering two revenue milestones and kicking off Phase 4 toward production slated within 1.5–2 years.
  • Atomera signed an MST CAD license with a large high-voltage manufacturer and continues progressing JDA I and JDA II customer integrations, underlining growing momentum in power, RF-SOI, and CAD services.
  • Financials: 2023 revenue was $550K (all in Q4), while GAAP net loss widened to $19.8 million ($0.80/share) versus $17.4 million a year ago on higher R&D and G&A spend.
  • 2024 non-GAAP operating expenses are guided to $17–18 million, reflecting uncertainty and one-time fees from transitioning to a new foundry post-TSI Semiconductor.
  • Atomera is engaging advanced-node and memory customers on surface roughness scattering, dopant fluctuation control and AI-driven chiplet architectures, though no DRAM deals are yet finalized.
AI Generated. May Contain Errors.
Earnings Conference Call
Atomera Q4 2023
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