Atomera ( ATOM ): Notes from 12/21 investor call with CEO Scott Bibaud

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Dan Carlson from TW Research Group hosted a call with Atomera’s CEO Scott Bibaud on Monday December 21st and it was open to investors interested in the company. These are the notes I took from the call. There were many investors on the call and any other details left out please send to me and I will update. I had my own list of 4 questions that were discussed.

Question 1. Why doesn’t the company put out more releases around items such as the 24 new patents issued so far in 2020, the EPI tool status and events like the Synopsys TCAD webinar.

Answers to question 1.

The company recognizes the value of releasing info and is trying to find a better way on their website to show their patent portfolio. They do not want to flood the news space with every new patent since they have been receiving multiple ones every month.

The EPI tool is installed and being used by engineering. The installer is still working final issues before company will consider it certified and start paying lease. Fortunately those issues do not stop company from using and when certified the company will PR.

The Synopsys seminar in November was a huge deal for the company as Synopsys highlighted MSTCad and the benefits. Unfortunately it was a Synopsys sponsored event so they had no control over what was going to be discussed or ability to invite people.

Question 2. Can you give us an example of piece part royalties.

Answer to question 2.

Target is 1-3% royalty per part. As an example a TI DSP might cost $4 and command a 2% royalty or 8 cents/part sold. A DRAM coming out of a megafactory producing 10s of millions of parts a month might only have a 1% royalty.

Question 3. Other areas of use outside semiconductor space.

Answer to question 3.

While there are other areas the technology could be used they feel they already have a huge market space they are addressing and are very far down the road. Any new area will require investment and time and right now they believe the areas they are addressing will keep them very busy.

Quetion 4. Do they have any large capital expenditures in 2021 that would require raising more capital.

Answer to question 4.

Looking at Capex spending in 2021 they see no major purchases.

Miscellaneous Information Covered.

When asked how fabless companies like Apple or Google might impact adoption of MST technology here is what was discussed.

Fabless companies that bring large volumes of product can drive the adoption of MST in their fab houses. If a company like Apple designs parts using Atomera tools that utilize MST technology they can make their fab house, TSMC adopt it, otherwise they will take their business elsewhere.

Scott mentioned he considered a company like Universal Display ( OLED ) a very good comparison as they have taken a while to get adopted and own significant IP in the display space. I have discussed it further in the below article.

There was a question about who the JDAs were with. At first he mentioned they were with the biggest fabs but then corrected himself and said they were also working JDAs with fabless companies. My impression is there are a lot of deals being worked with both the largest fabs in the world and also large fabless customers.

I have added this section on 1/2/21 in response the questions on the stocktwits Atomera board. These are my own opinions and not part of above call.

Question 1. Any details on how much time tentatively it takes from a Signed JDA to start booking Royalty in revenue?

Answer 1.Not sure I care. If they sign a JDA with a major household name fab that is going to spread the technology across multiple nodes and generate 100s of millions in royalties every year whether that happens in 6 months or a year the stock is worth a large multiple of current price. Also I expect one of the licenses, lets say STMicro, to start generating royalties in the near future.

Question 2. Once Royalty generation starts, is there a number on min and max how many years the royalty would continue?

Once technology adopted minimum of 7 years of usage as the technology will be adopted in new DRAM or SRAM parts and those have a long life cycle. See example below.

Each new standard change is taking longer to happen. DDR5 2021.

Question 3. Is there a formula/logic/consideration that may make royalty %age to go Down or Up in future?

Once adopted in one fab all the fabs will need to adopt technology or they won’t be competitive. If you look at the current speciality wafer on the market MST wafers should replace those since they cost the same but have better performance. A true win-win for the fab. It also seems like their technology may become more standard when you look at where the industry needs to go to make these newer 5nm and 3nm fabs work.

Note MST wafer costs same as current industry standard high performance wafer but performs 2x. Fab makes more money since it can charge more.

Question 4. Do you potentially see some negative scenarios? What may stop JDAs actually not getting signed? Is there a chance any other in-house research/technology might be better alternative for big players in near future? Just trying to find holes in the story ( if any?)

There is always a chance a deal does not get signed that is why the first one is key. Once it is signed other fabs either get on-board or get left behind. When your major customer, like an Apple, will head elsewhere to fab their parts you get on-board. I think the major stumbling point is who owns changes to the technology after installation into the fab. I have seen this type of issue slow down deals time and again. There is no doubt a large fab house will tweak the process over time and they will want to own those changes. It will get resolved. The fact the fabs are probably already looking at improvements tells me they are probably much further along in terms of installation than we have been told. The other part people have to remember these are potentially billions in royalties over time. If they were small deals they would have been done already. On alternative technology the alternative is to go down a node to get same performance. The good news is MST is even more important for these smaller nodes and the royalty stream is much higher because wafers are much more expensive and Atomera gets a 1-3% royalty per wafer.
Whats the biggest risk? You have a tiny company, Atomera, negotiating with a mega company and thats very unusual. Just trying to deal with a mega company is hard as they have departments that are 10x the size of Atomera. My feel is the first deal is very close and future deals will now have a clear path how to resolve key issues. Plus next deals know the technology has been validated by a third party, besides themselves, and they can’t be left behind because you can bet the first agreement company will be out selling the benefits of the new technology to everyone in the industry.

Additional questions after JDA announced. 1/6/21. This are my opinions.

Question 6. What are your expectations of this JDA?

Answer 6. The key points to this JDA are the following statements from release.

“Atomera is thrilled to join with an industry leader that has a strong record of technology innovation to extend Moore’s Law,” said Scott Bibaud, president and CEO, Atomera. 

This latest agreement is part of Atomera’s effort to develop deeper and more strategic relationships with selected customers through JDAs – an agreement format that is well suited to large customers who have multiple production nodes, process technologies and product divisions, ultimately leading to deeper customer penetration, faster integration, and quicker adoption across product lines. 

My take. Industry leader is one of the top 5 wafer manufacturers in the world. They have repeatedly stated they are working with the biggest manufacturers first. Since they mention the JDA having the unique properties of allowing multiple production nodes and product lines the chance of multiple nodes seems very likely. My guess is 4 nodes and each node is capable of generating $50m to $255m/year in royalties. I believe the company is on the below list.

Soon 2 of these on the list will have signed JDAs. The third JDA is also likely on this list.
Royalties $255m/year

Question 7. When would you expect the next JDA?

Answer 7. My expectations is the second JDA comes within the second quarter. One JDA and one tech transfer a quarter going forward seems possible. Other important points. Why will future JDAs go quicker. Simple answer there is now a signed boilerplate to use. Issues that might have been holding up signing have been resolved for the first JDA and can be used for all future JDAs. Deals that are worth potentially billions each take time and need to be done right.

On a recent call when asked about JDAs it has come up there is also in process a JDA with a fabless company. It was mentioned that a large fabless company like Apple, can drive their major fab TSMC, to adopt MST. So both the large fabless company and their fab might be JDA 3 and 4.

Question 8. What is with the ATM funding being finished that started in September?

Answer 8. The original ATM for $25m was started in September and raised the first $15m by the beginning of October. This final sale was roughly another 500k shares that raised another $10m. This completes the ATM. Still only 22m shares outstanding.

Question 9. Why did the company decide to finish the ATM at this point.

Answer 9. The company should now have roughly $37m in cash and by finishing off the ATM this allows the company managing the ATM, Craig Hallum, to initiate coverage. Atomera participated in the Alpha conference for Craig Hallum a few months back. There is also the chance they needed the additional money as part of signing the next JDA. Sometimes companies have to put up a bond as part of these agreements. With multiple JDAs possible having plenty of cash allows you to have a solid negotiating position.

Any due diligence from this site is for entertainment only and not a solicitation to buy or sell Atomera stock. Any estimates are just examples of what is possible and should not be considered financial advise. I have not been compensated in any way and will never be compensated for my reports.

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