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EXHIBIT 99.2
ASYST TECHNOLOGIES
FIRST QUARTER FY 2004 FINANCIAL RESULTS
MODERATOR: STEPHEN SCHWARTZ
JULY 29, 2003
4:30 PM CT
Operator: Good afternoon, ladies and gentlemen, and welcome to the
Asyst Technologies First Quarter 2004 Financial Results
conference call.
At this time, all participants are in a listen-only mode.
Following today's presentation, instructions will be given
for the question and answer session. If anyone needs
assistance at any time during the conference, please press
the star followed by the zero. As a reminder, this
conference is being recorded today, Tuesday, July 29th,
2003.
I would now like to turn the conference over to John
Swenson, Vice President of Investor Relations and
Corporate Communications. Please go ahead, sir.
John Swenson: Thank you very much, operator, and good afternoon,
everyone. Welcome to the Fiscal 2004 First Quarter
conference call for Asyst Technologies.
A press release detailing our results for the quarter was
distributed via Business Wire at approximately 1:15 PM
Pacific Time today, July 29th,
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2003. The release has been posted to our Website which is
at www.asyst.com. To access the release interested parties
should click on the Investor Relations link followed by
the Press Release link and look for the release entitled,
Asyst Technologies Reports Fiscal First Quarter Results.
The release includes condensed consolidated financial
statements, as well as a reconciliation between GAAP
results and pro forma results. The Company will from time
to time present pro forma information to exclude
non-recurring items, such as gains and losses from the
sales or valuation impairment of assets, restructuring
charges, amortization of acquired intangibles, acquisition
related stock compensation expense, and other items. We
believe this pro forma presentation provides useful,
supplemental information for the analysis of the ongoing
business.
I also need to remind you that during today's call we will
make forward-looking statements. Such statements are
subject to a number of risks and uncertainties that could
cause actual results to differ materially from the
statements made. These risk factors are described in our
most recently filed reports with the SEC on Forms 10-K and
10-Q.
Now to our conference call. With us today are Steve
Schwartz, Chairman and CEO, and Geoff Ribar, Chief
Financial Officer. Geoff will start us off with a
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financial review and then Steve will provide a strategic
and operational overview. Then we will be happy to take
your questions.
Now I'll turn the call over to Geoff Ribar. Geoff?
Geoff Ribar: Thank you, John.
Results for the quarter were consistent with our guidance
with three financial highlight areas for today's call.
First, we met our objectives for sales in what we trust is
our low point for the cycle. Second, we outperformed on
gross margins at Asyst-Shinko. We also exceeded our
expectations on gross margin in the base business prior to
booking non-recurring transition and inventory costs
related to Solectron. Third, in the base business we
achieved our targeted operating expense savings of $3
million, a 12% reduction in the base business, and kept
our cash burn under our $20 million target.
Now to the specific results. Net sales for the quarter
were $45.3 million, which is down 24% from $59.7 million
in the March quarter. As required under GAAP for
percentage of completion accounting, which is what we use
at Asyst-Shinko, we had unbilled receivables of
approximately $25.6 million and $17.4 million at June 30,
2003 and March 31st, 2003, respectively.
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By customer type, billings for the quarter were 35% OEM
and 65% fab. This is the same breakdown as last quarter.
Billings by region broke down as follows: North America
23%, Japan 34%, Asia Pacific 31%, and Europe 12%. Notable
is the increase in Japan, which was the only region to
increase on an absolute basis.
As a percentage of total billings, 300mm products
represented 37% of billings for the quarter, compared with
39% in fiscal Q4. Flat panel represented 7% of billings,
up from 5% in the prior quarter. The remainder, or 56% -
of billings was 200mm.
Only one customer represented 10% or more of sales for the
quarter, and the top ten customers accounted for 49% of
total sales during the period.
Now to bookings. Net bookings for the quarter were $44.5
million for a book-to-bill of approximately 0.98 to 1.
This compares with $42 million in the prior quarter. ASI
accounted for approximately $23 million of the net
bookings. Significantly gross bookings were at $61 million
for the quarter, offset by roughly $16 million of backlog
cleanup, which was predominantly at Asyst-Shinko.
It is important to note that our recently announced UMCI
booking was received after the close of the quarter, and
we only booked the first phase of that
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fab, which was approximately $7 million. We have the LOI
for the full fab, which is valued in excess of $40
million.
Our consolidated net backlog stood at approximately $81
million at the end of the quarter. The breakdown of net
bookings was 37% OEM, compared with 39% in Q4.
Net bookings breakdown by region was as follows: North
America 20%, Japan 72%, Taiwan and the other Asia Pacific
5%, Europe 3%. Japan bookings grew dramatically, primarily
driven by two large AMHS expansions of existing Japanese
customers. Taiwan and the other Asia Pac bookings also
grew nicely on a gross basis after three quarters of
consecutive declines.
Booking breakdown by product type was 70% 300mm, compared
with 60% in Q4. Flat panel comprised 11% of bookings,
versus 3% last quarter. The remainder, or 19%, was 200mm.
Gross margin for the quarter was 10%, compared with 19% in
the prior quarter. The margin was impacted by $4.8 million
of charges related to our transition to outsourced
manufacturing, including $1.6 million to repurchase and
reserve inventory at Solectron. If we exclude the impact
of these charges, gross margins would have been at
approximately 20%, compared with the pro forma 26% in the
prior
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sequential quarter. Our out performance relative to
guidance on a pro forma basis was driven by stronger than
expected margin at Asyst-Shinko and in the base business.
Turning to operating expenses, R&D was $9.6 million,
compared with $8.5 million in the prior quarter. We left
R&D largely intact in our restructuring of the base
business and had expected R&D overall to be essentially
flat with the prior quarter. R&D at Asyst-Shinko was about
$1.2 million higher than planned, as we pushed forward on
engineering and materials related to future business
opportunities, particularly in Gen-6 Flat Panel Display
Transport. We are expecting R&D at ASI to normalize and
expect overall R&D to be down more than $1 million in the
September quarter.
SG&A expense at $17.6 million compares with $19.8 million
in the prior quarter. We achieved the $3 million of SG&A
savings that we had targeted in the base business, but we
saw higher spending at ASI primarily driven by higher
commissions. We are also expecting this to normalize, and
with our restructuring kicking in, we expect SG&A to be
down by more than $2 million in the September quarter.
Total operating expenses, excluding amortization of
intangibles, restructuring and impairment charges came in
at $27.2 million, versus $28.4 million in the prior
quarter, a reduction of 4%. This is on
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top of a 10% reduction in the March quarter. We continue
to be on track towards our goal of reducing consolidating
operating expense by 30% by the December quarter.
Now I'll provide some detail on the restructuring and
asset impairment charges. Restructuring charges of $4.4
million was approximately 360K above the high end of our
guidance. This was primarily attributable to higher
severance costs in Japan and Europe. We may have up to an
additional $3 million to $5 million of restructuring costs
over the next couple quarters as we fully outsource
manufacturing of our Japanese robotic products and
complete restructuring of our Japanese workforce and
facilities.
You will also notice an asset impairment of $6.9 million,
which relates to our land held for sale. The good new is
that we have the land under contract with a hard money
deposit and expected net cash proceeds of about $12
million from the sale. The bad news, of course, is we were
forced to write-down this land to its expected net
realizable value.
We trust that this is one of the last material cleanup
issues we will have to face as a new management team.
Assuming the sale is completed, we will be ecstatic to be
out of the real estate business. Commercial real estate
continues to be
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extremely depressed and we see much better value with the
cash on our balance sheet.
The other expense was $900,000 compared with $1.7 million
in the prior quarter. The reduction is primarily
attributable to the inflow of royalties.
GAAP net loss for the quarter of $37.4 million includes
the manufacturing transition, and restructuring and asset
impairment charges I've mentioned. Pro forma net loss,
which excludes these items as well as amortization of
intangibles, was $17.8 million, which compares with $12.4
million in the prior quarter.
Diluted share count for the quarter was 38.5 million
shares. Therefore, we are reporting a pro forma net loss
per diluted share of $0.46.
Now turning to the Balance Sheet. Our cash and short-term
investment at quarter end totaled $76.3 million, down $23
million from the prior quarter. This reflects $19.2
million of cash consumption in the base business and $3.8
million of cash consumption at Asyst-Shinko. In ASI we
used cash in the quarter to acquire Shinko Electric's
North America AMHS service and support entity and to
support changes in working capital, offset by positive
EBITDA of $600,000. Approximately $18.8 million of the
cash is for the exclusive use of ASI.
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Accounts receivable totaled $70 million at the end of the
quarter, down from $74.9 million at the end of Q4.
Inventory at the end of the quarter was $18.3 million,
down from $22.2 million at the end of the prior quarter.
Now to outlook. We expect to report an increase in
consolidated net sales of approximately 10% for the second
fiscal quarter ended September 30th, 2003.
Gross margin is expected to be in the range of 20% to 25%,
which reflects some initial traction from the outsourcing
program. This will be the start of steady margin
improvement as the result of outsourcing in the coming
quarters.
Operating expenses, including amortization of intangibles
of approximately $5 million but excluding any
restructuring charges, are expected to be in the range of
$28 million, which is more than $3 million below the June
quarter levels and $5 million below the fiscal Q4 levels.
We anticipate being cash flow positive in the second
quarter, including any cash impact from ASI and expected
cash proceeds from the land sale.
We expect the other net expense to be approximately $1
million.
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Tax benefit is expected to be approximately $1.2 million,
including a tax benefit from amortization at Asyst-Shinko.
Tax expense of about $400,000 will be based on a 42%
statutory tax rate on ASI's pretax income.
The minority interest is expected to be approximately
700,000, which would be a positive impact to the
consolidated income statement.
With that, I'll turn the call over to Steve.
Stephen Schwartz: Thank you, Geoff.
There are a number of important topics I'd like to cover
today. The first is our continuing progress operationally,
which is positioning us for superior operating leverage in
the upturn. The second is market leadership, which is
critical to customer attraction and to satisfactory margin
performance. The third is future growth opportunities. And
the fourth is to report on customer wins, which are one of
the proof points to our market leadership claims.
The first topic, operational excellence, is critical to
both our ability to deliver customer satisfaction and to
our ability to sustain breakeven or better performance in
any downturn. Our strategy has been built around
outsourcing manufacturing. We've completed the physical
transition of 98% of our U.S. manufactured product
revenue.
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Our Japan robotics manufacturing is being transitioned
now, and we expect completion by the December quarter.
We've architected a vertically integrated supply chain
around our Shinei Solectron manufacturing hub in
Singapore. We still have raw materials from our old supply
chain that will impact the September quarter, but the cost
advantages of our strategy already are taking hold.
Our pro forma margin in the past quarter was four points
better than it would have been under our old model, and we
expect steady margin improvements in the coming quarters.
Our goal is to secure consolidated margins in the low 40%
range in the up cycle with leverage coming from both our
base business and ASI.
We frequently field questions about AMHS margins, and we
firmly believe that margins in the 30% range are
achievable in that business within the next 12 to 18
months, primarily by continuing to work on the cost side
of the equation. We will report to you each quarter on our
progress.
As important as margins is our customer satisfaction.
Since moving to Solectron, our quality and on-time
delivery performance are better
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than ever, and our lead times on all products have
shortened.
We also have dramatically reduced our operating expense
structure, including the dramatic restructuring executed
just 90 days ago with additional reductions in our
overseas organization still ongoing. Our headcount today
in the base business is less than one-third of our
headcount at the peak. Including Asyst-Shinko, at our
current depressed run rate of sales, we are averaging
revenue per employee of approximately $225,000. We believe
that we can expand that measure by 60% to 70%, which would
put us in a league with the most efficient companies in
our industry.
Shifting to market leadership, it is important to be clear
both in how we define the market and in how we define
leadership. The two largest segments of our served market
are atmospheric tool hardware and AMHS. The portions of
these markets serving wafer manufacturing totaled just
under $600 million in 2002 and are expected to roughly
double over the next two years.
We are the clear leader in atmospheric tool hardware as
reported by Dataquest. We had 57% market share in 2002, up
from 50% in 2001. We believe our improvement was driven by
our steady progress in the 300mm portion of the market,
where we continued to win not only new product migrations
of existing
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customers, but competitive displacements of incumbent
suppliers or captive solutions. We had 11 such market
share wins amid our total 13 design wins in the June
quarter alone.
Dataquest doesn't break out the 200mm portion of the SMIF
market, but in a very recent analysis we prepared on
behalf of a prospective new customer, we verified our
continued dominance of that market with an 84% share. Two
hundred millimeter continues to comprise more than
one-third of the tool market, and we believe that 200mm
will be the quickest to turn on when the upturn comes.
Moving to AMHS, the same Dataquest report showed us with
29% share of the total silicon AMHS market, up from 18% in
2001. Our current share number puts us in a virtual tie
with Daifuku for the number one market share. Again the
share gains were driven by 300mm where we currently are
installed in 8 of the 14 production 300mm fabs. This
position is particularly compelling when you consider that
one 300mm AMHS win drives revenue of $40 million to $60
million.
We have a solution that is differentiated with regard to
reliability, performance, and functionality. Our FasTrack
solution provides next generation conveyor transport that
has significantly greater capacity and flexibility than
any existing or announced transport solution.
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We have our FastLoad that allows the loading of tools,
tool to tool delivery, and microstocking and WIP
management of the bay completely decoupled from the
transport system. And we have zero-footprint stocking that
reduces the need for stockers and speeds material
delivery.
But even with all these advantages, we worked hard for
three years to penetrate the 300mm market, because success
in a production environment is not driven by technology
alone. Demonstrated reliability in multiple real fab
environments moving and managing millions of production
wafers is essential, as is a supplier's reputation for
engineering, support, and devotion to the customer.
Asyst-Shinko gave us that, and within just nine months of
forming the JV, we have our first 300mm win for FasTrack.
This win at UMCI demonstrates not only the commercial
viability of FasTrack, but also our ability to go to
market with a unified solution and customer strategy. We
think we have just begun to tap the potential of our AMHS
franchise.
We participate in two other important segments of fab
automation. One is Auto-ID, which is the electronics and
software capability that enables the tracking and
management of material in the fab. We now have market
share in excess of 55% in Auto-ID
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and a product that is acknowledged as the industry
standard.
The other is sorters, where we were once the market
leader, but have dropped to number three. Our Spartan
platform generated intense interest at SEMICON in a sorter
application, and we expect to begin shipping Spartan
Sorters to fabs before year end. We believe that the
Spartan will enable us to recapture leadership position in
the sorter market.
I mentioned that I wanted to talk about growth
opportunities. Growth through market share gains is a
clear opportunity for us, and we have ample third party
validation of our progress on that front. The other way we
intend to grow is through new products and entering new
markets. For example, in Auto-ID we are showing new
products that add $1 million to $3 million of high margin
revenue opportunity per fab.
We also are building a revitalized service business around
our nearly 20 years of installing, servicing, and
optimizing automation equipment in the fab. That
experience, plus our leadership AMHS position, uniquely
qualifies us to address and bring value to the
interoperability issues that rob fabs of productivity. We
are currently showing to customers service products that
can increase our SAM from the current $2 million to $3
million per fab to more than $11 million per fab.
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We have assigned a senior executive to this business unit
with the task of building both revenue and margin and our
traction so far has been substantial. In Q1 we increased
service revenue by 30% over the prior sequential quarter
and saw it represent a healthy 15% of sales for the
period.
Automated materials handling for the flat panel display
market also is an abundant growth opportunity for Asyst.
We have a very solid relationship with last year's largest
flat panel display Cap-Ex spender and now have small
penetrations with two additional top five FPD
manufacturers. The flat panel AMHS market is at least as
large as the market for 300mm silicon AMHS. It is
currently less cyclical, and we believe that the long-term
margins can be just as attractive as in the silicon
business.
Finally, I want to share color and data on our recent
customer wins.
In AMHS we announced that we won the full fab AMHS at UMCI
in Singapore. Although we learned that we were the winner
at UMCI several months ago, we waited until we had a
configuration, a delivery date, and a purchase order
before announcing it. This was the first 300mm fab win for
our FasTrack, which from raw speed to zero-footprint
stocking is
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by far the most advanced material handling system for high
throughput applications.
Three unannounced AMHS wins include the two large Japan
expansions that Geoff mentioned, as well as expansion of a
large Taiwanese foundry's current 300mm fab.
In the OEM business, I mentioned that we had 13 design
wins, 11 of which were new penetrations. This included six
wins for our connectivity software, one system win for the
Plus Portal, a win for the IsoPort front load to displace
our leading competitor, and three robotics wins. We also
had a system win and an IsoPort win that were customer
migrations from previous generation Asyst products.
We are aware of only one OEM design loss in the quarter,
which was a small OEM moving to two Japanese robotics
suppliers.
A big focus of our IsoPort program has been to qualify the
front load at all 300mm customers, which helps create pull
with the OEMs. We were qualified at an additional six
customers for a total to date of 12, and now we're
qualified with the largest, multi-fab, 300mm chip makers,
as well as with the three manufacturers that are building
the next fabs in Japan, Singapore, and Taiwan.
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Lastly, in Auto-ID we announced that we have been named
tool of record for a new 300mm fab in Japan and preferred
tool of record for a new fab in Singapore.
Before I wrap up, I want to address the general market
outlook, which seems to be about the same or slightly
better for us relative to the industry. We certainly
expect sales to move up in the September quarter, and we
are getting positive signals from customers about their
projects.
We are particularly bullish on 300mm where a number of
projects are coming close to decisions and orders. We are
tracking 13 new fab projects. We already have been
selected as AMHS supplier for one of these fabs, UMCI, and
for an existing Taiwanese customer that will likely kick
off its second 300mm fab sometime next year.
For two other customers, we believe we are the likely
supplier of choice based on the level of customer
satisfaction in their earlier fabs. In addition, we are
tracking 11 300mm expansions and are incumbent AMHS
supplier at six of these.
It is significant that most of these projects are in Japan
and Asia, where our traditional Asyst business is also
very strong.
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In conclusion, I want to emphasize that we are focused on
the things that we believe will deliver long-term value.
We are well positioned in our product portfolio and in the
right geographies to continue to lead our served markets.
That market leadership is critical because customers
prefer to work with winners and are willing to pay a
premium for it.
We have an operating plan and a management team that have
been in place for some time now, executing on a
significant retooling of the business. This is essential
to our success because operational excellence drives both
customer satisfaction and positive margins and cash flow.
And finally, we are a growth engine. We recognize that
growth is critical because that will fuel our continued
innovation and drive the leverage we have built into the
business model. We have all the foundational elements in
place, and now we are eager to see some market growth to
test what we've created here.
That concludes our formal comments and now we'll be happy
to take your questions. Operator?
Operator: Thank you. Ladies and gentlemen, at this time we will
begin the question and answer session. If you have a
question, please press the star followed by the one on
your push-button phone. If you would
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like to decline from the polling process, press the star
followed by the two. If you are using speaker equipment,
you will need to lift the handset before pressing the
numbers. One moment please for the first question.
Our first question comes from Jay Deahna with JP Morgan.
Please go ahead.
Jay Deahna: Hi, can you hear me?
Stephen Schwartz: Yes.
Jay Deahna: Okay. Yeah, the first question is is the relationship with
Shinko leading to better relationships with Japanese
accounts in terms of broadening out your existing product
line to those accounts?
And secondly, how many 200mm SMIF conversion fabs do you
expect over the next couple of quarters?
And then lastly, how many large scale AMHS projects do you
think will book in the next two quarters?
Stephen Schwartz: Hi, Jay, this is Steve. Let me take a crack at this. I
think the Asyst-Shinko relationship helps dramatically. We
had pretty good position in Japan already. Asyst Shinko is
very strong. We're getting some chances at customers now
as a combined entity to propose different kinds of
solutions to
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them, including the service solutions, so it's going to
allow us a lot of traction, particularly in Japan, because
our relationships are very strong.
In 200mm conversion, we're actively helping about three or
four of them right now in terms of defining the product
configurations so that ultimately when they pull the
trigger that we have a pretty good chance. We think there
are a couple of dozen opportunities, but we're active with
about three or four right now.
And finally, in terms of large AMHS projects, we think
that there is a possibility for say five that could happen
in the next two quarters, at least for the business to be
announced.
Jay Deahna: Okay, and would you say that those would generally be in
the $25 million to $40 million range, part A; and part B -
Do you get the sense that, you know, kind of in the June
timeframe into the first half of July that, you know, a
series of 300mm fabs and expansions kind of got moved from
the back burner to the front burner and are beginning to
brew?
Stephen Schwartz: I'll answer those backwards. I think there's a lot of
momentum now, at least positive activity that makes it
seem like the 300mm projects are becoming more active, so
yeah, we'd agree that's about the timing.
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In terms of the fab size, we still think that typically
that ultimate AMHS opportunities are in the $40 million to
$60 million range. How much would be put out in orders in
the first phase, it's probably in the order of half of
that, would be my guess, but the total project is probably
in the $40 million to $60 million range.
Jay Deahna: Last, a follow-up, on the $40 million to $60 million, what
is the wafer start per month range that associates with
that? Is that 20,000 to 30,000?
Stephen Schwartz: It's typically 20 to 30.
Jay Deahna: Twenty to thirty. Thanks very much, Steve.
Stephen Schwartz: Yeah, Jay.
Operator: Our next question comes from Brett Hodess with Merrill
Lynch. Please go ahead.
Brett Hodess: Two questions. First, when you look at the timing of the
orders that you were just talking about over the next
couple of quarters, what would be the lag after you got
the order before you would see revenues from those, Steve?
As far as the big AMHS orders.
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Stephen Schwartz: Right now the average is probably about six months, so
for the three that we alluded to in the call here, just
about six months of lag.
Brett Hodess: So an order pickup in the second half for the AMHS would
start to hit us in - depending on when they hit, of course
- 1Q and 2Q next year.
And on the OEM side, that business hasn't picked up a
whole lot yet. Can you give us a little more color on what
you see the OEMs starting to do?
Stephen Schwartz: Brett, we'll be shipping product into those fabs kind of
at the end of this calendar year and in the first quarter
for the orders we just took for the AMHS project, so
that's about the timing.
Brett Hodess: Okay.
Stephen Schwartz: And you're right, the OEM hard orders really haven't
started. They're going to have to ultimately populate at
least these factories, but we don't have - we don't
recognize - hard orders that correspond to some of the
AMHS activity yet.
Brett Hodess: Okay, thank you.
Operator: Our next question comes from Bill Ong with American
Technology Research. Please go ahead.
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Andrew Huang: Hi, this is Andrew Huang on behalf of Bill. I just had a
quick question on the gross margin targets. The 40% gross
margin target that you cited during the up cycle, does
that assume that Asyst-Shinko has outsourced its
production, and I have a follow-up to that.
Stephen Schwartz: Yeah, that's an all in number for the Asyst-based
business, historical business, plus Asyst-Shinko, and by
various means we intend to improve the gross margins. Some
of that will be outsourcing and some of the production
we'll maintain with the current supply base, so we're
going through those exercises right now about what will
stay and what will be outsourced.
Andrew Huang: Okay, and then the follow-up is - you know, this might be
looking a little far out but - going to the next down
cycle, what would you expect your gross margins to be with
the outsourcing relationship.
Geoff Ribar: Yeah, our model is at the low end of the next cycle that
the number - the margin - would at least have a three in
front of it, probably the mid-30s is our goal and our
objective. Then with the outsourcing we have tremendous
value from that strategically during the downturn.
John Swenson: Andrew, included in our assumptions is that in the
downturn a healthy service business will be a bigger part
in our revenue as well.
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Andrew Huang: Thank you.
Operator: Our next question comes from Theodore O'Neill with AG
Edwards. Please go ahead.
Theodore O'Neill: Thank you very much. Looking over the, you know, last
couple of quarters and then the forecast that we're
putting together here, and comparing that to say Brooks
Automation, there doesn't seem to be a wits worth of
difference in the amount of losses, and yet your strategy
has been to try to, you know, limit that by doing
outsourcing, whereas, Brooks has done none of that or very
little of that. Can you talk about where you expect -
where investors - would expect to see that benefit coming
in, because right now it doesn't appear to be there.
Stephen Schwartz: Theodore, we'll show some benefit from the outsourcing in
the current quarter, and we will show quarter-on-quarter
steady improvement in the gross margins as a result,
beginning this current quarter.
Theodore O'Neill: But just from the metrics of gross profit margins and EPS
losses, there doesn't seem to be any difference.
Geoff Ribar: I think that's because, you know, we're still not complete
with 100% of the transition here. We're still using our
old supply chain to an extent or the inventory acquired
through our old supply chain for
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production still. Once we pick up fully on Solectron's
supply chain, you'll see material differences in material
costs going forward. That's going to take probably to the
December quarter, as I think we've said before.
Theodore O'Neill: So Geoff, you're saying there ought to be more leverage in
this going forward then?
Geoff Ribar: There will be much more leverage in this going forward
than we've achieved so far, and that's mostly because the
supply chain is continued - for conservatism - we
continued the old supply chain until we got the new supply
chain up and going.
Theodore O'Neill: Okay, thank you very much.
Operator: Our next question comes from Jay Mellen with RBC Capital
Markets. Please go ahead.
Jay Mellen: Thanks. Geoff, I wondered if you could run through ASI and
what percent of revenue that contributed in margin
profile, and a follow-up.
Geoff Ribar: Yeah, Jay, ASI was just about 50% of the revenue during
the quarter. It was just a little bit over 50%.
Jay Mellen: Okay, and what margin did they achieve, gross margin?
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Geoff Ribar: We haven't specifically disclosed that traditionally,
but the margin was a little bit higher than the
traditional Asyst margin.
Jay Mellen: Okay, and could you go through cash flow from ops,
depreciation, amortization, and cap-ex?
Geoff Ribar: Sure. Yeah, we basically spent about $1.5 million on
capital spending. We spent about $4.4 million on
restructuring charges. The rest of the numbers was from
operations, the losses from operations.
John Swenson: Amortization, Jay, was 4.8.
Geoff Ribar: And depreciation was $2.4 million.
Jay Mellen: Okay, great. Thanks.
Operator: Our next question comes from Stuart Muter with Adams,
Harkness, and Hill. Please go ahead.
Stuart Muter: Good afternoon. A couple of questions on AMHS. Steve, you
talked about $40 million to $60 million opportunity per
fab. How much of that is service?
Stephen Schwartz: That doesn't include any service.
Stuart Muter: Excellent, great. And on the flat panel opportunity, do
you have any statistics on the number of fabs out there,
and also are the margins on the flat panel AMHS systems
similar to silicon?
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Stephen Schwartz: I don't have the detail on the number of fabs that exist.
There are somewhere in the range of 55 to 60 discreet
upgrades or projects, if you will, during the next eight
quarter period, so there are a pretty significant number
of projects. I don't have the exact number of factories,
but there are a lot of opportunities.
From a gross margin standpoint, we anticipate the flat
panel will be about the same as it is for the silicon
AMHS, and Asyst-Shinko has been able to demonstrate that
so far.
Stuart Muter: And Steve, on the 55 to 60, how many are you guys really
targeting?
Stephen Schwartz: We're focused on three of the big spenders. That's where
- we want to get the highest leverage out of any activity
and any development we put into these, because there's a
lot of customization that goes in, so we need to focus on
big next projects, so three of the top five forecasted
spenders for '03 and '04 are the targets.
Stuart Muter: Excellent. Thank you.
Operator: Our next question comes from C.J. Muse with Lehman
Brothers. Please go ahead.
Page 29
C.J. Muse: Hey, guys. I've got a couple questions. I was hoping
you'd give a brief update on what you're hearing from your
OEM customers.
Stephen Schwartz: I think, C.J., like us, they're waiting for hard orders,
so I think everybody is beginning to understand that there
is some activity that's going to begin to pick up. We're
waiting for hard orders from them. I think they're waiting
for hard orders from their customers.
C.J. Muse: All right, and then I guess to follow up on the flat panel
side of things. Is your AMHS tool set able to work with
6th-generation glass?
Stephen Schwartz: Indeed, investments that we talked about that we just made
in Asyst-Shinko related to Gen-6 product development.
C.J. Muse: Okay, and I guess the final question, with your
shareholders equity falling pretty dramatically this
quarter, are we bumping up against your bank loan
financial covenant?
Geoff Ribar: We are not - C.J., this is Geoff - no we are not. We are
safe in all covenants.
C.J. Muse: All right, great. Thank you.
Operator: Our next question comes from Steve O'Rourke with U.S.
Bancorp Piper Jaffray. Please go ahead.
Page 30
Steve O'Rourke: Good afternoon. Just a couple questions on bookings. You
had mentioned, I think, $16 million in backlog cleanup in
ASI. Could you, one, elaborate on that? And two, on the
UMCI business, if I remember correctly, you mentioned that
$7 million was booked in this quarter out of a total $40
million plus. When should we expect the rest to book? In
the September quarter?
Geoff Ribar: I'll answer those kind of in reverse order. The additional
UMCI bookings will come when we anticipate shipment within
a year, so the other $40 million - the other 33, you know,
$43 million - that we expect there won't come for a period
of time. They're just building out the first phase.
Steve O'Rourke: Okay, so we should see it staggered over a couple or three
quarters.
Geoff Ribar: Yes, that's correct.
Steve O'Rourke: Okay, and the $16 million backlog cleanup?
Geoff Ribar: Yeah, that was just some general cleanup of ASI backlog.
There's no material items there.
Steve O'Rourke: Fair enough. And one other question - just on the product
side. Spartan - how has acceptance been at some of the
larger OEMs, and could we expect some design wins, for
example, in the near term.
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Stephen Schwartz: Steve, right now we're building seven beta units, and most
of these - five of these - we'll ship to OEMs this year.
Steve O'Rourke: Fair enough. Thank you.
Geoff Ribar: Steve, and just one clarification, the $7 million for UMCI
we did not book in the quarter just reported. We'll be
booking that in this quarter.
Steve O'Rourke: Okay, thank you.
Operator: Our next question comes from Darice Liu with CE Unterberg
Towbin. Please go ahead.
Darice Liu: Good afternoon. You mentioned the Gen-6 AMHS project for
flat panel displays. Is that an R&D project or is that a
design win?
Stephen Schwartz: At this moment, it's an R&D project, but we hope money
well invested.
Darice Liu: Okay, and can you quantify how much of a margin impact is
attributed to the pre-Solectron raw materials in the
inventory channel?
Geoff Ribar: Yeah, it's probably four or five margin points or
something like that that - we expect we fully can get rid
of that.
Page 32
Darice Liu: You said it would also impact in the September quarter.
How much is it impacting it by?
Geoff Ribar: By about that same percentage.
Darice Liu: Same percentage? And will that be it after September?
Geoff Ribar: No, we'll continue to make margin progress as we go
forward. You know, initially we're outsourcing a lot of
the supply chain to vendors locally in Singapore, but
we'll expand and use the other sources in the other
countries, and continue to drive the cost down. There's a
continuing drive down of product costs as part of our
contract with Solectron.
Darice Liu: Okay, and can you remind us what your target breakeven
level is?
Geoff Ribar: $65 million.
Darice Liu: And did you guys give a timing number to that?
Geoff Ribar: We did not.
Darice Liu: Okay, thank you.
Operator: Our next question comes from Vijay Rakesh with Berean
Capital. Please go ahead.
Page 33
V.J. Rakesh: All right, good afternoon. I was wondering if you could
add a little bit more color to what you said about the
pullback in Asia, and especially when the foundries
reporting increased utilization (INAUDIBLE). And a second
part to that, of the 11 AMHS projects that you're
tracking, how many of those are flat panel and how many
are pure plate silicon (INAUDIBLE). Thanks.
Geoff Ribar: Let me address the 11 expansion. Those are all silicon,
300mm silicon project.
Vijay. Rakesh: Okay, great.
John Swenson: Could you repeat the first half of your question, V.J.?
V.J. Rakesh: I think you mentioned a pullback in Asia on your earnings
release. I was wondering if you could add a little bit
more color to that as to what is causing that pullback?
Why are the foundries or the IDMs more cautious on
spending?
John Swenson: V.J., it's just been this steady three-quarter decline
out of Taiwan and the rest of A-Pac, particularly in the
foundry business, you know, kind of 30% quarter-on-quarter
declines here since last fall. That's all we're talking
about.
V.J. Rakesh: Okay.
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John Swenson: Pretty well documented.
Geoff Ribar: Yeah.
John Swenson: But it's bottomed clearly, and as last quarter we said,
it's bouncing back.
V.J. Rakesh: Okay. Great, thanks.
Operator: Our next question comes from Glenn Primack with Broadview
Advisors. Please go ahead.
Glenn Primack: Good afternoon. Within the guidance and all, how do you
forecast like potential royalties from Entegris? Are you
seeing any of that flow through yet?
Geoff Ribar: Yes, we have royalties, although we haven't specifically
disclosed from who, but we have those royalties and those
royalty bases will continue on a going forward basis.
Glenn Primack: So how much is that...
Geoff Ribar: About half a million dollars a quarter.
Glenn Primack: Okay.
John Swenson: Is that it, Glenn?
Glenn Primack: Yeah, that's it. Thanks.
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Stephen Schwartz: Thanks.
Operator: Our next question comes from Manoj Nadkarni with
ChipInvestor.com. Please go ahead.
Manoj Nadkarni: Good afternoon. Can you please give us some color about
new business from end products perspective among different
segments of chip making microprocessors, DRAM, Flash,
foundries? Where are you seeing the most strength and what
is yet to pick up?
Stephen Schwartz: Manoj, if you could one more time, please.
Manoj Nadkarni: Yeah, could you give us some idea about the customer base
from end products perspective, microprocessors, DRAM, with
the Flash? I know you are strong with the foundries, but
the new business you are seeing, either the orders booked
or the opportunities that you see, do you see across all
different areas or do you see some of these segments
stronger? Can you just shed some more light?
Stephen Schwartz: Thanks, Manoj. It's pretty broad based expansion. It's
DRAM, it's microprocessor, and logic capabilities, so it's
pretty broad based in terms of what the next opportunities
are.
Page 36
Manoj Nadkarni: Okay, so DRAM guys who did not use much of AMHS before or
automation before are finally going to automation with the
300mm.
Stephen Schwartz: Indeed.
Manoj Nadkarni: Okay. Thank you.
Operator: Our next question comes from Phillip Lee with JP Morgan.
Please go ahead.
Phillip Lee: Hi. Two questions. One is with respect to the $4.8 million
charge, the cost of goods sold, could you elaborate on the
other $3.2 million of the outsourcing transition charges
that were not related to the $1.6 million inventory
reserve? And then the second question is what is the
quarter ending headcount?
Geoff Ribar: Okay, Phillip, the other $3.2 million was largely
transition services to fully transition the products for
manufacturing here to Singapore, so those were charges
specifically related to that activity. The ending
headcount was approximately 550 people at end of quarter.
John Swenson: In the base business.
Geoff Ribar: In the base business.
Page 37
Phillip Lee: Okay, and then, I'm sorry what kind of transition
services?
Geoff Ribar: You know, transportation, some specific transportation of
inventory, some services where they provided needs to help
us to work on our bill of materials and get the bill of
materials documented, and other activities along those
lines.
Phillip Lee: Okay, thanks.
Operator: Ladies and gentlemen, if there are any additional
questions, please press the star followed by the one at
this time. As a reminder, if you are using speaker
equipment, you will need to lift the handset before
pressing the numbers.
Our next question comes from Steve O'Rourke with U.S.
Bancorp Piper Jaffray. Please go ahead.
Steve O'Rourke: Hi. Just a quick follow-up. You mentioned service as sort
of a growth segment. What kind of gross margins do you
think you can drive from service, and where are you now
with respect to that?
Stephen Schwartz: Steve, we'd like to get the service gross margins up into
the 30-something percent gross margin, and again most of
that drops down to the bottom. Today we've got pretty
healthy gross margin in spares and less so in services
because we put all the service resources into gross
margin. So we're
Page 38
not exactly prepared to report where we are, but we'll
have some pretty significant improvements as we get the
service business structured.
Steve O'Rourke: And is there a time, like a target you have as far as
getting up to that 30%-plus level? Is that something you
can give now, or is that still too far out?
Stephen Schwartz: We ought to be more than 25% probably within three or four
quarters.
Steve O'Rourke: Okay. Thank you.
Operator: Our next question comes from Bill Ong with American
Technology Research. Please go ahead.
Bill Ong: Thanks. It's Andrew Huang again. Just as a reminder, did
you say that services accounted for what percent of
revenue for the quarter?
Stephen Schwartz: It was about 15% of revenue in the first quarter.
Bill Ong: Okay. Thank you.
Operator: Ladies and gentlemen, if there are any additional
questions, please press the star followed by the one at
this time. As a reminder, if you are using speaker
equipment, you will need to lift the handset before
pressing the numbers.
Page 39
Gentlemen, I'm showing there are no further questions at
this time. Please continue.
John Swenson: Okay, this is John, again. Thanks everyone for joining us.
We'll be available here in Fremont the rest of the
afternoon if there are any questions and we look forward
to speaking with you next quarter. Bye.
Operator: Ladies and gentlemen, this concludes the Asyst
Technologies First Quarter 2004 Financial Results
conference call.
If you would like to listen to a replay of today's
conference, you may dial 303-590-3000 and enter the access
number of 545209. Once again, if you would like to listen
to a replay of today's conference, you may dial
303-590-3000 and enter the access number of 545209.
Thank you for participating. You may now disconnect.
END