MTSN

Mattson Technology, Inc. (MTSN)

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Mattson Technology Inc. (MTSN)

Q1 2010 Earnings Call Transcript

April 21, 2010 6:00 pm ET

Executives

Laura Guerrant – IR, Guerrant Associates

Andy Moring – CFO

Dave Dutton – President & CEO

Analysts

Edwin Mok – Needham

Wenge Yang – Oppenheimer

Peter Kim – Deutsche Bank

Richard [ph]

Patrick Ho – Stifel Nicolaus

Christian Schwab – Craig-Hallum

David Wu – GC Research

Presentation

Operator

Good day ladies and gentlemen, and welcome to the Mattson’s first quarter financial results conference. (Operator instructions) And now I would like to introduce your host for today, Laura Guerrant.

Laura Guerrant

Thank you and good afternoon everyone. Thank you for joining us today to discuss Mattson Technology's financial results for the first quarter of fiscal 2010, which ended March 28. In addition to outlining the company's financial results for the quarter, we will also provide guidance for the second quarter of fiscal 2010.

On today's call are Dave Dutton, Mattson Technology's President and Chief Executive Officer; and Andy Moring, the company's Chief Financial Officer.

Before turning the call over to Andy, I'd like to remind everyone that information provided in today's conference call contains forward-looking statements regarding the company's future prospects, including but not limited to anticipated market position, revenue, margins, earnings per share, tax rate and fully diluted shares outstanding for future periods.

Forward-looking statements address matters that are subject to a number of risks and uncertainties that can cause actual results to differ materially. Such risks and uncertainties include, but are not limited to those described in today's news release, and in the company's Forms 10-K, 10-Q and other filings with the SEC. The company assumes no obligation to update the information provided in this conference call.

On another note, the management of Mattson Technology will be marketing with the investment community in the San Francisco Bay area on Friday, April 23. If you are interested in meeting with management, please contact me at 808-882-1467.

And with that, I'd like to turn the call over to Andy. Andy?

Andy Moring

Thank you, Laura, and welcome to our first quarter 2010 conference call. After I review the financial performance and give guidance, Dave will comment on the business and then we'll open up the call for Q&A.

During the first quarter, Mattson continued to trend a double-digit sequential growth in our business. Revenues were never top end of our guidance as customers continued [ph] to buy technology upgrades in preparation for what we anticipate will be a normal cyclical expansion through the second half and into the next year.

As previously announced, our Etch business continued to show traction during the first quarter, as we shipped a paradigmE evaluation tool to a foundry customer, and began shipping to another customer, a multiple order for paradigmE. Our momentum in Etch is the key to us growing the sector in this upturn.

Operationally in addition to the growth in our revenue, margins and loss per share met guidance. We continue to drive cost containment. Receivable balances have increased and inventory levels have declined. We are ready to capitalize on the upturn with a diversified product portfolio and a substantially improved cost structure that would generate significant earnings in this cycle.

Here are the key points relative to our financial performance in the first quarter. We recognized revenue due to purchase order and customer acceptance of our Millios millisecond anneal tool in the logic line of a large customer. Operating expenses increased 10% from last quarter, close to what we had expected primarily due to reinstatement of full employee salaries after the cost containment efforts implemented last year.

Operating expenses continue to be closely monitored and well-managed by the company. Our ending cash balance of $52 million was slightly below our guidance due to inventory required to support our new products. We expect that this new cash need for new product support will continue in the second quarter. However, we have more than enough liquidity to handle any working capital needs of the current ramp.

Now to a more detailed look at our financial results for the quarter. Net sales were near the top of guidance at $25.2 million, and while still (inaudible) even profitability levels, were up 41% from the fourth quarter of 2009. We recognized revenue for the Millios evaluation tool for logic applications due to acceptance by the customer.

We shipped a number of Suprema strip tools and have been encouraged by the number of orders and shipments for the Helios XP, our new RTP product. During the quarter, we also shipped the first paradigmE tool of the order we announced in January 21st. This tool we take into revenue during the second quarter, as will subsequent shipments of the order.

Gross margin for the first quarter was 31% compared to 28% for the fourth quarter of 2009. Our margins were negatively impacted by two factors. First, factory under absorption still occurs at these lower revenue levels. Second, per accounting requirements, we have historically deferred approximately 10% of shipment revenue that represents the installation value of the tools. This deferred installation revenue is recognized to customer acceptance, generally 60 days to 90 days after shipment. In periods of significant revenue growth, this deferral will have an impact on current quarter margins as deferrals will exceed acceptances from the previous quarter.

The impact on margins in the first quarter for these two items is about four percentage points. While the impact of factory absorption will diminish as revenue increases, the deferral issue will continue to be a modest factor during a sustained production ramp.

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