Atomera Incorporated

Hello, everyone, and welcome to Atomera's first quarter 2025 update call. I'd like to remind everyone that this call and webinar are being recorded, and a replay will be available on Atomera's IR website for one year. I'm Mike Bishop with the company's investor relations. As in prior quarters, we're using Zoom, and we will follow a similar presentation format with participants in a listen-only mode. We will open with prepared remarks from Scott Bebo, Atomera's president and CEO, and I'll Frank Lorenzio, Atomware 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 presentation sections 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 statements, whether in prepared remarks or during the Q&A session, are subject to inherent risks and uncertainties. These risks and uncertainties are detailed in the risk factor section of our filings with the Securities and Exchange Commission, specifically in the company's annual report on Form 10-K filed with the SEC on March 4, 2025. except as otherwise required by federal securities laws, NMR disclaims any obligation 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. Now, I would like to turn the call over to our President and CEO, Scott Bebo. Go ahead, Scott.

Thanks, Mike. I'd like to start out today by giving a few more details on our recent partnership announcement with a major capital equipment provider, who unfortunately has a policy against allowing their name to be used in partners press releases. First, let me say that we've had a long relationship with this equipment maker, and this agreement is something both companies have been working towards for a long time. They want to bring advanced material solutions to their customers to solve problems in the gate all around space, and we can help them do that. Atomera benefits by leveraging our partner's detailed knowledge of these large customers' applications, design goals, organizations, and decision makers. Ultimately, if we are both successful, Atomera will get more licensees into production faster, and our partner will sell more equipment and services to our mutual customers. Let me tell you why I'm excited about this agreement. Advanced node customers have huge teams working on multiple different aspects of each new technology node. Some working one or even two nodes ahead and some working on the node currently in production. Our partner has detailed insight into each of these efforts working collaboratively with their customers to find solutions in many different areas. Inevitably, customer wants to see actual silicon results to prove that the solution works. And when they get them, they ask for even more results. Each request is more detailed and specific. Although Atomera has a very sophisticated development environment, it pales in comparison to what our partner OEMs can bring to bear and which we will be able to use to provide these more detailed tests. By doing so, we can deliver solutions to the customer that are more optimized and validated and therefore may go into production more quickly. Probably even more importantly, we will be rowing downstream with our partner on the sales and marketing side of the equation. As a small company, we do not have a large and sophisticated sales organization that can be so helpful to close designs within the complex decision-making structure of these large customers. Since both of us will be driving these designs towards production, our partner company's direct sales force will be assisting us along the way, which will be an invaluable resource to us. Just last quarter, I talked about how Atomera's MST technology can solve many of the problems in gate all-around transistors. This partnership will help us to promote and ultimately close sales in that area. While the collaboration agreement details are confidential, I can assure you that the terms do not have a significant impact on our longstanding business model of license fees and royalties. The primary benefit for both our companies in this deal is to grow the pie larger, not to take pieces of each other's businesses. Although the stated aim of the agreement is on gate all-around architectures, there's little doubt the partnership will extend into advanced memories and other areas as well. Timing of this announcement coincides with the rising use of EPPI in advanced logic as well as in high performance DRAM where HiK has been adopted. As EPPI applications are more widely embraced, the barriers to implement MST go down. The size and the growth of the EPPI market is therefore an indicator of the potential for MST sales and in 2027, the EPI equipment market is expected to be approximately $2.6 billion, with a CAGR in the leading-edge nodes of 10% to 15%. Even before finalizing this agreement, we've been making significant progress in gate-all-around applications, generating much more detailed silicon-validated performance enhancement data for customers, as well as depositing MST films on customer wafers for evaluations. We've established footholds in each of the gate all-around customers that we are confident will expand over the rest of this year, assisted by our new partnership. On the memory side, we've been granted new patents focused on DRAM sense amplifiers, which are relevant for both high bandwidth as well as standard DDR memories. We are actively leveraging this IP into our current discussions with the large memory providers. Late in 2024, many of our RFSOI customers expressed a need to improve low-noise amplifiers, or LNAs, in addition to our prior efforts on RF power switches. Using TCAD and silicon test result data, we determined that MST can significantly improve the performance of LNAs in RFSOI devices. Just recently, mobile phone manufacturers have started putting new emphasis on LNA improvements to meet the increasing demands of newer 5G technologies. So we are seeing widespread interest from customers. Our presentation at RF Insights highlighted the new application and has generated lots of inbound interest. Indeed, during the last few months, we've worked with several different RFSOI manufacturers to start new wafer runs using our partner Soitec's ultra-thin RFSOI wafers to prove out these LNA benefits. With good results, we believe our customers will want to take this into production relatively quickly. Work with power customers also continues to grow with interest in new applications and voltage levels, many of which are driven by demand for AI servers. But let me share what I can on progress with our most important power customer, STMicro. During the last six months, our biggest focus with STMicro has been on optimizing manufacturability, yield, and throughput in preparation for high-volume manufacturing, and we've made great progress here. Our two teams are meeting together on a weekly basis as we push to get the best performance out of our efforts. Many different lots are in the fab with frequent test results indicating a clear path towards qualification. ST has not authorized me to provide additional insight into their schedule, though. One measure of ST's regard for our technology is the interest we've seen from other groups within ST. Today, we are in active discussions with three other product areas in ST beyond smart power devices. Each of these has the potential to lead to new licenses and future royalty streams. It's clear that Atomera's technology focus areas have excellent overlap with ST's overall technology strategy and direction. We believe this is a very important validation of our technology's effectiveness coming as it does from a customer who has a deep understanding of its potential from their hands-on experience. Now, a brief update on each of our licensees. We continue discussions with our JDA1 customer about meeting new requirements they've raised. Of course, we recognize this effort needs to move faster, and we believe that working with our new equipment provider will help make that happen. For both our JDA2 and Fabless licensees, we are in the process of running wafers, and we expect to see results of those later this year. Each of these companies has expressed interest in also working with us in new technology areas. Likewise, we are in discussion with our foundry licensee, and we hope to start new lots with them soon. Our progress with new customers this quarter has been excellent, and we continue to move forward with the two very high potential transformative customers discussed in our last call. We are encouraged by the amount of work they want to do and the speed at which they are moving. We also started discussions with new customers in entirely new areas for us, We're working today to engage with them and first discussions, and hopefully that will lead to licensing and our revenue opportunities with them later this year. Previously, we've described our work to expand into a new product category, compound semiconductors, and more specifically, gallium nitride. As a brief refresher, gallium nitride is a wide bandgap semiconductor material that supports a broad range of applications, including consumer power supplies, automotive electrification, and power electronics for AI data centers. The market for GAN in these applications is growing quickly and is forecast to exceed $2 billion at the device level by the end of the decade, growing at about a 40% CAGR. Last year, we described exciting results from initial studies of MST improving GAN growth on silicon substrates. Customers found them interesting but asked for electrical data to demonstrate the impact at the device level. We have been working to fabricate devices, and this quarter, as part of the previous announced partnership with Sandia National Labs, we completed the world's first GAN devices produced using MST technology. This is an exciting accomplishment. Data collection from these first of kind devices is still in progress, but we are now seeing indications of improved electrical performance consistent with our previous observation of improved material quality. As would be expected from first of kind tests, there are some elements of these devices that aren't optimized, and we're already working on the next round with a target of a complete customer shareable data set illustrating the benefits of MST for GAN applications. Several of our existing customers are active in GAN production. So once we have this data, we should have a ready audience. And there are other GAN foundries and IDMs that would help us expand beyond the current customer base as well. We are very excited about MST for GAN and so are our partners. Just recently, Sandia National Labs renewed our access program so that we can do more work together. Robert Mears wrote a great article on this topic, recently published in Compound Semiconductor Magazine, which you can find on our website. The beginning of this year has been a very busy time for us across all our markets and product areas. Work on STMicro is moving towards completion. We are seeing customer expansion in power, RF, and in other application areas, which we hope to talk about in future calls. The work we are doing on gate all around and memory is tied directly to the biggest driver of the semiconductor industry today, the rollout of AI infrastructure, and our newly announced partnership with a major semiconductor equipment provider will help us accelerate and close license deals to take advantage. Finally, our GAN work is not only aligned with a major industry push, but we also believe it can be executed with faster time to revenue than our other segments. The workload at Atomera has gotten to the point where we are actively recruiting for staff in our engineering team focused on transition to high volume production, and in our sales and marketing team focused on closing deals. With applications developing momentum in so many areas, We believe it's only a matter of time before Atomera becomes a technology licensing powerhouse within the semiconductor industry. Now, Frank will review our financials.

Thank you, Scott. At the close of the market today, we issued a press release announcing our results for the first quarter of 2025. This slide shows our summary financials. Our GAAP net loss for the first quarter of 2025 was $5.2 million or 17 cents per share compared to a net loss of $4.8 million or 19 cents per share in Q1, 2024. GAAP operating expenses in the first quarter of this year were $5.5 million, which was an increase of $448,000 from 5 million in Q1, 2024. The increase in OPEX was due to a $397,000 increase in R&D expenses, reflecting higher outsourced device fabrication services to support increased customer activity, and a $277,000 increase in G&A expense, primarily due to higher legal expenses. These increases were partly offset by a $226,000 decline in sales and marketing expenses, mostly due to lower headcount. Non-GAAP net loss in Q1 2025 was $4.4 million compared to a loss of $4 million in Q1 of last year due to a $468,000 increase in non-GAAP operating expense, reflecting the same factors I just discussed. Stock compensation expense, which is the main difference between GAAP and non-GAAP operating expenses, were $1 million in both periods. Sequentially, Q1 non-GAAP net loss of $4.4 million compares to a $3.9 million loss in Q4 of 2024, primarily due to the same higher R&D and legal expenses I spoke about earlier, offset by lower sales and marketing due to headcount. Our balance of cash, cash equivalents, and short-term investments on March 31st, 2025 was $24.1 million, compared to $26.8 million on December 31, 2024. We used $4.8 million of cash in operating activities in Q1 compared to $4.1 million in Q1 2024 and $3 million in Q4 of last year. As has been the case in prior years, cash outlays in the first quarter will be higher this year than in other quarters, reflecting payments for items that hit our P&L throughout the year. Early in Q1, we raised $2.4 million under our ATM facility by selling approximately 163,000 shares at an average price of $15.19, putting us in a comfortable cash position such that we have not needed to access the capital market during the recent volatile months. For Q2, revenue will depend on timing of wafer shipments to our Fabless licensee and will be in the range of $0 to $50,000. Consistent with our usual practice, we're not providing revenue guidance any further out. The next major revenue milestone under our agreement with ST will occur when they get into formal process qualification. Moving to expenses, on our last call, I shared that we expected non-GAAP OPEX to be in the range of $17 to $18 million in 2025. Outsourced fabrication work, which we used to do at TSI Semiconductor, has now been spread over multiple vendors who can offer specialty services that are more specifically tuned to the range of technology areas that we're working on. We also have had lower headcount in sales and marketing, which we're making progress on replacing. I now expect our full year non-GAAP operating expense for 2025 will be in the range of $17.25 to $17.75 million. With that, I will turn the call back over to Scott for a few summary remarks before we open the call up to questions. Scott?