Company Overview
Atomera Incorporated (NASDAQ:ATOM) is a semiconductor materials and technology licensing company that is at the forefront of delivering innovative solutions to tackle the industry's most pressing challenges. With a strong focus on research, development, and strategic partnerships, Atomera is positioning itself as a catalyst for the semiconductor industry's transformation.
Historical Background
Atomera Incorporated was originally incorporated in the state of Delaware in March 2007 under the name MEARS Technologies, Inc. The company was focused on the development, commercialization and licensing of proprietary processes and technologies for the semiconductor industry. On January 12, 2016, the company changed its name to Atomera Incorporated. In its early years, Atomera was an early-stage company with limited revenue-generating activities, devoting substantially all of its efforts toward technology research and development and to commercially licensing its technology to designers and manufacturers of integrated circuits. The company did not intend to design or manufacture integrated circuits directly, but rather develop and license technologies and processes that it believed offered the designers and manufacturers of integrated circuits a low-cost solution to the industry's need for greater performance and lower power consumption.
Over time, Atomera built relationships with foundries, integrated device manufacturers, fabless semiconductor manufacturers, original equipment manufacturers and electronic design automation companies. The company generated limited revenue from licensing agreements, joint development agreements, engineering services and licensing of its MSTcad software. However, Atomera had yet to achieve profitability, generating only limited revenues since inception and incurring recurring operating losses. In May 2022, Atomera entered into an Equity Distribution Agreement, establishing an at-the-market offering program, which has provided the company with additional capital to fund its ongoing operations and technology development efforts.
Core Technology
Atomera's core technology, Mears Silicon Technology (MST), is a thin film of reengineered silicon that can be applied as a transistor channel enhancement to CMOS-type transistors, the most widely used transistor type in the semiconductor industry. MST is designed to address a number of key engineering challenges facing the semiconductor industry, including improvements in speed, reliability, and power efficiency.
Business Model
Atomera's business model revolves around licensing its proprietary technologies and processes to foundries, integrated device manufacturers (IDMs), and fabless semiconductor companies. The company generates revenue through licensing agreements, whereby customers pay a license fee for the right to use MST technology in the manufacture of silicon wafers, as well as royalties for each silicon wafer or device that incorporates Atomera's technology.
Financials
In the third quarter of 2024, Atomera reported revenue of $22,000, a significant decrease from the $112,000 reported in the same period of the previous year. The company's GAAP net loss for the quarter was $4.6 million, or $0.17 per share, compared to a net loss of $5 million, or $0.20 per share, in the third quarter of 2023. Atomera's non-GAAP net loss for the quarter was $3.9 million, compared to a loss of $4.3 million in the same period of the prior year.
For the full fiscal year 2023, Atomera reported revenue of $550,000 and a net loss of $19,790,000. The company's operating cash flow for 2023 was negative $14,557,000, and its free cash flow was negative $14,588,000.
The reduction in revenue and increased net loss in Q3 2024 were primarily due to a decline in research and development expenses, which decreased by $546,000, or 17%, and a $117,000, or 32%, decrease in selling and marketing expenses. These declines were partially offset by a $129,000, or 8%, increase in general and administrative expenses.
For the fourth quarter of 2024, Atomera expects revenue to be approximately the same as Q3 2024, which was $22,000. The company anticipates non-GAAP operating expenses for the full year 2025 to be higher than 2024, likely in the range of $16 million to $17 million, as they plan to make additional investments in sales and marketing and explore more effective use of outsourced foundry services.
Liquidity
As of September 30, 2024, Atomera had cash, cash equivalents, and short-term investments of $17.3 million, compared to $19.5 million as of December 31, 2023. The company used $2.9 million in cash from operating activities during the third quarter of 2024, compared to $3.2 million in the first quarter of the year. During the third quarter, Atomera sold approximately 691,000 shares under its at-the-market (ATM) offering at an average price of $3.18 per share, resulting in net proceeds of approximately $2.1 million.
Atomera's debt-to-equity ratio stands at 0.09, with cash and cash equivalents of $13,760,000 and short-term investments of $3,580,000. The company's current ratio and quick ratio are both 5.25, indicating strong short-term liquidity.
Key Focus Areas
Atomera's key focus areas include power semiconductors, advanced node logic, memory, and RF-SOI. In the power semiconductor market, the company has made significant progress with its partnership with STMicroelectronics (ST), which is currently in the process of qualifying Atomera's MST technology for use in its next-generation smart power products. The company believes this partnership represents a substantial business opportunity with long-term revenue potential.
In the advanced node logic and memory segments, Atomera is working closely with multiple customers to demonstrate the benefits of its MST technology, which it believes can improve device performance and yield, particularly as the industry shifts towards gate-all-around transistor architectures. The company's efforts in the RF-SOI market, where it provides a performance advantage that it believes cannot be achieved without MST, are also progressing, with Atomera collaborating with customers representing the majority of the supply of devices built on RF-SOI substrates.
Atomera has also made progress in the growing gallium nitride (GaN) on silicon market, recently announcing a collaboration with the Center for Integrated Nanotechnologies (CINT) at Sandia National Laboratories to validate MST's ability to address the challenges of growing GaN films on silicon substrates. The company believes this technology can be converted to revenue faster than its traditional business, and it hopes the work with Sandia will help accelerate its time to market.
Industry Trends
The semiconductor industry is expected to grow at a compound annual growth rate (CAGR) of around 5-7% over the next 5 years. This growth is primarily driven by increasing demand for electronic devices and the rollout of new technologies such as 5G and artificial intelligence. The advanced node (sub-10nm) and memory segments, which are key focus areas for Atomera, are growing particularly rapidly to meet the performance and cost requirements of emerging applications.
Future Prospects
Despite the challenges faced in the third quarter, Atomera remains optimistic about its long-term prospects. The company is currently in active negotiations on what it believes could be a transformative agreement with a large customer, and it is hopeful that this deal, along with the continued progress with existing partners, will cement its position in the semiconductor industry.
The timing for Atomera to start receiving royalties from their agreement with ST Microelectronics is under ST's control, and the specific timeline was not provided. This uncertainty in timing highlights both the potential and the challenges in Atomera's business model, as the company works to convert its technological innovations into consistent revenue streams.
Conclusion
The semiconductor industry is facing a series of complex challenges, including the need for greater performance, lower power consumption, and improved manufacturing yields. Atomera's innovative MST technology and its strategic partnerships position the company as a key player in addressing these industry-wide issues. As the semiconductor industry continues to evolve, Atomera's ability to deliver cutting-edge solutions and forge strong collaborative relationships will be crucial in driving the next generation of semiconductor innovations. While the company faces challenges in terms of revenue generation and profitability, its focus on key growth areas within the semiconductor industry and its ongoing efforts to commercialize its MST technology suggest potential for future growth and success.