Fremont, California and Sydney, Australia; 24 July 2019 Pivotal Systems Corporation (“Pivotal” or the “Company”) (ASX: PVS), a leading provider of innovative gas flow control (“GFC”) solutions to the semiconductor industry, is pleased to release a Quarterly update and Appendix 4C Report for the period ended 30 June 2019.
- During the quarter, Pivotal made substantial customer and product progress:
- Achieved Preferred Supplier Status for both the Standard GFC and High Flow GFC at a leading US based Original Equipment Manufacturer (OEM)
- Achieved record bookings (new orders) from China for both the Standard GFC and the High Flow GFC at a leading Chinese Integrated Device Manufacturer (IDM)
- Achieved qualification and multiple repeat orders for the High Temperature GFC with a leading Japanese OEM
- Successfully qualified the standard GFC at a leading European foundry
- Successfully qualified and obtained multiple repeat orders at a leading Japanese Logic IDM
- Successfully qualified and received multiple repeat orders for both deposition and etch at a leading Taiwanese IDM
- Successfully shipped a second Flow Ratio Controller (“FRC”) to a leading Korean IDMo Successfully passed ISO 9001:2015 recertification
- Unaudited Revenue for 1H2019 of US$8.0 million was in line with our expectations despite reduced capital expenditure by leading Korean IDMs.
- Net cash outflow of US$3.7 million primarily reflects growth in the Accounts Receivable balance as shipments made closer to the end of the quarter will be collected outside Q2.
- Backlog (confirmed orders not yet shipped) at 30 June 2019 was US$5.8 million.
- Pivotal appointed Mr. Timothy Welch as Chief Financial Officer.
June 2019 Quarter Cash Flow
The Company finished the Q2 2019 quarter with a cash balance of US$9.8 million and no debt.
Cash receipts from customers for the period were US$2.4 million, reflecting the low Q1 shipments and continuing soft market for semiconductor capital equipment as OEM’s continue to manage inventory levels.
Cash payments for Product Manufacturing (Section 1.2(b)) were US$3.2M which is down from Q1. The skew in shipments toward the end of the June 2019 quarter means that a significant portion of Q2 costof goods sold (“COGS”) will be paid in Q3. We also continue to invest in Product Development during the downturn.
This investment has been undertaken to deliver into four customer-led product development initiatives, together with building inventory levels of the new High Flow GFC. This will enable the Company to respond quickly to any Increase in capital expenditure purchases from IDM and OEM customers that have qualified the High Flow product.
The standard low flow GFC, commonly used for tch applications, continued its qualification with a leading Japanese OEM and first units have shipped for testing. The Company also achieved new process gas qualifications for the standard GFC at a leading US based OEM for etch applications.
The High Flow GFC was qualified at a second leading US based OEM for the large deposition market. This qualification will potentially lead to a doubling of our existing market share with this OEM over time. The rapid qualification and subsequent selection as a “Preferred Supplier” by this OEM further demonstrate the excellent working relationships Pivotal has built while addressing their leading-edge process requirements.
The recently introduced Flow Ratio Controller continues to perform well in beta site production tests at leading Korean memory companies as evidenced by a second revenue unit being shipped in the 1H2019.
At the recent SEMICON West industry conference, the Company once again demonstrated a new architecture for the existing etch gas stick commonly used by the OEMs. This architecture is called SmartStik as it leverages all of the intelligent signals of the standard GFC, while operating at the microsecond (up to 1,000 times faster than standard GFC millisecond speeds). This design also includes the insertion of a Teflon coating to the GFC valve, enabling a positive shutoff capability. This new architecture potentially enables the elimination of costly components used on traditional etch gas sticks as the SmartStik makes them redundant.
The Company also provided live demonstrations at SEMICON West of the new High Temperature GFC, running at 100 degrees centigrade and the Flow Ratio Controller showing industry leading fast turn on, switching speeds at industry leading accuracy.
Pivotal is also intending to release a derivative of the High Flow GFC, which is expected to materially enhance metal-organic chemical vapour deposition techniques (“MOCVD”) used in the production of solar, LED and flat panel markets. The combination of these product initiatives is expected to increasePivotal’s total available market to over US$1 billion. The development and testing per specific application continued during the period, which is expected to be completed in the next 6-12 months.
As of 6 June 2019, Pivotal appointed Mr. Timothy Welch as Chief Financial Officer (“CFO”). Mr. Welch is a highly experienced CFO for high-technology companies, has operations experience and a proven track record of building infrastructures, scaling revenues, and executing successful mergers & acquisitions.
Headcount grew from 44 to 46 full-time employees during Q2 2019.
As at 30 June 2019, the Company had an order backlog of US$5.8 million.
John Hoffman, Chairman and CEO of Pivotal Systems stated, “As we mentioned in our March Release, we believe industry slowdowns, while arduous and painful, are a time to get closer to key customers to better address their next generation flow control requirements. Pivotal has maintained our commitment to innovation and productization of new technology. As evidenced by the significant design wins in the 1H2019 we believe we are leveraging the current industry slowdown to gain strategic market share.”
Pivotal’s growth strategy continues to be to successfully leverage established IDM customer acceptance of its GFC technology into new semiconductor processes while gaining increased acceptance by the major OEMs into new applications or tool sets. The Company continues to move positively towards our market penetration and fan out objectives for FY2019 based on the rapid acceptance of the High Flow GFC.
The preliminary unaudited revenue for the 1H2019 of US$8.0 million is in line with the Company’s prior guidance.
The Company expects to update the market on 27 August 2019 regarding its financial results for 1H2019. The Company expects 2H2019 revenues to increase sequentially from the first half. At this time, the Company sees strengthening in the overall semiconductor industry and we will be able to provide more specific guidance during our 1H2019 release and subsequent conference call.
Investor Conference Call
The Company will host an investor conference call at 9.00am AEST today (4.00pm PDT on Tuesday, 23 July) with Mr. John Hoffman, Chairman and CEO and Mr. Timothy Welch, CFO.
You can listen to a recording of the call HERE.