Weebit Nano Limited (WBT) Earnings Call Transcript & Summary

Hello, and welcome to Stocks Down Under. My name is Marc Kennis. I'm one of the co-founders, and today, I'm joined by Coby Hanoch, the CEO of Weebit Nano. Good morning, Coby. Good morning in Tel Aviv, right?

Yes.

So busy times for you, I understand. Obviously, a lot's happened with the share price, which we'll talk about today as well. And I guess part of what's happening is new flow and people are looking for -- and then [ shorters ] have come into the stock, obviously. But I guess people are looking to get more news out of the company in terms of what's happening and what you've talked about in the past.

So let's just kick it off with that. You're in advanced conversations and discussions with a number of companies, prospects, et cetera. What's the progress on these discussions and I guess, because in this industry, which is actually really conservative, stuff like that takes very long, right? So what makes it so complicated, what can potentially push out these conversations?

I think I explained to people already in the past, the complexities and especially getting the first customers on board. So I won't really go into all of that. We are getting now a significant interest in our technology. We're talking to different customers. Specifically, SkyWater customers and making good progress. Sometimes you hit all kinds of things that you need to deal with that have nothing to do with Weebit. Just as an example, it turns out that there is a certain IP modules that SkyWater is missing right now in their library. When I was talking about foundries and saying on the shelf, they have all kinds of IPs. So this specific IP module turned out to be a very important one for several of the customers that we talked to. And we ended up working with the customers on trying to resolve that issue and finding a way around that and getting an IP for them. This is something that has nothing to do with Weebit, but it caused quite significant delays with some of them that otherwise we could have already closed. So that's an example of things that happen to us, these customers, they have their schedules, they have their timelines on when they start new projects when they need to make decisions, not everyone needs to make a decision immediately right now and things like that. But overall, the discussions -- and by the way, some of these companies are actually names that even in Australia, people will recognize. So we're really making good progress. It is a bit later than we thought. But nevertheless, we are very confident that we will be closing customer agreements before the end of this year and really start that push forward.

Right. Okay. So it's still plural as in your multiple agreements potentially. That's an important one, I think. It's not just one but several potentially. So if you look across the spectrum, so you've got -- you're talking to customers of the SkyWaters. But of course, the foundries themselves are our prospects, big ones for you. So can you talk a little bit specifically about that group of customers -- or prospects, I should say?

Yes, of course. Those are maybe the most important ones because once you get the bigger foundries on board, then all of their customers are potential customers. And there's really significant work going on with many of these foundries. By the way, foundries/IDMs. To remind you, foundries are companies that have fabs that give services to others, IDMs are companies that have fabs of their own for their own products. And we are working with the big foundries and big IDMs in different stages of evaluations, getting good results. I have to say, we're very happy with the results that we're getting in these -- all of these evaluations and tests and so on and discussions. We need to deal with issues that come up sometimes even though we are using standard material, standard tools, standard everything. Sometimes you have a situation where a foundry would say, yes, it's standard, but it's at full capacity. So we might need to buy a new machine, and it's going to take us so many months and cost and all of that, and there's all kinds of discussions around these things. So I mean, you hit all of these things when you're in the negotiations that you need to deal with. We're moving forward. We're making good progress with several of these guys. And again, I do expect before the end of the year, for sure, to announce at least one of them that we're moving forward with them.

Right. And so you talked about names that people in Australia will know as far as the client base is SkyWater, but I'm assuming that's the same for -- this true is for foundries. Well, there's a few really big ones. But IDMs, are those names that people recognize or not?

Yes. I mean if you look at the list of the top IDMs and I presented that list in previous meetings with shareholders. There are quite a few of them that I think even in Australia, people recognize, and we are working with some of those. So I think all -- any one of the big foundries, even if people in Australia don't know the name, they are one of the big foundries and they have a lot of customers and they manufacture capacity and so on. So again, it's -- I think there is quite a big disconnect between all of the activity that's going on at the company and what's happening with the share price. But obviously, on my side, I'm just totally focused and we have so much work that we're just totally focused on getting these deals done and pushing them forward. And I just actually just a few hours ago, came back from another trip to meet one of these potentials, and we're just all into it.

Right. So if we can summarize those first two -- a couple of questions into a summarizing question. Are you still expecting revenues to come in, [ maiden ] revenues in this calendar year?

Yes. We clearly are. As I said in the past, I want to make sure that the expectations are set properly. There won't be huge amounts, but the initial -- some very initial payments that are related to some of these very initial deals, we are expecting to see before the end of the year.

Right. You alluded to it already in terms of what's happening with the share price. And I found in my history of my experience as an analyst, if the product is right, and the management team and the Board are doing the right things, share price will take care of itself, just be patient. So I'm always a bit reluctant to ask the following question. But given that you were included in the ASX 200, which is phenomenal. It hasn't done the share price much good, though, actually, similar to what happened when you got included in the ASX 300. But from your point of view, where you're sitting and you know what's going on inside the company and the conversations you're having, can you share a bit of your insight into what's happening with the share price? Just your thoughts on that?

So I mean I honestly -- and people think that I am not serious about it, but what's happening with the share price right now is I can spend my whole day just following the share price and who's shorting and what's doing happening, and I won't make any progress. So I really am not looking at the share price all the time and not following it. And of course, shareholders are contacting me and I'm responding about it. What I'm told is that in Australia, when you're included into a new index, obviously, the index funds have to buy the shares. From my understanding, they then offer them to shorters. And so it's -- Weebit is not completely unique. Again, this is what I'm told that -- and that's what happened to us when we got into the ASX 300. And now it's happening again. And I can understand that we didn't announce any significant news yet, so everyone's -- the shorters are having -- doing what they're doing. I'm sure that -- again, what I can control is getting deals done, at least partially, it also depends on the other side, but we are pushing that forward. We -- as I said, there's good progress with customers, with foundries, with different partners. And we are resolving issues that come up. We are pushing forward. And for me, that's what counts. And I believe that at the end, when we will get to the point where we have these things done and we announced them that, hopefully, the market will recognize it.

All right. Yes, makes sense. I think in general, like you said, you can control what you can control, management should focus on that specifically. So all right, enough about the share price, Coby. Just let me -- just to conclude that by saying, as you know, we own shares in the company as well and my fellow director in Stocks [indiscernible] Research and will continue to hold. We're very bullish on this story, especially and let's zoom out a little bit because of the potential for ReRAM, right? So it's a vast opportunity. But can you talk a little bit about sort of high level about who else is out there in the ReRAM space? Who is the competition? What's the emerging competition, established competition? And I know you've talked about the potential before, but maybe zoom in a little bit on the market size in the longer term. And if there's enough market there to sustain a number of providers of ReRAM technology.

So we've been presenting analyst numbers about the size of the nonvolatile memory market, which is -- it's huge. It's -- I think the number is -- it's expected to be over USD 120 billion in the near future. So it's a very big market. There are several sections in it. And overall, it's big. I think that today the clear message from the market is people want advanced new memories. Flash has so many limitations that people are looking for a replacement, MRAM is expensive and has all of its issues. And I think you can see in the latest report that they show how the number of wafers with new nonvolatile memory pretty soon will be 60% [ReRAM] and much smaller numbers for MRAM and other things. And I think that's really what I'm feeling from the market. Obviously, I'm not objective, but I -- but that's what I'm sensing very strongly from the foundries, from the customers. People are seeing this, the automotive space, et cetera, you'll hear about it all the time. The key point I think that is really important to understand is ReRAM is a very, very difficult technology to develop. It takes many, many years of hard work. When you look at the market today, I believe that Weebit is the only company in the world today that has what it takes to really break through and become the leader in ReRAM. And why am I saying that? In ReRAM, there are four critical disciplines. There's what's called device, process, analog design and digital design. These are the four processes -- the four disciplines that are required to really make ReRAM work. The device and process are actually what is needed to make the memory [a reg] work. The analog and digital design are what makes the memory module and what controls it and all of the smarts of how you actually get the most out of that memory array. And today, when I look around, there are not many ReRAM out there. You have -- the ones that are really in production mode or anywhere near production mode, it's basically what TSMC has. And TSMC, definitely, I give it full respect and everything and on the device and process, these guys are very, very strong. But TSMC doesn't really focus on giving services on the design side. We've heard from customers who go to TSMC, and TSMC basically says, "Hey, here's the module that we developed. You take it or leave it." And the customer says, "No, but we need to make modifications. We need it to be ultra low power. We need to have it very fast or the endurance or this." And that's something that you need to have a very strong design team who can actually support that. And we go to these customers and we say, "Hey, we have this really big team that has all this experience, and you just tell us what you want, and we'll do it and we'll tailor." And we have customers who come to us with very extreme requests, and it's very interesting. And we go and we're working with them on how to give them the most optimal module so that they can really be efficient. When you look at UMC that has the ReRAM that they took from Panasonic, I'm -- it's not clear to me who is supporting and continuing all of the device and process work there. And I'm not saying that they don't have anyone. I'm saying, I'm not finding out who actually has that ability. I think we have a big advantage on that side. So when you look at the ReRAM -- different ReRAM companies, Weebit today is the only independent company that is in commercialization mode and ready to go. And we have a very, very strong device and process team under our CTO, Ishai, who himself has so much experience in ReRAM. He was one of the founders of Adesto and he's been doing ReRAM work for, I guess it's getting close to 20 years now. He's a real world expert on ReRAM. And in his team, we have more than 10 PhDs that did their PhD on nonvolatile memory, on ReRAM and so on. So it's really a very, very strong team. And under Ilan, our VP, R&D, who's been developing memory modules for so long, and he has so much experience, he's known in the industry. And again, we have there a really, really strong team that can give that support. Overall, customers, when they look at Weebit, they say, "Wow, this is a very nice, the team is growing. It's a good-sized team. It has this ability and all four disciplines." And it gives people a lot of confidence. And I think that's really a key message to pass. We are in a very unique situation. We're the only ones who can work with everyone. We're not tied to a specific foundry. And we have what it takes to give good support on all fronts. And that's really, I think, the key message. So I see a very strong future for Weebit. We're continuing to develop -- by the way, we're continuing to develop game-changer technologies in the form of selectors and so on. We don't talk about it a lot. But we are working on it. There's still a lot of R&D work there. But once we get that happening, we will have significant advantages -- technical advantages over other versions of ReRAM. So I'm still very, very bullish about the future of Weebit.

You sound very bullish as well, Coby, you sound very, very positive, which is good. Full of confidence. And I think it's interesting what you mentioned, maybe you can briefly touch on the selective development because maybe you can summarize that for people that don't know that, but that would open up a big market in discrete memory, right? So for the large-scale storage solutions.

Yes, we're looking -- so first of all, for those who don't know, one of the big advantages of ReRAM is that it is what's called bit addressable. You can actually access directly to every bit. So in order to do that, every bit has what's called the selector. And in the industry, the simplest selector, most obvious one is a transistor. So what we use today, what everyone uses today, basically, is a [ 1T1R-type ] technology, basically one transistor for every resistor. Or there is a variant that's called 2T2R, but I won't go into that. So this is a great solution, except for the fact that the transistor is somewhat big and has some limitations. So it's great for the embedded memory space. It's not so good. It's already a limitation when you try to go to the discrete of the standalone memory market. So we are working on more advanced selectors for the discrete side. But actually, we're looking even at how we can improve the selector technology also in the embedded space even. So there is really a lot of work going on. We have a large R&D team that is working on this. We have the management focus. This is what Weebit does. We are very focused on this unlike the other companies that are dealing with ReRAM out there in production mode. And I think that's a key thing. And we're also well funded for this. So we really can continue that development.

All right. Good stuff, Coby. Thank you very much for your time. I know you're a very busy man. We just -- I caught you just off the plane, right? So it's good [indiscernible] you're busy. And yes, look, it's again, sort of looking at what's happening in terms of developments on your end, new customers, new deals that are coming. You sound very busy. So yes, hopefully, we can see that come through soon. And in the meantime, we stop looking at the share price, it will take care of itself. And so from where we're sitting, being very long-term shareholders, is a long-term story as there is a lot of potential right on different -- in different subsegments of the semiconductor market and you're addressing them one by one. So we're still very bullish. So Coby, thank you very much for your time. And we'll touch base when you have -- new slot coming out, we'll definitely touch base again.

Yes. Hopefully, it won't take too long, we're working on it. Thank you.