Revasum (ASX:RVS): Interview with CEO Rebecca Shooter-Dodd

December 13, 2021

Revasum, RVS, semiconductors, Silicon Carbide

Summary

Revasum (ASX:RVS): We spoke with Becca Shooter-Dodd, CEO of chip equipment company Revasum (ASX:RVS), about the bullish outlook for 2022 and the company’s recent upbeat revenue guidance. This strong outlook is driven by strong expansion of Silicon Carbide (SiC) manufacturing capacity worldwide.

Revasum is one of Marc & Stuart’s Top Picks!

Se a full transcription of our interview below.

 

 

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Transcription

 

Marc: Hello, and welcome to Stocks Down Under. Today we’re joined by Rebecca Shooter-Dodd, the CEO of Revasum. Welcome, Rebecca, how are you?

Rebecca: I’m good. How are you doing?

Marc: Pretty good, thank you. Let’s jump straight in. Earlier this week Revasum released a presentation that you’d given to the CEO Summit this week. But the interesting bit of that presentation was actually hidden away on slide 22, I think, about the guidance for…well for this year, but more importantly for next year. $25 to $35 million. So, that’s a big number. What gives you and the company the confidence and the belief to get to that number? Because there must, obviously, something underlying that expectation.

Rebecca: Yeah. So, it’s a few things actually. So, we’re seeing a shift in our revenue from silicon equipment to silicon carbide equipment. The 6EZ has a far higher ASP than our other tools. So, the more of those we sell, you know, your revenue jumps up pretty quickly. And we did just get process acceptance from the first 6EZ at our customer on Monday of this week, just before I released the announcement. And for people who don’t know, that’s a very big field. CMP is a very challenging process step. So, we think that will be really pivotal to increasing the sales of the 6EZ. So, some of it’s that. There’s also an uplift in the recurring revenue. So, I’ve spoke previously about us really focusing on those recurring revenue streams and expanding that. So, that’s a chunk of it too. And we have strong customer forecasts who are booking into Q3 now for equipment. And yeah, it’s looking really good and I feel confident about the forecast.

Marc: Great. And just to clarify, Q3 or you say Q3, that’s Q3 of next calendar year, right?

Rebecca: Yeah, absolutely. So, our slots that we have in the plan are largely booked for Q1 and Q2. We have a couple of bits available depending on the piece of equipment. But, we’re really looking at Q3 now. So, we’re pretty comfortable with that guidance number.

Marc: All right, and when you talk about recurring revenues, for our viewers, can you explain quickly what you mean by recurring…what it means for Revasum, recurring revenues?

Rebecca: Yeah, absolutely. So, it’s a number of things. It can be spare parts, consumables, so the grinder has grind wheels, the polisher has polish pads, the spares consumables service revenue as we get more of these pieces of equipment into the field. People are looking for assistance above and beyond your normal warranty assistance from these tools. So, we can charge for that and process development work. So, the company really has a big focus on those recurring revenues right now and expanding that for the company. So, it’s exciting.

Marc: And, when you look at the breakdown of the forecast for next year, about two-thirds, roughly, depending on if you look at the low-end or the top-end of the range. But, two-thirds is for new tools. So, can you talk a little bit about the feedback you’re getting from prospects and from customers about those tools? And you just mentioned that the acceptance came through for…I think it’s the first one, the first customer for the…

Rebecca: For the first 6EZ, absolutely.

Marc: Yeah.

Rebecca: So, the one we installed in Europe, the 6EZ, it’s installed and it’s gone through process acceptance. Which is the key really. You can install a tool if it’s not accepted, it doesn’t matter. So, that tool is ready for their, kind of, production environment. So, that’s a really critical thing in this industry to achieve that sign-off. Other people will see that I think, and it’s a good tool. So, I feel confident in where we’re going with the 6EZ. And the grinder has been around for much longer and we’re still seeing orders come through for that tool as well. So, very excited. The industry for silicon carbide is really heating up and it’s, kind of, just up and to the right. For the foreseeable future people often ask me, is it gonna be cyclical like silicon, we don’t know yet. For the foreseeable future, it’s up and to the right. So, it’s exciting for us.

Marc: Right. And I think that customer you mentioned that just accepted the first one, I think, they also ordered a second one, right? For delivery in 2022?

Rebecca: Yeah. So, that will be delivered in Q1 of 2022.

Marc: Right. Looking at some of the trials, if you can say it like that, how many evaluations are underway for your silicon carbide tools right now?

Rebecca: So, we have the evaluation tools spill out at our customer in the U.S. We have ongoing process development going on with them. And then, I would say, we’re working to, kind of, five to 10 new customers qualifying their process in our lab. Similar to how we did with the customer in Europe that’s taken the first couple of tools. We’re qualifying the process in our lab and we’re hoping to see purchase orders come out of that in, kind of, Q1 and Q2 of next year.

Marc: Right. And when you look at the market for silicon carbide grinders, polishers, you must have done the research in terms of market size and unit sales. How big is that market and how quickly could you ramp up with your outsourcing manufacturing partner?

Rebecca: So, it’s still challenging to put a number on that market and there isn’t much research out there or much data. The wafer volumes that are being quoted publically, I don’t believe. I think our customers are running far more wafers than that. Can I put a market size on it right now? No. What I think we’re gonna see over the next 12 to 24 months is people taking their first 6EZ, their second 6EZ, and taking the time to qualify the process. Once they’ve taken the first one or two, the kind of companies we’re working with will look to order 10 6EZs or 15 6EZs. That’s the kind of volumes we will be looking at. For those customers that take our grinder as well, just for context for people, the throughput of the tools you have to have two grinders to every polisher. So, for our customers that take both, we’re really excited about the polisher sale, that’s obviously our flagship product. But also excited about, okay, they’ll need…for every 6EZ they order they’ll need two grinders.

Marc: And can you just remind us of the list price for both of those?

Rebecca: Yeah. So, the grinder is 800K plus, depending on your configuration, and the 6EZ is two million-plus, depending on the configuration.

Marc: Right, okay. So, that sort of, you know, describes what your…what the revenue potential could be for just one set of tools?

Rebecca: Yeah, absolutely.

Marc: Looking at the cash position, also in your presentation you mentioned that you expect to be cash flow…free cash flow positive next year.

Rebecca: Mm-hmm. Yap.

Marc: Looking at the cash position, I think, by the end of September it was something like 4.8 mil and then you have a cash burn of roughly one million? I saw at least in that quarter. Looking at those numbers what can you tell investors about the potential or lack thereof for a cap raise? Do you think you can get to cash break-even without further capital needed?

Rebecca: Yeah. So, we have no plans to do a capital raise at this point. The cash outflows this year are truly for inventory building and cash in advance on deposits for large inventory purchases. That will ease up next year as we all just come through it. And we have no immediate plans to do a capital raise. We don’t see any need for it now.

Marc: Well, I guess investors are glad to hear that. Last question.

Rebecca: Yeah, as always.

Marc: On the gross margins, usually with new tools, you know, there’s a learning curve for the company as well as they sell tools into the market. So, your margin will typically be lower, but as you ramp up and when you get to some sort of critical mass these margins have the potential to go pretty high actually. Looking at your gross margins, I think it was around 35 percent in the last quarter, where do you see those going once you get some sort of, you know, traction and track record in installing these tools with customers?

Rebecca: Yeah, absolutely. So, I think, the 35% it’s an incredible margin for the capital equipment industry, in the semiconductor industry. I would love to push that a little higher. I’m confident that we can get it to that 40% mark next year. But, that’s a very healthy margin for capital equipment, so I’m happy with that.

Marc: Excellent. Well, Becca, thank you very much for your time. It’s very exciting time for Revasum and we put stock on our topics list again. We had a very nice run earlier. It went a bit hard for us back then, and this is two months ago, so we took it out, but the recent announcement will be…we put it back on. I think you’re looking at the guidance for the next year, at least, and from my point of view, it’s secular development for silicon carbide right now, you know, away from the typical silicon cycle. So, I think, there’s probably more good years to come. Yeah, we put it back on the list. We’re pretty bullish on it and we’ll keep a close eye on what’s happening and especially purchase orders coming through.

Rebecca: Awesome. We’re excited too. So, glad you are as well.

Marc: Excellent. Thanks, Becca.