Fang Holdings Limited
Q4 2005 Earnings Call Transcript

Published: 16 Feb 2006

[Operator:]

Good day, my name is Jackie and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Saifun Fourth Quarter 2005 Earnings Conference Call. All lines have been placed on a listen-only mode for the duration of the conference. It is now my pleasure to turn the floor over to Todd Fromer. Sir you may begin your conference.

[Todd Fromer:]

Thank you, and thank you all for joining us this morning for the Saifun Semiconductors Fourth Quarter 2005 Earnings Conference Call. Before I begin, I would like to read the following regarding forward-looking statements. During the course of this conference call, the company may make forward-looking statements regarding future events. We wish to caution you that such statements reflect only the company’s current expectations and that actual events or results may differ materially. You are kindly referred to the risks factors and cautionary language contained in the company’s final prospectus filed on November 10, 2005 with the US Securities and Exchange Commission in connection with the company’s initial public offering. The company undertakes no obligation to update any projections or forward-looking statements in the future. The company will not be providing guidance or opening the conference for questions and answers after the presentation. Although, the company expects to do so following its next earnings call. We will now turn the call over to Dr. Boaz Eitan, Chairman and CEO of Saifun Semiconductors. Boaz, the floor is yours.

[Dr. Boaz Eitan:]

Thank you Todd, and welcome to Saifun Fourth Quarter Earnings Conference Call. And our first conference call is a public conference. We are pleased to be able to share with you our accomplishments over the year and offer some insight into our business. For those who are new to our story, allow me to give a little explanation of what we do. Saifun provides intellectual property solution for the non-volatile memory, most commonly called Flash memory. We market our NROM technology, which enable semiconductor manufacturers to deliver a variety of products at a lower cost per megabit with more data size, higher density, higher scalability, and better yield compared to the standard technology used today. 2005 was a remarkable year for Saifun. We established the company as a major IP provider in the NVM space. We increased NROM penetration by our licensees, and saw a number of NROM-based product on the market grow. In addition, we maintain our technological leadership with the launch of the Quad NROM, a unique technology that enables the storage of 4-bit per cell. Quad NROM technology is a breakthrough in the NVM phase, one that we believe will generate even greater value for our licensees, as they bring Quad NROM-based product to the market. Our results for the quarter were very strong. In the fourth quarter, we completed our IPO on the NASDAQ grade approximately $135 million. These additional capital enhances Saifun’s already strong balance sheet and better positions us to achieve our long-term strategic object. With that, I would like to turn the call over to our CFO, Igal Shany, who will provide the detailed overview of our results for the quarter. Following the financial overview, our President, Kobi Rozengarten will provide details on the overall market for NVM technology and Saifun’s role in this market. Igal.

[Igal Shany:]

Thank you Boaz. Looking at the full year ‘05 our GAAP revenues were $78.6 million. The GAAP revenues including $19.2 million of non-cash revenues resulting from our former joint venture with Infineon. In the fourth quarter ‘05, we concluded recognizing these non-cash revenues, therefore unless specifically stated otherwise, the results we discuss on this call disregard these non-cash revenues. The adjusted revenues for the full year ‘05 were $59.4 million, an increase of 94% compared to $30.6 million for the full year 2004. In ‘05, we achieved a growth margin of 80% and an operating profit of approximately 60%. In addition, in ‘05, we discontinued our direct product selling activity and we believe we will not incur additional profit and losses with regards to this activity. Looking at the fourth quarter of ‘05, revenue-- $9.4 million for the fourth quarter of 2004. Our revenues are made up of licensing and service revenues as follows

[Kobi Rozengarten:]

Thank you Igal. 2005 was an exciting year for Saifun and for the Flash market. Flash continues to be the fastest growing segment of the semiconductor industry. Our NROM technology addresses all major segments of the NVM market, mainly Code known as NOR, Data known as NAND, and Embedded Flash. I would like to address each of these three segments and our activity to capture market share. The first is Code, the market is being driven by high-end wireless application and we believe that NROM offers the best cost performance technology for growth on the market. So as our licensees have been developing Code products based on NROM since 2000, and we are well positioned to lead this market. We are very pleased with the progress and commitment expansion made to our NROM technology and with the decision of one of our Japanese licensee to extend its license to Code application. The second segment is data. The demand for Data is growing significantly. Being driven by a variety of high-density application including digital cameras, media player, USB pen drive, and mobile handsets. Our 4-bit Quad NROM is well suited for these applications. We are currently working on several Data projects with our licensees using this new generation of 4-bit technology. Our licensees Infineon and SMIC are well positioned and committed to the Data market. SMIC, the largest foundry in China is the latest licensee to join us. In addition, we believe that NROM has the potential to support new entrants in the approach to penetrate this lucrative market. We can offer a total cost-effective solution while speaking the time to market. And the third segment is embedded, where we offer our IM solution, especially well suited for embedded microcontroller and security application. Hereto, we have committed licensees like Matsushita and Sony. As we look at 2006, we believe that Saifun is well positioned to benefit from increased demands for high-density and high-performance Code and Data product. As our licensee come to the market with a variety of products based on NROM 2-bit and 4-bit technologies. As we go forward, we will continue to invest in our technology. Our licensees are already reporting 30% higher silicon efficiency, 40% reduction in critical manufacturing steps and 10% Ifab (phonetic) throughput. We will continue to work to increase the NROM advantages even farther. We will continue to work on advance design will leveraging the advantage of our trapping technology to scale down even farther. Our expertise and design services have led to product development opportunities, which resulted in an increase in our service revenue in the last quarter. We expect to maintain this higher level of services revenue during 2006. To summarize, I would like reiterate that we are excited about Saifun’s future. I apologize that we will not be able to take your questions, but I sincerely thank you for joining us today and for the continued support of Saifun.

[Operator:]

Thank you. This does conclude today’s teleconference. You may now disconnect your line and have a wonderful day.