NASDAQ:AEHR Aehr Test Systems Q1 2024 Earnings Report $8.34 -0.38 (-4.31%) As of 02:47 PM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Aehr Test Systems EPS ResultsActual EPS$0.16Consensus EPS $0.18Beat/MissMissed by -$0.02One Year Ago EPSN/AAehr Test Systems Revenue ResultsActual Revenue$20.62 millionExpected Revenue$21.80 millionBeat/MissMissed by -$1.18 millionYoY Revenue GrowthN/AAehr Test Systems Announcement DetailsQuarterQ1 2024Date10/5/2023TimeN/AConference Call DateThursday, October 5, 2023Conference Call Time5:00PM ETUpcoming EarningsAehr Test Systems' Q4 2025 earnings is scheduled for Tuesday, July 15, 2025, with a conference call scheduled on Wednesday, July 16, 2025 at 4:00 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Aehr Test Systems Q1 2024 Earnings Call TranscriptProvided by QuartrOctober 5, 2023 ShareLink copied to clipboard.There are 8 speakers on the call. Operator00:00:00Good afternoon, and welcome to the Aehr Test Systems Fiscal 20 24 excuse me, First Quarter Financial Results Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Jim Byers of MKR Investor Relations. Operator00:00:40Please go ahead. Speaker 100:00:43Thank you, operator. Good afternoon, and welcome to Aehr Test Systems' Q1 fiscal Results Conference Call. With me on today's call are Aehr Test Systems' President and Chief Executive Officer, Gaye Erickson and Chief Financial Officer, Chris You. Before I turn the call over to Gain and Chris, I'd like to cover a few quick items. This afternoon, right after market close, Aehr Test issued a press release announcing its fiscal 2024 Q1 financial results. Speaker 200:01:17That release is available on the company's website at hare.com. Speaker 100:01:21This call is also being broadcast live over the Internet for all interested parties and the webcast will be archived on the Investor Relations page of the company's website. I'd like to remind everyone And on today's call, management will be making forward looking statements that are based on current information and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. These factors that could cause actual results to differ These forward looking statements, including guidance provided during today's call, are only valid as of this date. And Aehr Test undertakes no obligation to update the forward looking statements. And now, I'd like to turn the conference call over to Gayn Erickson, President and CEO. Speaker 300:02:19Thanks, Jim. Good afternoon, everyone, and welcome to the Q1 fiscal 2024 earnings conference call. Thanks for joining us today. Let's start with a quick summary of the highlights of the quarter and the continued momentum we're experiencing in the semiconductor wafer level test and burn in markets. Then Chris will go over the financials in more detail. Speaker 300:02:37And after that, we'll open up the lines to take your questions. We finished the Q1 with solid revenue of 20 point $6,000,000 in non GAAP net income of $5,200,000 the strongest Q1 in our history, which has historically been our seasonally softest quarter. With this, we're off to a very good start to our fiscal year and we're reaffirming our expectation to grow fiscal full year revenue by at least 50% to over $100,000,000 and profit by over 90% year over year growth to at least $28,000,000 During the quarter, we had record shipments of our FOX WaferPak contactors in both revenue and units, with revenues reaching well over 50% of total revenues We're also very pleased with the continued stream of new designs for wafer packs we're seeing. Our new design volume has tripled over the last 9 months As we're seeing more and more electric vehicles coming online with their own specific device designs for inverters and onboard chargers. As a result, our customers are buying additional WaferPak contactors for these new designs, highlighting the recurring revenue part of our business. Speaker 300:03:44As we've noted before, our proprietary WaferPak contactors are needed with our FOX wafer level test and burn in systems to contact with the individual die on the wafer and our design specifically for a given device. As our customers win new designs from their customers, Aehr eventually secures orders for new wafer packs to fulfill these new wins. With each new design, our customers will need enough new wafer packs to meet the volume capacity need for those new devices. With the increase in wafer pack designs, we've been adding resources in both our U. S. Speaker 300:04:17And Philippines operations to expand our already successful application and support team there. We're also continuing to add capability and capacity in the Philippines to meet the support needs of our growing installed base in Asia. Another key highlight is that we've now received customer acceptance of both configurations of our new fully automated FOX WaferPak aligner, which allows hands free operation of WaferPak handling and alignment and is available either as a standalone unit or fully integrated with our FOX XP multi wafer systems. We recognized revenue for the standalone wafer pack aligners in the Q1 And after the close of the quarter, we received customer acceptance and sign off of the aligners integrated with our FOX XP Systems. The integrated aligners are integrated with FOX XP systems equipped with 2 key test system enhancements introduced over the last year. Speaker 300:05:10These FOX XPs include our new bipolar voltage channel module option for both positive and negative gate bias stress and burn in as well as our very high voltage channel module option. The VHP channel module option, which together with our proprietary wafer packs And new inert gas control option for the FOX XP enable high temperature reverse bias testing up to 2,000 volts at wafer level for Silicon Carbide and Gallium Nitride high voltage semiconductors that are used in power converter applications such as electric vehicle traction inverters and onboard chargers. Acceptance and production release of these FOX XPs with the integrated aligners and the associated revenue recognition provide a solid start to our 2nd quarter revenue and pave the path for revenue recognition immediately upon all future shipments of these products to this customer and forecasted shipments to additional customers this fiscal year. So let me talk a little bit about our new customers. We're excited to have announced last month yet another new customer in Silicon Carbide. Speaker 300:06:14This is our 6th customer for silicon carbide wafer level burn in. This new customer is a U. S.-based multibilliondollar semiconductor supplier that serves several markets including automotive, computing, Consumer, Energy, Industrial and Medical Markets. After conducting a detailed financial evaluation of Aehr and Aehr's FOX family of products, Including multiple on-site visits to Aehr's application lab, this new customer purchased an initial FOX NP system, wafer pack aligner and multiple wafer packs for engineering qualification and small lock production of our silicon carbide powered devices. This system is also configured with our new bipolar voltage and very high voltage options that enable new advanced test and burning capabilities for silicon carbide power semiconductors. Speaker 300:06:59This customer has indicated that as their production capacity increases, they intend to quickly move to our FOX XP multi wafer test and burn in systems for high volume production. In addition to the automotive electric vehicle device market opportunity, this customer is also focusing on the enormous opportunity for Silicon carbide power devices in industrial, solar and other power applications. Including this newest customer, the last two announced customers has selected our systems primarily for applications other than electric vehicles, which include industrial, solar and commuter electric trains. This further extends our application space beyond the enormous opportunity we see in silicon carbide for electric vehicle traction inverters and onboard and offboard chargers. These additional applications expand our market opportunity beyond the 4,500,000 6 inches Silicon carbide wafers that William Blair forecast will be needed per year by 2,030 just for electric vehicles. Speaker 300:07:58These new applications are driving an additional 2 8000000 6 inches equivalent wafers annually by 2,030 to address industrial, solar, electric trains, energy conversion and other applications. It's also interesting to note that these last two customers did not need to see their wafers tested on our system before they move forward to purchase from us. This need for testing before purchase was essentially a requirement with our early customer engagements, But it's clear that many of our potential new customers have become much more comfortable moving forward with Aehr simply on our assurances that our solution will perform as committed. This allows the customers to accelerate their time to market. Having said that, we're happy to engage with customers either way. Speaker 300:08:45If they want to see their wafers tested first, we're happy to work with them. We have yet to lose a prospective customer after demonstrating our test and burn capabilities on their wafers. In fact, we've never lost a head to head evaluation to a competitive product since introducing our FOX NP and XP configured with the silicon carbide and Gallium Nitride Test Resources. So let me move on to our pipeline of prospective new customers for silicon carbide wafer level burn in. In the last few weeks, we've attended 2 international conferences in Europe and I personally met with more than a dozen companies in the silicon carbide market that are not Currently using our solutions. Speaker 300:09:24We also met with all 6 of our current silicon carbide customers. These Face to face meetings included multiple meetings with 1 of the market leaders in silicon carbide that we've been doing a significant automotive qualification of wafer level burn in for well over 2 years. Candidly, this is the longest and most extensive sales and benchmarking process I've ever experienced in my entire 30 plus year career. The good news is that we've made even more progress in the last few months with a very large number of wafers being run at our facility, followed by multiple meetings to review the data. Based on everything we've heard, Our data, cost of ownership, products, including our new fully automated wafer pack aligner, particularly in the integrated configuration, they're all meeting their needs. Speaker 300:10:12We continue to feel confident that this customer will move forward with us using the FOX XP multi wafer solution for their high volume needs, including initial purchase orders and system shipments this fiscal year. Our meetings also included face to face meetings with potential new silicon carbide companies who have now told us that they intend to place their first purchase orders with us over the next several months, including some that want us to ship systems, wafer packs and aligners to them this fiscal year. In the next few weeks, we'll also be meeting with a significant number of potential new customers as well as end users of silicon carbide devices in Asia as we're seeing increasing activities and opportunities heating up there. I can tell you it's a very exciting time in the silicon carbide and the electric vehicle markets right now and we've never been busier. Let me add some further color on the silicon carbide market opportunity. Speaker 300:11:10A recent report from UBS forecast that the total silicon market will be close to $8,000,000,000 in 2025 and over 40% of that total will be industrial applications. While the primary opportunity is still serving the electric vehicle automotive market, the Industrial segment represents a material amount of dollars and a significant market opportunity. The report also focuses on the progression of electric vehicle batteries from 400 volts to 800 volts, Which is the level generally recognized by the industry at which silicon carbide is mandatory to get the range and recharging speed consumers are demanding. Devices used in the traction inverters for 800 volt DC battery systems actually operate up to almost 1200 volts AC. This voltage at this voltage, the devices will experience electrical arcing when tested at 1200 volts under normal testing environments, which creates a very real problem for conventional testers on wafer probers and probe cards. Speaker 300:12:11At such high voltages, The 1200 volt bias to the device will actually create an electrical arc through the air or on a wafer even if surrounded by 100% nitrogen. This is basically how a spark plug works. However, this spark actually damages the devices permanently. Aerie's proprietary wafer packs have individual chambers that encapsulate each wafer and allow us to control the temperature, Gas makeup and pressure within this chamber on each wafer. Our proprietary gas and pressure control option allows us to test and burn in an entire wafer up to 2,000 volts without arcing or damaging the wafer. Speaker 300:12:53Other competitive systems using standard waferpro RC arcing in as little as 900 volts, which makes it impossible to do high voltage reverse bias test and burn in at the wafer level for devices aimed at these new 800 volt battery vehicles. Per UBS, in 2023, 91% of the batteries Sold in electric vehicles are forecasted to be 400 volts and only 9% are 800 volts. But by 2026, UBS expects the percentage 800 volt battery cars to be above 30%, which is why it appears so many silicon carbide suppliers are timing their major ramps to be in the 2025 to 2026 timeframe. So in the next couple of years, we expect Aehr to benefit from both an increased number of electric vehicles being sold as well as a significant increase in silicon carbide needed for needing our solution for those electric vehicles. We're also in extensive engagements with multiple Gallium Nitride suppliers. Speaker 300:13:55Gallium Nitride is similar to silicon carbide in Both of these semiconductor compounds are considered wide bandgap semiconductors that are able to withstand high voltage applications more directly than silicon. Gallium Nitride semiconductor material has characteristics that make it optimal for lower power converter applications such as consumer power converters, Solar microinverters in industrial motor controllers as compared with silicon carbide that is optimal for higher power, higher voltage applications such as traction inverters in electric vehicles, trucks, trains and converters using charging infrastructure and storage. One of our prospective Gallium Nitride customers is also a company that we've been doing automotive qualification work for their silicon They became very interested when we introduced them to the new higher voltage options, including the bipolar voltage for gate stress and the very high Engineering and new product introduction needs, but also fully compatible FOX XP system for high volume production, including the hands free Integrated WaferPak Aligner. Interestingly, in this case, the Gallium Nitride Group at this company evaluated our system and has decided to move forward with us faster than the Silicon Carbide Group that we've been working with for nearly 3 years. Stay tuned for more announcements on this in the near future. Speaker 300:15:25We're also engaged with another large Gallium Nitride that is already a major supplier of IGBT and silicon carbide devices and has decided to move forward with an on-site evaluation. We have agreed to place a VOX NP system on their floor for a defined period of time and they've already ordered multiple wafer packs that are not contingent on any evaluation terms for acceptance. We're very excited about this prospect as well as the opportunity to showcase our capabilities to the GaN team with the Silicon Carbide team watching closely. This company, which is one of the largest automotive semiconductor suppliers in the world, could very likely be one of the largest, if not the largest Gallium Nitride semi supplier in the world. The Gallium Nitride market is another potentially significant growth driver for our wafer level solutions, particularly growth driver for our wafer level solutions, particularly for automotive and photovoltaic applications, where burn in appears to be critical for meeting the initial quality and reliability needs Many forecasters believe that the Gallium Nitride device market will be larger than silicon carbide due to its much larger application Based in terms of power chargers for everyday use, data centers, solar and industrial applications. Speaker 300:16:36While we're not yet certain how This market could be for Aehr's wafer level test and burn in systems, we will be working with several key players in the space this year to form a better determination. While we do expect to recognize some revenue for systems wafer packs and aligners for Gallium Nitride applications this fiscal year, We continue to expect the significant majority of our revenue come from silicon carbide. Now let me move on to silicon photonics wafer level and singulated diemodule burn in market. We continue to be very enthusiastic about This market, which includes the current photonics transceiver market used in data and telecommunications and the upcoming application of silicon photonics integrated circuits for use in optical chip to chip communication, which we see as a major market opportunity. As we discussed on our previous call, we received our first order last May from a current major silicon photonics customer for a new volume production FOX XP multi wafer test and burn in system for use for their very high power silicon photonics device wafers. Speaker 300:17:40This system is configured to enable cost effective production test of up to 9 full wafers in parallel and up to 3,500 watts of power per wafer. The original application for this system was silicon photonics devices for fiberoptic There's now been discussion about using this system for multi chip modules embedded with processors for chip to chip optical communication. This customer is one of the world's largest semiconductor manufacturers and we expect to receive orders for production systems as they increase production of these devices. While we believe it will be light it will likely be several years before we see Significant revenue generated from this optical chip to chip communications market. This order from our lead silicon photonics customer and their request for an accelerated shipping date is encouraging and provides some data to suggest that this market opportunity could happen sooner. Speaker 300:18:40Our FOX wafer level test and burn in solution with our proprietary wafer pack full wafer contactors are a great fit for the silicon photonics semiconductor market. These next generation silicon photonics based integrated circuits can require up to 2 to 4 times as much power for full wafer test burn and then stabilization. And our FOX new production system configuration, which can be used to test and burn in these new optical IO devices, expands the market opportunity of the FOX XP system even further. The power and functionality of lasers used to transmit data Critically important to the performance of the communication channel and air solutions not only weed out early life failures, but also improved the performance of the device through what the photonics industry refers to stabilization. During the first day or to normal operation, the laser output characteristics change in an exponentially decaying manner and must be stabilized until the decaying stops before the final product can be tuned to meet its performance specification. Speaker 300:19:39Aehr can do this across an entire way for a fully integrated photonics integrated circuits with embedded or attached laser emitters. These fully integrated circuits with lasers are reportedly the highest performance and level of integration possible, which is optimal for integrating into a package along with a microprocessor, graphics processor or artificial intelligence processor for Chip to chip communication. Aehr currently has 6 customers using our systems for production test of silicon photonics devices, 5 use our NP and XP systems for wafer level test and burn in and one uses both NP's and XP systems for engineering and production burn in of individual singulated diode modules using our proprietary die packs. We're watching this market very closely and are working with some of the leaders in silicon photonics to ensure that we have the products and solutions available to meet their needs for this potentially significant market application. To conclude, we're encouraged by the continued positive momentum we're seeing for Silicon Carbine Electric Vehicles and also very excited about the expanding growth opportunities we're seeing in several additional markets with current and prospective customers. Speaker 300:20:50For the fiscal year ending May 31, 2024, we're reiterating our previously provided guidance for total revenue to be at least $100,000,000 representing growth of over 50% year over year and GAAP net income of at least $28,000,000 representing earnings growth of greater than 90% year over year. We look forward to updating you on our progress throughout the fiscal year. Now with that, let me turn it over to Chris before we open up the line for questions. Speaker 400:21:18Thank you, Ginnie. Good afternoon, everyone. We're pleased to announce another strong quarter for Aehr Test Systems after a record fiscal 2023. On today's call, I will summarize our results For the fiscal Q1, we exceeded the consensus on both our top and bottom line. 1st quarter revenue was $20,600,000 up 93% from $10,700,000 in Q1 of last year. Speaker 400:21:44Strong demand for our wafer packs contributed to a significant year over year increase in revenue in the Q1. WaferPak and DiePak consumables revenue accounted for 55% of our total revenue in the Q1 compared to just 5% of revenue in the prior year quarter. As we have noted before, customers typically purchase our FOX systems ahead of wafer packs and subsequently staggered purchases of wafer packs. We're seeing continued momentum for new wafer pack designs with existing and new customers to meet the customer and market requirements. Non GAAP net income, which The impact of stock based compensation was $5,200,000 or $0.18 per diluted share for the Q1. Speaker 400:22:34This compares to non GAAP net income of $1,300,000 or $0.05 per diluted share in the Q1 of fiscal 2023. Bookings in the Q1 were $18,400,000 up from $15,200,000 in the preceding Q4 and down slightly by 4% from $19,100,000 in the Q1 of fiscal 2023. Included in our Q1 bookings are announced Orders for additional WaferPak contact us of $16,000,000 from our lead silicon carbide customer. Backlog as of quarter end was $22,300,000 up 14% from a year ago with $1,700,000 bookings received Primarily from a new U. S. Speaker 400:23:20Customer that we announced previously, in the 1st 4 weeks of Q2 of fiscal 2024, We now have an effective backlog of $24,000,000 GAAP gross margin for the Q1 came in at 48.4%, up from 42% in Q1 last year. The increase in gross margin reflects a favorable product mix of higher margin wafer packs. Also contributing to the increase in gross margin in the Q1 was the overall higher revenue level compared to Q1 last year. Operating expenses in the Q1 were $5,900,000 up 45.8 percent from $4,000,000 in Q1 last year. The year over year increase is primarily due to previously noted increased headcount related expenses to support our worldwide sales and marketing efforts and our R and D programs. Speaker 400:24:12Our investments in sales and marketing staff continue to have a positive impact on With development programs for augmenting features and performance of our new automated wafer pack aligner, which enabled new advanced tests and burning capabilities for silicon carbide and gallium nitride power semiconductors on the AirsFox XP Waver Level Test and Burning Systems. The first order for our standalone automated aligner was shipped during Q4 fiscal 2023 and was accepted by our customer in the 1st fiscal quarter. We continue to invest in R and D to enhance our existing market leading products and to introduce new products to maintain our competitive advantages and expand our applications in addressable markets. Turning to the balance sheet. We continue to generate healthy cash flow and finished the quarter with a strong cash position. Speaker 400:25:19Our cash and cash equivalents increased to $51,000,000 at the end of Q1, up 6% from our total cash, cash equivalents and investments balance of $47,900,000 at the end of Q4. We generated $3,900,000 in operating cash flow during the quarter, while also investing in inventory to support our growth strategy in fiscal 2024. We have zero debt and continue investing our excess cash in money market funds or short term investments to take advantage of favorable interest rates in the current macro environment. Interest income earned in the Q1 was almost $600,000 compared to $121,000 in the Q1 last year. In Q3 of last year, we announced an ATM at the market offering of up to $25,000,000 in shares of the company's common stock on the open market. Speaker 400:26:15We received gross proceeds of $7,300,000 on the sale of 209,000 shares in fiscal 2023. We did not sell any shares during our fiscal Q1. As of the end of the fiscal 1st fiscal quarter of Our expectation that we will sell shares against this ATM offering during this fiscal year at times and prices that are most advantageous to our shareholders and to the company. Now turning to our outlook for the current fiscal 2024 that ends on May 31, 2024. We continue to believe in the company's world trajectory as our differentiated products and technologies continue to attract and win new customers who desire more cost effective and more efficient wafer level test and burn in solutions. Speaker 400:27:10As Gabe mentioned, We are reaffirming our previously provided guidance for full year total revenue to be at least $100,000,000 representing growth of over 50% year over year and GAAP net income of at least $28,000,000 representing earnings growth of greater than 90% year over year. Lastly, looking at the Investor Relations calendar. Our Annual Shareholders Meeting will be held on Monday, October 23rd at the company headquarters here in Fremont, California at 5 pm. If you're interested in attending, we appreciate an RSVP if possible, so we can plan for attendance accordingly. Please feel free to contact myself or Jim Byes of MKR, our Investor Relations firm to let us know. Speaker 400:27:57We will also be participating in a couple of investor conferences in the next few months. On November 16, we'll be participating in the Craig Hallum Alpha Select Conference taking place in New York. And on December 12, we'll be back in New York to participate in the 12th Annual NYC Summit. We hope to see some of you at these conferences. This concludes our prepared remarks. Speaker 400:28:21We're now ready to take your questions. Operator, please go ahead. Operator00:28:26We will now begin the question and answer session. Our first question is from Christian Schwab with Craig Hallum Capital Group. Please go ahead. Speaker 500:29:06Hey, good afternoon guys. Gain on the gross margin in the quarter at 48.5% with wafer packs At greater than 5% of revenue, I would assume the gross margin would have been a little bit better than that. Is there something going on There for that? Speaker 300:29:27Yes. So if you remember historically and Actually consistently, our aligners have been amongst our lowest margin products. We They are fully RIP, but we have contracted to have them completely built external to our facility here. And I wouldn't call them pass through because it's not that, but they tend to be on the lower end of the margin. So we had a couple of aligners, The automated aligners in there and that kind of offset that by a couple of few points, I think. Speaker 300:30:00So as our business increases and we start Candidly, as we see more companies or more customers wanting to actually do an integrated aligner with every system, That will have some, but generally overall, it still sort of normalizes our systems level margins. But I think that's where if you would do the math, that's where that came from. Speaker 500:30:25And then and as far as mix on a go forward basis, Would you anticipate the remainder of the year returning back to north of 50%? Or Is that going to be tremendously mix dependent quarter to quarter? Speaker 400:30:41Yes. No. So that's right. So we're still targeting 50% and above as a Margin for the year and that's what we're looking at. Speaker 500:30:50Okay, great. And then regarding future orders from different customers. I think you talked about meeting with your 6 current customers and 12 new customers. Just as we think about backlog to support the $100,000,000,000 of revenue, When should we assume potentially your 3rd major customer coming in as well as I think you said over the next few months you anticipated that. I'm just trying Speaker 200:31:27to get follow-up. I think we're trying Speaker 300:31:27to do our best to give Kind of plenty of heads up on those and I will tell you that our ability to guess the customers is not perfect either. But just a little bit, so of our current 6 customers, we I mean more than half of them certainly our top 2 largest customers were Customers are all going to have bookings and revenue shift within the year, and then a number of new customers as well. So And we kind of alluded to both with the GaN related and the large benchmark. I'm feeling really good. It's kind of hard to We probably shouldn't tell you exactly when they're going to come anyhow, but we're certainly trying to give you enough hints. Speaker 300:32:18I mean, we I think everybody and we're certainly Clear here, a $24,000,000 backlog with what $20,000,000 in the bank. We've got a lot of turns and a lot of turns expected this year to do the $100,000,000 and we don't expect to finish the year with 0 backlog either. And for those that have come and seen our facility and we're always really pretty open about that. And if you haven't planned it, if there's no other Excuse to come for our shareholders meeting besides the glass of wine and hors d'oeuvres, you can come out and see our manufacturing floor, but it is billowing right now. And that is where a lot of the inventory is going, etcetera, in anticipation of this. Speaker 300:32:59Our lead times candidly continue to be world class Speaker 500:33:09That's great, Gabe. Thank you for that Color. As far as the new customers then, I know you've talked previously about having multiple Customers this year at 10%. So obviously, it probably appears we have at least 2, but should we Speaker 300:33:32No, we're still Chris and I were just going through that this morning again. Right now, we're right at 3% or 4%. There's we certainly believe 3% and the 4% there's like I think there was like 4% or 5% that are all in the 3% to 6% that anyone might be able to poke their head up or something. So I mean from a diversity, we're all excited because of How many customers, but let's not kid ourselves. We don't have hundreds of customers and never will in this space, but we'll definitely have a much more diverse number Customers, which is nice, but we'll stick to the 3% to 4%. Speaker 300:34:07I don't it's not clear how we would get to 5% necessarily, but we might have We don't call out the 5% customers, but we might have a good chunk of those too. Speaker 500:34:18Great. I don't have any other questions at this time. Thanks, Gabe. Speaker 300:34:22Okay. Thanks, Christian. Thank you. Operator00:34:24The next question is from Jed Dorsheimer with William Blair. Please go ahead. Speaker 200:34:29Hi, thanks. Hey, Gaines and Chris. I guess, first question, I just wanted to dig in, Christian touched on it and but just on the And but just on the wafer pack aligners, the standalone that were recognized in the quarter versus And congratulations on getting the fully integrated systems signed off. Should I look at that Is taking your the effective backlog and subtracting the bookings, so that the quarter would have been 6,000,000 Greater had those signed off in the quarter. Is that the right way to look at that? Speaker 200:35:08Or how would you suggest that? Speaker 300:35:11Yes. I mean, as we got a little closer, we kind of anticipated that we didn't get really specific. We weren't even sure that the second I won't get into all the wouldn't have scored for revenue. So I guess Theoretically, we could have pulled in 1 and the other one was already in our plans whether we told you or not in our Q2. I mean between the 2 of them, I Think it's closer to $8,000,000 or so. Speaker 200:35:38Got it. And that so to be clear, you sold these integrated systems Of that of those two systems at the same customer, which I think Chris mentioned is a U. S. Customer, That the aligners were recognized in the August quarter, But the rest of the 2 systems went into September. I just want to make sure I have that Speaker 300:36:05correct. And I'm not sure everyone else is going to be able to follow along with it. The way our revenue recognition works, which is very consistent with the industry and we're always very open Is that when we have a brand new product that has never been accepted or released into production with a customer before, We will not score revenue on it or anyone like it until candidly the first one is accepted. And I won't get into perfunctory and all that, but it turns out the first customer shipments were of what we call standalone aligner And it went with our to our lead customer who has been accepting XPs all along. So the only thing deferred, if you will, was the revenue for those 2 aligners. Speaker 300:36:50So when they accepted, they were just the 2 aligners. The weird thing is on the 2nd lead customer, 2nd large customer that had the systems. The XP and the aligner were bolted together. And so we and the XP also So, Ken, our previous CFO and Chris was on board as well. We drew a circle around The whole thing isn't accepted until it's all accepted, which is a little weird. Speaker 300:37:17But basically, once the aligner Was accepted then the XP and the aligner was all accepted at the same time. And in that case, both of them triggered. Yes. So And they're both released and working now. Speaker 400:37:28Yes. So to add to that, so that means going forward whether they are manual auto aligners or integrated aligners, we don't need to wait for that. Speaker 300:37:35Whether they have the new options or anything, it just ships And we'll go Speaker 400:37:39ahead and do revenue when we ship going forward. Speaker 200:37:42Well, that's better than I expected. So nice. I guess Second question is just on this long courtship with this potential large Customer, any more details on sort of I know it's the longest in your history, Dane, and 3 years sounds like a long Long time for that process. Is there any more details you can provide on sort of what is is the next step A large order, is that what we should expect? And I ask that kind of Also in the context of your capacity, as you're adding these customers, I know you've talked about low lead times, but if you saw A large 20, 30, 40, whatever that number system type order, I would assume that that changes things in a good way. Speaker 300:38:40Yes. I mean, generally speaking, even if customers talk about It's normally met with 1 or a small number of systems, say for production to begin with and then a little bit of absorption. That might change here because they're running out of time. I mean and they've done way more evaluations than I've seen in the past. So I think that has a chance to collapse itself. Speaker 300:39:09There's also engineering systems involved, etcetera. So I'm not Sure, I want to perfectly carve it because I might end up being wrong. But engineering systems, 1st production systems, quantities, Perhaps we may get quantities with longer lead times because it's getting pretty serious with companies now. They're putting real capital in place, Putting fabs in place, making commitments to these very significant ramps that are happening in the automotive guys in 2025, 2026. And I don't think they want to be cut short. Speaker 300:39:42So my message, I guess, to my customers listening, I mean, we are able To ship more than anybody else, we literally can ship up to, Call it 50, 80, 100 testers, call it wafers or blades of capacity a month. We are shipping more per month than the combined number of installed base of every other competing alternative Has ever shipped. But there's still a scenario where please get your orders in, so that we can continue to make sure that we can address everybody's needs. But I just reiterate, obviously, we're expecting Significant amounts of orders in the fiscal year to be able to turn to make $100,000,000 and end without 0 backlog And we're sticking to our guns there. Speaker 200:40:41Got it. Last question for me. Just on Chris, on the 300 basis points decline in gross margin. You answered this question that Kristen asked in terms of mix shift or gain you did. But operating margins dropped by 500 basis points. Speaker 200:40:59Is there something else that drove the incremental 200? Or is that just The aligners that in mix shift that contributed the extra off contraction there? Speaker 400:41:13Yes. It's really primarily on the aligners that decrease the margin here. Speaker 200:41:19Okay. Yes. Speaker 300:41:21I'll tell you what I let me I'm going to give a little bit more color. We hadn't talked about this. In our agreement with respect to the Centimeters that was building these things for us. We actually had some NRE charges in there. They're not necessarily directly tied to cost Sales, but they were timed with the timing of it. Speaker 300:41:41So the first units actually have a higher incremental cost to us Then I think the ones going forward, I think the first 4 or 5 units had that. So anyhow, it was worse Then would be expected, if that helps. Speaker 200:41:58It does. Sorry, one last one. Speaker 600:42:00What percentage was your largest customer Speaker 200:42:04In the quarter? Speaker 400:42:08Its number one customer is 88%, very high. Speaker 200:42:1288%. Great. Thank you. Operator00:42:22The next question is from Dylan Patel with Semiannalysis. Please go ahead. Speaker 700:42:29Hey, thanks for taking my question. I wanted to ask about how I think through the number of wafers per tester, right? So there's all the various different configurations that you've Sort of options you've had for various different customers. Some people want to do the bipolar voltage channel modules and some people want to do high voltage, some people want to go negative. I'm curious, can you sort of outlay how to think through what is the test time for these various systems for various options? Speaker 700:42:56And Sort of how many can be tested per FOX XP, right? Because some of these are 9 per system versus 18. And yes, I would love to hear That sort of rationale. Speaker 300:43:08All right. Well, as I described this, I simply want you to listen in terms of just the simple math, Because mostly what I'll describe is the simple math, but obviously the pieces will what is customers A, B and C's test time. And I want to give a little bit of color on that when I'm done. From a simple math perspective, the NP systems have 2 wafers. They're usually used for engineering and if you want to do small lot production, you can test 2 wafers at a time. Speaker 300:43:38So if your test time was 24 hours, You would get 2 wafers per day off of that. If your test time or call it cycle time is 12 hours, you could get 4 wafers a day off of that. The XP, which is fully compatible blades, which are effectively that each tester uniquely can test a wafer, It has either 9 or 18. Following the same math, you would either get 9 or 18 wafers a day at 24 hours Or 2 times that at 12 hours or 4 times that at 6 hours. So I'm not trying to be coy, but that's the way of thinking about Now the real debate is and the discussion is what's the test time? Speaker 300:44:20Well, if you get into the what's called On the bathtub curve of reliability. And that shouldn't if you go type in bathtub curve And reliability, you can find all kinds of articles out there to talk about it. Basically, when a device is first manufactured, all semiconductor devices, As soon as they are functionally good, they have a likelihood of failure at that point in time. And as time goes on, The likelihood that they fail actually decreases. This was observed a long time ago And it's very consistent across all semiconductor processes. Speaker 300:45:04So what that looks like is the likelihood of failure Drops as time goes and then at some point it stops dropping and it's the bottom of the bathtub curve. 20 years from now they start Failing again and that's the other end of the bathtub curve. What's important is depending on the expectation of the customer or the application is whether or not the failure rate upon shipment is good enough. And if it is too high, you do things like stress and burn in, which is what we supply to decrease and move it down the curve. The higher the quality, the more screening or burn in you need to do to move it down the curve and that is generally energy and time. Speaker 300:45:49So an example we try to use in certain applications like the inverter of the automobile, probably the most Highest reliability requirement out there, because on an inverter it might have 12 or 24 chips in a single module Or 48 in a single inverter on the Tesla, for example, and Tesla Platt has 3 of those. So they have 144 chips in there. The requirement is none of those 144 chips fail during the whole life of the car, Okay. There's also chips, say, somewhere else in the power in the onboard charger, there's only 3 chips. So those 3 chips have the same requirement. Speaker 300:46:36They can't fail in the life of the car. But there's only 3 of those versus 144. So by the very nature of that, the onboard charger perception wise could be burnt in less, if you want to get away with it. This was a huge topic at the conferences last the last 2 weeks in Europe at the Power Semiconductor and the Executive Summit on Power Semiconductors And reliability was a huge discussion and that is what is the reliability requirement of the automotive space. Last week Was it Hyundai had a recall of cars? Speaker 300:47:15The cars were 2015 and older And they had to recall 3,500,000 cars because 22 cars had some brake leakage event that caused the fire And 22 overheating. That 44 cars out of 3,500,000 that had an event And they're recalling 3,500,000 cars that are over 10 years old, okay? So what is the failure rate, okay, For an EV that's going to last 10 years or longer. And if you said, well, dollars 44 out of $1,000,000 is not bad. $44,000,000 out of $3,500,000 required every one of those cars to be recalled. Speaker 300:47:59We get into this whole discussion and I get kind of passionate about it like what's the right number. Companies don't all have the same expectations of quality. We get a pretty front line view. I can tell you sometimes it upsets me. I don't not everybody is the same. Speaker 300:48:15Here's my opinion. I wouldn't drive a car that had less than 12 to 24 hours of burning of the silicon carbide, okay? I wouldn't do it. So, it's important. That's why we use these numbers. Speaker 300:48:27Today, we have said burn in times on average Industry are more than 20, 12 hours and we think over time they will get down to that. We will see, but it's going to be the car manufacturers that dictate that. And I can tell you we've met with a number of them and we're meeting with more in the next 2 weeks. They are very opinionated about what's needed. I've never heard one of them Not demand a high level of burn in for their automotive parts. Speaker 300:48:54Now that's very clear in the automotive space. So enough of my Hi, Horace here, Dylan. I'm sorry to let you up like that, but I hope that gives you some clarity. Speaker 700:49:06That's great. And then I kind Speaker 300:49:07of wanted to clue in on Speaker 700:49:09a question or a statement that you had in the sort of the prepared remarks, which was you're seeing more electric vehicles with their own specific design for inverters. Are you saying that Like XYZ major auto OEM will want a specific inverter design from They're a supplier and then that's going to require a different chip design or different device design than someone else? Or I assume that everyone would have pretty similar designs for their inverters. Would that mean that there's more sort of XP or sorry, WaferPak? WaferPak. Speaker 700:49:45WaferPak because of this, yes. Speaker 300:49:48Yes. And I know more than I Can share it, but I still don't think I know everything in this space around this. But yes, people with seemingly the same power Our dictating specific requirements of the chip size, it gets into thermal trade offs, voltage trade offs, Power trade offs, acceleration trade offs, how much power you have on hand, what kind of efficiency you have. And so I'm actually kind of surprised that even the same automotive supplier will dictate multiple different flavors and then the next automotive guy won't buy the same ones. So I'm sure it drives our customers crazy because I'm sure they way rather everybody buy 1. Speaker 300:50:32There's probably some element where they don't want to commoditize it either though. I mean, if they all made exactly the same chip, well then maybe the customers would commoditize everything faster. But the net is for us, There is more and more wafer pack designs. And I know I said, I specifically call automotive, but candidly a lot of the new industrial designs, there's a Much broader array of those 2 and that's those designs have been increasing too. Speaker 700:51:02So in the past, I think it Speaker 400:51:03might have even been like Speaker 700:51:04a year ago, you mentioned that You'd expect people to change wafer packs maybe every 2 to 3 years or designs every 2 to 3 years. Is that do you think that still remains the Or do you think that people will have to have more wafer packs relative to say the next peak and fit 18 or 9 of them, they might have more than that 18 or 9 because there's 3 or 4 different designs Across their 3rd quarter for major customers and then they might have to switch them out more often. I'm just trying to get a feel of that. Speaker 300:51:29Yes. So I'm pretty sure I would have said because I remember this. I probably was probably saying 3 or 4 years. I think 2 to 3 might be aggressive, but we weren't sure. We know like in memory, for example, every like 18 months to 24 months, the wafer the probe cards are all swapped out. Speaker 300:51:46That's probably the most extreme. Generally speaking, automotive lasts longer. But the issue with silicon carbide is it's in this sort of infant Phase where people are going to Gen 2, Gen 3, Gen 4, Gen 5, they're going from 150 millimeter to 200 millimeter. And as those happen, There is more evolution. To me, if you can look at it over 15 years, my guess is there's more activity in the next 5 to 7 years than there will be in the back half of 7 years, but for sure we're going to see customers with more than one wafer pack per blade like an 18 blade or 18 tester XP. Speaker 300:52:25If you ask me in 3 years, what do I think? I bet you there for every wafer pack that's in the system, there's a couple on the shelf That wouldn't shock me for just how they will do it to meet customer demand. Operator00:52:48The next question is from Larry Shlobena with Shlobena Capital. Please go ahead. Speaker 600:53:02Sorry, I'm looking at my notes. When do you expect a follow on order from The recently accepted fully automated XPs, they use those machines almost 4 months. Won't they be needing some more capacity here soon? Speaker 300:53:25They're going to need more capacity soon. How's that? So, no idea. Yes. I think they're going to buy more systems and we're going Speaker 400:53:37to ship them within our fiscal year. Yes. Speaker 600:53:42And then the 3 year long development company that you referred to that you said they were going to go with GaN first before silicon carbide. Is Speaker 300:53:53I kind of stitch myself into a little bit of I didn't give myself much wiggle room. Speaker 400:54:03It appears that way, yes. Speaker 600:54:06And If it goes that way, would you expect them to start with an NP first and then progress through an XP or they jump right to an XP? Do you have a sense of it? Speaker 300:54:15Yes, I would think it would be an NP first. Speaker 600:54:19Yes. Okay. On the optical IO, the customer that asked for accelerated delivery, Should we sell for our model plan on fiscal year fiscal year Q the February quarter? I think you spelled out that it was going to be in the calendar Q1. But does that mean Should we assume that it will definitely happen in the February quarter fiscal? Speaker 300:54:47I don't know yet. I mean they had originally talked And we acknowledge the order for Q1, which could have been through a March shipment. Recently, they're like sooner the better. So we're actually trying to pull it in. So you're Speaker 600:55:06in charge of that. We should figure The February quarter then? Speaker 300:55:13That's what we're working on, but they're listening too. So we're trying our best to pull it in. It's awesome. I mean, it's coming along really nicely. There's a couple of things that we're still working through from Qualification and some thermal uniformity and things, but the system is being built up. Speaker 300:55:31We're actually building it in the integrated configuration. It will not be docked to our new aligner, but it can easily be docked to it. So it's being configured in the new Configuration that will allow it for to just be rolled up against the new aligner. Speaker 600:55:51So it can go on and fully automated phantom. Is that what you're Speaker 300:55:55All they have to do is buy the aligner and we can bolt on a 300 millimeter front end on this thing, overhead Transport or robotics and it's fully Sexthem integrated into high volume manufacturing floor. Speaker 600:56:10That sounds really exciting. We've seen articles written that Taiwan Semi is pursuing Something similar optical IO. And would they be sneaky enough to be accessing your XP, you placed an XP in Taiwan at an OSAT. Would they be accessing that machine to do their Stabilization and reliability testing versus coming in directly Speaker 300:56:42You know what, It's funny. Sometimes when you ask me a question, I'll just ignore you, but they are not right now. I don't want people to be left with opinion that they are. But I think the folks it's pretty interesting. We're trying to read up and we're talking to Key players in the space, AMD, Intel and NVIDIA have all been sort of pounding this drum. Speaker 300:57:07It seems like it's been picking up on this. And then TSMC and GlobalFoundries in particular want to play. They want to be a part of this. And it's very interesting when you start thinking That it's not just the chip to chip that makes silicon photonics. In the chip itself, there's photons Firing around inside on big bus planes that are transmitting these multi gigabyte buses. Speaker 300:57:33And it's just what semiconductor will look like in a decade versus what they are now is going to drastically change based upon silicon photonics. And for us, not only our processors, Bertin, in general, by the way, But our focus has really been on this product has been on the burn in of the fiber optic transceiver, the integrated laser. But there is also burn in opportunities and this is as you know, I guess you've asked a lot of questions over the quarters. A lot of the play with bringing out the new aligner was not just silicon carbide. The silicon carbide guys and the GaN guys are delighted by it. Speaker 300:58:15But that really wasn't I'm not going to sit here and tell you, we started this project before we really saw the silicon carbide take off and we did it because of mainstream wafer level burn in for processors, There's automotive microcontrollers and memory, we think for sure it's just too high volume. You can't be handling Wafer packs and walking in between a cart and a thing. So that's what we did for we're thrilled to death and The systems are working really well. We're getting really good feedback. We got another customer in here today. Speaker 300:58:48I know that's teasing And they're super impressed with it. And we're just pretty proud of it. I guess we're Speaker 600:58:56Another customer did you say for what market? I didn't say that. I know. How did you describe them? I'm sorry, I missed it. Speaker 300:59:06I just had another customer that's in here looking at it and they're very excited and they gave us some really Speaker 400:59:10good feedback. I thought Speaker 600:59:12you mentioned what market they're in. So obviously Taiwan Semi would be serving AMD and NVIDIA. That's why I was asking. I know you mentioned in the past that you're interested in it. I would think it would come through Taiwan summer. Speaker 600:59:26That's why I was interested in that. So you kind of led me to my last question. As you stated, XP was developed initially for memory. The lack of the automation held it back. Now that it's fully accepted and it's in the marketplace, When are you going to get an evaluation tool to our big U. Speaker 600:59:52S. Memory maker that's planning on building Several fans in the U. S. Speaker 300:59:59As we alluded to and we are serious about it, we are actively Pursuing the memory space again, we have had conversations and design reviews, not with everybody, but some of the folks that are candidly closer Proximity, but not only, on it and that continues on, including with some meetings over the next few weeks. It's a little awkward, but shareholders need to sort of understand. We actually have financial bonuses Tied to every executive on the staff to get into memory. That includes me and every one of my They are multi year plans, but we're always getting in the memory. That has been my passion. Speaker 301:00:46That's Speaker 601:00:50Well, you're the number guys. So you're going to make it happen. Speaker 301:00:55Thank you, Speaker 601:00:57Meyer. Great to see the progress. Hopefully, you exceed your goals. It looks like it's possible if everything comes together, so we'll be paying attention. Speaker 301:01:09Thanks, Larry. Speaker 601:01:11Take care of you guys. Speaker 301:01:12Thank you. Operator01:01:14The next question is a follow-up from Dylan Patel with Semia Analysis. Please go ahead. Speaker 701:01:20No question at this time, sorry. I miss smashed the phone. Speaker 301:01:25It's okay. Operator01:01:27This concludes our question and answer session. I'd like to turn the conference back over to Dane Erickson for any closing remarks. Speaker 301:01:33Thanks, operator. I really appreciate everybody for joining us On the call again and spending an hour with us. And as always, we make ourselves available as much as we can. I will tell you, we are traveling Like crazy right now, but we're trying our best to get to everybody. We do have our shareholders meeting on the 23rd. Speaker 301:01:56They're generally like a lot of shareholders, they're not that exciting or anything, but we do have them here. We will be here with executives to do Q and A And we typically will throw a smock on you and walk you through the manufacturing area. So if you can and want to join us, just give us a heads up and we'd love to meet you there. And with that, we'll turn it back over and take care. We will all talk to you next quarter. Speaker 301:02:18Bye bye. Operator01:02:20The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallAehr Test Systems Q1 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Aehr Test Systems Earnings HeadlinesAehr Test Systems, Inc. (AEHR): A Bull Case TheoryApril 18, 2025 | insidermonkey.comAehr Test Systems (NASDAQ:AEHR) Q3 2025 Earnings Call TranscriptApril 10, 2025 | msn.comURGENT: Someone's Moving Gold Out of London...People who don’t understand the gold market are about to lose a lot of money. Unfortunately, most so-called “gold analysts” have it all wrong… They tell you to invest in gold ETFs - because the popular mining ETFs will someday catch fire and close the price gap with spot gold. May 5, 2025 | Golden Portfolio (Ad)Aehr Test Systems: Navigating Growth Amid ChallengesApril 9, 2025 | tipranks.comAehr Test Systems (AEHR) Receives a Rating Update from a Top AnalystApril 9, 2025 | markets.businessinsider.comQ3 2025 Aehr Test Systems Earnings Call TranscriptApril 9, 2025 | gurufocus.comSee More Aehr Test Systems Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Aehr Test Systems? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Aehr Test Systems and other key companies, straight to your email. Email Address About Aehr Test SystemsAehr Test Systems (NASDAQ:AEHR) provides test solutions for testing, burning-in, and semiconductor devices in wafer level, singulated die, and package part form, and installed systems worldwide. Its product portfolio includes FOX-XP and FOX-NP systems that are full wafer contact and singulated die/module test and burn-in systems that can test, burn-in, and stabilize range of devices, including silicon carbide-based and other power semiconductors, 2D and 3D sensors used in mobile phones, tablets and other computing devices, memory semiconductors, processors, microcontrollers, systems-on-a-chip, and photonics and integrated optical devices. The company also offers FOX-CP system, a low-cost single-wafer compact test solution for logic, memory, and photonic devices; FOX WaferPak Contactor, a full wafer contactor capable of testing wafers up to 300mm that enables integrated circuit manufacturers to perform test, burn-in, and stabilization of full wafers on the FOX-P systems. In addition, it provides FOX DiePak Carrier, a reusable temporary package that enables IC manufacturers to perform final test and burn-in of bare die and modules; and FOX DiePak Loader. The company was incorporated in 1977 and is headquartered in Fremont, California.View Aehr Test Systems ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Is Reddit Stock a Buy, Sell, or Hold After Earnings Release?Warning or Opportunity After Super Micro Computer's EarningsAmazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousRocket Lab Braces for Q1 Earnings Amid Soaring ExpectationsMeta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2Palantir Earnings: 1 Bullish Signal and 1 Area of ConcernVisa Q2 Earnings Top Forecasts, Adds $30B Buyback Plan Upcoming Earnings American Electric Power (5/6/2025)Advanced Micro Devices (5/6/2025)Marriott International (5/6/2025)Constellation Energy (5/6/2025)Arista Networks (5/6/2025)Brookfield Asset Management (5/6/2025)Duke Energy (5/6/2025)Energy Transfer (5/6/2025)Mplx (5/6/2025)Ferrari (5/6/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 8 speakers on the call. Operator00:00:00Good afternoon, and welcome to the Aehr Test Systems Fiscal 20 24 excuse me, First Quarter Financial Results Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Jim Byers of MKR Investor Relations. Operator00:00:40Please go ahead. Speaker 100:00:43Thank you, operator. Good afternoon, and welcome to Aehr Test Systems' Q1 fiscal Results Conference Call. With me on today's call are Aehr Test Systems' President and Chief Executive Officer, Gaye Erickson and Chief Financial Officer, Chris You. Before I turn the call over to Gain and Chris, I'd like to cover a few quick items. This afternoon, right after market close, Aehr Test issued a press release announcing its fiscal 2024 Q1 financial results. Speaker 200:01:17That release is available on the company's website at hare.com. Speaker 100:01:21This call is also being broadcast live over the Internet for all interested parties and the webcast will be archived on the Investor Relations page of the company's website. I'd like to remind everyone And on today's call, management will be making forward looking statements that are based on current information and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. These factors that could cause actual results to differ These forward looking statements, including guidance provided during today's call, are only valid as of this date. And Aehr Test undertakes no obligation to update the forward looking statements. And now, I'd like to turn the conference call over to Gayn Erickson, President and CEO. Speaker 300:02:19Thanks, Jim. Good afternoon, everyone, and welcome to the Q1 fiscal 2024 earnings conference call. Thanks for joining us today. Let's start with a quick summary of the highlights of the quarter and the continued momentum we're experiencing in the semiconductor wafer level test and burn in markets. Then Chris will go over the financials in more detail. Speaker 300:02:37And after that, we'll open up the lines to take your questions. We finished the Q1 with solid revenue of 20 point $6,000,000 in non GAAP net income of $5,200,000 the strongest Q1 in our history, which has historically been our seasonally softest quarter. With this, we're off to a very good start to our fiscal year and we're reaffirming our expectation to grow fiscal full year revenue by at least 50% to over $100,000,000 and profit by over 90% year over year growth to at least $28,000,000 During the quarter, we had record shipments of our FOX WaferPak contactors in both revenue and units, with revenues reaching well over 50% of total revenues We're also very pleased with the continued stream of new designs for wafer packs we're seeing. Our new design volume has tripled over the last 9 months As we're seeing more and more electric vehicles coming online with their own specific device designs for inverters and onboard chargers. As a result, our customers are buying additional WaferPak contactors for these new designs, highlighting the recurring revenue part of our business. Speaker 300:03:44As we've noted before, our proprietary WaferPak contactors are needed with our FOX wafer level test and burn in systems to contact with the individual die on the wafer and our design specifically for a given device. As our customers win new designs from their customers, Aehr eventually secures orders for new wafer packs to fulfill these new wins. With each new design, our customers will need enough new wafer packs to meet the volume capacity need for those new devices. With the increase in wafer pack designs, we've been adding resources in both our U. S. Speaker 300:04:17And Philippines operations to expand our already successful application and support team there. We're also continuing to add capability and capacity in the Philippines to meet the support needs of our growing installed base in Asia. Another key highlight is that we've now received customer acceptance of both configurations of our new fully automated FOX WaferPak aligner, which allows hands free operation of WaferPak handling and alignment and is available either as a standalone unit or fully integrated with our FOX XP multi wafer systems. We recognized revenue for the standalone wafer pack aligners in the Q1 And after the close of the quarter, we received customer acceptance and sign off of the aligners integrated with our FOX XP Systems. The integrated aligners are integrated with FOX XP systems equipped with 2 key test system enhancements introduced over the last year. Speaker 300:05:10These FOX XPs include our new bipolar voltage channel module option for both positive and negative gate bias stress and burn in as well as our very high voltage channel module option. The VHP channel module option, which together with our proprietary wafer packs And new inert gas control option for the FOX XP enable high temperature reverse bias testing up to 2,000 volts at wafer level for Silicon Carbide and Gallium Nitride high voltage semiconductors that are used in power converter applications such as electric vehicle traction inverters and onboard chargers. Acceptance and production release of these FOX XPs with the integrated aligners and the associated revenue recognition provide a solid start to our 2nd quarter revenue and pave the path for revenue recognition immediately upon all future shipments of these products to this customer and forecasted shipments to additional customers this fiscal year. So let me talk a little bit about our new customers. We're excited to have announced last month yet another new customer in Silicon Carbide. Speaker 300:06:14This is our 6th customer for silicon carbide wafer level burn in. This new customer is a U. S.-based multibilliondollar semiconductor supplier that serves several markets including automotive, computing, Consumer, Energy, Industrial and Medical Markets. After conducting a detailed financial evaluation of Aehr and Aehr's FOX family of products, Including multiple on-site visits to Aehr's application lab, this new customer purchased an initial FOX NP system, wafer pack aligner and multiple wafer packs for engineering qualification and small lock production of our silicon carbide powered devices. This system is also configured with our new bipolar voltage and very high voltage options that enable new advanced test and burning capabilities for silicon carbide power semiconductors. Speaker 300:06:59This customer has indicated that as their production capacity increases, they intend to quickly move to our FOX XP multi wafer test and burn in systems for high volume production. In addition to the automotive electric vehicle device market opportunity, this customer is also focusing on the enormous opportunity for Silicon carbide power devices in industrial, solar and other power applications. Including this newest customer, the last two announced customers has selected our systems primarily for applications other than electric vehicles, which include industrial, solar and commuter electric trains. This further extends our application space beyond the enormous opportunity we see in silicon carbide for electric vehicle traction inverters and onboard and offboard chargers. These additional applications expand our market opportunity beyond the 4,500,000 6 inches Silicon carbide wafers that William Blair forecast will be needed per year by 2,030 just for electric vehicles. Speaker 300:07:58These new applications are driving an additional 2 8000000 6 inches equivalent wafers annually by 2,030 to address industrial, solar, electric trains, energy conversion and other applications. It's also interesting to note that these last two customers did not need to see their wafers tested on our system before they move forward to purchase from us. This need for testing before purchase was essentially a requirement with our early customer engagements, But it's clear that many of our potential new customers have become much more comfortable moving forward with Aehr simply on our assurances that our solution will perform as committed. This allows the customers to accelerate their time to market. Having said that, we're happy to engage with customers either way. Speaker 300:08:45If they want to see their wafers tested first, we're happy to work with them. We have yet to lose a prospective customer after demonstrating our test and burn capabilities on their wafers. In fact, we've never lost a head to head evaluation to a competitive product since introducing our FOX NP and XP configured with the silicon carbide and Gallium Nitride Test Resources. So let me move on to our pipeline of prospective new customers for silicon carbide wafer level burn in. In the last few weeks, we've attended 2 international conferences in Europe and I personally met with more than a dozen companies in the silicon carbide market that are not Currently using our solutions. Speaker 300:09:24We also met with all 6 of our current silicon carbide customers. These Face to face meetings included multiple meetings with 1 of the market leaders in silicon carbide that we've been doing a significant automotive qualification of wafer level burn in for well over 2 years. Candidly, this is the longest and most extensive sales and benchmarking process I've ever experienced in my entire 30 plus year career. The good news is that we've made even more progress in the last few months with a very large number of wafers being run at our facility, followed by multiple meetings to review the data. Based on everything we've heard, Our data, cost of ownership, products, including our new fully automated wafer pack aligner, particularly in the integrated configuration, they're all meeting their needs. Speaker 300:10:12We continue to feel confident that this customer will move forward with us using the FOX XP multi wafer solution for their high volume needs, including initial purchase orders and system shipments this fiscal year. Our meetings also included face to face meetings with potential new silicon carbide companies who have now told us that they intend to place their first purchase orders with us over the next several months, including some that want us to ship systems, wafer packs and aligners to them this fiscal year. In the next few weeks, we'll also be meeting with a significant number of potential new customers as well as end users of silicon carbide devices in Asia as we're seeing increasing activities and opportunities heating up there. I can tell you it's a very exciting time in the silicon carbide and the electric vehicle markets right now and we've never been busier. Let me add some further color on the silicon carbide market opportunity. Speaker 300:11:10A recent report from UBS forecast that the total silicon market will be close to $8,000,000,000 in 2025 and over 40% of that total will be industrial applications. While the primary opportunity is still serving the electric vehicle automotive market, the Industrial segment represents a material amount of dollars and a significant market opportunity. The report also focuses on the progression of electric vehicle batteries from 400 volts to 800 volts, Which is the level generally recognized by the industry at which silicon carbide is mandatory to get the range and recharging speed consumers are demanding. Devices used in the traction inverters for 800 volt DC battery systems actually operate up to almost 1200 volts AC. This voltage at this voltage, the devices will experience electrical arcing when tested at 1200 volts under normal testing environments, which creates a very real problem for conventional testers on wafer probers and probe cards. Speaker 300:12:11At such high voltages, The 1200 volt bias to the device will actually create an electrical arc through the air or on a wafer even if surrounded by 100% nitrogen. This is basically how a spark plug works. However, this spark actually damages the devices permanently. Aerie's proprietary wafer packs have individual chambers that encapsulate each wafer and allow us to control the temperature, Gas makeup and pressure within this chamber on each wafer. Our proprietary gas and pressure control option allows us to test and burn in an entire wafer up to 2,000 volts without arcing or damaging the wafer. Speaker 300:12:53Other competitive systems using standard waferpro RC arcing in as little as 900 volts, which makes it impossible to do high voltage reverse bias test and burn in at the wafer level for devices aimed at these new 800 volt battery vehicles. Per UBS, in 2023, 91% of the batteries Sold in electric vehicles are forecasted to be 400 volts and only 9% are 800 volts. But by 2026, UBS expects the percentage 800 volt battery cars to be above 30%, which is why it appears so many silicon carbide suppliers are timing their major ramps to be in the 2025 to 2026 timeframe. So in the next couple of years, we expect Aehr to benefit from both an increased number of electric vehicles being sold as well as a significant increase in silicon carbide needed for needing our solution for those electric vehicles. We're also in extensive engagements with multiple Gallium Nitride suppliers. Speaker 300:13:55Gallium Nitride is similar to silicon carbide in Both of these semiconductor compounds are considered wide bandgap semiconductors that are able to withstand high voltage applications more directly than silicon. Gallium Nitride semiconductor material has characteristics that make it optimal for lower power converter applications such as consumer power converters, Solar microinverters in industrial motor controllers as compared with silicon carbide that is optimal for higher power, higher voltage applications such as traction inverters in electric vehicles, trucks, trains and converters using charging infrastructure and storage. One of our prospective Gallium Nitride customers is also a company that we've been doing automotive qualification work for their silicon They became very interested when we introduced them to the new higher voltage options, including the bipolar voltage for gate stress and the very high Engineering and new product introduction needs, but also fully compatible FOX XP system for high volume production, including the hands free Integrated WaferPak Aligner. Interestingly, in this case, the Gallium Nitride Group at this company evaluated our system and has decided to move forward with us faster than the Silicon Carbide Group that we've been working with for nearly 3 years. Stay tuned for more announcements on this in the near future. Speaker 300:15:25We're also engaged with another large Gallium Nitride that is already a major supplier of IGBT and silicon carbide devices and has decided to move forward with an on-site evaluation. We have agreed to place a VOX NP system on their floor for a defined period of time and they've already ordered multiple wafer packs that are not contingent on any evaluation terms for acceptance. We're very excited about this prospect as well as the opportunity to showcase our capabilities to the GaN team with the Silicon Carbide team watching closely. This company, which is one of the largest automotive semiconductor suppliers in the world, could very likely be one of the largest, if not the largest Gallium Nitride semi supplier in the world. The Gallium Nitride market is another potentially significant growth driver for our wafer level solutions, particularly growth driver for our wafer level solutions, particularly for automotive and photovoltaic applications, where burn in appears to be critical for meeting the initial quality and reliability needs Many forecasters believe that the Gallium Nitride device market will be larger than silicon carbide due to its much larger application Based in terms of power chargers for everyday use, data centers, solar and industrial applications. Speaker 300:16:36While we're not yet certain how This market could be for Aehr's wafer level test and burn in systems, we will be working with several key players in the space this year to form a better determination. While we do expect to recognize some revenue for systems wafer packs and aligners for Gallium Nitride applications this fiscal year, We continue to expect the significant majority of our revenue come from silicon carbide. Now let me move on to silicon photonics wafer level and singulated diemodule burn in market. We continue to be very enthusiastic about This market, which includes the current photonics transceiver market used in data and telecommunications and the upcoming application of silicon photonics integrated circuits for use in optical chip to chip communication, which we see as a major market opportunity. As we discussed on our previous call, we received our first order last May from a current major silicon photonics customer for a new volume production FOX XP multi wafer test and burn in system for use for their very high power silicon photonics device wafers. Speaker 300:17:40This system is configured to enable cost effective production test of up to 9 full wafers in parallel and up to 3,500 watts of power per wafer. The original application for this system was silicon photonics devices for fiberoptic There's now been discussion about using this system for multi chip modules embedded with processors for chip to chip optical communication. This customer is one of the world's largest semiconductor manufacturers and we expect to receive orders for production systems as they increase production of these devices. While we believe it will be light it will likely be several years before we see Significant revenue generated from this optical chip to chip communications market. This order from our lead silicon photonics customer and their request for an accelerated shipping date is encouraging and provides some data to suggest that this market opportunity could happen sooner. Speaker 300:18:40Our FOX wafer level test and burn in solution with our proprietary wafer pack full wafer contactors are a great fit for the silicon photonics semiconductor market. These next generation silicon photonics based integrated circuits can require up to 2 to 4 times as much power for full wafer test burn and then stabilization. And our FOX new production system configuration, which can be used to test and burn in these new optical IO devices, expands the market opportunity of the FOX XP system even further. The power and functionality of lasers used to transmit data Critically important to the performance of the communication channel and air solutions not only weed out early life failures, but also improved the performance of the device through what the photonics industry refers to stabilization. During the first day or to normal operation, the laser output characteristics change in an exponentially decaying manner and must be stabilized until the decaying stops before the final product can be tuned to meet its performance specification. Speaker 300:19:39Aehr can do this across an entire way for a fully integrated photonics integrated circuits with embedded or attached laser emitters. These fully integrated circuits with lasers are reportedly the highest performance and level of integration possible, which is optimal for integrating into a package along with a microprocessor, graphics processor or artificial intelligence processor for Chip to chip communication. Aehr currently has 6 customers using our systems for production test of silicon photonics devices, 5 use our NP and XP systems for wafer level test and burn in and one uses both NP's and XP systems for engineering and production burn in of individual singulated diode modules using our proprietary die packs. We're watching this market very closely and are working with some of the leaders in silicon photonics to ensure that we have the products and solutions available to meet their needs for this potentially significant market application. To conclude, we're encouraged by the continued positive momentum we're seeing for Silicon Carbine Electric Vehicles and also very excited about the expanding growth opportunities we're seeing in several additional markets with current and prospective customers. Speaker 300:20:50For the fiscal year ending May 31, 2024, we're reiterating our previously provided guidance for total revenue to be at least $100,000,000 representing growth of over 50% year over year and GAAP net income of at least $28,000,000 representing earnings growth of greater than 90% year over year. We look forward to updating you on our progress throughout the fiscal year. Now with that, let me turn it over to Chris before we open up the line for questions. Speaker 400:21:18Thank you, Ginnie. Good afternoon, everyone. We're pleased to announce another strong quarter for Aehr Test Systems after a record fiscal 2023. On today's call, I will summarize our results For the fiscal Q1, we exceeded the consensus on both our top and bottom line. 1st quarter revenue was $20,600,000 up 93% from $10,700,000 in Q1 of last year. Speaker 400:21:44Strong demand for our wafer packs contributed to a significant year over year increase in revenue in the Q1. WaferPak and DiePak consumables revenue accounted for 55% of our total revenue in the Q1 compared to just 5% of revenue in the prior year quarter. As we have noted before, customers typically purchase our FOX systems ahead of wafer packs and subsequently staggered purchases of wafer packs. We're seeing continued momentum for new wafer pack designs with existing and new customers to meet the customer and market requirements. Non GAAP net income, which The impact of stock based compensation was $5,200,000 or $0.18 per diluted share for the Q1. Speaker 400:22:34This compares to non GAAP net income of $1,300,000 or $0.05 per diluted share in the Q1 of fiscal 2023. Bookings in the Q1 were $18,400,000 up from $15,200,000 in the preceding Q4 and down slightly by 4% from $19,100,000 in the Q1 of fiscal 2023. Included in our Q1 bookings are announced Orders for additional WaferPak contact us of $16,000,000 from our lead silicon carbide customer. Backlog as of quarter end was $22,300,000 up 14% from a year ago with $1,700,000 bookings received Primarily from a new U. S. Speaker 400:23:20Customer that we announced previously, in the 1st 4 weeks of Q2 of fiscal 2024, We now have an effective backlog of $24,000,000 GAAP gross margin for the Q1 came in at 48.4%, up from 42% in Q1 last year. The increase in gross margin reflects a favorable product mix of higher margin wafer packs. Also contributing to the increase in gross margin in the Q1 was the overall higher revenue level compared to Q1 last year. Operating expenses in the Q1 were $5,900,000 up 45.8 percent from $4,000,000 in Q1 last year. The year over year increase is primarily due to previously noted increased headcount related expenses to support our worldwide sales and marketing efforts and our R and D programs. Speaker 400:24:12Our investments in sales and marketing staff continue to have a positive impact on With development programs for augmenting features and performance of our new automated wafer pack aligner, which enabled new advanced tests and burning capabilities for silicon carbide and gallium nitride power semiconductors on the AirsFox XP Waver Level Test and Burning Systems. The first order for our standalone automated aligner was shipped during Q4 fiscal 2023 and was accepted by our customer in the 1st fiscal quarter. We continue to invest in R and D to enhance our existing market leading products and to introduce new products to maintain our competitive advantages and expand our applications in addressable markets. Turning to the balance sheet. We continue to generate healthy cash flow and finished the quarter with a strong cash position. Speaker 400:25:19Our cash and cash equivalents increased to $51,000,000 at the end of Q1, up 6% from our total cash, cash equivalents and investments balance of $47,900,000 at the end of Q4. We generated $3,900,000 in operating cash flow during the quarter, while also investing in inventory to support our growth strategy in fiscal 2024. We have zero debt and continue investing our excess cash in money market funds or short term investments to take advantage of favorable interest rates in the current macro environment. Interest income earned in the Q1 was almost $600,000 compared to $121,000 in the Q1 last year. In Q3 of last year, we announced an ATM at the market offering of up to $25,000,000 in shares of the company's common stock on the open market. Speaker 400:26:15We received gross proceeds of $7,300,000 on the sale of 209,000 shares in fiscal 2023. We did not sell any shares during our fiscal Q1. As of the end of the fiscal 1st fiscal quarter of Our expectation that we will sell shares against this ATM offering during this fiscal year at times and prices that are most advantageous to our shareholders and to the company. Now turning to our outlook for the current fiscal 2024 that ends on May 31, 2024. We continue to believe in the company's world trajectory as our differentiated products and technologies continue to attract and win new customers who desire more cost effective and more efficient wafer level test and burn in solutions. Speaker 400:27:10As Gabe mentioned, We are reaffirming our previously provided guidance for full year total revenue to be at least $100,000,000 representing growth of over 50% year over year and GAAP net income of at least $28,000,000 representing earnings growth of greater than 90% year over year. Lastly, looking at the Investor Relations calendar. Our Annual Shareholders Meeting will be held on Monday, October 23rd at the company headquarters here in Fremont, California at 5 pm. If you're interested in attending, we appreciate an RSVP if possible, so we can plan for attendance accordingly. Please feel free to contact myself or Jim Byes of MKR, our Investor Relations firm to let us know. Speaker 400:27:57We will also be participating in a couple of investor conferences in the next few months. On November 16, we'll be participating in the Craig Hallum Alpha Select Conference taking place in New York. And on December 12, we'll be back in New York to participate in the 12th Annual NYC Summit. We hope to see some of you at these conferences. This concludes our prepared remarks. Speaker 400:28:21We're now ready to take your questions. Operator, please go ahead. Operator00:28:26We will now begin the question and answer session. Our first question is from Christian Schwab with Craig Hallum Capital Group. Please go ahead. Speaker 500:29:06Hey, good afternoon guys. Gain on the gross margin in the quarter at 48.5% with wafer packs At greater than 5% of revenue, I would assume the gross margin would have been a little bit better than that. Is there something going on There for that? Speaker 300:29:27Yes. So if you remember historically and Actually consistently, our aligners have been amongst our lowest margin products. We They are fully RIP, but we have contracted to have them completely built external to our facility here. And I wouldn't call them pass through because it's not that, but they tend to be on the lower end of the margin. So we had a couple of aligners, The automated aligners in there and that kind of offset that by a couple of few points, I think. Speaker 300:30:00So as our business increases and we start Candidly, as we see more companies or more customers wanting to actually do an integrated aligner with every system, That will have some, but generally overall, it still sort of normalizes our systems level margins. But I think that's where if you would do the math, that's where that came from. Speaker 500:30:25And then and as far as mix on a go forward basis, Would you anticipate the remainder of the year returning back to north of 50%? Or Is that going to be tremendously mix dependent quarter to quarter? Speaker 400:30:41Yes. No. So that's right. So we're still targeting 50% and above as a Margin for the year and that's what we're looking at. Speaker 500:30:50Okay, great. And then regarding future orders from different customers. I think you talked about meeting with your 6 current customers and 12 new customers. Just as we think about backlog to support the $100,000,000,000 of revenue, When should we assume potentially your 3rd major customer coming in as well as I think you said over the next few months you anticipated that. I'm just trying Speaker 200:31:27to get follow-up. I think we're trying Speaker 300:31:27to do our best to give Kind of plenty of heads up on those and I will tell you that our ability to guess the customers is not perfect either. But just a little bit, so of our current 6 customers, we I mean more than half of them certainly our top 2 largest customers were Customers are all going to have bookings and revenue shift within the year, and then a number of new customers as well. So And we kind of alluded to both with the GaN related and the large benchmark. I'm feeling really good. It's kind of hard to We probably shouldn't tell you exactly when they're going to come anyhow, but we're certainly trying to give you enough hints. Speaker 300:32:18I mean, we I think everybody and we're certainly Clear here, a $24,000,000 backlog with what $20,000,000 in the bank. We've got a lot of turns and a lot of turns expected this year to do the $100,000,000 and we don't expect to finish the year with 0 backlog either. And for those that have come and seen our facility and we're always really pretty open about that. And if you haven't planned it, if there's no other Excuse to come for our shareholders meeting besides the glass of wine and hors d'oeuvres, you can come out and see our manufacturing floor, but it is billowing right now. And that is where a lot of the inventory is going, etcetera, in anticipation of this. Speaker 300:32:59Our lead times candidly continue to be world class Speaker 500:33:09That's great, Gabe. Thank you for that Color. As far as the new customers then, I know you've talked previously about having multiple Customers this year at 10%. So obviously, it probably appears we have at least 2, but should we Speaker 300:33:32No, we're still Chris and I were just going through that this morning again. Right now, we're right at 3% or 4%. There's we certainly believe 3% and the 4% there's like I think there was like 4% or 5% that are all in the 3% to 6% that anyone might be able to poke their head up or something. So I mean from a diversity, we're all excited because of How many customers, but let's not kid ourselves. We don't have hundreds of customers and never will in this space, but we'll definitely have a much more diverse number Customers, which is nice, but we'll stick to the 3% to 4%. Speaker 300:34:07I don't it's not clear how we would get to 5% necessarily, but we might have We don't call out the 5% customers, but we might have a good chunk of those too. Speaker 500:34:18Great. I don't have any other questions at this time. Thanks, Gabe. Speaker 300:34:22Okay. Thanks, Christian. Thank you. Operator00:34:24The next question is from Jed Dorsheimer with William Blair. Please go ahead. Speaker 200:34:29Hi, thanks. Hey, Gaines and Chris. I guess, first question, I just wanted to dig in, Christian touched on it and but just on the And but just on the wafer pack aligners, the standalone that were recognized in the quarter versus And congratulations on getting the fully integrated systems signed off. Should I look at that Is taking your the effective backlog and subtracting the bookings, so that the quarter would have been 6,000,000 Greater had those signed off in the quarter. Is that the right way to look at that? Speaker 200:35:08Or how would you suggest that? Speaker 300:35:11Yes. I mean, as we got a little closer, we kind of anticipated that we didn't get really specific. We weren't even sure that the second I won't get into all the wouldn't have scored for revenue. So I guess Theoretically, we could have pulled in 1 and the other one was already in our plans whether we told you or not in our Q2. I mean between the 2 of them, I Think it's closer to $8,000,000 or so. Speaker 200:35:38Got it. And that so to be clear, you sold these integrated systems Of that of those two systems at the same customer, which I think Chris mentioned is a U. S. Customer, That the aligners were recognized in the August quarter, But the rest of the 2 systems went into September. I just want to make sure I have that Speaker 300:36:05correct. And I'm not sure everyone else is going to be able to follow along with it. The way our revenue recognition works, which is very consistent with the industry and we're always very open Is that when we have a brand new product that has never been accepted or released into production with a customer before, We will not score revenue on it or anyone like it until candidly the first one is accepted. And I won't get into perfunctory and all that, but it turns out the first customer shipments were of what we call standalone aligner And it went with our to our lead customer who has been accepting XPs all along. So the only thing deferred, if you will, was the revenue for those 2 aligners. Speaker 300:36:50So when they accepted, they were just the 2 aligners. The weird thing is on the 2nd lead customer, 2nd large customer that had the systems. The XP and the aligner were bolted together. And so we and the XP also So, Ken, our previous CFO and Chris was on board as well. We drew a circle around The whole thing isn't accepted until it's all accepted, which is a little weird. Speaker 300:37:17But basically, once the aligner Was accepted then the XP and the aligner was all accepted at the same time. And in that case, both of them triggered. Yes. So And they're both released and working now. Speaker 400:37:28Yes. So to add to that, so that means going forward whether they are manual auto aligners or integrated aligners, we don't need to wait for that. Speaker 300:37:35Whether they have the new options or anything, it just ships And we'll go Speaker 400:37:39ahead and do revenue when we ship going forward. Speaker 200:37:42Well, that's better than I expected. So nice. I guess Second question is just on this long courtship with this potential large Customer, any more details on sort of I know it's the longest in your history, Dane, and 3 years sounds like a long Long time for that process. Is there any more details you can provide on sort of what is is the next step A large order, is that what we should expect? And I ask that kind of Also in the context of your capacity, as you're adding these customers, I know you've talked about low lead times, but if you saw A large 20, 30, 40, whatever that number system type order, I would assume that that changes things in a good way. Speaker 300:38:40Yes. I mean, generally speaking, even if customers talk about It's normally met with 1 or a small number of systems, say for production to begin with and then a little bit of absorption. That might change here because they're running out of time. I mean and they've done way more evaluations than I've seen in the past. So I think that has a chance to collapse itself. Speaker 300:39:09There's also engineering systems involved, etcetera. So I'm not Sure, I want to perfectly carve it because I might end up being wrong. But engineering systems, 1st production systems, quantities, Perhaps we may get quantities with longer lead times because it's getting pretty serious with companies now. They're putting real capital in place, Putting fabs in place, making commitments to these very significant ramps that are happening in the automotive guys in 2025, 2026. And I don't think they want to be cut short. Speaker 300:39:42So my message, I guess, to my customers listening, I mean, we are able To ship more than anybody else, we literally can ship up to, Call it 50, 80, 100 testers, call it wafers or blades of capacity a month. We are shipping more per month than the combined number of installed base of every other competing alternative Has ever shipped. But there's still a scenario where please get your orders in, so that we can continue to make sure that we can address everybody's needs. But I just reiterate, obviously, we're expecting Significant amounts of orders in the fiscal year to be able to turn to make $100,000,000 and end without 0 backlog And we're sticking to our guns there. Speaker 200:40:41Got it. Last question for me. Just on Chris, on the 300 basis points decline in gross margin. You answered this question that Kristen asked in terms of mix shift or gain you did. But operating margins dropped by 500 basis points. Speaker 200:40:59Is there something else that drove the incremental 200? Or is that just The aligners that in mix shift that contributed the extra off contraction there? Speaker 400:41:13Yes. It's really primarily on the aligners that decrease the margin here. Speaker 200:41:19Okay. Yes. Speaker 300:41:21I'll tell you what I let me I'm going to give a little bit more color. We hadn't talked about this. In our agreement with respect to the Centimeters that was building these things for us. We actually had some NRE charges in there. They're not necessarily directly tied to cost Sales, but they were timed with the timing of it. Speaker 300:41:41So the first units actually have a higher incremental cost to us Then I think the ones going forward, I think the first 4 or 5 units had that. So anyhow, it was worse Then would be expected, if that helps. Speaker 200:41:58It does. Sorry, one last one. Speaker 600:42:00What percentage was your largest customer Speaker 200:42:04In the quarter? Speaker 400:42:08Its number one customer is 88%, very high. Speaker 200:42:1288%. Great. Thank you. Operator00:42:22The next question is from Dylan Patel with Semiannalysis. Please go ahead. Speaker 700:42:29Hey, thanks for taking my question. I wanted to ask about how I think through the number of wafers per tester, right? So there's all the various different configurations that you've Sort of options you've had for various different customers. Some people want to do the bipolar voltage channel modules and some people want to do high voltage, some people want to go negative. I'm curious, can you sort of outlay how to think through what is the test time for these various systems for various options? Speaker 700:42:56And Sort of how many can be tested per FOX XP, right? Because some of these are 9 per system versus 18. And yes, I would love to hear That sort of rationale. Speaker 300:43:08All right. Well, as I described this, I simply want you to listen in terms of just the simple math, Because mostly what I'll describe is the simple math, but obviously the pieces will what is customers A, B and C's test time. And I want to give a little bit of color on that when I'm done. From a simple math perspective, the NP systems have 2 wafers. They're usually used for engineering and if you want to do small lot production, you can test 2 wafers at a time. Speaker 300:43:38So if your test time was 24 hours, You would get 2 wafers per day off of that. If your test time or call it cycle time is 12 hours, you could get 4 wafers a day off of that. The XP, which is fully compatible blades, which are effectively that each tester uniquely can test a wafer, It has either 9 or 18. Following the same math, you would either get 9 or 18 wafers a day at 24 hours Or 2 times that at 12 hours or 4 times that at 6 hours. So I'm not trying to be coy, but that's the way of thinking about Now the real debate is and the discussion is what's the test time? Speaker 300:44:20Well, if you get into the what's called On the bathtub curve of reliability. And that shouldn't if you go type in bathtub curve And reliability, you can find all kinds of articles out there to talk about it. Basically, when a device is first manufactured, all semiconductor devices, As soon as they are functionally good, they have a likelihood of failure at that point in time. And as time goes on, The likelihood that they fail actually decreases. This was observed a long time ago And it's very consistent across all semiconductor processes. Speaker 300:45:04So what that looks like is the likelihood of failure Drops as time goes and then at some point it stops dropping and it's the bottom of the bathtub curve. 20 years from now they start Failing again and that's the other end of the bathtub curve. What's important is depending on the expectation of the customer or the application is whether or not the failure rate upon shipment is good enough. And if it is too high, you do things like stress and burn in, which is what we supply to decrease and move it down the curve. The higher the quality, the more screening or burn in you need to do to move it down the curve and that is generally energy and time. Speaker 300:45:49So an example we try to use in certain applications like the inverter of the automobile, probably the most Highest reliability requirement out there, because on an inverter it might have 12 or 24 chips in a single module Or 48 in a single inverter on the Tesla, for example, and Tesla Platt has 3 of those. So they have 144 chips in there. The requirement is none of those 144 chips fail during the whole life of the car, Okay. There's also chips, say, somewhere else in the power in the onboard charger, there's only 3 chips. So those 3 chips have the same requirement. Speaker 300:46:36They can't fail in the life of the car. But there's only 3 of those versus 144. So by the very nature of that, the onboard charger perception wise could be burnt in less, if you want to get away with it. This was a huge topic at the conferences last the last 2 weeks in Europe at the Power Semiconductor and the Executive Summit on Power Semiconductors And reliability was a huge discussion and that is what is the reliability requirement of the automotive space. Last week Was it Hyundai had a recall of cars? Speaker 300:47:15The cars were 2015 and older And they had to recall 3,500,000 cars because 22 cars had some brake leakage event that caused the fire And 22 overheating. That 44 cars out of 3,500,000 that had an event And they're recalling 3,500,000 cars that are over 10 years old, okay? So what is the failure rate, okay, For an EV that's going to last 10 years or longer. And if you said, well, dollars 44 out of $1,000,000 is not bad. $44,000,000 out of $3,500,000 required every one of those cars to be recalled. Speaker 300:47:59We get into this whole discussion and I get kind of passionate about it like what's the right number. Companies don't all have the same expectations of quality. We get a pretty front line view. I can tell you sometimes it upsets me. I don't not everybody is the same. Speaker 300:48:15Here's my opinion. I wouldn't drive a car that had less than 12 to 24 hours of burning of the silicon carbide, okay? I wouldn't do it. So, it's important. That's why we use these numbers. Speaker 300:48:27Today, we have said burn in times on average Industry are more than 20, 12 hours and we think over time they will get down to that. We will see, but it's going to be the car manufacturers that dictate that. And I can tell you we've met with a number of them and we're meeting with more in the next 2 weeks. They are very opinionated about what's needed. I've never heard one of them Not demand a high level of burn in for their automotive parts. Speaker 300:48:54Now that's very clear in the automotive space. So enough of my Hi, Horace here, Dylan. I'm sorry to let you up like that, but I hope that gives you some clarity. Speaker 700:49:06That's great. And then I kind Speaker 300:49:07of wanted to clue in on Speaker 700:49:09a question or a statement that you had in the sort of the prepared remarks, which was you're seeing more electric vehicles with their own specific design for inverters. Are you saying that Like XYZ major auto OEM will want a specific inverter design from They're a supplier and then that's going to require a different chip design or different device design than someone else? Or I assume that everyone would have pretty similar designs for their inverters. Would that mean that there's more sort of XP or sorry, WaferPak? WaferPak. Speaker 700:49:45WaferPak because of this, yes. Speaker 300:49:48Yes. And I know more than I Can share it, but I still don't think I know everything in this space around this. But yes, people with seemingly the same power Our dictating specific requirements of the chip size, it gets into thermal trade offs, voltage trade offs, Power trade offs, acceleration trade offs, how much power you have on hand, what kind of efficiency you have. And so I'm actually kind of surprised that even the same automotive supplier will dictate multiple different flavors and then the next automotive guy won't buy the same ones. So I'm sure it drives our customers crazy because I'm sure they way rather everybody buy 1. Speaker 300:50:32There's probably some element where they don't want to commoditize it either though. I mean, if they all made exactly the same chip, well then maybe the customers would commoditize everything faster. But the net is for us, There is more and more wafer pack designs. And I know I said, I specifically call automotive, but candidly a lot of the new industrial designs, there's a Much broader array of those 2 and that's those designs have been increasing too. Speaker 700:51:02So in the past, I think it Speaker 400:51:03might have even been like Speaker 700:51:04a year ago, you mentioned that You'd expect people to change wafer packs maybe every 2 to 3 years or designs every 2 to 3 years. Is that do you think that still remains the Or do you think that people will have to have more wafer packs relative to say the next peak and fit 18 or 9 of them, they might have more than that 18 or 9 because there's 3 or 4 different designs Across their 3rd quarter for major customers and then they might have to switch them out more often. I'm just trying to get a feel of that. Speaker 300:51:29Yes. So I'm pretty sure I would have said because I remember this. I probably was probably saying 3 or 4 years. I think 2 to 3 might be aggressive, but we weren't sure. We know like in memory, for example, every like 18 months to 24 months, the wafer the probe cards are all swapped out. Speaker 300:51:46That's probably the most extreme. Generally speaking, automotive lasts longer. But the issue with silicon carbide is it's in this sort of infant Phase where people are going to Gen 2, Gen 3, Gen 4, Gen 5, they're going from 150 millimeter to 200 millimeter. And as those happen, There is more evolution. To me, if you can look at it over 15 years, my guess is there's more activity in the next 5 to 7 years than there will be in the back half of 7 years, but for sure we're going to see customers with more than one wafer pack per blade like an 18 blade or 18 tester XP. Speaker 300:52:25If you ask me in 3 years, what do I think? I bet you there for every wafer pack that's in the system, there's a couple on the shelf That wouldn't shock me for just how they will do it to meet customer demand. Operator00:52:48The next question is from Larry Shlobena with Shlobena Capital. Please go ahead. Speaker 600:53:02Sorry, I'm looking at my notes. When do you expect a follow on order from The recently accepted fully automated XPs, they use those machines almost 4 months. Won't they be needing some more capacity here soon? Speaker 300:53:25They're going to need more capacity soon. How's that? So, no idea. Yes. I think they're going to buy more systems and we're going Speaker 400:53:37to ship them within our fiscal year. Yes. Speaker 600:53:42And then the 3 year long development company that you referred to that you said they were going to go with GaN first before silicon carbide. Is Speaker 300:53:53I kind of stitch myself into a little bit of I didn't give myself much wiggle room. Speaker 400:54:03It appears that way, yes. Speaker 600:54:06And If it goes that way, would you expect them to start with an NP first and then progress through an XP or they jump right to an XP? Do you have a sense of it? Speaker 300:54:15Yes, I would think it would be an NP first. Speaker 600:54:19Yes. Okay. On the optical IO, the customer that asked for accelerated delivery, Should we sell for our model plan on fiscal year fiscal year Q the February quarter? I think you spelled out that it was going to be in the calendar Q1. But does that mean Should we assume that it will definitely happen in the February quarter fiscal? Speaker 300:54:47I don't know yet. I mean they had originally talked And we acknowledge the order for Q1, which could have been through a March shipment. Recently, they're like sooner the better. So we're actually trying to pull it in. So you're Speaker 600:55:06in charge of that. We should figure The February quarter then? Speaker 300:55:13That's what we're working on, but they're listening too. So we're trying our best to pull it in. It's awesome. I mean, it's coming along really nicely. There's a couple of things that we're still working through from Qualification and some thermal uniformity and things, but the system is being built up. Speaker 300:55:31We're actually building it in the integrated configuration. It will not be docked to our new aligner, but it can easily be docked to it. So it's being configured in the new Configuration that will allow it for to just be rolled up against the new aligner. Speaker 600:55:51So it can go on and fully automated phantom. Is that what you're Speaker 300:55:55All they have to do is buy the aligner and we can bolt on a 300 millimeter front end on this thing, overhead Transport or robotics and it's fully Sexthem integrated into high volume manufacturing floor. Speaker 600:56:10That sounds really exciting. We've seen articles written that Taiwan Semi is pursuing Something similar optical IO. And would they be sneaky enough to be accessing your XP, you placed an XP in Taiwan at an OSAT. Would they be accessing that machine to do their Stabilization and reliability testing versus coming in directly Speaker 300:56:42You know what, It's funny. Sometimes when you ask me a question, I'll just ignore you, but they are not right now. I don't want people to be left with opinion that they are. But I think the folks it's pretty interesting. We're trying to read up and we're talking to Key players in the space, AMD, Intel and NVIDIA have all been sort of pounding this drum. Speaker 300:57:07It seems like it's been picking up on this. And then TSMC and GlobalFoundries in particular want to play. They want to be a part of this. And it's very interesting when you start thinking That it's not just the chip to chip that makes silicon photonics. In the chip itself, there's photons Firing around inside on big bus planes that are transmitting these multi gigabyte buses. Speaker 300:57:33And it's just what semiconductor will look like in a decade versus what they are now is going to drastically change based upon silicon photonics. And for us, not only our processors, Bertin, in general, by the way, But our focus has really been on this product has been on the burn in of the fiber optic transceiver, the integrated laser. But there is also burn in opportunities and this is as you know, I guess you've asked a lot of questions over the quarters. A lot of the play with bringing out the new aligner was not just silicon carbide. The silicon carbide guys and the GaN guys are delighted by it. Speaker 300:58:15But that really wasn't I'm not going to sit here and tell you, we started this project before we really saw the silicon carbide take off and we did it because of mainstream wafer level burn in for processors, There's automotive microcontrollers and memory, we think for sure it's just too high volume. You can't be handling Wafer packs and walking in between a cart and a thing. So that's what we did for we're thrilled to death and The systems are working really well. We're getting really good feedback. We got another customer in here today. Speaker 300:58:48I know that's teasing And they're super impressed with it. And we're just pretty proud of it. I guess we're Speaker 600:58:56Another customer did you say for what market? I didn't say that. I know. How did you describe them? I'm sorry, I missed it. Speaker 300:59:06I just had another customer that's in here looking at it and they're very excited and they gave us some really Speaker 400:59:10good feedback. I thought Speaker 600:59:12you mentioned what market they're in. So obviously Taiwan Semi would be serving AMD and NVIDIA. That's why I was asking. I know you mentioned in the past that you're interested in it. I would think it would come through Taiwan summer. Speaker 600:59:26That's why I was interested in that. So you kind of led me to my last question. As you stated, XP was developed initially for memory. The lack of the automation held it back. Now that it's fully accepted and it's in the marketplace, When are you going to get an evaluation tool to our big U. Speaker 600:59:52S. Memory maker that's planning on building Several fans in the U. S. Speaker 300:59:59As we alluded to and we are serious about it, we are actively Pursuing the memory space again, we have had conversations and design reviews, not with everybody, but some of the folks that are candidly closer Proximity, but not only, on it and that continues on, including with some meetings over the next few weeks. It's a little awkward, but shareholders need to sort of understand. We actually have financial bonuses Tied to every executive on the staff to get into memory. That includes me and every one of my They are multi year plans, but we're always getting in the memory. That has been my passion. Speaker 301:00:46That's Speaker 601:00:50Well, you're the number guys. So you're going to make it happen. Speaker 301:00:55Thank you, Speaker 601:00:57Meyer. Great to see the progress. Hopefully, you exceed your goals. It looks like it's possible if everything comes together, so we'll be paying attention. Speaker 301:01:09Thanks, Larry. Speaker 601:01:11Take care of you guys. Speaker 301:01:12Thank you. Operator01:01:14The next question is a follow-up from Dylan Patel with Semia Analysis. Please go ahead. Speaker 701:01:20No question at this time, sorry. I miss smashed the phone. Speaker 301:01:25It's okay. Operator01:01:27This concludes our question and answer session. I'd like to turn the conference back over to Dane Erickson for any closing remarks. Speaker 301:01:33Thanks, operator. I really appreciate everybody for joining us On the call again and spending an hour with us. And as always, we make ourselves available as much as we can. I will tell you, we are traveling Like crazy right now, but we're trying our best to get to everybody. We do have our shareholders meeting on the 23rd. Speaker 301:01:56They're generally like a lot of shareholders, they're not that exciting or anything, but we do have them here. We will be here with executives to do Q and A And we typically will throw a smock on you and walk you through the manufacturing area. So if you can and want to join us, just give us a heads up and we'd love to meet you there. And with that, we'll turn it back over and take care. We will all talk to you next quarter. Speaker 301:02:18Bye bye. Operator01:02:20The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.Read morePowered by