Q3 2020 Earnings Call
[music].
Good day and welcome to the Aehr Test Systems' third quarter fiscal 2020 financial results call. Today's call is being recorded at this time I would like to turn the call over to Mr., Jim Byers NK, Our Investor Relations. Please go ahead Sir.
Thank you operator, good afternoon, and welcome to Aehr test Systems' fiscal 2023rd quarter financial results Conference call.
With me on todays call, our Aehr test Systems', President and Chief Executive Officer, Gayn, Erickson, and Chief Financial Officer can spend.
Let's turn the call over to gain in Canada cover a few quick items. This afternoon Aehr test issued a press release announcing its third quarter fiscal 2020 result that really is available on the company's website at <unk> Dot com.
This call is being broadcast live over the Internet for all interested parties and the webcast will be archived.
In the Investor Relations page of the company's website.
I'd like to remind everyone that on todays call management will be making forward looking statements that are based on current information then estimates that are subject to a number of risk.
Certainly used that could cause actual results to differ materially.
I was in the forward looking statements those factors that may cause results to differ materially from that wasn't the forward looking statements are discussed in the Companys. Most recent periodic and current reports filed with the FCC.
These forward looking statements, including guidance provided during today's call are only valid as if this data and Aehr test systems undertakes no obligation to update forward looking statements.
And now with that I'd like to turn the conference call over to Gayn Erickson, President and CEO.
Thanks, Jim Good afternoon to those tightness on todays conference call and also listening online.
Cannot see if all goes our third quarter financial results later.
First let's spend a few minutes discussing our business and product highlights, including our continued progress with our waste 11, Singulated die test in part and solutions.
Open up line trade questions.
Before I discuss our performance and financial results for the third quarter I'd like to see a few words about the impact to the Corona virus in our response to this schedule pandemic.
First I'd like to express or heartfelt concern to all of those who've been impacted and to everyone listening each day and hope that all of you and your family and friends are staying safe and healthy.
As a company 19 pandemic continues to unfold I phone foremost concern that Aehr test is to ensure the health and safety our employees their families and I will like to me.
As of today I feel fortunate transport that none of their test dressed employees are immediate family has contracted the virus.
On March 19 to 2020, the executive Department of the state of California issue did executive order ordering individuals in the state of California to stay home were asked their place to residents as except as needed to maintain continuity of operations at the federal critical infrastructure sectors.
There is a global supplier to critical infrastructure, specifically companies in the I T communications and manufacturing manufacturing sectors that requires semiconductor components as such we're taking extraordinary measures to maintain continuity of our operations and to continue to safely operate.
Full capacity available in manufacturing and across the company to support the vital needs of our critical infrastructure customers, while complying with the local and state mandated shelter in place to records.
Wherever possible our employees continue to work from their residences using the best possible remote communication clapping collaboration tools available as well as securely access seen remote operation of our tools at our facilities and also that our customer sites.
Working remotely our R&D in applications teams continued to be highly effective and fancier Arden.
Easy for me to say, our ongoing product enhancement programs and customer applications to meet critical releases and custom product roadmaps.
In addition to direct and indirect Representatives Air also has engineers and infrastructure around the world to support our customers and meet our contracts response times and critical parts lead times for our installed base of Aehr test products.
Personally I, so very fortunate that Aehr test is in a position to currently not having employees yet directly impacted by this pandemic and that we have the capability capacity and government support to be productive effective and able to meet all customer needs at this time.
We're also in the position, where our customers and open pit business, which I realize it's simply not the case with so many businesses around the world.
Let me turn to our business highlights [noise].
We're pleased with our results for the fiscal third quarter, which includes 10, which include continued profitability and strong gross margins.
Profitability for the quarter exceeded our historical business model, reflecting higher than average consumables as a percentage of total revenue.
Yeah.
Despite the current challenging global environment, we remain engaged with a large number of potential new customers. We continue to see a substantial number of customer evaluations of our Fox and T X P and see products to address their production needs in test and burn and on a number of applications.
We think this is the combination of so many of our customers engineering teams have any more time or more focus to work on improvements to the production processes. So that they come out of this environment stronger than they came into it.
Because so many of our applications are related to the global infrastructure of I teach communications that a clearly more important than ever before and are being stretched to there's limits. We have several customers that are saying that they're trying to actually polin plans for new programs and new products as a result, the new demands on the world like communication infrastructure.
We're currently working with more than a dozen new customers for production wafer or die level testing Ben that includes silicon photonics devices for Fiveg and data storage farms.
Power Silicon carbide devices for automotive.
Sensors for mobile and automotive applications and memory devices for data storage and computing.
Our sales marketing and applications teams remain very busy supporting these sales efforts using online conferences videos and other collaboration tools.
During the quarter, we shipped an additional Fox XP multi wafer test and burn it system to meet the production ramp leading suppliers silicon photonics devices.
Customer continues to look to air to support their high volume production ramp in wafer level burn in capacity and to forecast significant growth in shouldn't mature silicon photonics devices that we expect to drive the need for additional production test and burn and capacity for multiple years into the future.
As we talked about on past calls as our customers moved to high volume production Touchstone <unk> Fox P systems, we see their ramps driving significant incremental capacity of both our systems and also our proprietary waferpak contactors and die carriers.
When they buy a Fox XP your NP system from us. They also by a set of either wafer pack or diapers contactors that'll allow us to make contact to their specific and unique device design.
These consumables are needed with each new device, they introduce or with each device shrink or new design.
During the quarter, we received orders totaling more than $2.9 million from our installed base of box test and burn and system customers for our wafer pack and I've got consumables, including orders from a single customer approximately $2.3 million for die packs for test and mobile sensors.
Their device applications for these orders include production tends to second carbide devices flash memories and silicon photonics devices.
Shipments of our consumables for Fox systems accounted for 51% or total revenue for the third quarter.
As I've noted before the consumable business continues long after systems installed and that as we go our installed base. We believe we can reach a point, where our wafer pack in direct contact Kim succeed over half of our annual revenue providing stable baseline right.
Oh overtime, we feel that the percent of our business made up of consumables will grow although it will still be it will still Barry as a percentage total from quarter to quarter.
Turning to our packaged part and OEM chamber business as I noted on our last call. The low level business. We've experienced their package part business has been expected and there's already built into our financial forecast. We started to see some poor catchphrase renewed market demand for package part burn in systems from customers are asking us about our high voltage capability.
Okay, and adding this capability to our package part systems, we see the need for high voltage capabilities in both ways to level and packaged part now that's a new high growth opportunity for Aehr test.
These changes in our customer long term forecast for a package part burn in systems reflect a move towards higher voltage higher voltages and other requirements for for smartphone devices in automobiles, particularly with electric and hybrid album automobiles and autonomous vehicle sensors. As a result, we've seen a drop off in demand about older package part.
System configurations, and we're currently evaluating these markets.
Now turning to our guidance for fiscal year 2020 currently all of our customers had the wafer fabrication facilities open to support the critical infrastructure around the globe Globe information technology communications, and critical manufacturing sectors and areas able to ship orders for systems way.
For a tax die toxin parts needed to support these customers with little to no limitations or delays.
However, due to the uncertainty of the full impact of the cold in 19 pandemic on our customers, who simply cannot predict how this will impact our business in the near term.
And were taking a conservative stance to withdraw I previously provided guidance for fiscal 2020 year that in this may 31st.
Looking ahead, we remain optimistic about the significant market opportunities in front of house and about our customers and our unique capability to serve their test needs this year and beyond.
As we continue to focus on your selling resources and processes. We've continued to make some structural changes in a few areas of our company that we began last fiscal year to bulk position us for success in adjusting our new market opportunities as well as improve our efficiencies.
This month completed closure of our Japanese subsidiary and the transition away from direct sales in Europe moving to sales representatives in both Europe and Japan.
I'm pleased to know that with these changes we've always seen far better sales coverage of Europe, while at the same time, reducing our fixed costs in both Europe, and Japan by approximately $120000 per quarter beginning at the start of our fiscal 2021 year, which will start this june 1st.
As a result of these changes will be taking some onetime charges associated with these closures and layoffs of employees in those offices in our fiscal fourth quarter.
Lastly, im pleased to announce that we recently hired a new VP of operations, Michael Brown and Michael comes to US with extensive background in the semiconductor test industry in particular that printed circuit Board and assembly and probe card industries, where our traditional manufacturing spend is over 75% I told him today.
Michael is replacing David Fucci, who served as our VP of operations for the last six years and is retiring at the end of May.
We wish David well in thinking for his contributions during a pivotal time and airs history.
David <unk> retirement, it's been in the works for some time and we began looking for his replacement several quarters ago, well before the Corona buyers outbreak. We're excited to have Michael onboard to lead our team in manufacturing operations supply chain quality and inventory management.
To conclude we had three solid quarters before the world got hit I called it died cheap we increased increased revenue by 34% year over year and most importantly, turning to $5 billion last into a profit and we expect to get back on track once its crisis is older.
The fundamentals for Aehr test remain strong long term and we believe that we will emerge from this difficult period, even stronger than we went in with an even larger number of customers committed to using our Fox systems to meet their production test and burn in needs.
With that let me turn it over the can before we open the lines for questions.
Thank you gain.
Has gained noted our financial performance for the third quarter included continued profitability and stronger margins as well as lower operating expenses, reflecting our cost containment measures.
Sales in the third quarter were 6.1 million down 11% from 6.9 million in the preceding second quarter and up 93% from 3.2 million in the third quarter of the previous year.
The sequential decrease from the preceding quarter reflects a decrease of $841000 in wafer level burn in revenues.
Increase from Q3 last year included an increase in wafer level burn in revenues of 3.4 million.
Reflecting an equal mix of system revenues and wafer pack and AIPAC revenues, partially offset by a decrease in customer service revenues of 435000.
Non-GAAP net income for the third quarter was 452000 or two cents per diluted share compared to non-GAAP net income of 456000 or two cents per diluted share in the preceding quarter any non-GAAP net loss of 1.6 million.
Or seven cents per diluted share in the third quarter of the previous you're the non-GAAP results exclude the impact of stock based compensation expense restructuring charges and write down of excess and obsolete inventory [noise].
On a GAAP basis net income for the third quarter was 245000 or one cent per diluted share.
This compares to GAAP net income of 251000 or one cent per diluted share in the preceding quarter and a GAAP net loss of 3.2 million or 14 cents per diluted share in the third quarter the previous year.
The GAAP net loss in Q3 fiscal 2019 includes the impact of approximately 1.4 million.
Were 6.6 cents per share and onetime restructuring in inventory write down charges taken in the quarter.
Gross profit in the third quarter was 3 million or 49% of sales compared to gross profit of 3.2 million or 47% of sales in the proceeding second quarter and gross profit of 272000 or 9% of sales in the third quarter the previous year.
The sequential increase in gross margin percentage is primarily due to a change in product mix, reflecting an increase in wafer pack and AIPAC revenues from Q2.
The increase in gross margin over prior year Q3 is primarily due to the impact of 795000 in inventory write down charges, along with higher unabsorbed overhead costs due to lower revenue levels in the third quarter last year.
As we've noted on prior car calls or wafer pack and AIPAC revenues are accounting for more significant portion of our overall revenues favorably impacting your gross margins as they maintain higher margins than our systems or pass through products in the third quarter or wafer pack and Tite Pak consumables business accounted for 51% of total revenues up.
From 44% in the preceding Q2 and 46% in Q3 of last year.
Operating expenses in the third quarter were 2.7 million, a decrease of $216000 or 7% from 3 million in the preceding quarter.
And a decrease of 652000 or 19% from 3.4 million in the prior year third quarter. The decrease in operating expenses from the prior year, primarily reflects the impact of restructuring charge of 607000 taken in Q3 last year related to workforce reduction severance costs.
As Jna was 1.9 million in the third quarter down from 2.2 million in the proceeding second quarter and flat compared to 1.9 million in the prior year third quarter.
The sequential decrease is primarily due to a reduction in cost associated with new product introductions, including traveling so presale support activities and lower commissions from a decrease in bookings R&D expenses were 845000 in the third quarter compared to 795000 in the proceeding second quarter and 931000.
In the prior year third quarter.
Turning to the balance sheet for the third quarter, our cash and cash equivalents were 5.1 million at February 29 2020.
Compared to 5.3 million at the end of the preceding quarter.
Accounts receivable at quarter end was 3.5 million down from 5.2 million at the preceding quarter end, primarily due to the impact of customer deposits and deferred revenue on current quarter revenues and a decrease in revenue from the prior quarter.
Inventories at February 29th was 9.3 million down from 9.8 million of the preceding quarter end, primarily due to the consumption of inventory on hand at prior quarter supporting current quarter revenues.
Property and equipment was 783000 compared to 860000 at the preceding quarter end customer deposits in deferred revenue short term and long term were 419000 down from 1.9 million at the preceding quarter end related primarily to customer deposits offsetting current quarter revenues and the.
A decrease in backlog from prior quarter.
Bookings in the third quarter totaled 3.1 million.
Backlog at February 29th was 3.6 million compared to 6.5 million at the end of the preceding second quarter and $6.9 million ended the third quarter of the previous year.
Now turning to outlook for fiscal 2020 as game noted due to the uncertainty of the full economic impact of the coping 19 pandemic on our customers we cannot predict how this will impact our business in the near term and are taking the conservative stance with to withdraw our previous provided guidance for fiscal 2020, ending may 30 Onest.
In terms of operating expenses. The company has implemented cost reduction initiatives to reduce cost and align company resources for future growth action taken including dissolving or eight <unk> Aehr test systems, Japan subsidiary and reducing head count at artist system, Germany subsidiary, we expect to take a charge in the fourth quarter fiscal 2020 of approximately a one.
Okay, and $50000, which includes severance payments for individuals impacted the and the reduction and legal fees associated with these actions through these actions, we expect to recognize cost savings of approximately $120000 per year, starting in Q1 in fiscal 2001, which begins on June 1st 2020, we'll be moving to a sales rep.
Distributorship model for sales in these regions.
The company is maintaining.
R&D investments and enhancement to our products were automotive silicon carbide, silicon photonics and memory, even with descriptions in place.
Resulting from the coping 19 pandemic, our R&D outpatient teams are working effectively [noise].
She's me to meet.
Critical releases and customer Roadmaps. This concludes our prepared remarks, we're now ready to take your questions. Operator. Please go ahead [laughter], yes, Sir if you would like to ask your question. Please signal by pressing star one on your telephone keypad.
Speakerphone, Please make sure that your mute [noise] turned off to allow your signaled to reach our equipment again.
Star one to ask your question, we'll pause momentarily hello, everyone and opportunity to signal for questions.
Well take our first question from Christian Schwab.
Sorry about that I had an abuse.
Hey.
Guys.
When we go into next quarter.
And if this lingers for multiple quarters do we feel confident in our cash position and given the fact that some customers you you highlighted possibly.
We're talking about probably Didnt orders are those large expensive systems that you'd have to put into inventory.
Okay. So it seems like there's a couple of jewels in there let me let me start with them. The latter one that Christian so I'll remind people in it.
You know.
There's been a great idea all long and now it seems even like better idea. We do have policies in place with all of our large customers that systems and wafer pack center.
Purchase from us.
Yeah, we receive a 30% down payment upfront to secure the order.
That allows us a significant ability of the way to meet all cash flow requirements to be able to build.
You know qualified and ship those projects to those customers. So if we get customers and orders in for things that we don't have on hand in inventory.
Mediated mentioned early reads, we don't need cash for that for say keep in mind that die taxing waferpaks. Although we do have sub assemblies that can be coleman, our unique to them, but we've also found that substantial amount of work during the last nine months actually something we probably should spend more time than I'm getting their lead times downs and.
Now, we're able to meet lead times for wafer packs and die packs at eight weeks and less which allows us to do quick turns that include that assembly test of all of the material and out the door. So that minimizes the cash requirements for that and keeping in mind, you still get down payments. So.
Your next question is just in general.
This thing extends how are we doing for cash use banks won't be surprised that we've spent a lot of time just looking at that understanding you know if we need to hunker down after an extended period of time, what that looks like I mean, why do anything that we're trying to get orange I'm completely on the models right. Now is that you know we do.
Hey, how are believed to be sustainable global base business. In addition to the support contracts that are done annually.
Our certain support business tends to be about a million dollars a quarter and then we see approximately $2 million a quarter of additional revenue that comes in as based mobile business kind of and I can always be careful same worst case, but the worst case and even at those really low levels given all appropriate.
Consistent.
I'll pay cuts or temporary Ah Ah pay cuts and things that we've done in the past, we think that our cash position long, that's you know inside plus quarters easily.
So our and that's without taking any I caught you know really drastic action. It also means that you would have to be it sustainably lower levels than we're expecting forecasting.
Getting that entire time. So you know you also mentioned that customers are pulling in the Mets. It's interesting I mean, we had a customer within just the last couple of days.
On a new application Paulson asked for eight week lead times on something so they really are you know we wake up every single day. In fact, we have a daily conference call with the executive staff every single money to view you know the health of everybody and go all the way down all the things that need to be accomplished but we.
We have so many customer engagements right now better keeping us getting busy the conservative next which is eventually going to be one of the questions. What is it I mean.
We have so much activity in so many customers that are talking up a storm about things they want to do but as you guys know when we get large orders. We report them soon the absence of reporting that means around things like orders. So you just taking as it stands right now to just be as conservative as we possibly can going forward.
With that same time, you hear this level of optimism in our voice, which seems inconsistent with respect to just the environment, but it's indicative of the customers kind of pushing really hard to get more products and pull things that.
In a in an optimistic scenario I guess my last question a follow up is it is there any new customers or <unk> or new customer applications for existing customers that could lead to you know.
[noise] meaningful revenue in calendar 2021.
Can you give me some a longer term or there's some big deals out there as I kind of like Oh, Yeah. I mean, he gave you highlighted a lot of you know opportunities in and a lot of different verticals.
I'm just wondering in a lot of customer engagements that you're having daily meetings about I'm just wondering if you know.
From a gauge bins will happen others will not but you know is there any is there any is there anything out there that you're like Super excited about from a revenue perspective.
Yeah, Okay. So I mean, there's two things one of them is the piece. It is sort of I guess you wake up every day and read the news that is maybe surprising is the number of engagements with people that are talking about things they will ship in the summer or sooner or small or and so you know again.
You talked about 2021, I'm talking about customers talking them. All you know ramping in pulling things into this calendar year related to next year, Yes, we actually we've talked about before yeah, we booked to deal with they all our first Fox CP customer, which is the integrate.
Global Beijing, So what we were kinda elusive mine, but it's a data storage data storage application that is a you know enormously large unit volume.
That we have believed they wouldn't start to kick in their production volume and need that need would drive how city of Fox CP test cells on that right now we see could start towards the end of this year and be a 2021.
The study there the major whereas if you will then.
We have engagements on multiple mobile applications that in clean you know things. This summer. That's fall believed next I know there are some things that potential there that has more upside than most recent couple years that we're talking about.
And then the silicon carbide customers that Reengage with right now you know the unit volumes around the silicon carbide, the long test and burn in times and the yields implications improvements that were able to give people seems pretty exciting that can move the dial and of course, we spend a ton of time talking about the silicon photonics customers.
And everything related to Fiveg and the data storage and that's probably you know.
The bulk of than more companies that are saying I want to pull in Poland polin, because they're actually being asked to put more infrastructure in place.
Now, let's accelerate the stuff that's going on with the Datacenters or the Fiveg infrastructure.
So.
You know there along there's a mix of things book this calendar year next year.
Very promising.
Great no other questions. Thank you.
Okay.
Thank you we'll take our next question from John touched one. Please go ahead Sir.
Yeah, Hi, guys. Thanks for taking the called Josh.
First question is this quarter.
No. It was maybe below consensus leasing so you know that quarter ended in February was kind of three corona.
It'll down sequentially. It sounds like things are going really well it seems like things have been going really well things been trending right direction why the trend.
This quarter.
Well I mean, just.
Just by the numbers right. We ended up with that backlog. That's three six says that Ken Yes 3.6.
Yeah. So we you know we start off you know March 1st.
With the backlog of 3.6, clearly if we don't get more orders, we would only have three six to ship now we absolutely how assistance and P. X P. Die packs wafer packs that could turn within the quarter.
But as the quarter draws on the question is are they going to come in and time to come in this quarter is gonna be moving into June and you know customers are talking up a storm about I mean, it orders, but you don't I'd like to see them.
I think that's really where the satellite as a board just a few days ago. So you know what do you what do you do how do you just slide.
Or end of year, when you kind of things that can shift between may and June and so we just said lets just pull it off the table people you know I mean, just sit here and be extra bold right now would seem to be completely against the grain.
Yeah, we could still have a good quarter this quarter.
And we could how that's called school.
[noise] [noise], but for the quarter that ended in February.
It was the weakness in that quarter because the question I'm trying to answer is are you calling guidance because of uncertainty of recruiting like you're saying who is there already some softness.
In the quarter in February that I should be concerned about that's a red flag outside of the Corona virus uncertainty.
Yeah, I mean, we certainly have had pets demolished.
We were expecting some orders and likely late in the korbel <unk> for shipments and in Q4, even some mortgage that potentially could it come in trendy and.
The Corby all that didn't come in.
And you know look trying to get L. Armstrong is it you know can we point to specific things here, who own them virus related I would say mode more could we specifically 0.20 exactly why someone ramps are you know shifting lost or customers that will implementing any placeholders immediately didn't.
I can't help but feel that you know leniency. He always just wondering is this something absolutely positive won't get pulled the trigger our mall or can I just wait a couple of weeks or something but one thing that we're not seen and you know that the warm so going away.
Oh I said before.
Anything we could be it's.
Given such a different place I mean, I get we get weekly calls in some cases twice a week from key customers, saying you know you're still fine can you do a deep dive on your supply chain are all yours suppliers still overall you know we're forecasting these needs. These ramps and you need to tell me you're gonna be.
We'll ship to me.
Right and so you've got that going on at the same time that you know, obviously well there's something come in that'd be consistent with one all regional guidance. When it then just finish the year.
So.
Yeah, I I feel I know you said, it's not like well a restaurant and people are coming in he wants to him because at home abolish she can't point specific to that I think it does seem to be a general cautiousness going on in capital equipment out there that I feel like we own field.
And so the the caution cautious guidance as opposed to be.
[noise] softer quarter is really your pre orders won't show up is it it's not do they if they all showed up could you get it to them.
Sounds like there's lots of activity, but <unk> <unk>.
I.
Oh I could ship more this quarter than last quarter still to this day, we had additional studies that show up today.
Hi, I held in inventory in material to be able to do.
Well, let me give you an idea a bit sensitivity.
So it's you know, but you'd give you wait 345 more weeks and when you can't.
So game can I, just something here on the mix makes a difference so keep in mind AIPAC, we packs or a more custom products. The lead times are are much much longer relative to our systems that we have in house and on hand, we actually even have a marketing lab that we've built up over the last several quarter.
Others that we could quickly turn a system order of any configuration very easily by the end of the quarter as long as that order came in.
Yeah.
So it's more order nervousness.
Then it is yes [noise].
Your ability to deliver.
And that's not due to activity it's just.
Earn that that activity might not turn into an order is there something concrete we do because it sounds like everything you say.
Gee, we're on fire Oh, My God. So we're all going to try and connect that were on fire. So they were pulling guidance, whether it's no cancellations that whatever it is is there anything.
Yeah, I mean actually back very specific question I want to answer we have had no cancellations.
Right.
We've actually had no pole push outs in everything we haven't backlog the questionnaires and called US and asked if we can ship caster.
Oh, you, you're pointing out that backlog isn't very big we even have customers that haven't given to see orders that are asking us to ship faster I don't want conversation.
Oh so.
Yes, it would seem inconsistent and well just trying to give means log data as we possibly can I. You know we had anticipated hobby you know a really good core business flows and so all I can help believed the only thing that really makes sense examples cautiousness.
People just trying to hold more won't get your home you own things.
It certainly feels I think we would but we wont else we get through this thing you know all business when we come ball.
No.
Just as strong as normal.
Like I said, it and yeah, we try to add to color behind it I mean, we've had an up tick in customer engagement.
In the last three weeks.
I mean, I can probably think though for fine.
Like you know like where are these guys painful.
And I mean, there's certainly a sense that they've had time in their hands, maybe others. They are people that are saying you know what we've got to move towards games. So we've got a pool. This week. So you know what can you do you know can you test these parts and the answer them indicates <unk>, yes.
I will talk in it we could build it we don't you know where the customers. So we can't yeah. We can't travel can we do that video conferencing and get a demonstration of your equipment.
Pretty good at that SAP, it's kind of interesting.
Okay last question.
The Americas your answer [laughter], I I could probably a super clear time I understand so you're the linear Tia this quarter I mean, I know your standard.
You know half your business or something is in the last month I don't know if that's correct number but.
I don't know any any thoughts on linear to your book and ship in the quarter <unk> and kinda one you'll know so I will then.
I will.
To it has it is very typical for us to have a disproportionate amount of our bookings in the third month.
You know often more than half, okay, and then it kind of repeats itself because we ship everything we can before the end of the quarter and then maybe actually sitting around tumbling. They thumbs up in the first month that is very tool this quarter.
In fact, explaining you know.
Thank you all but stay at home directives had been olmos and felt by us.
We've not had any restrictions yet we actually don't I hope everybody in the office right now, but anybody who needs to be is now.
And so.
As we get towards May we're already planning that you know manufacturing floor is expected to be relatively full and we've been really distributing.
Our Bangkok and wafer pack labs, the other manufacturing quarters to actually make room. So that we can keep our six feet distances well talking through how are we going to be creating up. These systems in may when you know it takes two people to move or a tool and how well we think to that so that we could maintain social distance to the same time that youre going to Scott.
Senior manufacturing takes coming back and filling up the place.
Okay. Thanks, guys. Good luck.
Okay. Thank you.
Thank you well take our next question from Jeffrey Scott.
Please go ahead.
You don't forget gauze <unk>.
In a long time, Hey, Jeff talked.
You take forever.
It seems like Pennsylvania, so going back to last quarter you reported a.
So photonics to customers in high volume production is it still three or.
Have you added one.
[noise], So I think I might have chosen the world production, because you know one center higher than others. So I don't want to get to Ken's. Let me just think through here I have.
I still have I think we still gosh I wish there in a little here I think I know, there's three or silver production and I believe we have another one that might be shipping parts off that might be for.
Okay are all those customers using a fox to solve the same awful.
Or or the problems unique to each of those three customers.
Well, they're slightly different but because they listen and I want to be careful that so let me make it generic no [laughter]. They all are they all at San Juan problem of what we would call aging stabilization.
So it train ball that all silicon photonics chain Chico's see output laser itself.
It during its first 24 to 48 hours of continuous you use an operation the out efficiency drops in the power. Therefore for the in power you get less output power, that's a big problem with multi channel fiber optic communication Transceivers you can't.
Each of the four lanes or a wave likes think of colors and different powersports, they all need to be balanced pay or else you lose bandwidth.
And so they all specify the output power to be stable overtime, but maybe you can do that one of the manufacturing process steps is they need to stabilize the lasers, which are two bells.
They always happy with the traditional device so lets them discreetly.
And it was down 10 or age in most cases home home.
Well test base in big rooms, and they were having placed in it and 48 hours later, you would come back and nothing has age and then you tested and it's been it meets the certain qualifications you pick it out and you can place it into these transceivers not keep in mind. These transceivers for these types of thing its.
Ones were $700 $700 $7000 apiece.
Are you.
Julie if you will in Silicon Photonics that you don't folks like the Intel wall, all claiming if the scalability and basically taking silicon wasteful, creating all the transceiver components on it and then effectively older lane or attaching the laser.
Processes, so that the laser is directly attached to the second.
The trick is those lasers still must be age or stable.
And what we do because we can stabilize them in wafer for them. We test all the way lasers, no single wafer thousands of them in parallel which skews. It allows you to maintain the cost effectiveness in the scale duty wafer level silicon photonics devices, so it isn't enabling capability.
So in all of our customers, we're doing that stabilization of those lasers and when we talk about sole consultants devices no. Each of our customers also slightly different things in terms of test and other types of functional infant mortality put four.
Comments related to specification that are unique to them.
That makes their system more valuable to them, but they're all a little bit different.
But the it's the stabilization Crocker, which is kind of the most valuable a.
Problem, that's being solved black Fox.
I would say that that's fair and since the facts has mr. extending some capability to discern every single device. Good from back all the customers are taking advantage of that but it would be fair to say if it works for them using it for stabilization there probably what they've done that other test.
Okay fair enough.
In Q2, you you said that you had a new customer for silicon carbide customer for automobile applications.
Was high voltage high temperature was that a one C or was that the first of a potentially more orders.
We believe that is the first more orders and not less than 18 wafers system [noise].
So you know that tool itself has the ability to test 18 week was at the time.
And my beliefs my understanding in last nights, a report and they're running 16 or 17 wafers at a time right now with that mix of wafer packs and they have more or more and more planned.
Well.
We're going to happen forthcoming.
False that was what we all have to say be too.
That's okay.
In the <unk> business highlights today, you said that you shipped an additional Fox XP.
Core of Silicon Photonics was that too one of your original lead customers are not.
Yes, yes, there was <unk> and.
And then we had we had announced the order before I discuss try to explain you know where did the $6 million come from.
Yep.
The mobile sensors again was sue to lead customer right.
It won't see wait for wafer packs and bypass the order the order the order it says yes.
[noise], so big chunk of Donald will those orders were shut off and you could imagine that that would be something that we would be scrambling to be should be right now because the leaving us up everyday people them quickly if they can.
Yeah, but they're they're reemergence was was not definite for fiscal two.
2020, it sounds like their activity, it's been accelerate that fail.
We actually they have been forecasting that store a wall.
In anticipation of a periodic need that we think it's pretty were getting in every single year.
And it did come in so in that sense I wouldn't say it will certainly model Blue book, We were building die packs for them throughout the fall we were critically important every single over they've given us they've been proxy nuts fish quickly becomes possible.
He did not the only engagements with <unk>.
And our mall.
Okay. You said you were engaged with more than a dozen potential new customers.
Yes that is a continuation of that doesn't do customers that you were engaged with a quarter ago right.
[noise] I have to think through what Matt themes, but for I think it can't be fair we have.
Yeah, we've only announced one or two new customers during the year.
[noise] you know what is the customers is interesting one of the ones that came back. This last week had Oh, we're engaged with my family and they we haven't had explained to me that they could fall off in decided they're going to try and do it and package that which we understand we sell package systems to.
I'm taking back.
So you know how and how can do my math I do force myself to count all all all we do this whole the audit committee whenever we see that together [laughter], maybe I think there's a tall or something.
I'd say, there's like 14% to more than what we had said with greater than that.
Yes, so again and they didn't validate that from our press release that there was more than 12 and I do have the list [laughter] child care. He can talk to [laughter] I know last quarter, you talked about solar panels.
So any uptick when there.
No I mean, the only thing that we specific we know that there's an application out there in that so we can flip <unk> I'm, sorry, silicon carbide devices.
Are particularly good in the solar panel power conversion.
Yes. So do you typically device applications you know one of the big ones everybody's heard about is you know Tesla uses those in there I love to cars all the electric cars are gonna be using silicon carbide.
Motor controller systems in power systems and that will show.
But I think any big ones is actually all the solar power conversions.
But that will not doing anything related to panels themselves or the electrical Bobby on the panel, we don't have anything like that.
Yeah I was I was surprised to hear you talked about last quarter.
You kind of surprised me a okay. That's all I have for right now I'll, let somebody else jump on.
Thank you thanks to.
Thank you we'll take our next question from <unk>.
Please go ahead.
Good afternoon gentlemen.
Hi, there.
Several customers are pulling and plans doesn't include any systems or is that mostly consumables.
Both.
So both yeah, I know I had I had one that's asking for a wafer packs and bypass and plan to use it on their claim system and I have some better new customers said they'd be new systems, and new wafer packs and ballpark.
So what do you when you talk about that as I would like I'm pulling him.
Then the next three months or is it still further old or how would you define or I mean, one certain I mean, we.
We just signed all the MD eightys and everything within the last 48 hours and asking for eight week lead times.
So it's a itself.
So it's kinda that'd be a system or that was actually that was actually want to back that was one of the past things one of them all the consumables.
We held.
Yeah, I mean, I have a customer that is they've been talking about that there and customers pulling in some fiveg infrastructure requirements.
And increasing their forecast to them and they are.
They have a ramp yet so.
So I want to will be an example, where they will absolutely need additional capacity of systems and they could Pakistan.
No.
Good.
Did did I answer you correctly, and saying or your pipeline is 14 potential customers right now are good <unk>.
Yeah, I mean kinston in Fox in talks related I think I talked about 14 more than that I wanted to make shown as our members a couple more.
And then we actually have.
Probably another half a dozen package can actually haven't really been talking.
<unk>.
<unk> of those 14 or how many of those would be in regards to silicon carbide.
I haven't namely but.
I.
I actually probably didn't want to do that because eventually get got down to <unk>, you're gonna. They asked me memory. So on all [laughter] actually that was a generic right right. So you're going to stay very generic they know because for all kinds of.
Reasons, but is multiple of each.
More than one.
And two in every one of those categories.
I know in the past you mentioned that the in that pipeline three memory.
Central customers, but unlike in the past the you did announce.
As per the 2.9 and total consumable was recently the one <unk> included a wafer pack for a flash memory potential customer. So somebody had another thing I want to you.
Good.
Yeah, Larry I don't I actually don't what you're up particularly.
Aware buyer of details are getting that I'm going to be they specific so that was not fair eight new customer.
Correct.
That was the one that's around that was or what.
It's it's one of our installed base customers only.
That one of the name.
Okay.
<unk>.
Were where do you stand automating <unk> I know your you said in the past that a you're involved in designing automation the automated.
Let me.
Actually tone, Larry I bought I, let me jump in on that actually I want to talk about my that features on that at this point, well and that pioneers the competitors and things like that to our yield.
Yes, I know that we have generic we talked about Oh, you know at some of our public events and things like that that we absolutely see customers asking us to do more and more automation.
And we and you know how do we take our products that make them more production, where they used to that they can't even got a higher and higher volumes and doesn't things that we are spending ammonia.
I'm a little bit though.
Okay and.
The you know.
The data centers are obviously.
Working overtime with somebody people at home working from home and you know burning up the internet.
Do you see.
Maybe additional business from maybe your existing customers onto silicon photonics side or.
Maybe a.
Maybe these policies.
No I turn it feels like I I think I mean, I know very specific theaters fiveg infrastructure has been towers, because I think and and there are as David said things, though you know people are not pulling back them up.
Yeah.
So those are you know that will bode well and I think what were seen as you know there's sort of on the you know.
The wild West of everybody My brother washing in train do silicon photonics, because it just at a price point. It. So you start to where you know shifting where it gets fiber optic bandwidth is as cheap as copper.
You know it change you know there's all you can build <unk> is definitely like Intel is 100% supply limited.
There's not enough silicon photonics out there every one of them be bought up.
So.
Yeah, there are people big and small doing all kinds of things to try and put more.
And getting once the Kathy.
<unk>.
One last thing on on a memory.
So you still have three active central memory customers and their pipelines.
Did you did you quantify that.
Hi, we we are actively engaged in that multiple.
Memory suppliers on.
Ah roadmaps related to wafer level burn.
And as or any kind of timeframe on that the were my be kicked off I would expect that Oh I would have to.
You know build.
A wafer packs.
To a total about you're talking about them.
I will I believed that this is something that would be for a.
I see this is like a 2021 problem.
And as we get a little closer of engagement. We can kinda narrowing then that would be a we are actively spending money in R&D with respect to goes not products.
Hmm this quarter next to each quarter throughout this calendar year.
<unk>.
All right. That's all I had look you guys.
We're excited to catch up there on one of those okay. I appreciate it thank you.
Uh huh.
Thank you we'll take our next question from Tom Diffely. Please go ahead Sir.
Yeah. Good afternoon, I'm curious, what you're seeing in supply chain right now because if you were at full capacity would you be having any kind of supply issues.
Yes, so we didn't really paranoid about bought as well and for the most part all did you know distributors and our subcontract manufacturers. All open let me be more specific it's pretty much everybody is we have a couple of small all mechanical assembly guys here.
Staffs to provide them with links to our letter that we kinda website all related to our all positioning as a critical supplier of critical infrastructure to basically as part of their justification to keep chipping you know upon demand and everything we've actually how.
Little or no direct impacts related to this every everyone that we have which is able to ship within their extended lead times.
That's great I mean, it seems sort of confusion, but many of our sense times are yeah. When we I talked to pick up on top of won't listen we're directly involved with military [laughter] or were you know it wasn't even you know where a contract manufacturer to a capital equipment supplier to semiconductors that important dry tea, which is sort of it.
Action that's normal they like Yeah, you know the government mistake U.S. detailed [laughter].
Oh, sorry, I'm, so far that soon.
Yeah. So can I was excited when do anymore.
Sure I'm kind of just one more on this so the other thing is we had basically zero supply chain check right now.
All of their critical infrastructure the call all of our critical components we have.
Things in place the dual chefs seen long before this and quite frankly, when they terex kicked in last year, we placed their last order with something out of China last February.
So we actually as things got ugly and personality like you know when all talking about China, It's a worldwide crisis, but at that time, Yeah. We were already had dual source or something so we've been able to.
Oh, CIS things without a critical supply Oh im not quite atone okay.
No. It's helpful. So can I was wondering when you move to a distribution model for Japan, and Europe, what does that due to your internal models that impact margins either grocer operating.
[noise]. So it does give us a little bit more flexibility from about variable cost standpoint from an overall margin standpoint, it's not going to make a difference that those costs will hit in our operating expense sales and marketing area, but it really moves from a fixed cost structure to a variable cost structure, which I think will ultimately benefit our bottom line.
[music].
Okay. So even the the rate that the distributor gets a fairly similar what's your opinion internally though.
Correct.
Okay. That's it thank you.
That's helpful.
Okay, that's either in or further questions. It's time I would now like to turn the call back to management for closing remarks.
Okay, one just give anyone in the second chance anyone else.
Yes, Sir and as a reminder for anyone that we'd like to ask a question that star one.
Okay.
Yeah, No alright, well folks I really appreciate you taking the time to to listen when we actually had a fairly long list and we appreciate everybody calling.
If you have all the questions I almost I think I've always said that this but if you're a town stoplight that this would be the time I'd tell you don't all [laughter], but we'd be happy to set up video complaints or something else. We've gotten exceptionally good at that and answer your questions as you've made it everybody stay safe and healthy.
Okay. Thank you very much point.
Thank you ladies and gentlemen, this concludes todays teleconference. You may now disconnect.
[noise].