Q4 2020 Aehr Test Systems Earnings Call
Good day and welcome to the Aehr test Systems' fiscal 2024th quarter and for your financial results call. Today's conference is being recorded.
This time I would like to turn the conference over to Mr., Jim Byers of the MTR Group. Please go ahead Sir.
Thank you operator, good afternoon, and welcome to Aehr test Systems' fiscal 2024th quarter and full year financial results Conference call.
Today's call, our Aehr test Systems', President and CEO, Gayn, Erickson, and Chief Financial Officer Ken's thing.
Before I turn the call over to gain it can I'd like to cover a few quick items. This afternoon Aehr test issued a press release announcing its fiscal 2024th quarter and full year results.
That releases are 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 can be archived on the <unk> will be archived on the Investor Relations page of the company's website.
Like to remind everyone that on today's call management will be making forward looking statements. Today that are based on current information estimates and are subject to a number of risks and uncertainties that could cause actual results could differ materially from those in the forward looking statements.
These factors that may cause results to differ materially from those in the forward looking statements are discussed in the company's most recent periodic and current reports filed with the FCC.
Forward looking statements and putting guidance provided during today's call are only validated just days and Aehr test systems undertakes no obligation to update the forward looking statements.
With that said I'd like to turn call over to Gayn, Erickson, President and Chief Executive Officer.
Thanks, Jim and take out going into those joined US on today's conference call and also what she'd online.
I will go over our fourth quarter and pull your financial results later in the called the personal they spend a few minutes discussing their business highlights included our continued problems for the wafer level and Singulated die casting blunt solutions and then we'll open up for your questions. This past fiscal year, we made substantial progress would I be blocks plavix it strengthens our customer base substandard.
Markets and enhanced operations in sales capabilities to capitalize on the significant market opportunities we see at home.
Sure I try what we were on track to meet our expected guidance for fiscal 2020, given the challenging global environment and uncertainty around the cold it sounded like we experienced push outs impossible task orders that are second to school high school bus floor blocks to systems and consumables in data center, which in Fiveg NVS applications for Silicon Photonics Transceivers.
He's touched most had indicated the push outs for temporary that's double acquired the additional system capacity and consumables in the current there's still 20 Twond yes.
So called me could you tell supporting our optimism, but want to quickly state. We are we getting stating guidance and expect Didnt expect like 21 full year revenue to be between 25 $28 million.
Okay, 26% and to be possible 30 years.
With the increase in number of customers and production using her systems new market opportunities. We added a new customers. This year, a move towards higher margin talk systems and consumables and the completion of our previously announced restructuring and shales enhancements. This past year going forward, you're well positioned Kate.
Such a new market opportunities.
And are now pocketable at a much smaller government level.
Let me walk you through some of the key business highlights for this last quarter in for the last fiscal year as we outlined in our earnings release.
First highlight we closed to new order with a major new customer in silicon photonics during the quarter or close to a mission order with a new customer that is a major global leader communication Transceivers for data centers telecom and Fiveg and construction FOLFOX full wafer level test embedding system for production stabilization and tested there.
A couple times devices.
This new customers deploying or Fox XP system, well initial production blending and stabilization about high performance Silicon Photonics devices and is forecasted to Ben transition towards Baltic Sea wafer level test and burn in systems going much for school year 2021 to meet their volume production forecast.
We categorized as customers are tier one customer, which is defined as a customer because resources and market size to be able to purchase $6 million to $10 million.
For your or more of our system some consumables.
The next highlighted as we closed in the initial order with the world's largest osats.
During the quarter, we closed an initial order with the world's largest outsource semiconductor assembly and test supplier to use the Fox P family of products, including Air wafer packs and died watch what production test pardon My wife, all these screening device you get full wafer singulated die a module.
They have already out in our system to benlysta tools and capabilities more marketing channels material to their customers and we got to be done some cross marketing and sales activities with the state changed some more updates and announcements.
Next era added a key new market with the addition of wafer level blending of silicon carbide devices.
This year, we successfully kept in check water poor and installed of course production capacity for silicon carbide devices, including.
Including internal listed markets, such as Silicon Photonics TD in Threed sensors automated lasers used in place devices, and im showing the value and feasibility and using a box solutions to address these markets.
Emission system order, what squawk box multi wafer system.
Hey, wafer packs and she could suggest 18 wafers in parallel adopt a thousand walks Apollo per wafer and the customers using it for one other person production burn an infant mortality screening that's something called like devices that maybe for level.
It seems so we can tell that application with the fortune 500 market leader in Silicon carbide Impella models, that's a significant new tier one customer.
Although the Fox XP system and they for patch the whole they can burning and infant mortality screen that silicon carbide devices.
[noise] since our initial installation in January we received multiple follow on orders for additional waferpaks from this customer, including multiple new designs and now have a significant number of different devices that have been reduced into production.
This customer is forecasting additional capacity needs for Fox XP systems during this fiscal year.
Some of the teacher.
Sure thing called like market semiconductor device market is slowing a tremendous state with a unit growth of high powered devices of over 50% Cage or are you. All these search I'm 2019 to 2025.
So can probably that said very impressive material for high power and put you pay a high voltage devices for applications, such as the needs of electric and hybrid electric vehicle powertrain.
Electric vehicle charging infrastructure I T data center power supplies and noble energy power conversion, such has been sold or as well as poor holler storage. These devices and shown reduction in power losses as much as 78% and many articles have been written about this person mainstream usage silicon Paul bite the bullet power devices backward.
The cast a modest suite, which and enable much longer driving range for charge.
This is basically change the market that most if not every electric vehicle hybrid electric vehicle automotive company moving to Silicon carbide based salad trained and charging system.
The challenge is a liability silicon carbide is known to have high infant mortality rates, but after reliability Bergen screen. He's defects can be completely would move to provide extremely viable devices for these mission critical applications.
Yeah, I was able to provide a complete solution for one of the keys liabilities to each house on them entirely sort of devices. All at one point well testing in monitoring every device. So he is doing the blended process to provide critical information devices that they won't make a packaged into multi die modules that the yield impact is kinda next 400.
And just losses.
You always searches forecast of over 600 million yielded power MOSFET 20 want equivalent bikes is shifting per year by 2025 equates to over half a million wafer starts per year, which creates an enormous opportunity for wafer level Singulated die systems, given the long duration, that's hard to burn and they did.
Hi usage entered the moved it to the pipes.
Pardon times can be as long as days per wafer so even at our industry, leading 18 wafer per system capacity Fox XP, that's a significant number of systems.
The next how it's pretty important.
20, we saw the industry adopt production wafer level burn.
We made significant progress with our new flops products the waste once you've laid back test and burn injury. So you will see tier one tier one customers added in five customers transitioning keep production with 100% stabilization Olympic mortality actually with our Fox systems.
We saw silicon photonics customers need to production for the first time and Justice last fiscal 2020.
Fiscal year, we saw elite cast motion for Silicon Photonics moved the coal volume production.
We expect them to purchase additional systems this figure and into the future as they continue to maintain or grow their market share and add additional silicon photonics devices to the mix.
We also need three additional silicon photonics customers to production that I thought systems, there's still plenty.
All three of these customers are expected to ramp production being this there's still plenty long as well, adding capacity in both systems and consumables.
Near the 15 year end, we announced yet another new film Silicon for jobs customer that is deploying a fox XP system for initial production bring in that stabilization of the I phone silicon photonics devices and is forecasted to bed and transition trail Fox XP multi rig or systems during the fiscal 2021 to meet their volume production forecast.
[noise] Silicon Photonics devices are highly integrated silicon based semiconductors that have embedded or integrated the non silicon based laser transmitters and receivers to enable smaller lower cost higher reliable alternative to traditional fiber optic transceivers historically [laughter] fiber optic transceivers are made up.
He just said magic I sees multiplexers be knox's external discrete lasers and mosquitoes in jail mechanical package that is used in data center in telecommunication could tell can you should telecommunication infrastructure.
Basically this is getting a high speed transmission lines for long haul and datacenter to datacenter back ended the internet.
However, these fiber optic transceivers had been extremely difficult and expensive to build.
If it's been seen as I'm limited to the adoption. The fact that credit switch that data into the maximum data rates and transmission in the data centers that store the world's data.
You know research has stated that market leaders like Intel Cisco Luxco products in fight and Acacia are setting the standards for 100, 200, 400, and even 800 gigabyte transceiver standards based on trends either it's fully integrated silicon photonics devices. While many other companies are also jumping into that.
Next let me Mark.
One of the key claims at these transceivers other lower manufacturing costs and the ability to scale manufacturing due to the full wafer level integration of these devices, which begins to scale the semiconductor manufacturing to fiber optic communication for the first time in history.
The airports in is that these devices all need to have their photonics transmitter stabilized under high power and temperature and also customers. She leaves our systems to screen infant mortality of these devices to ensure if I understood quality and long term reliability.
This is a manufacturing step down on 100% about in the case of Silicon Photonics, we provide a much more cost effective and scalable solution for this fat and doing this equivalent stabilization in student outcomes of die are put into the final piece would be substrate package.
The silicon Photonics market is growing Medicaid your 42% between 2019 and 25, two or 3.6 billion dollar annual market and we believe that the entire industry will transition to make the level of singulated die because its critical manufacturing stuff, which is where our Fox P products stand alone is the most cost effective solutions.
In a portfolio patterns and IP answer.
We estimate that the market opportunity to weaker stabilization I believe secret many contractors for silicon Photonics is approximately $150 million my 2025.
Well over 300 wafer test capacity required by that time.
Fox XP production system is the only multi wafer system available to test and burn and B type poly silicon, sometimes wafers in a single insertion and we can track stepped in nine 2000 won't Lakers apparel single system.
The total capacity needed by 2025 is about 35 of our main later Fox XP systems to put this in a percent.
To date Air has shipped about 50 wafers at capacity in that there's application.
Interestingly, whilst it fits the 20 was the first year to see volume production silicon photonics to take a level burning.
Like 20 also saw second half push outs in silicon photonics ramps.
We experienced push out some costs more forecastable orders intersecting Central House, Oh sit still 24 o'clock systems and consumables in data center, and some fiveg and use applications for certain photonics transceivers.
He's casket moves as I said before had indicated the push outs are temporary another acquired additional system for parts and consumables and the current fiscal 2021 year.
Our next highlighted shipments of consumable is more significant percentage revenue this year.
Getting the type of comprised of our proprietary Waferpak Contactors and <unk> carrier consumables for Fox systems accounting for 48% to total revenue in fiscal 2000.
In fiscal Q4 would treat just standard our consumables I can do that 79%.
Anticipated customer orders for systems did not materialize customer demand for the consumables for the installed base systems held steady.
As we stated in the past historically consumers can often soften any weakness in systems, that's customers contemplate new capacity, but maintain in some cases actually increase the need for me Waferpak Contactors and died at carriers to get me design ticked devices aftermarket.
In the semiconductor test industry, which was just over $9 billion total last year and 29 team.
This is made up about $3.7 billion in test systems, another $3.7 billion and consumables such as probe card for contacting wafers and sockets and watch the contracting package part and then another $1.7 billion, a semiconductor device handling equipment in wafer and package for.
With Airbus Fox product lines, we play actually in all three segments. Our Fox systems served the test systems market, our wafer packs and bypassed showed the contractor controllables market and our liners in the box system themselves that had been integrated thermal capabilities of the wafer prober, our turnkey solution for handling devices.
So the consumable business as a whole is approximately the same size and often higher than the system business in dad years in the overall semiconductor test business again, both about $3.7 billion.
Well I've only been bargains stage, which we primarily playing the consumables can be two to four times year annual sales and systems as a systems typically are used for longer periods of time.
And you will need to the new Contactors and consumables. This is why we're confident that a console business is likely to see the overall systems business over time, even though both will grow in absolute dollars.
Our next highlight is that areas currently can gauge the ball, but that's a new potential customers. We're currently working with well over a dozen additional tier one in Turkey customer instead of considering using our products for high market growth applications, including Silicon Photonics Silicon carbide automotive and then move.
Since production burning.
All tier one customers it seems as though since the opportunity to drive $6 million to $10 million or more in systems and consumables per year or two to customers have concerns that have the market share in application and drive one to 3 million per year or more.
Several of these companies are expected to pay so what is this year with ranch into production later in the fiscal year ended the following fiscal year, we see an increasing awareness and adoption rate, but we believe could drive the majority of the market for silicon carbide as well as I think that clinics to moved away from level or Singulated die burning within the next few years.
A final highlight as we can pick school 20, we completed our caught our planned restructuring and shift to higher margin products.
Were completed our previously announced restructuring and also moved too much higher margin Fox systems and consume wants during the first have you.
We started this before the pandemic outbreaks and complete does it during the last few months that's part of the previously announced some claims restructuring we completed the closure of a joint Japan subsidiary and also transition a European sales to third party sales representing late in the fiscal year.
We also added key marketing directories and made some additional structural changes to our sales force. We believe these enhancements have already and will continue to them to both improve our efficiency materially increase our sales activity in bookings going forward and increase our penetration that too pessimistic on target markets.
We believe these changes because it changes position us for success. The sales are like products as well as additional new products plaintiffs in reduction this year.
We also have shifted to higher margin higher or how you definitely differentiated systems and consumables.
As I noted in the last call. We've started to see some forecast for renewed market demand for packaged part burn in systems, particularly from customers are asking us about our high voltage capability, adding that capability to our package part systems.
These changes and long term forecast reflects the move toward higher voltages and other requirements for devices and automotive automotive automobiles, particularly with electric and hybrid automobiles and the Tom and then autonomy nickel sensors.
We expect to see a resurgence of package part burn in systems orders from some specific ABTS system customers and to generate additional new opportunities with our plan introduction. This fiscal year of a new packaged part burn and system, probably said at the very high voltage testing.
We see the need to high voltage capabilities in both wafer level package part as a new high growth opportunity for Aehr test I expect to see fast from current customers visiting and also had several new customers that include both tier one tier two other customers for package for funding.
That's the same time as discussed last last year, we had seen a significant drop off in a package part products business at several of our customers have shifted their businesses for entirely close product line dragging the need for testing burn and using the high power and high pin count capabilities of our ABTS family products.
And one specific case, a customer that had been buying multiple system for year. That's all that shuttered a line of products and we feel they are unlikely to take additional capacity about particular configuration that system that we had several systems of inventory left on hand, when they dropped their forecast because again.
Interestingly this and several other customers had at the same time shifted their focus to other product lines, particularly for automotive and other new applications are expected to drive new news in the future.
I had mentioned that specifically last quarter and noted that as a result, we were going to go deep dive into inventory build aquatic some configurations.
We decided it was freedom inappropriate to write down the inventory that we simply do not see a likelihood of selling in the foreseeable future, which resulted in a onetime charge this quarter of $1.6 million of inventory.
This leaves us with significant inventory assistance and material that is in on near term forecast, particularly in our Fox products, which also allows us to Nick short lead time shipments as well as the median significant revenue forecast without taking on additional inventory expenditures.
Last year, we recorded on the shipment of our new Fox CP test and Bergen system to a major new Chisholm customer well very high volume application for the enterprise and data center market with a plan build out of this production ramp over the next several years.
The Fox CP is our low cost single wafer compact test and the liabilities application solution could watch it's never been photonic devices and their solution is comprised of a test system integrated with the wafer prober configured the highpower thermal chop that allows up to two kilowatts and testing and bringing in a full wafers.
This customer has indicated they plan to begin their production ramp that in our current fiscal year and so we expect to begin additional shipments of test cells to them in the second half of this fiscal year.
Very excited about this application, which is expected to try very high volumes of devices and we believe the dry type system says for several years.
Let me try and wrap this up.
We added two key tier one customers. This past year, we now have five significantly large tier one customers again applications and market sizes academic $6 million to $10 million, one more year on Fox wafer level chip away to die test systems and consumables.
We also have another seven tier two customers that are each capable at Fox products as typically between one to 3 million in sometimes more.
Addition, five of our customers moved to production during the year using on Fox products for 100% stabilization and burden and infant mortality and we will be growing the listable tier one chip to customers. This year book wafer level Singulated die, but also some package parking lot markets and feel that can significantly grow bees and new customer.
In the markets, we're already serving.
Additionally, we will be adding new markets and enhancements to address them significantly largely markets later this fiscal year.
We're also.
He renewed activity in interest about Fox systems, and consumables for seven new applications in the to be in Threed sensor markets, particularly for mobile devices.
These sensors are becoming ubiquitous and smartphones tablets and are forecasted to be adopted adopted and laptops and computers as well.
The level security associated with facial recognition far exceeds things up in place biometrics and certainly greater than traditional keyboard entry passwords. These new opportunities into the in Threed sensing a rapidly opportunities that could add significant upside to our currently forecasted revenue for this year next.
Not built into our couldn't guidance.
Although covered my team has created challenges such as international travel some small impacts on their supply chain and created caution and or delays with some customer production ramps. We believed that there is no long term negative impact to air the basketball products both for the attractiveness of the key marketing research.
We absolutely believe that will come out of the stronger than we went into this world like pen down with more production customers more applications and higher margins, but higher by value products.
Our key customers products are being used to build up new data centers and pre data rates and increased storage and data centers build out the fiveg Ns and infrastructure enabled the newest sensors and technology in smartphones and tablets and able to widespread adoption of electric and hybrid electric vehicles and charging stations and address the.
Unstoppable demand for memory and data storage and computing data centers mobile devices and hundreds of applications that are keeping the world connected.
As we moved into fiscal 2021, we remain optimistic about both growth and systems and consumables within our installed base of customers as well, it's expanding the number of customers with their families helps to solutions, we expect significant growth in both top and bottom lines moving forward with much lower fixed operating expenses.
Nitpicking take higher margin products and services.
Stop when they turn it over the 10 before we open up the lines for questions.
Thank you gain and good afternoon, everyone.
As Dan mentioned, our fourth quarter results reflected the impact to the current challenging global business environment around the covert pandemic and customers are pushed out forecasted orders during the second half of fiscal 2020.
And our part of your call, we announced our two new Fox NP customers and our new Fox CP customers were expected to ramp to volume production during fiscal 2020 and add capacity, resulting in orders for Fox XP systems and CP systems.
Well these orders did not happen in the fiscal 2020, you're just reported as their timing was pushed out by the customer. We're confident that these orders will occur in our current 2021 fiscal year.
It is important to note that through the third quarter fiscal 2020, the company recognize revenues of 18.5 million or a little over $6 million per quarter and was profitable.
This reflects the impact of the cost reduction initiatives announced in the prior year effective fiscal 2020.
And a change in product mix, which allows the company to be profitable and lower revenue levels.
In the fourth quarter fiscal 2020 revenues decreased significantly as there were no system revenues recognized during the quarter.
Now let me take you through our results.
Net sales in the fourth quarter were 3.8 million compared to 6.1 million in the proceeding third quarter and 7.2 million in the fourth quarter the previous year.
The decrease from Q3 includes a decrease in wafer level burn in revenues of 2.1 2.2 million.
Primarily due to a decrease in wafer level burn and system revenues of 2.1 million.
The decrease from Q4 last year include the decrease in wafer level burn in revenues of 3.3 million.
Primarily due to a decrease of 3.6 million and wafer level burn in system revenues and a decrease in customer service revenues of 206000.
Non-GAAP loss net loss for the fourth quarter was 720000 or three cents per diluted share compared to non-GAAP net income of 452000 or two cents per diluted share in the preceding quarter and a non-GAAP net income of 428000 or two cents per diluted share in the fourth quarter the previous.
Sure.
Non-GAAP results exclude the impact of stock based compensation expense restructuring charges and write down of excess and obsolete inventory.
On a GAAP basis net loss for the fourth quarter was 2.9 million or 13 cents per diluted share, which includes the impact of approximately 1.9 million or eight cents per share in inventory write down of restructuring charges taken in the quarter.
This compares to GAAP net income of 245000 or one cent per diluted share in the preceding quarter GAAP net income of 110000 or zero cents per diluted share, which includes the impact of $118000, a one cents per share and restructuring charges in the fourth quarter.
For the prior year.
[noise] excess and obsolete inventory reserves of 1.6 million were taken in Q4 20 related to slow moving and obsolete package part burn and product inventory legacy parts inventory and down Red Fox P products and sub systems. The 220000 dollar restructuring charge consisted of severance payments and associated.
Legal fees for individuals impacted by the closure of our subsidiary in Japan, and a reduction in headcount in our German subsidiary.
As noted in our last call, we would be moving to a sales rep distributorship model for sales in these regions.
First loss in the fourth quarter was 93000 or 2% of sales compared to gross profit of 3 million or 49% of sales in the proceeding third quarter gross profit of 3.4 million or 47% of sales in the fourth quarter the previous year.
The sequential and year over year decrease in gross margin is primarily due to the impact of the 1.6 million xcede excess and obsolete inventory provision in Q4 accounting for a 44%.
Thanks, Mark margin impact during the quarter. In addition, gross margin was unfavorably impacted due to higher unabsorbed overhead cost the cost of sales due to lower revenue levels in the fourth quarter. As we've noted on prior calls or wafer pack and AIPAC revenues are accounting for a more significant portion of our overall revenues.
[noise] favorably impacting or gross margins as they maintain higher margins in our system or pass through products.
In the fourth quarter or wafer pack and AIPAC consumable business accounted for 79% of total revenues.
Up from 51% in the proceeding Q3, and 36% in Q4 of last year, providing a favorable direct material margin impact for the company.
Operating expenses in the fourth quarter were 2.7 million.
Flat compared to the proceeding third quarter and down 508000 from 3.3 million in the fourth quarter last year.
While Q4 20 was flat to the preceding quarter.
The decrease in SGN <unk> of $217000 was partially offset by the restructuring charges of 220000 taken in the quarter.
The decrease in operating expenses from prior year fourth quarter is primarily due to restructuring actions taken during taken in the prior year related to reduce costs.
That's DNA was 1.7 million for the fourth quarter compared to 1.9 million the preceding third quarter and 2 million in the prior year fourth quarter. The decrease from Q3 is due primarily to lower labor related costs, including lower salary expense and lower commissions from lower bookings and sales incentives in the fourth quarter.
Savings resulted to closure effort, our bar, Japan subsidiary and lower travel due to travel restrictions related to covert 19.
The decrease from prior year fourth quarter is primarily due to the impact of cost reduction initiatives in fiscal 2019.
R&D expenses were 854000 in the fourth quarter flat compared to 845000 to proceed in third quarter and down 266000 from 1 million 1.1 million.
Part of your fourth quarter. The decrease in R&D expenses from Q4 last year is primarily due to cost reduction initiatives in fiscal 2019, and lower R&D project materials.
Now turning to our results for the full fiscal year net sales for fiscal 2020 were 22.3 million up 6% from net sales of 21.1 million in fiscal 2019.
The increase includes an increase in wafer level burn in revenues of 5.3 million.
Partially offset by a decrease in packaged parts revenues of 2.2 million and customer service revenues of 1.9 million.
The decrease in packaged parts revenues is due to no ABTS system revenue and that's why 20 compared to three ABTS systems sold and definitely 19.
Fiscal 2020, net sales were comprised of 18.9 million and wafer level burn in revenue and 3.4 million a customer service revenue.
The full fiscal 2020 system revenues accounted for 636% of revenues compared to 45% in fiscal 2019.
Wafer pack and AIPAC consumable revenues accounted for 48% of total revenue in F. Why 20 compared to 29% of revenues and halfway 19.
Customer service revenues accounted for 15% of revenues and apply 20 compared to 25% of revenues and definitely 19.
Non-GAAP net loss for fiscal 2020 was $27000 or zero cents per diluted share compared to a non-GAAP net loss of 2.8 million or 13% per diluted share in fiscal 2019.
Well revenues increased by 1.2 million halfway 20 compared to appoint 19, the non-GAAP bottom line improved by 2.8 million.
As noted earlier this reflects the impact of cost reduction initiatives effective in fiscal 2020, and the change in product mix, which allowed the company be profitable on lower revenue level.
On a GAAP basis net loss for the fiscal year was 2.8 million or 12 cents per loot diluted share, which includes the impact of approximately 1.9 million or eight cents per share and inventory write down in restructuring charges taken in Q4.
This compares to a GAAP net loss of 5.2 million or 23 cents per diluted share, which includes the impact of 1.5 million or seven cents per share inventory write down or restructuring charges taken in fiscal 2019.
[noise] gross profit for fiscal 2020 was 8.4 million or 38% of net sales.
Compared to a gross profit of 7.6 million or 36% of net sales in fiscal 2019.
The increase in gross margin percentage airplay 20 compared to the prior year is primarily due to lower direct material cost really change and product mix.
Partially offset by the impact of excess and obsolete charges and apply 20 compare definitely 19.
Operating expenses for fiscal 2020 were 11.1 million, a decrease of 1.5 million or 12%.
From 12.6 million in fiscal 2019.
The decrease included a decrease in the S. DNA of 194000, a decrease in R&D of 767000, and a decrease in restructuring charges of 505000.
That's DNA was 7.5 million in fiscal 2020 down from 7.7 million reported in fiscal 2019, primarily due to cost reduction initiatives in fiscal 2019.
R&D expenses were 3.4 million in fiscal 2020.
Down from 4.2 million in fiscal 2019.
The decrease is primarily due to a <unk> a cost reduction initiatives in fiscal 2019, and lower R&D him material expenses.
Overall, the decrease in SGN and R&D of 961000 included 922000 decrease in labor related costs as a result of cost reduction initiatives implemented.
Turning to the balance sheet for the fourth quarter, our cash and cash equivalents were 5.4 million up 375000.
Compared to 5.1 million at the end of the proceeding quarter.
Accounts receivable at quarter end was 3.7 million an increase of 206000 compared to three and 3.5 million at the preceding quarter end.
Due to the impact of customer deposits and deferred revenue on current quarter revenues inventories at May 31st were 8 million compared to nine point threemillion into proceeding quarter end. The $1.3 million decrease is primarily due to the 1.6 million you know inventory provision taken in Q4 20.
Wrapping equipment was 663000 compared to seven in or 83000 preceding quarter end customer deposits into deferred revenue short term and long term were 192000, a decrease of 227000 compared to 419000, the preceding quarter end, primarily due to the decrease in backlog from the prior quarter.
Our current and long term debt of 1.7 million.
Related to funds, we received during the fourth quarter under the Paycheck protection program or P. P P, which we announced and an 8-K filing in late April we expect over one point fourmillion up to the full loan balance to be forgiven under the provisions of the carriers Act.
Bookings in the fourth quarter totaled 2.69.
Backlog at May 31st was 2.5 million compared to 3.6 million at the end of the preceding quarter and 7.5, many of them to the fourth quarter the prior year.
Now turning to our outlook for fiscal 2021.
For fiscal 2021 year ended May 31st 2021, we expect full year total revenue of between 25 million at 28 million, which represent growth between 12%, 26% year over year and to be profitable for the year.
As a requirement to receive funding under the carriers Act the company's required to use the funds from the P.P.P. loan to retain employees and maintain payroll.
Well, our revenues and backlog have decreased from the impact of the current challenging global business environment around the cobot pandemic.
The company has made no headcount reduction however, the company has taken actions to control spending through mandatory vacations shutdown days and travel restrictions.
This concludes our prepared remarks, we're now ready to take your questions. Operator. Please go ahead.
Thank you Sir if you would like to ask the question. Please signal by pressing star on your telephone keypad. If you were using a speakerphone. Please make sure. Your mute function is turned off to allow your signaled to reach our equipment.
Again press Star one to ask a question, we'll pause for just a moment to allow everyone an opportunity to signal for questions.
[laughter].
As a reminder, that star one to ask a question.
Take her first question from.
<unk> with Craig Hallum.
Hi, This is kinda on for Chris and they've sort in the past couple of questions.
First I look at a fiscal 21, hey, guys. So looking at fiscal 21 could you help with any any expectations for linear quarter to quarter. You know it within that are you expecting maybe some softness and some costs or push outs to continue in the first half or you know any any customer orders conversations with them that would give you any indication that the first half.
For a second half would be stronger or weaker be helpful.
Couple of things one is I think it's a fair.
A number the customers and we specifically stated in the call <unk> no explore our forecasting checking out. So I think we do in car second Tom will be stronger then of course trial and I think that's a reasonable conservative stance to take.
We have not.
Provided quarterly guidance before and yeah, basically do start the quarterly or the small backlog.
We've got several customers with forecast for systems that have that we have on hand, and then inventory and can turn in weeks in some cases, they had planned to take some last quarter.
So we have got a in the inventory that we'd have a whether they come in and trying to show like into this quarter are massively over under and honestly, we're focused on new into customers in markets that neither systems.
I can tell you wake up every day and checking for expected Peos doesn't help I will also tell you I do that more often than I want to admit to I mean, our customers are telling their customers and their shareholders that they're ramping me in many cases, but yeah I didn't hear what the customers lesser just tell me I'm up checking and making sure that I believe.
But what do they telling the street most of these customers are you know public and March Craig.
They need our tools, where the planet record that was a critical thing for us. This year, we looked at our business plan is to make sure that those wins need to production that they actually are counting on us it and get those qualified future there and customers.
Because of things whether automotive qualification, that's a big deal.
And basically we think we kind of your guidance had more without waiting another customer.
We had the customers we have the applications the products the inventory.
And we actually we've completely have the manufacturing capacity, we didn't talk much about that but have the ability to build far in excess of even our guidance to meet customer needs and we're adding more customers in applications and and basically that's what we're focusing on.
Thanks very helpful.
Second question, then as you all logistics tier one customers are people doing $6 million to $10 million year in July seven tier two customers are keppel didn't want to threem linear problems. So obviously just math that you know if those customers what drove customers ramp into those revenue levels. You know your total revenue to be significantly higher than is today.
In an awful understanding then you know you have dozens of orchestras or you're engaged with so I'm. Just wondering how we should think about how are you guys think about you know those customers ramping to those types of levels. You know is this a three to five you're kind of time rent or we would expect most of those could be in that kind of revenue level or how should we think.
Well I and again I.
So realistically wouldn't we put this tonight and this tier one tier two this is the first time, we've introduced that term and we had some feedback and just how do we get our arms around these when we look at the total available market competes customers sure, but the you know unit volumes. The test time. The you know is it 100% burn or a sampling.
We can estimate what they're buying power is there any given year right and so they intend to that was that is a range of the kind that customer I mean, you know.
I want to get into all the detail, but yeah. We are 10% customers that we have are forced to talk about and yeah, we're adding one or two more this year. You know yeah, you know our 10% in our 10-Q customers are likes it Intel and Aes Tiete and Apple T. API. So.
These are large multinational companies that large scale applications and for them to be able to do you know 10 or $12 million. It here they've all three of them that they can do that okay. So that's the kind a class of trying to decide that as we have other customers, including ones that are going out and they want to be careful not to not men.
And then but yeah I don't want me by customers think I don't love them as much dot com, you'll make sure it's not.
The likelihood of than doing $10 million is nowhere near the same but we would expect you to do one two or 3 million Bucks it yourself.
As always is the case at least early on we can see even customers being lumpy like maybe they have a good here and then I'll stop here. The next year, but if you start to look at the these new device and silicon Photonics and silicon carbide and some of these others there actually growing so fast it's it's reasonable for them to be sustainable.
Year after year.
And you know kind of ignoring some of that craziness going on in the world right now we would've expected this to be enough here, even over last year's guidance on so yeah again I don't think you should just linearly add them all up but you know, it's not crazy, but they all had good years in the same here.
I think it's really been it'd be you know maybe two thirds of them into new given time are having good deals and then they they told them all to make over time and the goal for us would be to get you know 15, 20 customers, which we think is reasonable column. So that we don't have to wake up at the beginning you wouldn't think well we're totally dependent.
One customer to be a significant amount of ourselves.
That's great very helpful. That's all for me thanks, guys.
Thanks I thought.
Thank you we'll take our next question from Jeff Bernstein with Cowen.
Hi, I'm, sorry, I I think right you cut out for a minute at one point you were talking about some business that is not in the guidance is that correct and can you just go back over that.
Sure.
Okay. So then you can see we did I did you hear me cut out her I get assembled maybe talking.
Right. Okay. So any help on yeah, so what I.
What I did it I'm not going to go back in best they read it obviously pulled back I forget the mature. So this was specifically we've seen in the last.
Several months, maybe and even picking up steam some renewed activity in a in our two d. treaty customer base that has raised floor and singulated die systems installed.
They actually continue to lead have than buying die X., I must and wafer packs the consumable with new product releases and that you know it's been material business for us, but interestingly they had not added any system capacity last year, we've been bought into.
Several new programs that we are aware I've now that appear to be a good for our products and arbitration getting our arms around it right now, but it's very interesting that theres. Some renewed activity. There. If you follow that several years ago, you know one of the tough year.
We see ours was you started the year with I guess, they're saying how great. It is gonna be and you know we forecasted that thinking that that was a gaming and ultimately they pushed out that program and ultimately cancel that specific programming. So I'll tell you I'm a little gun shy about you know.
Give me my chest about the this particular applications and so they are a little bit more direct you know my other ice so I didn't being bold them up to save that we can we get our guidance without any moves but some of these deals could be something material upside to two that are certainly offset any other.
Possible issues, but that's what I meant to say by them.
Gotcha and is and is there a change going on a with regard to.
100% burn in kind of thing versus some sort of statistical sampling and that kind of thing or is this really just about.
Brand new programs.
Well, let me let me do that the problems there in which include both hundred percent and sampling programs are can do you mean along.
He is a new programs I actually don't have all the details I think we believed that one of them is 100% and one of them is simply but I. We don't have that would you just touched that's great. Thanks, so much.
Thank you as a reminder to ask a question. Please press star one well take our next question from John Fitch going with the electric capital.
[noise] again, thanks for taking my question how are you.
Yeah.
I apologize because I've I've been a multiple calls so I just want to apologize in advance the gates you've addressed this but I I guess I guess I'm partially confused at.
The progress you keep making you introduce new products you get new customers.
And yet I don't see it in topline guidance expectations.
Topline performance granted you've got cobot for this quarter I understand but what did where's the disconnect I mean, you've signed up a ton of new customers in the past you continue to sign up new customers, you've got existing products, you've got new products, you talked at length about them.
Everything seems to be going the right way and I'd it doesn't seem to be flowing through so I'd just love some help.
With that basic question.
Well I think to you if if at least if we step back or is that the board and and I do sit and you're trying to look at the overall business to try and get our arms around it we've been pretty together three year plans I'm looking at those forecasts are you know one of these things I think it's fair it just didnt Miss.
Minimum wage you know customer, we like our for sale or at least silicon photonics customers. She is buying Fox XP systems.
They didn't go to production, yet and we talked about that several times, maybe almost every single quarter.
And they for whatever reasons had not actually introduced a new products that we're moving to the wafer level burn in and then finally Hobbs and you know a qualified it got it took the alarm, but actually that was you know if he looks just like a linear time that was okay. A couple of years that was not what we.
Second and ultimately it was okay. Yeah, then just going to happen and we try and they saw that shifted production this year and they've started to buy all the contractors. So we knew they couldn't go to production because they didn't have the contractors. So they have these beautiful system sitting there that will not be used at the reason was as they were bringing up to assist.
And I wanted to ramp quickly we were able to ship a lot of wafer packs all over the next yeah within a month or two and that's part of the business model to get them to production fell other customers were kind of a mix. Some had bought Yale after our lead customer, but also didn't get to production to this.
Here and then we had another customer that when you know it looked like a six month period, the customer that we just shipped to with the order that we announced in Q4.
It's going to be in production here shortly and then interestingly on our silicon carbide customer they went from zero to 100% within two months.
So you know what we are actually burn on my VP of sales was presented in our board discussion the collapsing their mind a time, it's taking for the customers to go from say when we first ship it to get to production, but the lead time on the sales cycle is still a little bit spotty some of those have been shorter.
In some of them yeah, we've been talking to some customers for a year now maybe here and Uh huh.
And then we've had other customers that you know.
The first thing that based and you know one to two maybe two quarters later they already are purchasing so I think there he is balance as either our own Aki overoptimistic or for you know how fast customers are actually ramping or the deployment I think to some extent the deployment of silicon photonics devices in the main and.
Customers to remember the B or if you know this or not we have a couple of folks that follow our stock that really track. This market, it's really interesting to talk to them, but the big buyers of this market on Facebook Amazon Google its the large data centers, okay, and so they have enormous buying power.
And there's been one of things was it appears that now finally, a buying silicon photonics devices were before they were buying the traditional kinda much more expensive.
Hi back the Transceivers. So this is a this is Adam this is a major inflection point for us because the and customers are now buying than buying site and shifting to the higher performance higher speed devices as well all of which is good for us and so I believe at this point it feels more believable that there's more.
You don't have behind that you know everybody, saying, it's going to be great and now we actually have customers that are ramping and at the end users are paid what I will tell you is one of the big things. What we were surprised by is the season pushouts capacity, well, maybe weren't surprised but yeah, we saw push out.
The capacity for those end use customers.
You know.
Starting in the beginning this calendar year.
So yeah, we could you know some absolutely customers point, specifically at the Colgate implications of and others are you know what happened why did the data centers Dallas was there a push out so it's something that we're trying to understand but there's no doubt my mind datacenters aren't going away.
Moving to more fiber optic the move to be a fiber optic down but lower levels of the data center because of the bandwidth all the data is there to support it and I said that the trend that's happening. So I mean, that's kind of I wanted to try and all those all that trend that makes sense and everything you said just makes sense, except for the fact that it does.
Matt certainly lineup with guidance that isn't necessarily lower than the guidance you gave last year at the same point in time, I mean, I just don't understand why 25 to 28 relative to 20 to 31 or wherever you were a year ago makes sense. Given you have more customers you're faster to production like you have new are probably you have more new products.
Help help me.
Why is there and why are we not to be inflection point I felt we were at in terms of revenues really.
Inflecting higher.
What am I missing.
Is it slower lead times on site.
Push outs solar lentivirus slow I.
Well, we certainly have stated on the on the on the push outs that we've definitely seen from customers that they themselves are explaining that in saying that that is turning around and that lighting to move forward. We've got some customer is that had not yet so the first time actually given a heads up capacity and forecasts.
I think the latest to guidance and that I mean, certainly.
The board discussions, it's there's a sensitive you know how aggressive or conservative should we be in this environment, we want to make sure that we can do what we saying we're going to do and you know there's obviously certain things that are out of control, but we believe that this is a comfortable number.
Hey, Dan I'd like to add a comment related comparative to prior year. So if you take a look just at wafer level burn in even though our overall total revenues only went up 6% wafer level burn and went up 39% or $5.3 million compared to last year. So even though we didn't get any says.
Im revenues in Q4, and there were the push outs fully we've talked about we did recognize a 39% increase one of the items built into the numbers was we had a decrease of $4.1 million. If you take a look at our package part revenue and our customer service business.
Included the upgrades of ABTS systems from prior year, So keep in mind building into our modeling and a fly 2020 were additional revenues in those areas as well.
My last comment it's just that.
You know I really think.
You guys should take a serious look at your board out of this year's proxy season.
It looks like it could use a refresh underwriting standards and I think that's something that could maybe help you guys are progressing rapidly or bring a set of fresh eyes to the entire situation. So I would.
Recommend that as shareholder and otherwise thank you.
I don't appreciate it and just to comment I just didn't generate that there was a specific question there actually very happy that we've added a couple of the extent of transition in our board over the last couple of years, adding some additional board members law all up on who had been a.
Capital Director Watt Intel very influential I spend has been wonderful John came on aboard a couple of years ago is wall and we did actually have a lead board.
Independent Board member passed away during the year.
And there's been some discussions about you know you wouldn't be appropriate time to add a board pemble both for any kind of double next related things you meant just honestly that some.
Reasonable balance and expenses and others. So I appreciate it John.
Thank you we'll take our next question from Jeff Scott with Scott asset management.
Hi, Jeff.
Hi, Jane How're you.
Okay first first question.
Right and I know Oh.
Sales reps.
I guess durbin base to cover the European accounts.
[music].
How long do you think it will take to get.
Some sense as to whether or not that.
That is working out and they can precisely what kind of metrics for you'd be looking yet.
Confirm or whether or not it was a good move is that number of new customer.
Dollar volume, but they're able to generate.
Okay, well a couple of things there I mean, certainly early on and I wouldn't dead and southern burn and made several trips and and customer calls with them and I was really pleased with the level.
I guess, the number of quality customers and the luggage within those customers. They were able to get to you know when I I and yeah last time, we were there was a february or March one things that I definitely has impacted us and somebody international travel.
I think.
Can you kind of alluded to it extends controls is not very hard to have expense controls right. Now so we've been doing some pretty creative things with our reps and with them, but we have employees around the world to ensure that it's not limiting our capabilities for installations in support of customers, but H.C.T. who's out of Germany and covers or no.
In Europe, it's actually been good start I do expect them to move from you know great customer calls to orders both in terms of volume quality and eventually dollars as well.
And those are expectations that we would have probably starting this year as well as you know reps in southern Europe, and we are we're working to close on.
For two in Japan, right now we've already begun discussions, but we're getting formalize everything with them and looking at some other things there's absolutely people that are really good at.
Some of these are non silicon Oh application customer issue around silicon carbide in particular, but also silicon photonics. It we're trying to bring on.
So I am, hoping and expecting and burn impacts metrics are not getting most sales to those reps as well.
Okay.
Next question.
And working on engineering for a more fully automated Fox system, where are you on that engineering progress.
That gives a system that is still in development.
We haven't talked and given customers exactly what they integration and lead time is due to some specific competitive and other reasons, but that is in process I'm assuming that that for them.
Okay.
Last question I'll have to go back and kind of part of the statements made about.
The tier one customer care to customer and things like that but my gut instinct is that a if you add <unk>.
<unk> revenue guidance for 21 that.
Excellent all of that is coming from further penetration of existing customer had no need for any real new customers is that.
Is that fair.
I guess, there, but I also want to just point out that's not because we think we are going to win new customers. So why do you want to take that from how conservative. We are it's like guys I knock starting off this year thinking that if we can just went that wasn't big Guy I could make my numbers that is not the case <unk> Bill.
<unk> guidance entirely with current customers applications <unk> my sense.
Mm hmm customer would represent an upside from that.
Got it brings you gave us that is that good yes.
That is true end to be balanced it obviously creates some potential for de risking but yes.
Okay. So the guidance really.
I'm going into production from existing customers as opposed to a hope with that you're going to get.
Kinda up any any largely of customers.
That's fair.
Okay, that's all I have anything.
Thank you. Thank you we'll take our next question from Tom Diffely with D.A. Davidson.
[noise] oil.
Question on the balance sheet I see me like you do get a couple of customers that have come at the same time, what can you say in terms of working capital or inventory builds and the balance sheet.
All right. So in terms of the balance sheet and inventory builds and capitalization.
We have $8 million in inventory at the end of May 31st 6.5 of that is in our Fox P product and included in that is about 1.7 million, what we call. Our demo labs is turnkey. So it allows for a quick turns on that and the benefit of that as we can turn quickly we do not need to add inventory we're in a position.
Where we don't expect a tremendous increase in inventory to meet our goals during the period.
And don't expect a whole lot of additional capitalization to be able to find that.
And Tom also just to put it and they set that we had a it's interesting I think I've talked about as the last quarter and didn't do it let's say certainly we've got enough content already but this last year one of the other big things that we did we just get our end of your claim is we significantly lowered our lead.
Times for our wafer packs and increase capacity. So we're able to do short term quick turns on fully custom wafer packs and buybacks.
And watch it yeah. It's important not that is we don't need any material around four so you know and given that half of our businesses. That's actually Waferpaks you could say Oh Wow, that's it but we really in most cases were being paid by our customers by the time, we pay our vendors on those things so.
And then lastly, actually we didn't talk about it because we have it didnt use it we did put in place a line of credit this last quarter on.
I know that you want to cover that a little bit Ken.
I'm sure it actually was it was.
It's a last quarter, but with our bankers Silicon Valley Bank, we have a 4 million dollar line of credit that's available to borrow for domestic a are and we have not borrowed any those funds that are available to us through the bank. So we have that ability plus we also have customers that also allow to factor any open they are the tax.
Actually at a rate that approximate prime so it's very favorable with these tier one customers in fact, one of our lead customers. So there's many avenues that we have to ER to really build our cash position as needed.
Okay. So it sounds like today that.
Sorry go ahead.
Hi, this is it sounds like you're even to exceed the high into your guided range over the years, we've got plenty working capital inventory and manufacturing capacity already in place.
Well that would certainly be our goal I want to be careful and getting.
Two acquired at my skis on this given kind of where we're at but yes and time, one thing and I said I think email for both folks that have followed us for a while I'm I've said the words in a while but we still all of our standard quote so 30% down payment.
So it's typically quite rare that we look the other way on some of those things and in many cases, which contractual obligations as part of the so we get large system orders from these tier one customers for either wafer packs die packs or systems, no actually giving us down payment.
Which in many cases is the majority of the actual material costs of the sale itself.
On that comes with don't cancel it yeah, they might not cancel either so from a you know the old classic will what happens if you get that $30 million oil or how do you can afford it that it's definitely been removed from our vocabulary.
Okay, well I appreciate all the details.
Thank you.
Thank you well take our next question from leverage Sabina Salina capital.
No real quick question on your Silicon carbide application or what wafer level system that you're you. So.
That does go.
80 test and burn and reliability to us in one fell swoop doesn't it are you.
You don't need to do an 80 on the wafers after it come through the fab.
With your says.
Well it depends there are certain tests steps that take functionally tested devices with our system. So we're able to one of the very unique thing, but im very pleased about in fact, there are white papers out there.
I think message board, but I did see that somebody posted on the golfing message board. They have done white papers on the street talking about and you know being expressed about their new wafer level burn in system and they did specific comparisons talking about the 90000 devices a week capacity.
<unk> compared to be set them colleagues in their system plus the ability to tested before it gets packaged into these modules and then on top of it they specifically pointing out that one of the key things that they can discern good from bad devices and as the devices failed during the burn in process.
They can see exactly where they are failing.
Which is very unique for all barring system and so they the testing capability consumable teachers and parents and opens and charts and things, but we can give them, 100% certainty. They travel we tested and that the proper voltages crunch that put there that's a big deal there are other tests.
People do all in an 80 insertion before and after one and typically that indicates that we fail apart they want even test they don't pick ups.
So it's a little bolt.
So you're saying that the throughput on the wafer level or something like 12 times, what the part burden system is but.
I think you said in your comments that because you're not you're catching those failures infant mortality failures in the and the die level on a wafer level.
Are you haven't put any more money into or they have important and packaging and so on did you say it was up to five times more expensive once its package when they find that failure and see outweigh or.
So the numbers I said, it's like for the 10, x. or so but the specific things that people look at that you physically she got have woman my hand, but okay, but it's too bad you guys can see it I like basically holding one of these high power modules that goes into a car.
And it's this large metal brain with a large heat sink on it. It's encapsulated. This thing they could you know eight or 10, all these small steps and that in parallel.
And then they'll sell it and if you go out and Digikey or anything else you can find it from the folks.
There's several people that are out there and I want to go into which when it's like customer ever. They wish up is it 10% with our 10-K right, but they specifically you know these things are doing hundreds of Atms, but there are put into this thing integrated in encapsulated and then they burn this modular.
And then one is the devices fails and it's pretty high failure rate, so they're throwing away 10 or more percentage I won't let me be given the numbers, but that's an easy number of this entire module well the non <unk>. The package itself my cost 100 $200 to build.
And then at the height inside that might be in the $500 apiece or tens of dollars apiece, because that's the price of them when they're discrete.
So that's a reasonable thing when they feel that they feel the whole modeling.
Yes.
Well, that's why are the ones from it but they all have edicts getaway flow.
So the Throughputs like 12 times higher or give or take.
We're catching those failures at the lowest cost before these anymore money is put into 'cause it sounds like a huge savings and then you have no the roadmap.
On the road is the go to eight inch wafers.
And your systems capable of 12, and so its future proof.
Of course economics, good do even better.
And that's an area. So I guess I go back.
Well why isn't everybody going to this is everyone currently.
Burn again, there's there component.
ER and the parts system and so why isn't it supposed to both banner the go to your wafer level.
We have a large punch list cuts when list of the ones that we held targeting.
Hey.
Hey, a reasonable majority of then we have not been in contact with <unk>.
The truth.
Others, we have bad when we started to make engagements and they're kinda talk started at the top of the list if you will.
And now that we have proven the feasibility and the capabilities. We are engaged with multiple other customers on this.
There are testing that they can't there are certain tests that we can do.
And there are certain tests right now that we do not yet have proven on our Fox systems that we're also working on and we're working with.
You know one or more of the largest silicon carbide customers on a working through that application.
So you know I think that you know it's Dick this is an area that <unk> that maybe how do we get in front of customers. How does it make phone calls how do we get it but that's one of the reasons or try to beef up and makes it changes in ourselves so didn't get and probably more customers right I mean, it seems like.
Seems like this approach was a no brainer, but if assuming the industry would go this Roe.
Is there a an idea how many systems could potentially be involved.
For the Silicon carbide application, how many expertise well.
That I see great specifically walk through some of the math there yeah, I talked about half a million wafer starts a year.
Right and you if you and I referred to be burning times as much as days.
So if you kind of walk through the math there there are multiple hundreds of wafer is worth a capacity out there we believe today and growing significantly and why I mean by wafer capacity would be how many blades in our case you need to be installed worldwide.
Okay.
And so that market is substantially larger and you know to be blunt the whole world only has one X P. In production right now.
That's the first one that was why it's so exciting and DAP customers going to be taking on more we are going to be another customers and you know sort of the Mad Max family right now.
So it seems like <unk> and I I know.
Good.
And I know this may sound interesting, but and anybody who.
I'm also.
Also follow some of those customers, we actually have talked to a couple of the Ceos, we'd like to talk to them all.
So.
Your your and enabling technology on Silicon Photonics, which was a in emerging new technology that's of.
Great potential then hopefully.
You will be recognized as is enabling technology provider for silicon carbide, which looks like it has tremendous potential but.
I wondered if they do you think.
We think silicon carbide is is and build well, it's already larger than silicon photonics and will grow much larger than that.
HM.
All right that's all I had thanks return.
Thanks, Eric.
Thank you we'll take our next question from Charlie Doe private Investor.
And can you break down the revenue for the lower end of guidance between product sale consumable and service.
Or as an alternative can you provide the level of product do you think.
Needed for the lower end of guidance for.
Oh, you know we haven't let me let me give you some ranges of sort of that are reasonable based on historical I mean, we historically a recording somewhere.
800 to a million dollars a quarter in in certain support those are there certain contracts.
I'm kinda material things. So you know using that going forward does make sense. So take 4 million out of that and you got certain support and then give generally we've been tracking maybe 30% to 50% consumables I say normal run rate.
And you could use that as a reasonable I think we do believe we'll get some package part business.
This year, but I'm, probably not paid significant number and the rest for all the between Pocs and the Fox consumables, we do think eye popping start business is likely to pick up the following year, but I don't want to get out there too far.
So and then from a margin then mix perspective, you know our Fox systems and wafer packs have have a very very good margin and are what we call kind of a material margin, which as you know like the price minus the mid just because a lot material or that the maybe do direct manufacturer.
In costs are you know and 60, 65% margins.
So whether they're the consumables or the systems are about the same come a mix perspective, and actually somewhat similar sort of certain support so our our overall, we're probably going to be less subject to mix. It. Although there are certain configurations and send it concerns is that have higher margins.
Great do you expect any material changes in the R&D expenses for the fiscal year 2021.
We generally run about a million Bucks a quarter I think we've been a little less than that the last because they just some R&D spend with respect to where we're out in the programs, but it's my expectation that that's about what I run rate should be.
So what can you tell right Ken.
Yeah, It's actually you you're actually correct, we've been running about 800000 and plus the last several quarters, but we are gonna be ramping up keep in mind. We gain we have a few of our programs that would be ramping up towards the <unk> fiscal quarters.
Ken and I are not in the same room, but we have done a audio lives do on our computers. So we can you sort of sitting next to each other.
What can start go ahead of the prospect for new products for their timing and the potential market given that you're going to continue with that.
The spending.
[noise].
Well.
You don't do we specifically already you know Libya their correctly stated that we are working on new platform product again in the package part that has very high voltage on it and that looks actually really exciting customer feedback has been fairly positive on it and we think that it.
Opens up.
There are certain applications for silicon carbide for example.
A discrete MOSFET customers may want to put it only in a package part burn in systems and they're all not there's just not the capacity out there to address it into that area. We've had other high voltage from 300 gold. So 600 adults in them, but sick and I guess I tried to up to 16 1700 possible.
So they that's an area that we see is going to drive some things that we've got R&D spend going on we have some automation programs and some other things that we're working on that we believe not only enhance all I can only be to address the club customers, but also some high volume market opportunities and I know.
Just discussed briefly in our calls that we are talking with some of the memory suppliers related to their roadmaps for wafer level burn in and you don't really continue to provide information as we get further along in those discussions.
Thanks, I appreciate the input.
Thank you.
Thank you we'll take our final question it comes from Jeff Bernstein of Cowen.
Yeah, I just two quick ones.
So you just touched on gallium nitride and my question was a what's going on or you know in terms of opportunity for you and gallium nitride RF and gallium nitride power and you know whatever engagements kind of look like so far.
And I have one so we we like we might actually already be testing and gallium nitride wafer apologize I know that that is the plan, but it is power device. So from our faster it looks pretty similar to if it was.
That's interesting I.
Okay, operator, I got one of our people. It was just on the call calling myself. So I do have a problem. So everybody is still one.
Okay anyhow, so they absolutely are doing what silicon carbide and gallium nitride.
And could be blood. They look the same to us a they both have similar reliability issues, it's sort of its [laughter] you got to have a certain I don't know if I take sense of humor, but if you're a test or guy and you're protecting kinda conductors you love devices that fail.
Okay that mean that had good frac wells and it turns out and and stay all in them into application, where it matters and many other things you want devices that fail in are never going to stop failing silicon carbide is actually very mature process in many ways. It's just that substrate is inherently not going to give you the kristen structure and.
Ever get to the defects that silicon while people know compound.
Silicon.
But you can't get semiconductors up to 1700 adults with the efficiency right. So okay got you do a burden stuff and all you get once you know one or two days later you need it out these aren't actually very expensive steps you done on our tool and so from a cost effectiveness. It's cheap people were just surprised we could do it.
Hey, folks that weren't on the calls last year. When we first engaged with this initial customer they were like what do you mean, you can do that just like it was like and we said yeah, well, we'll show you and we just simply offered them to buy a wafer pack and then we tested one of the wafer says they didn't even though that it was it shouldn't be.
But what do you think it was at all possible we tested their wafer we send that I think we've tested two or three of them sent it back. It went to then try qualification process, we've not only told them, which devices failed, but what time they failed and they went to the whole qual pockets, a cop 100% of with others.
They then turned around and Ted can we should be more wafers emcares appeal.
And we actually while we were building their system continue to ship wafers. So she can we please borrow more time, so we actually have shifts out of our outside the we're shifting them wafers I believe they were shipping customers.
Because they were like this it's fantastic so and that's why they immediately route.
So that's been a very positive.
Experience for all of us.
And in Ghana, RF or is that it a different test a structure I know I knew that are so far so far I had not heard about people driving the are off part of that these tiny another transceivers for the same level reliability, but I use oh.
If I think it's just that maybe the critical mix of the first one the first application was these power modules flowing into automotive where they were stopped but I'd elite that that people will be doing this for discrete and it will not surprise me if we're going to the RF side indicate that system capabilities.
Yeah got it okay.
Great. So so then just back on the question on the relative guidance, which which kind of you know jumped out as to me as well, but but I think what I'm hearing is you know in each one of these markets we've had a gartner hype cycle.
Nitride Silicon carbide, you know five G silver <unk> Silicon Photonics, three D sensing a our autonomous driving you know every one of these things we all know they are all coming [laughter]. So it feels like we're just in that early phase where you just don't have enough.
A you know that's all going to production and getting out there in the world <unk> took to really get a trend going for you guys and hopefully that means that this year's guidance has sort of been been shaken down to take all that into account and say, we're going to stop hoping to stuff hits the inflow.
I should point and we're going to let it hit the inflection point when it when it does is that a proper characterization.
I I think majority so and that part about you know there's only so much we can do when we have a customer decision where people are they have a products. They say I mean, we had specific quotes given to the two ourselves in the board. It's like nobody else has anything like this period at any price of course and it's like then why are we like <unk>.
It's more for him, but that's a different discussion.
And so we know that they're planning to and you know I.
And I my intention was not just spend a lot of time talking about cold. It. There are some businesses that I think we all can just wondering what the heck, it's going to happen. This [laughter]. This shouldn't be one of them and they are our semiconductor companies are all engage their all all their cloud. So there the end use applications for us our mopping.
Impacted we believe there's nothing materially impacted related is there anything related to Colgate or patent that makes or international travel or hotels or something that shouldn't have any impact, but you know certainly more communication more data all of that senses imply.
But yeah, I think that a I I you know I'm comfortable with where we're at you know there was one of the discussions ratio should we go out with guidance, it's like absolutely.
We should and you know we hope to.
Ah yes.
We hope to have them, we couldn't get mission.
Great. Thanks, very much for the time.
Thank you Jeff.
Operator.
We have no further questions and okay.
Okay I appreciate it Pops, we appreciate your time, well, that's and we as always if you have any questions or follow up.
Yeah and follow up questions I mean get can another back to us or see I'm KLR, we could set something up okay.
Thank you all very much and have a good one everyone's stay safe.
This concludes todays call. Thank you for your participation you may now disconnect.
[noise].