Q4 2022 Aehr Test Systems Earnings Call
Good day and welcome to the Air Test systems fiscal 2022 fourth quarter and full year financial results Conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero. After today's presentation, there will be an opportunity to ask questions to ask a question.
He May press Star then one on a touchtone phone to withdraw your question. Please press Star then two.
Note. This event is being recorded.
I would now like to turn the conference over to Jim Byers of M. K R. Investor Relations. Please go ahead.
Thank you operator, good afternoon, and welcome to Air Test systems fiscal 2022 was fourth quarter and full year financial results Conference call.
With me on today's call are test systems, President and Chief Executive Officer gain Ericsson and Chief Financial Officer, Ken Spink.
Before I turn the call over to gain and can I'd like to cover a few quick items.
This afternoon right after market close their test issued a press release announcing its just called 2022 fourth quarter and full year results.
That release 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 webcast will be archived on the Investor Relations page at the company's website.
And I'd like to remind everyone that on today's call management will make forward looking statements today that are based on current information and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements.
These factors that may cause results to differ.
From the forward looking statements are discussed in the company's most recent periodic and current reports filed with the SEC. These forward looking statements, including guidance provided during today's call are only valid as of this date and are test systems undertakes no obligation to update the forward looking statements.
Now with that said I'd like to turn the call over to Ain Erickson, President and Chief Executive Officer.
Thanks, Tim Good afternoon, everyone and welcome to our fiscal 2022 fourth quarter and full year's earnings conference call. Thank you for joining us today.
Let's start with a quick summary of the highlights of the quarter and fiscal year and the momentum we're experiencing in the semiconductor wafer level test and burn in market and then Ken will go over the financials in detail after that we'll open up the lines to take your questions.
We're pleased to report very strong growth for fiscal 2022 with record revenue for both the fourth quarter and full year.
Total revenue for fiscal 2022 was $58 million, our highest annual revenue on record and more than three times last year's revenue.
We also had record bookings for the year at $62 million.
Importantly, we're seeing the significant leverage in our operating model as evidenced by the strong profit for the fiscal year.
We also improved our balance sheet significantly with our year, ending cash position of $31 $5 million and no debt.
Let me go ahead and start and talk about the wafer level test and burn in market Silicon carbide for electric vehicles.
Where a lot of the excitement is going on our strong revenue growth in fiscal 2022 was driven by the demand for our wafer level test and burn in solutions, particularly for wafer level of stress and stabilization of silicon carbide devices.
Four years directly in electric vehicle market.
Silicon carbide market for electric vehicles, and its supporting infrastructure requirements are growing at a tremendous rate with canaccord genuity estimating that wafer capacity will increase from 150006 inch wafers in 2022 2021 to over 4 million six inch equivalent wafers in 2030.
Just to meet the electric vehicle market alone.
This represents growth of over 25 times the wafer starts just for electric vehicles.
They also forecast another 4 million six inch equivalent wafers to address other markets.
Such as industrial and solar power conversion.
Our lead customer for silicon carbide wafer level burn and made significant investments in their silicon carbide production throughout this past fiscal year today, we're excited to announce that we received $12 $8 million in new orders from them for multiple Fox XP systems are high volume production wafer pack aligner and a small number of wafer pack for wafer.
Contractors to meet their increased production capacity needs for Silicon carbide based power semiconductors for the electric vehicle market.
All of this is expected to ship by the end of our fiscal third quarter ending February of 2023.
This adds to the backlog of systems that we're shipping to them this fiscal year.
This quarter actually in addition to the system capacity order, we expect significant subsequent orders for wafer packs needed for the system orders announced today and they will ship at approximately the same time as the systems.
We have continued to optimize the shipment and installation processes of our Fox XP systems with the last system shipped to them installed and released fully into production within eight days. After we shifted out of our factory and that includes international shipping.
We're excited to see them continue their ramp and we continue to expect significant additional system in wafer pack purchases from them over the next several years and through the end of the decade as they strive to be a market leader market, leading supplier of silicon carbide devices.
Air Test provides a highly unique and cost effective solution for applying the stress test across every device on an entire wafer before their singular and put into packages or multi chip modules. This allows our customers to burn in every single device at a lower cost than they could in any other form due to our ability to contact thousands.
The devices on a single wafer and test 18 wafers in a single system with our Fox XP multi wafer test and burn in system and proprietary Fox full wafer contact wafer packs.
Silicon carbide based devices, such as MOSFET extends for metal oxide semiconductor field effect transistors are extremely efficient rugged and reliable semiconductors that are used in the power conversion to charge the batteries and battery electric vehicles, and then the engine controller traction Inverters that drive the electric engine.
<unk> and ABS.
Industry, leading semiconductor suppliers like our lead silicon carbide customer Tao key differentiators of Silicon carbide over the silicon based RGB teas, which are insulated gate bipolar transistors that include silicon carbides higher system level efficiency, owing to the greater power density lower power loss.
Higher operating frequency and increased temperature operation.
Yeah.
This translates into a higher driving range on a single charge smaller battery sizes for traction and burgers and faster charging time for onboard Chargers.
Silicon carbide based traction Inverters were first used by Tesla and their model three electric vehicle sedan. Tesla then converted all their electric vehicle engine controller attraction in British from Silicon based to Silicon carbide based MOSFET.
Forecasters like Canaccord, Genuity, Youll development and extra what believed that most traction inverters will be silicon carbide base within the next several years.
One of the biggest concerns of existing and would be electric car buyers as range anxiety, the fear of running out of energy before making it to a charging station at.
As some of you may have seen just recently, an all electric Mercedes Benz recently drove 747 miles without recharging handily, beating every electric vehicle on the market today.
This ultra long long range electric car called Division <unk> <unk>.
By on semiconductor on semi and highlights the significant progress that is being made with these concerns by using silicon carbide traction burgers among other features.
Silicon carbide MOSFET are tested to ensure they meet technical performance and specifications at wafer level before the devices are simulated and then again in package or multi chip module form before theyre shipped to customers. However, the extrinsic failure rate or the early life failure rate of silicon carbide.
Is much too high for mission critical applications, such as the traction Inverters are evenly onboard chargers at the a BS.
As such all Silicon carbide MOSFET suppliers apply what is known as a stress test or burn in test to every device that induces early life failures to happen within hours rather than years to weed out the devices that would otherwise fail in the vehicles.
We are currently engaged in discussions with most other current and future silicon carbide suppliers. The major silicon carbide companies expect that most EV traction inverters will move to multi chip modules as such they have told us that they must move to wafer level stress and burden to re.
Move the extrinsic failures before they put these known good die into multi die modules to meet their cost yield and reliability goals of these modules.
Erez unique low cost multi wafer level test and burn in solution provides the test electronics and the device contactor technology that enables contact to 100% of all devices on a single wafer and the handling and alignment equipment to provide a total turnkey single vendor solution to meet that needed critical test in <unk>.
<unk> requirements.
Our benchmarks and evaluations with prospective new silicon carbide customers continue with very good momentum.
We've recently completed a wafer stress benchmark with yet another of our large of the current large suppliers of silicon carbide with excellent results.
They have told us that the Fox platform is the only solution that can scale to meet the production capacity needed to address the silicon carbide device growth, particularly for electric vehicle applications.
This is in addition to our previously announced engagement with another large silicon carbide supplier with whom we've been working closely with over the last year to correlate and qualify the Fox system to just place their current production reliability.
Screening test and burn in systems.
The results of that benchmark also met a key milestone this last quarter and we believe that we will successfully complete their correlation process over the coming months, which will allow them to move forward with our Fox solution.
We expect both of these companies to implement the Fox platform solution into their manufacturing production flow.
In addition to the benchmarks with these two large silicon carbide companies, we have been approached by several more silicon carbide suppliers to evaluate our Fox XP systems to meet their production needs for traction burgers and onboard Chargers for electric vehicles and also for other applications such as electric commuter train engine controllers for.
Well take power conversion and other industrial applications.
As a result of all these positive evaluations, we believe that we will receive orders from at least several new silicon carbide customers and begin shipping systems to meet their production capacity by the end of our current fiscal year that ends may 31 2023.
With major production releases and ramps of many new electric vehicles from every automotive supplier in the world and many new electric vehicle focused players coming into the market in 2024 and 2025, there is a significant industry ramp needed to expand silicon carbide production to meet the forecasted needs of these electric vehicles over the <unk>.
Next few years and through the end of the decade and beyond.
Now moving to other markets, we're seeing a continued recovery in strengthening and several key wafer level test and burn in market segments. After the last two years of softness related to COVID-19. This includes silicon photonics devices for data center, and <unk> infrastructure, Judy and <unk> sensors for mobile and wearable devices and.
New high volume application for data storage on the horizon.
Specifically for Silicon Photonics during the COVID-19 shutdowns the data centers, such as Facebook, Google and Amazon did not upgrade their datacenters from copper based lands to fiber optic communication links as originally planned.
The silicon Photonics market had been forecasted to have 30% to 40% cumulative average growth rates for the last few years and through to the end of the decade. However.
However, they end up being flat over the last two years with COVID-19 with no growth at all.
We're fortunate enough to work with the market leader in several other key players in the space who are qualifier solution. In 2019, however, if they're not growing they're not buying test systems to meet their increased needs.
At the IMAX Technology Forum last week Silicon Photonics was described as an industrial reality and the critical path of Datacenters and AI scaling and that advanced Cmos processing and heterogeneous integration will be necessary to address the silicon photonics scaling challenges.
We have been told by several of our customers, including our lead customer that wafer level burn in and stabilization plays a key role in enabling silicon photonics mass production.
Our lead Silicon photonics customer that is one of the world's largest semiconductor manufacturers continues to use air for wafer level burn in and stabilization of their film Silicon Photonics wafers. During the last year. They added a significant number of additional Fox NP systems to support that characterized.
Characterization and product qualification of new Photonics based devices. This customer is expected to purchase new sets of wafer packs to be use with these systems and as the applications end market for Silicon Photonics based devices continues to grow we expect this customer as well as our other customers in this space to continue to increase their capacity in the <unk>.
Sure.
And just the last month, we received wafer pack orders for new devices from a couple of our silicon photonics customers.
And we're expecting customers to resume buying in the current fiscal 2023 and 2020 for several customers addressing the silicon photonics market at forecasted additional Fox systems in wafer pack or diabetic contactor capacity needs over the next 12 months.
We expect to see a nice recovery in this market segment sometime over the next year or two based on what we're being told by our customers.
We continue to see new programs for our Fox XP solution for two D and three D optical sensors.
Last year, we saw yet another device for a new application that we feel will drive our consumables business and possibly require incremental system capacity. This fiscal year. We continue to be optimistic that this market segment has significant potential over time, and we continue to meet our lead customer in their sub cons needs and to play an important.
<unk> role in their test and reliability supply chain.
Our newly customer and then in a new very high volume application for data storage devices that purchased at Fox CP single wafer production test and burn in system essentially went dormant during the COVID-19 shutdowns.
They have begun to show signs of recovery and restarting their planned production capacity ramp which feels like it will begin later this fiscal year or next fiscal year at the latest we continue to believe that this will drive a significant number of Fox CP systems.
Now, let me spend a few minutes talking about our R&D investments in manufacturing and supply chain.
We continue to make investments in our Fox full wafer and simulated dye test and burn in solutions last year, we shifted resources away from our planned new packaged part test system to focus on our Fox products. This year are we'll be releasing several test system enhancements that will extend our market leadership of our Fox products for full wafer test and burn in.
These include added voltage ranges increased parallelism per wafer new burn in and stress conditions and a new fully automated Fox wafer pack aligner configured to fully integrate with our Fox XP multi wafer systems to enable hands free operation.
We believe that this will become more important over time for a widespread adoption of wafer level burn in for multiple mock markets beyond the markets we address today.
As I've noted before despite a few bumps in the road our supply chain is holding up extremely well to the increase in demand and growth and we've been able to maintain reasonable lead times to meet customer requests, we're very confident in our ability to meet the customer forecasted demand plus considerable upside.
I also want to emphasize that we purchased additional material and have the supply chain in place to significantly grow beyond our revenue guidance for the fiscal year.
We will have better visibility in the second half the fiscal year on exactly what that looks like and once we get closer to understanding the actual capacity needs and requests of our customers. We will provide an update.
We're very encouraged by the positive momentum, we're seeing with current and prospective customers and anticipate multiple new customers will begin placing orders and taking shipments to meet the enormous needs a silicon carbide devices used in electric vehicle market over the next decade, we also see a recovery beginning this year in other key mark.
<unk> segments, including Silicon Photonics, and <unk>, and <unk> sensors, and another new market opportunity for data storage on the horizon.
If current <unk>, new customers increase our forecast and our decided to pull in orders we have significant upside capacity to meet their needs. This provides us with the confidence that we can meet a significant upside in revenue shipments at the customer demand pulls and we believe we will add several new silicon carbide customers that will be be ramping into <unk>.
<unk> by the end of our fiscal 2023 that ends next may.
This is in addition to the significant additional investment in.
And capacity by a currently customer for our silicon carbide wafer level burn in solution.
For the fiscal year, ending May 31, 2023 air expects total revenue to be at least $60 million to $70 million with strong profit margins similar to last fiscal year.
Are also expect bookings to grow faster than revenues in fiscal 2023 is the ramp in demand for silicon carbide in electric vehicle vehicles increases exponentially throughout the decade with that let me turn it over to Ken to review, our financial results and guidance in more detail before we open up the line for questions.
Thank you again and good afternoon, everyone. This gain noted we're pleased to report record revenue for both the fourth quarter and full fiscal year. Our fiscal 2022 revenues of $50 8 million were more than three times last year's annual revenue. In addition to record revenue. We finished the year with record bookings and strong growth in our profit margin.
We also finished the year with a solid balance sheet with cash of over $31 million and working capital of $49 million.
Looking at our financial results in more detail fourth quarter net sales were $20 3 million up 33% sequentially from $15 3 million in the preceding third quarter and up 166% from $7 6 million in the fourth quarter of the previous year.
These record Q4 revenues reflect our capacity to increase revenues, we actually shipped over 10 million for revenue in the single month of May, which really shows our ability to scale and meet customer demand even in the near term.
Wafer pack and die pack revenues comprised 45% or $9 $2 million of our total revenue in the fourth quarter. This is our second consecutive quarter of record wafer pack to AIPAC shipments, reflecting the growth in the consumables piece of our business.
non-GAAP net income for the fourth quarter was $6 5 million or <unk> 23 per diluted share.
Which excludes the impact of stock based compensation.
This compares to non-GAAP net income of $4 1 million or <unk> 14 per diluted share in the preceding third quarter, which excludes the impact of stock based compensation and a $1 million, one time charge for excess and obsolete inventory and non-GAAP net income of 930000 or four cents per diluted share in the fourth quarter of fiscal <unk>.
2021, which excludes the impact of stock based compensation.
On a GAAP basis net income for the fourth quarter was $5 8 million or <unk> 20 per diluted share compared to GAAP net income of $2 2 million or <unk> <unk> per diluted share in the preceding third quarter and GAAP net income of 567000 or <unk> <unk> per diluted share in the fourth quarter of the previous year.
Gross profit in the fourth quarter was $10 5 million or 52% of sales compared to gross profit of $6 4 million or 42% of sales in the preceding third quarter and gross profit of $3 5 million or 46% of sales in the fourth quarter of the previous year.
During the preceding third quarter, the company recognized a charge of $1 million related to reserves for <unk> excess and obsolete inventories on legacy parts, which represented a $6 seven percentage point impact on third quarter gross margins, excluding the impact of this charge gross margin in Q3 was seven four.
Or 49% of sales.
The increase in gross margin from both the preceding third quarter and Q4 of last year is primarily due to a decrease in unabsorbed overhead cost to cost of goods sold related to higher revenue levels in Q4.
Because our manufacturing overhead costs are relatively fixed relative to revenue levels. Our gross margins increased significantly with increasing revenues, where our fixed costs are basically spread over the larger revenues as Gaye noted with the higher revenue. We are generating we are seeing the significant leverage in our operating model to our bottom line as.
<unk> by the strong growth in gross profit.
Operating expenses in the fourth quarter were $4 6 million, an increase of 507000 or 12% from $4 1 million in the preceding third quarter and up $1 7 million or 58% from $2 9 million in the fourth quarter last year.
SG&A in the fourth quarter was $3 million, an increase of 381000 from $2 6 million in the preceding third quarter and up $1 1 million from $1 9 million in the prior year fourth quarter. The increase in SG&A expense from the preceding third quarter included an increase in employment costs of 275000, primarily due to higher <unk>.
Centered payments related to bonuses for exceeding revenue and profitability targets.
The increase from prior year fourth quarter included an increase in employment costs of 768000, and the increase in employment costs, including an increase in head count salary increases increases for employees during fiscal 2022.
Commissions and incentive payments related to bookings revenues and profitability and stock complicates compensation costs related to stock bonuses and our employee stock purchase plan.
In addition to the increase in employment cost the company recognized increases in travel and entertainment and shareholder relations costs.
R&D in the fourth quarter was $1 7 million up 126000, compared to $1 5 million in the preceding third quarter and up 626000 from $1 million in the fourth quarter of the prior year.
The increase in R&D from the preceding third quarter includes an increase in employment costs of 198000 due to higher incentive payments related to bonus objectives. This was partially offset by a decrease in professional consulting of 78000. As Q3 22 included mice included milestone payments related to R&D program initiatives initially.
During fiscal 2022.
The increase from the prior year fourth quarter included an increase in employment costs of 618000. This increase included an increase in head count salary increases for employees during fiscal 2022.
Higher incentive payments related to bonuses for exceeding revenue and profit profitability targets and stock compensation costs related to stock bonuses and our employee stock purchase plan.
We continue to invest in R&D to enhance our existing market, leading products and to introduce new products and maintain our competitive advantages and expand our applications and addressable markets.
Now turning to the results for our full fiscal year.
Net sales for fiscal 2022 were a record $50 8 million up 206% from net sales of $16 6 million in fiscal 2021.
For the full fiscal 2022 system revenues accounted for 50% of total revenues compared to 44% in fiscal 2021.
Wafer pack and die pack consumable revenues accounted for 45% of total revenues in 2022 compared to 35% of revenues in fiscal 2021.
Customer service revenues accounted for 5% of revenues in fiscal 2022 compared to 21% of revenues in fiscal 2021, non-GAAP net income for fiscal 2022 was $11 7 million or <unk> 42 per diluted share, which exclude the impact of stock based compensation, a $1 million adjustment taken in the third.
Good quarter for excess and obsolete inventory and forgiveness of the $1 7 million Paycheck protection program loan received in fiscal 2020.
This compares to non-GAAP net loss of $3 2 million or <unk> 13 per diluted share, which excludes the impact of stock based compensation and a noncash net gain of $2 2 million in tax benefit of 215000 related to the closure of errors, Japan subsidiary subsidiary in the first quarter.
On a GAAP basis net income for the fiscal year was $9 5 million or <unk> 34 per diluted share. This compares to GAAP net loss of $2 million or <unk> <unk> per diluted share in fiscal 2021.
Gross profit for fiscal 2022 was $23 7 million or 47% of net sales excluding the impact of the 1 million excess and obsolescence provision in Q3 gross margin for fiscal 2022 was 49%. This is up from gross profit of $6 million or 36% of net sales in fiscal.
2021.
Excluding the impact of the one time charge the increase in gross margin percentage of fiscal 2022 compared to 2021 is primarily due to a decrease in unabsorbed overhead cost to cost of sales related to higher revenue levels in fiscal 2022 operating.
Operating expenses in fiscal 2022 were $15 9 million.
SG&A was $10 million in fiscal 2022 up from $6 6 million in fiscal 2021. The increase in SG&A includes an increase in employment costs of $2 6 million, resulting from the elimination of cost reduction initiatives implemented in fiscal 2021, higher commissions and incentive payments really.
Weighted to increase bookings revenues and profitability.
Stock compensation costs related to stock bonuses and our employee stock purchase plan.
And an increase in head count in addition to the increase in employment costs. The company recognized increases in travel and entertainment shareholder relations and consulting cost.
R&D expenses were $5 8 million in fiscal 2022 up from $3 7 million in fiscal 2021. The increase in R&D includes an increase in employment costs of $1 7 million professional consulting of 331000 and project materials at a 155000 and the increase in employment.
Cost.
Included an increase in R&D headcount salary increases for employees during fiscal 2022 higher incentive payments related to bonuses for exceeding revenue and profitability targets and stock compensation costs related to stock bonuses and our employee purchase stock purchase plan.
The increase in head count consulting cost and project materials is related to R&D programs initiatives during fiscal 2022.
Turning to the balance sheet for the fourth quarter, our cash and cash equivalents were $31 5 million at May 31, 2022 down 536000 from $32 million at the end of the preceding quarter and up $26 9 million from $4 6 million at the end of the fourth quarter of fiscal 2021.
The increase from fiscal 2021 includes 24 million in net proceeds from our successful ATM offering in the second quarter of fiscal 2022.
Accounts receivable at quarter end was $12 9 million up from $8 $5 million in the preceding quarter and due to the impact of higher revenue levels inventories at May 31 were $15 million, an increase of 899000 from the preceding quarter end.
We ended up $6 2 million from Q4, 'twenty one to support our expected fiscal 2023 growth as <unk> indicated we have been ordering long lead components for systems and wafer packs to ensure adequate supply to meet customer lead times and forecast.
Property and equipment was $1 2 million compared to 776000 in the preceding quarter end.
Customer deposits and deferred revenue short term and long term were $2 5 million a decrease of $3 8 million from the procedure quarter end and an increase of $2 2 million from Q4, 'twenty one related to the changes in our backlog from prior quarters.
The company has no debt.
This compares to a mate 31 2021 fiscal year end, where we had $1 4 million outstanding on our line of credit and $1 7 million outstanding on our Paycheck protection program loan bookings in the fourth quarter were $4 4 million backlog as of May 31 was $11 1 million compared to $26 9 million at the end of the proceed.
<unk> third quarter, and $1 6 million at the end of the fourth quarter last year.
Effective backlog, which include backlog as of May 31, and all orders since the end of the fourth quarter is $25 5 million.
Now turning to our outlook for fiscal the coming fiscal year for our fiscal 2023 year ending May 31, 2023, we expect full year total revenue to be at least 60 million to $70 million with a strong profit margin similar to last year. We also expect bookings to grow faster than revenues in fiscal 2023 as the.
Wrapping demand for silicon carbide in electric vehicles increases exponentially throughout the decade.
Lastly, looking at the Investor Relations calendar Air test will be meeting with investors virtually at the Needham semiconductor and semi cap one on one conference on August 25th we hope to see some of you virtually at the conference.
This concludes our prepared remarks, we're now ready to take your questions. Operator. Please go ahead.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your touch 10 fan if youre using a speakerphone. Please pick up your handset before pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
And our first question will come from Christian Schwab with Craig Hallum Capital Group. Please go ahead.
Hey, guys. Congratulations on a strong start to the strong ending the fiscal year outlook for next.
What are you guys are talking about.
Several more.
Customer orders can you help us understand is this should we be assuming that this is going to come from kind of the major.
European and American.
Silicon carbide manufacturers like <unk>.
Or what's the opinion ROM et cetera.
Or is there an opportunity to.
Get into some of.
Of the newer Chinese manufacturers that.
Pete as well.
So even in our prepared remarks.
We have talked about I think starting.
Starting in a few quarters ago, we talked about a benchmark with one of the other major suppliers of silicon carbide today that Ed I think even in February so, we're saying that it was taking longer than we had originally expected.
<unk>.
Benchmark.
A really key milestone that was achieved over the last quarter that.
Bodes really well we think that.
We can complete the correlation.
Correlation results et cetera over the coming months, and we are expecting to get orders from them.
We also teed up last quarter that we had indications from another leak is another of the large customers that wanted to do a on wafer benchmark, we were actually able to complete that.
We were we brought up the wafer pack the whole thing and we presented them with the correlation and test results recently that it was and that was it was excellent results.
And.
We're pleased with how thats going and think that we can.
Advanced set along further and those were two of the large silicon carbide players today.
New players that are not current customers and I believe that will be part of their production plans.
And Thats how im.
Describing it we believe that they will be going forward with us.
There are others in fact, there is a winner.
Reviewing the funnel with Vern.
Vernon and the team there is a significant number of players that are talking about getting in the silicon carbide many of them have been announced.
That include large and small and candidly many.
Actually see large players that have not announced their plans that have approached us and have been talking to us about that.
They're very real plans for entering the silicon carbide market now folks cite canaccord genuity have actually been ringing the bell for the last really six months pointing out that the current.
Yes.
Announced plans by all the major silicon carbide suppliers only supplies about half of just the electric vehicle needs by the end of the decade. So it's a it's welcome to have all of these new players coming in because all of the players today don't have a chance as meeting all of the demand is there.
They basically go from onex to 'twenty five X the output by the end of the decade.
So.
We're leaving it kind of opened not trying to be too vague here, but that we're going to have a pretty significant number of silicon carbide customers and we're just trying to make sure people understand that that will include at least several this year that will not only buy from us, but we'll already start taking production orders for their ramps.
Great and then again when we talk about.
Wafer start with silicon carbide for the electrification of the automotive industry.
Do you have you guys I know yields are substantially different potentially buy.
Hi.
By different customers.
But for every can you give us an idea or have you been able to finalize the I do not have enough data for you now.
Every 25 or 50.
And wafer starts.
No.
If that was if it was a customer using U how how much capital equipment, they would need to buy and the reason why I say that.
As you know the wafer start numbers between Canaccord and others out there in the industry, such as Youll and such as.
The lead provider on the capital equipment side for ion implant too.
We really just didn't face less competition.
The trajectory of growth is very similar.
Yes exact wafer starts.
Are all of that close.
So I'm curious your thoughts on that.
Yes, Okay. So let me try and answer it with a couple of different ways. So first of all like.
We get a front row seat of People's yield and we sure as heck don't want to talk about publicly.
So when you look at the Canaccord <unk> of the world et cetera, theyre, taking their assumptions of yield into into account I think most people understand and it's widely known that the <unk>.
Yield that native yields of silicon carbide devices is not.
Extremely high let's call it that but it's also not.
Not crazy low either so I'm, just not going to answer that but specifically if you look at gross die per wafer, which is prior to yielding that data is out there theres a lot of data points out there because people like will speed and others solve the simulated die. So you can they actually that describe the size of.
The die and the numbers that we can see out there is for and in Burger for a electric vehicle. They tend to be about maybe 350 to 400 and some devices gross die per wafer at 150 millimeter today.
And then when you go to 200 millimeter, that's going to start kicking in towards the end of the decade in particular, I mean, I don't think that the midpoint.
50% till late in the decade.
Split between 200 milligram and 150 200 millimeter as about 75% more die per wafer.
We've been using the number of approximately and this is averaged over this whole period like maybe 500 die per wafer is all youre going to get off of these wafers for call. It six inch equivalent wafers and and Thats rounding up I mean, and then we know that there is about 48 die or there are 48 died.
<unk> Burger, which is per engine and so I've seen people.
Some of the silicon carbide suppliers use numbers like four engines per wafer to maybe eight or 10 on the high end side.
So you can start looking at each how many wafers are needed to supply a single engine car.
The model Threes, what 70, 80% of their cars are sold with two engines et cetera et cetera. The current I believe I think is on the one and a half plus average engines per car at some point in time.
So we can see where the demand is coming from from our toil. It really comes down to the test and burn in time and that is something that it continues to be dynamic we have talked publicly about there have been public statements by some of the suppliers out there that have talked about six hours they've talked about 14 hours.
You've talked about 24 hours.
And some of our modeling we've talked about test times being able to get down to say 12 hours of burn in and on a system like ours with 18 wafers that theoretically means you can get 36 wafers per day out of it.
Now we know for a fact that there is a number of conversations going on in the industry that the burn in times are likely to go up.
There is as much pressure to go up as to go down and the pressure is is that there still is more opportunity to increase the quality by increasing the burn in times to remove infant mortality to get down into the.
Sub 100, or even 10 parts per million numbers. There is a lot of capacity today that has been shipped.
In die form and there were public statements that talked about being able to ship the die form with 99% of the.
Failure screened out well that's awful I mean that means you have a 1% of the die still need to go through some sort of quality burden at a later date.
There is actually two big suppliers out that that supply die sales today and one of them was the one that actually talked about that 1% failure rate.
It's just not going to be good enough, we think that you need to be down in.
<unk> hundred or single digit part per million failure rates and youre going to need to have longer burn in times lastly is.
Folks like Danfoss and.
Borgwarner and companies that are only buying singular die are demanding and specifying <unk>.
Stabilized threshold voltages of the devices before they put them into the multi chip modules and that actually takes a considerable amount of time to actually stabilize that through a burden process. So those two things are driving test times up there's obviously cost pressures to try and drive it down and we think that test times will continue to be.
And the on average multiple hours.
Up to two hours, perhaps even 24 hours, depending on the customer and where the product is throughout the decade.
Okay, Great and then my last question.
Again kind of on the on the wafer start side others are projecting.
It can wafers for the automobile industry will have to at least triple.
You know over a three year timeframe to potentially hit the penetration rates that are expected. So.
As we look at your leading customer.
And let's assume that they grow with the industry and their market share remains whatever it is today I guess there is no reason to believe that they couldnt be.
At least three times larger than.
And then they've been.
Over the last 12 to 14 months of orders is that the right way to be thinking about that.
Yes, I mean, it's always awkward so we announced on semiconductor has a 10% customer last year on semiconductor was.
A distant sixth or seventh place player in a three man race two three years ago.
I mean, it was they were they did.
Couple of few million dollars, where it's very clear that they are taking a significant amount of share and theyre boldly out making comments about the first company to reach $1 billion in Silicon carbide. This again from a company that a couple of years ago didn't do $10 million.
They also just announced a $1 billion a commitment to $1 billion. It was in Korean won but into their Korean facility for silicon carbide, and so theyre, making some significant investments and it's going to take them and a whole lot of other people to supply the demand.
Listen I listened to S T and they were talking about the capacity they are increasing in.
And Singapore over the next year, and then a new fab coming online online insistently, Italy in 2024, and they were saying they don't believe that they're going to be able to sustain their market share.
Even with adding an entirely new fab. So there is going to take a lot new a lot of new players in there as well.
We kind of look at it is.
Land grab there is a lot of folks getting into here, we're trying to run as fast as we can we're adding resources in sales and marketing and other things to try and get make sure we get our.
Our message out there, we're adding applications engineers and doing some things structurally to be able to be able to address more customers because theres going to be a lot of new and big players out there from our perspective, so pretty exciting time.
Yes, it sounds very exciting.
Congrats again.
Great no other questions. Thank you.
Thanks Christian.
Our next question will come from Larry <unk> with <unk> Capital Management. Please go ahead.
Hey, Larry.
Got a quick question.
Your anticipated additional sales I think you said in.
And automating the.
The xps going forward.
As Ed last August you had a sale to your lead silicon carbide customer.
Or a automated.
Aligner.
And is that going to revenue anytime soon.
Or did you already shipped.
Yes.
Yes, it is kind of revenue anytime soon so.
Youre actually bouncing around a different question I'm, just going to share it here.
That order, we talk to the customer about it and we have converted that order into our next generation automated aligner.
That new liner.
Is available in both what we call a standalone or an integrated form sometimes people want to do as we do today with our volume customers, which is they share an aligner across multiple systems.
Theres other customers that want to take the aligner and bolt it right onto the front of it and remove the people that are actually moving the wafer packs around similar by the way to how all packaged part burn in is done today is with people moving around these bids in our case, they're called wafer packs.
So.
And in fact, the order that we announced today is the second order for that system those are those.
Those are liners will be shipping.
Okay.
One will actually ship before the end of February as well the.
The automated version of it is just more integrated it has some additional R&D that we're going to be working on over the next three to six months and we are now.
Quotations out and we will be accepting orders for it in the automated form.
For delivery sometime towards the end of our fiscal year.
So that.
The one you.
You put it in the press release today for them for the $12 8 million.
That's actually the second automated aligner yet.
And that was the first one the first one do you expect the revenue when did you say again did you mentioned that you had.
Actually haven't given a commitment on that but.
Prior to the second one which will revenue in February how is that.
Alright.
So.
Since this is your lead.
Silicon carbide customer are they do they have intentions of automating all of the xps that there eventually either have or going to receive is that kind of what your expectations are.
At this time now they they like other customers are totally convinced they want to be offline.
Because of their extended burn in times and the way they use the tools and so we offer the ability we kind of say, yes to every customer. So this gives us an opportunity to there are customers that absolutely feel strongly one way or the other and we want to be able to meet their needs.
Some of the potential new silicon carbide customers may be fully automated.
I believe that is true that's correct. Yes. Okay. Then initially this application or a fully automated XP by the way what are you calling that thing do you have a name for it yet.
We havent, we havent named that system yet.
We will get our name out later this year.
Okay. So.
The initial application I thought was for memory specifically.
Flash memory.
For the stacked die applications in order to.
To get rid of the infant mortality risk on one of those stack dies.
Is that do you expect to get kicked that off anytime soon now that you're on the verge of.
Launching this new product you have to be named new fully automated though it.
It's always been a little bit hidden down in that comment sections, but.
TS people at every quarter, along the way we had actually done some design reviews with.
With a couple of key memory suppliers on this aligner.
Before COVID-19.
And all of those guys went very very quiet during COVID-19, we've had conversations that have been quite frankly, a little bit in the background. There comments to us. We're at this point theyre ramping what they have there nobody is doing evaluations, which I think has been the experience across the whole semiconductor test business nobody was.
Really buying new things they were buying what they had before so.
We've had some recent conversations that lead me to believe that there is.
The opportunity to renew those discussions is upon us so.
It's a slow that the slowdown in memory slightly that there'd be more open to kick some off like this but the question is.
Is it your intention or do you think the best way to look at this would be an existing fab that would be adding this capability.
Because there were now so definitely.
Or my experiences, yes, my experiences as yet.
Really the best time to cut in is that a.
Discontinuity, such as our new Fabs are going in.
And so even though there are.
Benefit might be.
So great.
You know it could pay for itself in six months or.
That has been my experience in particular as they add these new fabs and they will put a floor space and plan consistent with whatever it is that they plan to put the tooling in on.
That would be my experience.
Lastly, ill along those lines.
With the.
With that new capability, where it makes sense the joint venture with maybe on a testing company.
Incorporate since its a fairly long burn in.
Where maybe they could do the a T tests on a wafer while youre burning in 18 wafers. They could do maybe one at a time, but <unk> done during the entire burden cycle is that something that you guys you guys might be considering.
That seems to be so to make a lot of sense here, we're getting a lot in our futures here, but let me just make a plug there is not an HCA product out there that has the level of density.
And power management that could fit into our XP. That's one of the key differentiation that we have is that we're able to put a 2048 channel <unk> system into a basically a three four inch pitch and put 18 of them in the same footprint as a regular <unk> system with not dissimilar pinkie.
Testing one wafer so I would not if I could I couldnt pick one <unk> supplier out there that I wish they could build a tester and stick into my system.
We're actually board differentiated the Fox XP system and its base hardware. It was in fact defined around capabilities that are much more complex certainly then.
MOSFET for example, it has full digital capabilities pattern generation et cetera, and it is capable of testing these flash memories.
So actually I'm pretty proud of the system. We spent a lot we haven't talked a lot a lot lately now there are other ways to potentially partner with some of the supply or some of the customers.
Who themselves have done some of their own work with test and that could be something to think about.
But.
Most days I wake up and I focus my energy on whats going on exciting in the silicon carbide space.
Looking down the road in mitigating some of the memory business in time as everybody who has heard me talk knows.
Alright.
Alright, that's all I had thanks again, great quarter and keep up the good work.
Goodyear look for a better year. Thanks, Larry.
Our next question will come from Dylan Patel with semi analysts. Please go ahead.
Hey, Thanks for taking my question I wanted to ask about the test.
Density.
Question. So many other tests for them so to speak about the relationship of lower yields, meaning higher test intensity and right now it's silicon carbide yields aren't pretty.
Even at the best firms, but they are expected to go up.
My understanding of your solution is that it's unique in that because it's burning.
Basically tells the same regardless of how lower high yields arc.
Is that accurate or do I get that loan yields necessitate.
People would want to buy your product, but can you expand on the durability of demand, even if yield to reach multiple nines eventually.
Yeah, Okay. So the.
There is certainly a correlation between low yielding devices and devices that are more apt to need.
Reliability and Vernon.
But at the same time the failure mechanisms are not the same.
The primary mechanisms that caused the yield and the devices are not the ones that are necessarily induced by the burden in the burn and sometimes require additional NRG through heat and voltage and power to actually create that tunneling effect on the gate that causes. This failure you can't actually test for it you have to actually do it.
<unk> tests to find it.
So there are devices with low yield that don't use Vernon the application doesn't need it.
There are devices with very high yield that need 100% Vernon DRAM would be an example of it DRAM has extremely high yield, but it still has 100% burn in to catch about a 1% defect and has now for 40 years. So that's a scenario where there's way more money in it.
Get rid of burn in in DRAM than human Silicon carbide and no one has figured out how to do it the.
The information that I'm hearing from the Silicon carbide focuses that they don't believe that there is any chance that Vernon is going to go away.
Basically in the horizon of a decade or more.
One thing is going to happen is there will be ways to try and optimize test time by increasing temperatures and doing things to try and optimize but youre always riding the line that if you stress the device a little too much you can actually damage it and so theres a balance what are the analogy I have used is microwave versus an oven.
You can actually Cook, a turkey, and a microwave but it doesn't come out that well and similarly, if you apply enough energy to a silicon carbide you can induce the failure within potentially seconds, but youre absolutely damage it and it won't last for months much last years. So I've actually found my experience so far.
Consistently with the customers I have been working with they're actually applying less thermals and less voltages that I thought they would because theyre trying to keep those devices to have long term or intrinsic reliability to meet the needs. So there is always sort of a balance there.
Again, I don't believe that.
I think as yields go up one thing I actually heard one of our customers talk about is that the next generation and generation. After the device yield is actually expected to.
To improve but the burn in times are going to get longer.
Which is definitely not intuitive and the reason they said is it's going to take longer to actually get the failure. It will take longer to induce the tunneling effect that creates a failure, but if they don't then apart instead of at dine three months later in a car it would dive maybe two years later in the car and that's cash.
Trophic if your entire fleet of cars were to start failing with walk home events three years later so.
No.
Anyhow, there's a lot of science involved in this thing and it does appear at this point that.
Burn in is here to stay for a while on these devices.
Thank you for the question.
Great and then I wanted to switch gears to wafer packs related to silicon photonics.
And specifically where is the burn and specifically happening on the Silicon Photonics is it happening on the indium phosphide wafer ware laser fabricated or is it happening once you ban them onto the silicon photonics wafer.
We have examples where customers want to burn it in on a wafer call. It a substrate that would then be bonded on.
But the examples of our current customers are all in a scenario where well on the wafer level customers, where they are bonded on and then they are burnt 10 after their bonded on.
So and customers like Scorpios, which we've announced they actually fabricated on it's printed on if you will as a process node. So it's not really a bottoming if you will.
They do the burn in on the wafer level for scale.
Before that die is simulated and then placed into the system.
Okay. Thank you that was helpful for trying to understand when theres, new generations of lasers, or if that's when theres, new transceiver and it's the latter.
And just one last little question is.
In the past we've talked about difficulties visiting your major prospective clients, especially in Asia like China, South Korea, Luckily been able to start visiting some of my clients in Asia have you been able to and do you think that's going to help move the needle on some of these.
Future customer orders or evaluations.
It is I mean, Europe's been pretty free and getting better you get even get back to the U S without passing a COVID-19 test as of like last week, but we've been able to freely move there with some call. It. Some restrictions we've had people that are moving to and from the U S and Asia.
And we've got some we haven't.
Recent Asia customer that's been making visits here.
So I think it is opening up China still pretty iffy.
But as that opens up we think that will be better yes.
Great that concludes my question. Thank you look forward the next year.
Awesome.
Again, if you have a question. Please press Star then one our next question will come from Bradford Ferguson.
Tariff Ferguson financial please go ahead.
Hi, My clients are now a 1% holder of your company now so shareholders.
I was curious what's keeping the likes of these the serious silicon carbide makers.
From creating their own wafer level burn in.
And I'm curious what's protected as at the 18 wafers at a time is it.
The aligner or to load or what's.
What's protected from that.
There's actually a lot of protection as it Brad I guess.
It's nice meeting you so wow.
Our systems.
A significant number of patents and IP that make a very significant hurdle ticket into if you understand our space.
An expert in the test space They will tell you that.
Being able to test the wafer is novel every semiconductor wafer in the world has been tested and they are all tested in a similar way with what's called a wafer probe or a probe card and a tester that sits on the wafer probe or I built them for years when I built a tester I had to build a tester that would always set on the generic platform.
Of the three major probe suppliers in each of their five or six progress. So theres like maybe 'twenty progress maximum ourselves, maybe it's less than that that the tester was generic to the probe cards. All had to be worked with if you want to build a test or you had to build it with that would work across half a dozen to a dozen probe card suppliers and all the folks like form.
<unk> and techno probe et cetera have standard design packages for a specific tester and the product teams and the tester group's work with them to ensure that probe cards are there when the testers come out similarly, the docking to the program. These sort of three pieces create sort of commoditized and stable market because you could by any one of the three.
<unk> any one of the 20th probe cards any one of the five or six testers out there and that's how the world is operated.
With us that problem was you couldn't break through a cost barrier. If you start with a $300000 program. That's the footprint size of a prius and a parking lot and you need to put 100 or two or 300 wafers worth the capacity in place because you have a 10 hour burn in time.
You can't get there you just the cost of the depreciation of that capital equipment sitting in a in a wafer test environment is too high.
So what we have is we've created a pro Berlin Tesla it.
Actually doesn't use a proper it doesn't use a standard probe card with the normal course displacement.
It's planarity comes completely different than the patents and the wafer probe card industry and we use a tester with a tester interface that doesn't exist by anyone else. There are several features about our system that literally do not exist by anyone so if a test your supplier wanting to come in first of all they would step all over our patents everything from how we can.
Contact our wafer pack to how we distribute power to onboard components. There is a number of patents that we do that they can't do this blade architecture.
Your probe card supplier you would have to build a probe card that would look just like our wafer pack that absolutely positively would violate a half a dozen or more of our patents. We've approach some of the big suppliers about potentially being.
Partial suppliers to us and some of those big guys, there probe chips, which would rip completely off the wafer pack because we run 150 C and we run them from room to 150 C and back without a soap time and those probing the managed based probes would never survive.
We have direct quotes from people on that so we do it differently than them and the probe where companies have no vested interest in being involved in appropriate list program and appropriately tester. So in fact that was part of the real risk associated with us for the early investors in order for somebody to actually go with our solution.
Had to close their eyes and have confidence that we would just supply with them. The tester the probe card and the handling equipment because if any one of those didn't work nothing would work and.
And so there was a point in time, where it was like is anyone going to be.
The nerve to actually do this and then looking back as people know now our lead customers that became 10% customers included the likes of Intel and Apple and now it looks a lot easier with some large suppliers that are ramping but.
If you were to go out and try and build what you have there is no way to do it without violating our patent and it would cost you a lot of money time to try and do it even if you wanted to violate the patents. So we have a we have an enormous hit.
Start and IP advantage and right now we are not aware of any company, who has been told that anybody is working on appropriate lis system like ours.
We keep our ear to the ground. So that we can quickly take legal action against anyone who tries.
Okay, that's great.
I'm guessing that the Fox system can handle 200 nanometer today.
So four millimeter wafer size 200 millimeter wafer sizes, what yes, we can we actually do four inch six inch eight inch and 12 inch wafers today with our wafer packs theyre all in volume production and are are out of our all of our Fox wafer pack of liners can handle all of the above.
So 12 inches effectively 300 millimeters that right that's correct Yep yep Okay.
So.
Several of the serious players are.
Creating new Fabs that are dedicated to silicon carbide and gallium.
And they are intending to grow at four.
Yeah, they're they're intending to grow at 40% a year.
With their silicon carbide business.
Meanwhile, we look at Evs are growing at 100% a year.
So it seems like.
Maybe they're being a little conservative.
And you all are guiding to.
The high end of our 40% annual revenue growth.
What what makes you all a little on the conservative side of that you know wondering whether photonics is going to.
Come through finally, this year or is it just the nervousness about when orders come.
I think it's it's it's just timing of orders and.
When not if.
We do our order growth is going to be higher we've never guided orders, we talked about it as a board whether we should do that so we've at least said for the first time, they're going to be higher. The question is when is the timing happening I mean, we have talked about this in previous calls there were some of those big Silicon carbide companies that one year ago, we're talking about open.
Up a fab by the end of the calendar year.
Last December and we and people were beating me up and I felt bad debt.
How come you Havent sold them a wafer level burn in system and the reality is as I was questioning that ourselves trying to understand what were we missing till the dust settles and you realize that they're not even sampling out of that fab, yet and that break production isn't going to be really until next year. So I think that the timing of these new fabs.
And their output is the piece, we're watching but there is no doubt that some of that time is behind us and the pending orders coming from the automobile companies are driving big dollars to put this capacity in place.
During 'twenty three gasoline or to meet the 25 ramp.
So.
That's where the hesitation comes from and we're doing a ton of things in the background to to our supply chain to ramp it up to be able to do things faster to do we have we're doing more outsourcing with our contract manufacturers. So that we can assemble and test the system in a much shorter period of time and I was I mean that.
That data point folks, we shipped the system and.
And on the eighth day, basically or the ninth day, they tested 18 wafers okay.
It's like shipping 18, testers and having them all released eight days later that is crazy.
And Thats awesome that botox to how much demand there is and how they are pulling but Vernon has team and my my support guys are.
It's just awesome that they could do that and as.
As we do that that allows us to ramp faster and faster for people. So.
I'm trying to be cautious and appropriate with setting the street's expectations, but.
I don't think I've ever been more optimistic than we are right now.
And one more question revenues versus last quarter grew $5 million.
But your Cogs only grew a million.
So even if you adjust for the inventory write down that happen.
It seemed like your Cogs only grew.
By 2 million so to me that says.
You have a potentially a 60% <unk>.
Gross margin as you scale, a bigger and bigger.
As with the end up within a point Youre right Youre dead on our what we call our direct margin, which is basically our total costs, including warranty et cetera about 40 cents on the dollar.
<unk>.
Our margins are actually improving from last year to this year indirect margins.
As weak as we go to 200 millimeter wafer.
Wafer packs, our margins are actually improving.
But the customers are delighted because they get more lower cost associated with it.
Our new systems are actually we're expecting to see in <unk>.
Group margins related to some of the new features that we think provides additional value to customers.
Yeah, a lot of things going right for us.
Alright, Thank you very much.
Thank you Brad.
Our next question will come from Wally Wadman with Constitution Research. Please go ahead.
Hi, <unk> how are you all.
Okay and a couple of just filling the blank can you hear me okay.
Yes, perfect Okay.
Okay.
Did you maybe I missed it did you say what percentage of your revenue should lead customer.
Was either for the year for the quarter.
Tickets ADT, yes.
A significant number at over 80%, 82% is what Ken selling me across the board right now.
Okay.
I'm also curious when you talked about.
Going forward your R&D spending.
You spent you focused on the Silicon carbide Mark I know you are focused on let me call. It the legacy markets, but I'm curious if that spend is going just to upgrade and enhance existing tools are you trying to develop new tools for new markets.
Yes, there is a little of both.
There is some things that we're doing to add some voltages and all of that some customers have specifically asked us they would allow us to with that customer, but theyre in the same market, but kids because remember everyone does do everything exactly the same there's also things that we really would consider new markets and opportunities and I think.
Particularly the automated aligner theres going to be certain classes of markets that that really makes a lot of sense. So it's a mix, but theres a lot of things that we're doing just to make sure we shore up to capture sort of the markets that were and capture a larger if not dominant market share of.
That.
The address all customers.
But we're also doing things that we think are going to play forward like for example, the applicability to memory that Larry was talking about.
Okay, and then you've talked over the last couple of quarters about potential new customers I'm curious of the $50 million annual revenue or fiscal year revenue how much of that came from existing customers and how much came from new customers.
However, you want to frame answer that question.
Yes. It was it was pretty I mean, we consider our lead silicon carbide customer or an existing customer. So we just talked about 82%.
<unk>.
When we started the year we were expecting.
And I think I would have shared that we were going to get one or two probably single system orders or something by the end of the fiscal year and they didn't come in from the new customers.
We're excited about where we're at right now heading into the year, but.
It's sort of surprising to me that some of that stuff didn't happen as fast as it did we did not lose those customers. They did not changed their mind. They have there are more engaged with us than they were a year ago in this case.
But it's been bizarre sort of taking some time on.
This years.
Yes.
This is revenue I won't give specific numbers, but we believe a good chunk of that is going to be new customers.
And has the potential.
Some of the growth is from those new customers too.
Candidly, our current customers could easily surprise us just based on the tone, there talking about and kind of re engaging and so we're trying to make sure we have plenty of material.
The supply chain to be able to address.
That mix if you will during the first half of calendar year next year in particular.
Where theres more I don't know if youre willing to answer this but the last couple of quarters you've talked about.
Being able to handle volumes above what your existing forecast. So I'm just curious what your sales capacity would be.
Oh, what is could you if the business materialize ctrip $100 million or.
80 million whats that look like well I'll tell you what I'll give you. This one Ken mentioned that the other day. So we just by the math, we did 20 point whatever million dollars in Q4.
Over half of that was in May.
Okay. So we're doing.
We're doing $120 million run rate.
And write down of 120 in my model.
Okay.
We have proven to ourselves that we have the ability to do that right now.
I don't believe that's enough as we go forward over the next several years.
Yes.
Last quick question the.
Pricing.
Will you just passing through your cost increases.
Were you able to get out in front of that.
You know, what we've been able to manage our vendors fairly well and.
And penalize them drastically when they try and raise their prices with us.
Disdain that.
But there have been certain things like shipping Oh, My Gosh last Christmas we normally would ship chambers, we have two chamber suppliers, we ship them. They are built in low cost regions, there to our specifications and normally that chambers would cost us about $2000. If we put them on a boat each to ship them to us.
We wrote a check for 94 to $96000 for a pair of them to get them here right. After Christmas.
Because we couldn't they couldn't get on a boat la was locked up.
You want to see it on a plane 48 $68000 apiece Crazy, we wrote the money I did not pass that onto the customer.
<unk> and explain it to them and those costs are coming back down again.
It's our hope to try and manage this.
<unk> seen some raises of some prices in certain areas.
But we've been able to manage it fairly well.
Okay. Thank you that's enough.
Hey.
Our next question is a follow up from Christian Schwab with Craig Hallum Capital Group. Please go ahead.
Hey, just a quick follow up gain is there any reason.
You know other than I guess lack of success.
But I knew customers designing the uinta and customer shipments but.
<unk> discussed that great like the rapid growth that's going on.
Debt.
These other customers could ramp.
One year, plus or minus timeframe from when they start.
Giving you orders to a similar level as odd as it is it fair to assume.
Something similar to that.
Yeah I mean.
Yes and no.
I happen to have a pretty good idea of what those guys are so it depends on the timeline. So if you said within a year cannot be as big as on for the first time, they take a system I would say, yes could they be sooner.
Sooner than what sorry, our original cost towards it.
Probably.
Our first customer bought a system and then didn't take another one for what a year and a half.
That's not going to play out with the new guys I don't think I think they're going to go much faster.
And do they have the ability to do 2000 $30 million a piece absolutely in a year.
Great no other questions. Thanks again.
No problem.
I show no further questions I would like to turn the conference back over to management for any closing remarks.
I appreciate it. Thank you folks we've had some feedback that her conferences do run a.
<unk>, but I wanted to make sure. The last time, we ended up cutting off before everybody got their questions in so I'm glad that people had a chance so with that I. Appreciate everyone's time, we're really excited about this fiscal year and we look forward to seeing you at one of the investor conferences or on our next call take care now bye bye.
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