Q1 2024 Aehr Test Systems Earnings Call
Speaker 1: Good afternoon and welcome to the AIR Test Systems Fiscal 2024, excuse me, First Quarter Financial Results Conference Call. All participants will be in line for the first half of the conference call.
Good afternoon, and welcome to the Air Test systems fiscal 'twenty 'twenty four for just excuse me first quarter financial results Conference call all participants will be in listen only mode should.
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Speaker 1: I would now like to turn the conference over to Jim Byers of MKR Investor Relations. Please go ahead.
I would now like to turn the conference over to Jim Byers of M. P. R. Investor Relations. Please go ahead.
Speaker 2: Thank you, operator. Good afternoon and welcome to Airtest Systems' first quarter fiscal 2024 Financial Results Conference call.
Excuse me. Thank you operator, good afternoon, and welcome to Air Test systems first quarter fiscal 2024 financial results Conference call.
Speaker 2: With me on today's call are Airtest Systems President and Chief Executive Officer, Gain Erickson, and Chief Financial Officer, Chris Hsu. Before I turn the call over to Gain and Chris, I'd like to cover a few quick items.
With me on today's call are Aercap, Systems', President and Chief Executive Officer gain Ericsson and Chief Financial Officer, Chris you.
Before I turn the call over to gain and Chris I'd like to cover a few quick items.
Speaker 2: afternoon right after market closed their test issued a press release
This afternoon right after market close their test issued a press release.
Speaker 2: announcing its fiscal 2024 first quarter financial results.
Announcing its fiscal 2024 first quarter financial results.
Speaker 2: That release is available on the company's website at air.com. This call is also being broadcast live over the internet for all interested parties. And the webcast will be archived on the investor relations page of the company's website.
That release is available on the company's website at <unk> Dot com.
This call is also being broadcast live over the Internet for all interested parties and the webcast will be archived on the Investor Relations page of the company's website.
Speaker 2: I'd like to remind everyone that on today's call, management will be making forward-looking statements.
I'd like to remind everyone that on today's call management will be making forward looking statements.
Speaker 2: 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 state.
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.
Speaker 2: These factors that could cause actual results to differ materially from the forward-looking statements are discussed in the company's most recent periodic and current reports filed with the SEC.
These factors that could cause actual results to differ materially from the forward looking statements are discussed in the company's most recent periodic and current reports filed with the SEC.
Speaker 2: These forward-looking statements, including guidance provided during today's call, are only valid as of this date.
These forward looking statements, including guidance provided during today's call are only valid as of this date.
Speaker 2: An air test undertakes no obligation to update the forward-looking statement.
And air Test undertakes no obligation to update the forward looking statements.
Speaker 2: And now I'd like to turn the conference call over to Gail Erickson, President and CEO .
And now I'd like to turn the conference call over to gain Erickson, President and CEO .
Speaker 3: Thanks, Jim. Good afternoon everyone and welcome to the first quarter of Fiscal 2024 Earnings Conference Call. Thanks for joining us today. Let's start with a quick summary of the highlights of the quarter and the continued momentum we're experiencing in the semiconductor wafer level test and burn-in markets. Then Chris will go over the financials in more detail and after that we'll open up the lines to take your questions.
Thanks, Tim Good afternoon, everyone and welcome to the first quarter fiscal 2024 earnings conference call. Thanks for joining us today.
Let's start with a quick summary of the highlights of the quarter and the continued momentum we're experiencing in the semiconductor wafer level test and burn in markets.
This will go over the financials in more detail and after that we'll open up the lines to take your questions.
Speaker 3: We finished the first quarter with solid revenue of $20.6 million and non-GAAP net income of $5.2 million, the strongest first quarter in our history, which has historically been our seasonally softest quarter. With this, we're off to a very good start to our fiscal year, and we're reaffirming our expectation to grow fiscal full-year revenue by at least 50% to over $100 million, and profit by over 90% year-over-year growth to at least $28 million.
We finished the first quarter with solid revenue of $26 million and non-GAAP net income of $5 $2 million the strongest first quarter in our history, which has historically been our seasonally softest quarter with this we're off to a very good start to our fiscal year and we're reaffirming our expectation to grow fiscal full year revenue by at least.
50% to over $100 million and profit by over 90% year over year growth to at least $28 million.
Speaker 3: During the quarter we had record shipments of our Fox Wafer Pack contactors in both revenue and units with revenues reaching well over 50% of total revenues for the quarter.
During the quarter, we had record shipments of our Fox wafer pack contractors in both revenue and units with revenues, reaching well over 50% of total revenues for the quarter.
Speaker 3: We're also very pleased with the continued stream of new designs for wafer packs we're seeing. Our new design volume has tripled over the last nine months as we're seeing more and more electric vehicles coming online with their own specific device designs for inverters and onboard chargers. As a result, our customers are buying additional wafer pack contactors for these new designs highlighting the recurring revenue part of our business.
We're also very pleased with the continued stream of new designs for wafer packs were seeing our new design volume has tripled over the last nine months as we're seeing more and more electric vehicles coming online with their own specific device designs for and burgers and onboard Chargers.
As a result, our customers are buying additional wafer pack contractors for these new designs highlighting the recurring revenue part of our business.
Speaker 3: As we've noted before, our proprietary wafer pack contactors are needed with our Fox wafer level test and burn in systems to contact with the individual dye on the wafer and are designed specifically for a given device. As our customers win new designs from their customers, Aire eventually secures orders for new wafer packs to fulfill these new wins. With each new design, our customers will need enough new wafer packs to meet the volume production capacity need for those new devices.
As we've noted before our proprietary wafer pack contractors are needed with our Fox wafer level test and burn in systems to contact with the individual die on the wafer and are designed specifically for a given device.
As our customers win new designs from their customers are eventually secures orders for new wafer packs to fulfill these new wins with each new design, our customers will need enough new wafer packs to meet the volume production capacity need for those new devices.
Speaker 3: With the increase in wafer pack designs, we've been adding resources in both our US and Philippines operations to expand our already successful application and support team there. We're also continuing to add capability and capacity in the Philippines to meet the support needs of our growing installed base in Asia.
With the increase in wafer pack designs, we've been adding resources in both our U S and Philippines operations to expand our already successful application and support team. There. We're also continuing to add capability and capacity in the Philippines to meet the support needs of our growing installed base in Asia.
Speaker 3: Another key highlight is that we've now received customer acceptance of both configurations of our new fully automated Fox Wafer Pack Aligner, which allows hands-free operation of wafer pack handling and alignment and is available either as a standalone unit or fully integrated with our Fox XP multi wafer system.
Another key highlight is that we've now received customer acceptance of both configurations of our new fully automated Fox wafer pack aligner, which allows hands free operation of wafer pack handling and alignment and it's available either as a standalone unit are fully integrated with our Fox XP multi wafer systems, we recognize revenue for the Standalone.
Speaker 3: We recognize revenue for the standalone wafer pack aligners in the first quarter, and after the close of the quarter, we receive customer acceptance and sign-off of the aligners integrated with our FOX XP systems.
Wafer pack aligner in the first quarter and after the close of the quarter, we received customer acceptance and sign off of the Aligner is integrated with our Fox XP systems.
Speaker 3: The integrated aligners are integrated with FOX XP systems equipped with two key test system enhancements introduced over the last year. These FOX XPs include our new bipolar voltage channel module option for both positive and negative gate bias stress and burn-in, as well as our very high voltage channel module option.
The integrated of liners are integrated with Fox XP systems equipped with two key test system enhancements introduced over the last year. These Fox Xps include our new bipolar voltage channel module option for both positive and negative gate biased stress and burden as well as our very high voltage channel module option the V H P.
Speaker 3: The VHP channel model option, which together with our proprietary wafer packs, and new inert gas control option for the Fox XP, enable high temperature reverse bias testing up to 2,000 volts at wafer level for silicon carbide and gallo-nitride high-voltage semiconductors that are used in power converter applications such as electric vehicle traction inverters and onboard chargers.
Channel model option, which together with our proprietary wafer packs and new inert gas control option for the Fox XP enable high temperature reverse biased testing up to 2000 volts at wafer level for silicon carbide and gallium nitride high voltage semiconductors that are used in power converter applications, such as electric vehicle traction Inverters and onboard Chargers.
Speaker 3: acceptance and production, production release of these FOXXPs with the integrated aligners and the associated revenue recognition provide a solid start to our second quarter revenue and paid the path for revenue recognition immediately upon all future shipments of these products to this customer and forecasted shipments to additional customers this fiscal year. So let me talk a little bit about the
[noise] acceptance and protecting production release of these Fox XP is with the integrated of liners and the associated revenue recognition provide a solid start to our second quarter revenue and pave the path for revenue recognition immediately upon all future shipments of these products to the to this customer and forecasted shipments to <unk>.
Additional customers this fiscal year.
So let me talk a little bit about our new customers. We're excited to have announced last month, yet another new customer in silicon carbide. This is our sixth customer for silicon carbide wafer level burn in this new customer is a U S. Based multibillion dollar semiconductor supplier that serves several markets, including automotive computing consumer energy and.
Speaker 3: We're excited to have announced last month yet another new customer in Silicon Carbide. This is our sixth customer for Silicon Carbide Way for Level Burnin. This new customer is a US-based multi-billion dollar semiconductor supplier that serves several markets, including automotive, community, consumer, energy, industrial, and medical market.
Industrial and medical markets after conducting a detailed financial evaluation of air and Air Sparks family of products, including multiple onsite visits to Air's application lab. This new customer purchased an initial Fox N P system wafer pack aligner and multiple wafer packs for engineering qualification and small lot production of their silicon carbide power device.
Speaker 3: After conducting a detailed financial evaluation of Air and Air's Fox family of products, including multiple on-site visits to Air's application lab, this new customer purchased an initial Fox NP system, wafer pack aligner, and multiple wafer packs for engineering qualification and small lot production of their silicon carbide power devices.
Speaker 3: This system is also configured with our new bipolar voltage and very high voltage options that enable new advanced test and burning capabilities for silicon carbide power semiconductor.
This system is also configured with our new bipolar voltage and very high voltage options that enable new and advanced test and burn in capabilities for silicon carbide power semiconductors.
Speaker 3: This customer has indicated that as their production capacity increases, they intend to quickly move to our FOX XP MultiWave for Test and Burned Systems for High Volume Production.
This customer has indicated that as their production capacity increases they intend to quickly moved to our Fox XP multi wafer test and burn in systems for high volume production.
Speaker 3: In addition to the automotive, electric vehicle device market opportunity, this customer is also focusing on the enormous opportunity for silicon carbide power devices and industrial, solar, and other power applications.
In addition to the automotive electric vehicle device market opportunity. This customer is also focusing on the enormous opportunity for silicon carbide power devices, and industrial solar and other power applications.
Speaker 3: including this newest customer, the last two announced customers has selected our systems primarily for applications other than electric vehicles, which include industrial, solar, and commuter electric trains. This further extends our application space beyond the enormous opportunity we see in Silicon Carbide for electric vehicle traction inverters and onboard and off-board chargers.
Including this newest customer at the last two announced customers have selected our systems primarily for applications other than electric vehicles, which include industrial solar and computer electric trains. This further extends our application space beyond the enormous opportunity we see in silicon carbide for electric vehicle traction Inverters and <unk>.
Onboard and off Board Chargers. These additional applications expand our market opportunity beyond the $4 5 million six inch equivalent silicon carbide wafers at William Blair forecast will be needed per year by 2030, just for electric vehicles. These new applications are driving an additional 2.8 million six inch equivalent wafers.
Speaker 3: These additional applications expand our market opportunity beyond the 4.5 million six inch equivalent Silicon carbide wafers that William Blair forecast will be needed Pre-year by 2030 just for electric vehicles
Speaker 3: These new applications are driving an additional 2.8 million six inch equivalent wafers annually by 2030 to address industrial, solar, electric trains, energy conversion, and other applications.
Annually by 2030 to address industrial solar electric trains energy conversion and other applications.
Speaker 3: It's also interesting to note that these two, these last two customers did not need to see their waifers tested on our system before they moved forward to purchase from us. This need for testing before purchase was essentially a requirement with our early customer engagements, but it's clear that many of our potential new customers have become much more comfortable moving forward with air, simply on our assurances that our solution will perform as committed. This allows the customers to accelerate their time to market.
It's also interesting to note that these two these last two customers did not need to see their wafers tested on our system before they move forward to purchase from US This need for testing before purchase was essentially a requirement with our early customer engagements, but it's clear that many of our potential new customers have become much more comfortable moving forward with.
Are simply on our assurances that our solution will perform as committed this allows the customers to accelerate their time to market.
Speaker 3: Having said that, we're happy to engage with customers either way. If they want to see their way first, tested first, we're happy to work with them. We have yet to lose a prospective customer after demonstrating our test and burning capabilities on their way first. In fact, we've never lost a head-to-head evaluation to a competitive product since introducing our FOX NP and XP configured with the Silicon Carbide and Gallim Nytride Test Resource.
Having said that we're happy to engage with customers either way if they want to see their wafers tested first we're happy to work with them, we have yet to lose a prospective customer after demonstrating our test and burn in capabilities on their wafers. In fact, we've never lost a head to head evaluation to a competitive product since introducing our Fox N P and.
X P configured with the silicon carbide and gallium nitride test resources.
Speaker 3: So let me move on to our pipeline of prospective new customers for Silicon Carbide Wafer Level Burnin.
So let me move on to our pipeline of prospective new customers for silicon carbide wafer level burn in.
Speaker 3: In the last few weeks, we've attended two international conferences in Europe . And I personally met with more than a dozen companies in the Silicon Carbide market that are not currently using our solutions. We also met with all six of our current Silicon Carbide customers. These space-to-face meetings included multiple meetings with one of the market leaders in Silicon Carbide that we've been doing a significant automotive qualification of Wafer Level Burn-in for well over two years.
In the last few weeks, we've attended two international conferences in Europe .
And I personally met with more than a dozen companies in the silicon carbide market that are not currently using our solutions. We also met with all six of our current silicon carbide customers.
These face to face meetings included multiple meetings with one of the market leaders in silicon carbide that we've been doing a significant automotive qualification of wafer level burn in for well over two years.
Speaker 3: Canada lead this is the longest and most extensive sales and benchmarking process I've ever experienced in my entire 30 plus year career.
Candidly this is the longest and most extensive sales and benchmarking process I've ever experienced in my entire 30 plus year career. The good news is that we've made even more progress in the last few months with a very large number of wafers being run at our facility followed by multiple meetings to review the data.
Speaker 3: The good news is that we've made even more progress in the last few months with a very large number of wafers being run at our facility, followed by multiple meetings to review the data.
Speaker 3: based on everything we've heard, our data, our data, cost of ownership, products, including our new fully automated wafer pack aligner, particularly in the integrated configuration, they're all meeting their needs. We continue to feel confident that this customer will move forward with us using the Fox XP Multi-Wave for Solution for their high volume needs, including initial purchase orders and system shipments this fiscal year.
Just on everything we've heard our data our data cost of ownership products, including a new fully automated wafer pack aligner, particularly in the integrated configuration, they're all meeting their needs. We continue to feel confident that this customer will move forward with us using the Fox XP multi wafer solution for their high volume needs.
Including initial purchase orders and system shipments this fiscal year.
Speaker 3: Our meetings also included face-to-face meetings with potential new silicon carbide companies who have now told us that they intend to place their first purchase orders with us over the next several months including some that want us to ship systems, wafer packs and aligners to them this fiscal year.
Our medians also included face to face meetings with with potential new Silicon carbide companies, who have now told us that they intend to place their first purchase orders with us over the next several months, including some that want us to ship systems wafer packs Santa liners to them this fiscal year.
Speaker 3: In the next few weeks, we'll also be meeting with a significant number of potential new customers, as well as end users of Silicon Carbide devices in Asia, as we're seeing increasing activities and opportunities heating up there. I can tell you it's very exciting time in the Silicon Carbide and the electric vehicle markets right now, and we've never been busier.
And the next few weeks will also be meeting with a significant number of potential new customers as well as end users of silicon carbide devices in Asia, as we're seeing increasing activities and opportunities heating up there I can tell you. It's a very exciting time in the silicon carbide and the electric vehicle markets right now and we've never been.
Busier.
Speaker 3: Let me add some further color on the Silicon Carbide Market Opportunity. A recent report from UBS forecast that the total Silicon Carbide Market will be close to $8 billion in 2025 and over 30 percent of that total will be industrial applications. While the primary opportunity is still serving the electric vehicle automotive market, the industrial segment represents a material amount of dollars and a significant market opportunity.
Let me add some further color on the silicon carbide market opportunity.
A recent report from UBS forecast that the total silicon carbide market will be close to $8 billion in 2025.
For 30% of that total will be industrial applications, while the primary opportunity is still serving the electric vehicle automotive market. The industrials segment represents a material amount of dollars and a significant market opportunity.
Speaker 3: The report also focuses on the progression of electric vehicle batteries from 400 volts to 800 volts, which is the level generally recognized by the industry at which Silicon Carbide is mandatory to get the range and recharging speed consumers are demanding.
The report also focuses on the progression of electric vehicle batteries from 400 volts to 800 volts, which the low which is the level of generally recognized by the industry at which silicon carbide is mandatory to get the range and recharging speed consumers are demanding.
Speaker 3: Devices used in the traction inverters for 800 volt DC battery systems actually operate up to almost 1200 volts AC.
Devices used in the traction in burgers for 800 volt D. C battery systems actually operate up to almost 1200 volts AC.
Speaker 3: This voltage at this voltage, the devices will experience electrical arcane when tested at 1200 volts under normal testing environments, which creates a very real problem for conventional testers on wafer probers and probe cards.
This voltage at this voltage the devices will experience electrical arcing when tested at 1200 volts under normal testing environments, which creates a very real problem for conventional testers on wafer probe and probe cards at such high voltages that 1200 volt bias to the device will actually create an electrical arc through the air.
Speaker 3: at such high voltages that 1200 volt bias to the device will actually create an electrical arc, do the air, or on a wafer, even if surrounded by 100% nitrogen. This is basically how a spark plug works. However, this spark actually damages the devices permanently. Air's proprietary wafer packs have individual chambers that encapsulate each wafer and allow us to control the temperature, gas makeup, and pressure within this chamber on each wafer.
There are on a wafer even if surrounded by a 100% nitrogen. This is basically how a sparkplug works. However, this spark actually damages the devices permanently errors proprietary wafer packs have individual chambers that encapsulate each wafer and allow us to control the temperature gas makeup and.
Pressure within this chamber on each wafer.
Speaker 3: Our proprietary gas and pressure control option allows us to test and burn in an entire wafer up to 2,000 volts without arcing or damaging the wafer.
Our proprietary gas and pressure control option allows us to test and burn in an entire wafer up to 2000 volts without arcing or damaging the wafer.
Speaker 3: By contrast, other competitive systems using standard wafer progress see arcing as little as 900 volts, which makes it impossible to do high voltage reverse bias test and burn in at the wafer level for devices aimed at these new 800 volt battery vehicles.
By contrast, other competitive systems using standard wafer probe or see arcane in as little as 900 volts, which makes it impossible to do high voltage reverse biased test and burn in at the wafer level for devices aimed at these new 800 volt battery vehicles.
Speaker 3: Per UBS in 2023, 91% of the battery sold in electric vehicles are forecasted to be 400 volts and only 9% are 800 volts.
Per U B S. In 2023, 91% of the batteries sold and electric vehicles are forecasted to be 400 volts, and only 9% or 800 volts, but by 2026 UBS expects a percentage of its 800 volt battery cars to be about 30%, which is why it appears so many silicon carbide suppliers or timing there.
Speaker 3: But by 2026, UBS expects the percentage of 800 volt battery cars to be above 30%, which is why it appears so many silicon carbide suppliers are timing their major ramps to be in the 2025 to 2026 timeframe.
Major ramps to be in the 2025 to 2026 timeframe. So.
Speaker 3: So in the next couple years, we expect air to benefit from both an increased number of electric vehicles being sold, as well as a significant increase in silicon carbide needed for needing our solution for those electric vehicles.
So in the next couple of years, we expect <unk> to benefit from both an increased number of electric vehicles being sold as well as the significant increase in silicon carbide needed forced needing our solution for those electric vehicles.
Okay.
Speaker 3: We're also in extensive engagements with multiple gallium nitrike suppliers. Gallium nitrike is similar to silicon carbide in that both of these semiconductor compounds are considered wide band gap semiconductors that are able to withstand high voltage applications more directly than silicon.
We're also an extensive engagements with multiple gallium nitride suppliers gallium nitride is similar to silicon carbide and that both of these semiconductor compounds are considered wide bandgap semiconductors that are able to withstand high voltage applications more directly to the silicon and gallium nitride semiconductor material has characteristics.
Speaker 3: Gallium nitride semiconductor material has characteristics that make it optimal for lower power converter applications, such as consumer power converters, solar microinverters, and industrial motor controllers, as compared with silicon carbide, that is optimal for higher power, higher voltage applications, such as traction inverters in electric vehicles, trucks, trains, and converters using charging infrastructure and storage.
That make it optimal for lower power converter applications, such as consumer power converters solar micro Inverters and industrial motor controllers as compared with Silicon carbide that is optimal for higher power higher voltage applications, such as traction inverters in electric vehicles trucks trains and converters using charging infrastructure and storage.
Speaker 3: One of our prospective Gallim Nytride customers is also a company that we've been doing automotive qualification work for their Silicon Carbide device.
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One of our prospective gallium nitride customers is also a company that we've been doing automotive qualification work for for their silicon carbide devices. They became very interested when we introduce them to the new higher voltage options, including the bipolar voltage for gates stress and the very high voltage for drain stress.
Speaker 3: They became very interested when we introduced them to the new higher voltage options, including the bipolar voltage for gate stress and the very high voltage for drain stress capability. They really love that we offer both a low cost small footprint Fox NP for their engineering and new product introduction needs, but also a fully compatible Fox XP system for high volume production, including a hands-free, integrated wafer pack of liner.
Ability they really loved that we offer both a low cost small footprint Fox N P for their engineering and new product introduction needs, but also fully compatible Fox XP system for high volume production, including a hands free integrated wafer pack aligner inter.
Speaker 3: Interestingly, in this case, the Gallium Nitride Group at this company evaluated their system and has decided to move forward with us faster than the Silicon Carbide Group that we've been working with for nearly three years. Stay tuned for more announcements on this in the near future.
Interestingly in this case the gallium nitride group at this company evaluated air system and has decided to move forward with us faster than the Silicon carbide group that we've been working with for nearly three years stay tuned for more announcements on this in the near future.
Speaker 3: We're also engaged with another large GALIMNI TRIED Supplier that is already a major supplier of IGBT in Silicon Carbide devices and is decided to move forward with an on-site evaluation.
We're also engaged with another large gallium nitride supplier that is already a major supplier of IGT and silicon carbide devices and has decided to move forward with an onsite evaluation.
Speaker 3: We've agreed to place a BoxNP system on their floor for a defined period of time, and they've already ordered multiple wafer packs that are not contingent on any evaluation terms for acceptance. We're very excited about this prospect, as well as the opportunity to showcase our capability to the GAN team with the Silicon Carbide team watching close.
We have agreed to place a Fox N P system on their floor for a defined period of time and they have already ordered multiple wafer packs that are not contingent on any evaluation terms for acceptance.
We're very excited about this prospect as well as the opportunity to showcase our capabilities to the Gan team with the silicon carbide team watching closely.
Speaker 3: This company, which is one of the largest automotive semiconductor suppliers in the world, could very likely be one of the largest, if not the largest, gallium nitride semi-supplier in the world.
This company, which is one of the largest automotive semiconductor suppliers in the world could very likely be one of the largest if not the largest gallium nitride semi supplier in the world.
Speaker 3: The Gallium Nitride Market is another potentially significant growth driver for our way for low solutions, particularly for automotive and photovoltaic applications where burn-in appears to be critical for meeting the initial quality and reliability needs for those markets. Many forecasters believe that the Gallium Nitride Device Market will be larger than Silicon Carbide, due to its much larger applications based in terms of power charges for everyday use, data centers, solar, and industrial applications.
The gallium nitride market is another potentially significant growth driver for our wafer level solutions, particularly for automotive and photovoltaic applications, where burn and appears to be critical for meeting the initial quality and reliability needs of those markets.
Forecasters believed that the gallium nitride device market will be larger than silicon carbide due to its much larger application space in terms of power Chargers for everyday use datacenters solar and industrial applications.
Speaker 3: While we're not yet certain how big this market could be for airs, wafer level of testing burn and systems, we will be working with several key players in the space this year to form a better determination.
While we're not yet certain how big this market could be for errors wafer level test and burn in systems, we will be working with several key players in the space This year to form a better determination.
Speaker 3: While we do expect to recognize some revenue for systems, wafer packs, and aligners for Gallium Nide tried applications this fiscal year, we continue to expect the significant majority of our revenue come from Silicon Carbide.
While we do expect to recognize some revenue for systems wafer packs and the liners for gallium nitride applications. This fiscal year, we continue to expect a significant majority of our revenue come from Silicon carbide.
Yeah.
Speaker 3: Now let me move it onto silicon photonics, wait for level and simulated die slash module burn in market.
Now, let me move on to Silicon photonics wafer level and singular die slash module burn in market.
Speaker 3: We continue to be very enthusiastic about this market, which includes the current photonics transceiver market used in data and telecommunications and the upcoming application of Silicon Photonis integrated circuits for use in optical chip to chip communication, which we see as a major market opportunity.
We continue to be very enthusiastic about this market, which includes the current photonics transceiver market used in data and telecommunications and the upcoming application of Silicon photonic integrated circuits for use in optical chip to chip communication, which we see as a major market opportunity as we discussed on our previous call. We received our first order less.
Speaker 3: As we discussed on our previous call, we received our first order last May from a current major Silicon photons customer for a new volume production Fox XP multi-wafer testing burn system for use for their very high power Silicon photonics device wafers.
May from a current major silicon photonic customer for our new volume production Fox XP multi wafer test and burn in system for use for their very high power Silicon Photonics device wafers.
Speaker 3: This system is configured to enable cost-effective production test of up to 9 full wafers in parallel and up to 3500 watts of power per wafer.
This system is configured to enable cost effective production test of up to nine full wafers in parallel and up to 3500 watts of power per wafer.
Speaker 3: The original application for this system was Silicon Photonics Devices for Fiberoptic Transceivers using data centers and data and telecommunication networks. There's now been discussion about using this system for multi-chip modules embedded with processors for chip-to-chip optical communication. This customer is one of the world's largest semiconductor manufacturers, and we expect to receive orders for additional production systems as they increase production of these devices.
The original application for this system with Silicon photonics devices for fiber optic transceivers used in data centers and data and telecommunication telecommunication networks. There's now been discussion about using this system for multi chip modules embedded with processors for chip to chip optical communication.
This customer is one of the world's largest semiconductor manufacturers and we expect to receive orders for additional production systems as they increase production of these devices.
Speaker 3: While we believe it will likely be several years before we see significant revenue generated from this optical chip-to-chip communications market, this order from our lead silk infotimes customer and their request for an accelerated shipping date is encouraging and provide some data to suggest this market opportunity could happen sooner.
While we believe it'll be light it will likely be several years before we see significant revenue generated from this optical chip to chip communications market. This order from our lead silicon photonic customer and their request for an accelerated shipping date is encouraging and provide some data to suggest that this market opportunity could happen sooner.
Speaker 3: Our FOX Wafer Level Test and Burn in Solution with our proprietary Wafer Packed Full Wafer Contacters are great fit for the Silicon Photonics and Mechanic DeMarket. These next generation Silicon Photonics-based integrated circuits can require up to two to four times as much power for full wafer test burn and instabilization. And our FOX new production system configuration, which can be used to test and burn in these new Optipolio devices, expands the market opportunity of the FOX XP system even further.
Our Fox wafer level test and burn in solution with our proprietary wafer pack full wafer contactor is a great fit for the silicon Photonics semiconductor market. These next generation Silicon Photonics based integrated circuits can require up to two to four times as much power for full wafer test burn in and stabilization in our Fox New production system.
Configuration, which can be used to test and burn in these new optical Io devices expands the market opportunity of the Fox XP system, even further.
Speaker 3: The power and functionality of lasers used to transmit data are critically important to the performance of the communication channel, and air solutions not only weed out early life failures, but also improve the performance of the device through what photonics industry refers to a stabilization.
The power and functionality of lasers used to transmit data are critically important to the performance of the communication channel and air solutions not only weed out early life failures, but also improve the performance of the device to what photonics industry refers to as stabilization during the first day or two of normal operation the laser output Carrick.
Speaker 3: During the fair stay or two of normal operation, the laser output characteristics change in an exponentially decaying manner and must be stabilized until the decaying stops before the final product can be tuned to meet its performance specification.
Tourist exchange and an exponentially duquesne manner and must be stabilized until the Duquesne stops before the final product can be tuned to meet its performance specification air can do this across an entire wafer a fully integrated photonic integrated circuits with embedded or attach laser emitters. These fully integrated circuits with lasers are reportedly.
Speaker 3: Air can do this across an entire way for a fully integrated photonist integrated circuits within bedded or attached laser emitters.
Speaker 3: These fully integrated circuits with lasers are reportedly the highest performance and level of integration possible, which is optimal for integrating into a package along with a microprocessor, graphics processor, or artificial intelligence processor for optical chip-to-chip communication.
The highest performance and level of integration possible, which is optimal for integrating into a package along with a microprocessor graphics processor or artificial intelligence processor for optical chip to chip communication.
Speaker 3: Air currently has six customers using our systems for production test of silicon photonics devices, five us our npn XP systems for wafer level test in burnin and one uses both NP's and XP systems for engineering and production burnon of individual singulated Dye modules using our proprietary dyepack.
<unk> currently has six customers using our systems for production test of Silicon Photonics devices five years, our N P and XP systems for wafer level test and burn in and one uses both N P's NXP systems for engineering and production burn in of individuals' simulated diet modules using our proprietary dye packs.
Speaker 3: We're watching this market very closely and are working with some of the leaders and Silicon photonics to ensure that we have the products and solutions available to meet their needs for this potentially significant market application.
We're watching this market very closely and are working with some of the leaders in silicon photonics to ensure that we have the products and solutions available to meet their needs for this potentially significant market application.
To conclude.
Speaker 3: We're encouraged by the continued positive momentum we're seeing for Silicon Carbine and electric vehicles and also very excited about the expanding growth opportunities we're seeing in several additional markets with current and prospective customers.
We're encouraged by the continued positive momentum we're seeing for silicon carbide in electric vehicles and also very excited about the expanding growth opportunities. We're seeing in several additional markets with current and prospective customers for the fiscal year ending May 31, 2024, we're reiterating our previously provided guidance for total revenue to be at least $100 million.
Speaker 3: For the fiscal year, any May 31, 2024, we're reiterating our previously provided guidance for total revenue to be at least $100 million, representing growth of over 50% year over year, and gap net income of at least $28 million, representing earnings growth of greater than 90% year over year. We look forward to updating your on our progress throughout the fiscal year.
Representing growth of over 50% year over year, and GAAP net income of at least $28 million representing earnings growth of greater than 90% year over year. We look forward to updating you on our progress throughout the fiscal year.
Operator: Good afternoon, and welcome to the Aehr Test Systems Fiscal 2024 for, excuse me, first quarter financial results conference call. All participants will be in listen only mode. Should you need assistance, please signal the conference specialist by pressing the star key followed by zero.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded.
Speaker 3: Now with that, let me turn it over to Chris before we open up the line for questions.
Now with that let me turn it over to Chris before we open up the line for questions.
Speaker 4: Thank you, Gay. Good afternoon, everyone. We please announce an unassurbed quarter for air test systems after record fiscal 2023. On today's call, I will summarize our results for the fiscal first quarter.
Thank you Kay.
Good afternoon, everyone. We're pleased to announce another strong quarter for air Test systems. After a record fiscal 2023 on today's call I'll summarize our results for the fiscal first quarter.
Speaker 4: We exceeded the consensus on both our top and bottom line. First quarter revenue was 20.6 million, up 93% from 10.7 million in Q1 of last year.
We exceeded the consensus on both our top and bottom line first quarter revenue was $20 6 million up 93% from $10 7 million in Q1 of last year.
Speaker 4: Strong demand for wafer packs contributed to significant year-over-year increase in revenue in the first quarter.
Strong demand for our wafer packs contributed to significant year over year increase in revenue in the first quarter.
Speaker 4: Wavapack and DiePack consumables revenue accounted for 55% of our total revenue in the first quarter Compared to just 5% of revenue in the prior year quarter
Wafer pack in diabetic consumables revenue accounted for 55%, although the total revenue in the first quarter compared to just 5% of revenue in the prior year quarter.
Speaker 4: As we have noted before, customers typically purchase our Fox systems ahead of Waferspacks and subsequently stack or purchase itself Waferspacks.
As we have noted before customers typically purchase our Fox systems ahead of wafer packs and subsequently stacker purchases all the wafer packs.
Speaker 4: We're seeing continued momentum for new wave of packed designs with existing and new customers to meet their customer and market.
We're seeing continued momentum for new wafer pack designs with existing and new customers to meet the customer and market requirements.
Speaker 4: Non-GAP net income, which excludes the impact of stop-based compensation was 5.2 million, or 18 cents per diluted share.
non-GAAP net income, which excludes the impact of stock based compensation was $5 2 million.
Jim Byers: I would now like to turn the conference over to Jim Byers of MPR Investor Relations. Please go ahead. Thank you, excuse me. Thank you operator.
Or <unk> 18 per diluted share for the first quarter.
Speaker 4: This compares to non-gab net income of 1.3 million or 5 cents per delusional in the first quarter of fiscal 2020.
Jim Byers: Good afternoon, and welcome to Aehr Test Systems first quarter fiscal 2024 financial results conference call. With me on today's call, our Aehr Test Systems President and Chief Executive Officer, Gayn Erickson and Chief Financial Officer, Chris Siu. Before I turn the call over to Gayn and Chris, I'd like to cover a few quick items. This afternoon, right after market closed, Aehr Test issued a press release announcing its fiscal 2024 first quarter financial results.
This compares to non-GAAP net income up $1 3 million or <unk> <unk> per diluted share in the first quarter of fiscal 2023.
Jim Byers: That release is available on the company's website at Aehr.com. This call is also being broadcast live over the Internet for all interested parties. And the webcast will be archived on the investor relations page of the company's website.
Jim Byers: I'd like to remind everyone that on today's call management will be making forwards and statements that are based on current information and estimates when they're subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. These factors that could cause actual results to differ materially 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 Aehr Test undertakes no obligation to update the forward looking statements.
Speaker 4: Bookings in the first quarter were 18.4 million, up from 15.2 million in the preceding Q4, and down slightly by 4% from 19.1 million in the first quarter of the first quarter of 2020.
Bookings in the first quarter were $18 4 million.
Gayn Erickson: And now I'd like to turn the conference call over to Gayn, Aehr, Kim, President, and CEO. Thanks, Jim. Good afternoon, everyone, and welcome to the first quarter of fiscal 2024 earnings conference call. Thanks for joining us today. Let's start with a quick summary of the highlights of the quarter and the continued momentum. We're experiencing the semiconductor wave flow test in burning markets. Then, Chris will go over the financials in more detail, and after that, we'll open up the lines to take your questions.
From $15 2 million in the preceding Q4 and down slightly by 4% from $19 1 million in the first quarter of fiscal 'twenty to 'twenty three.
Gayn Erickson: We finished the first quarter with solid revenue of $20.6 million in non-gap net income of $5.2 million. The strongest first quarter in our history, which has historically been our seasonally softest quarter. With this, we're off to a very good start to our fiscal year, and we're reaffirming our expectation to grow fiscal full-year revenue by at least 50% to over $100 million and profit by over 90% year of your growth to at least $28 million.
Speaker 4: included in our Kiwan bookings are announced orders for additional wafer packs.
Included in our Q1 bookings.
Our announced orders with additional wafer pack.
Speaker 4: words in a
Contact is a $60 million from our lead silicon carbide customer.
Speaker 4: Backlog as of quarter end was 22.3 million.
Backlog as of quarter end was $22 3 million.
Speaker 4: up 14% from a year ago. With 1.7 million bookings received, primarily from a new US customer that we announced previously. In the first four weeks of the second quarter of fiscal 2024, we now have an effective backlog of 24 million.
Up 14% from a year ago.
$1 7 million bookings received primarily from our new U S customer that we announced previously in the first four weeks of the second quarter of fiscal 2024, we now have an effective backlog of $24 million.
Gayn Erickson: During the quarter, we had record shipments of our FOX wafer pack contactors in both revenue and units, with revenues reaching well over 50% of total revenues for the quarter. We're also very pleased with the continued stream of new designs for wafer packs we're seeing. Our new design volume has tripled over the last nine months, as we're seeing more and more electric vehicles coming online with their own specific device designs for inverters and onboard chargers.
Speaker 4: Gap growth margin for the first quarter came in at 48.4% up from 42% in Q1-Lash.
GAAP gross margin for the first quarter came in at 48, 4%.
From 42% in Q1 last year.
Speaker 4: The increase in gross margin reflects the favorable product mix of higher margin wafer pack.
The increase in gross margin reflects a favorable product mix of higher margin wafer packs.
Speaker 4: Also contributing to the increase in growth margin in the first quarter was the overall higher revenue level compared to Q1-Lash.
Also contributing to the increase in gross margin in the first quarter whats the overall higher revenue level compared to Q1 last year.
Gayn Erickson: As a result, our customers are buying additional wafer pack contactors for these new designs, highlighting the recurring revenue part of our business. As we've noted before, our proprietary wafer pack contactors are needed with our Fox wafer level test and burn and systems to contact with the individual die on the wafer and are designed specifically for a given device. As our customers win new designs from their customers, Air eventually secures orders for new wafer packs to fulfill these new wins.
Speaker 4: Upgrading expenses in the first quarter were 5.9 million.
Operating expenses in the first quarter were $5 9 million.
Speaker 4: Up 45.8% from 4 million in K-1 layers.
Up 45, 8% from $4 million in Q1 last year.
Speaker 4: The year-over-year increase is primarily due to previously noted increased head-cown related expenses to support our worldwide sales and marketing efforts and our R&D program.
The year over year increase is primarily due to previously noted increased headcount related expenses to support our worldwide sales and marketing efforts in our R&D programs.
Speaker 4: Our investments in sales and marketing staff continue to have a positive impact on expanding our customer engagement and marketing reach to support revenue growth.
Our investments in sales and marketing staff.
For you to have a positive impact on expanding our customer engagement and marketing reach to support revenue growth.
Gayn Erickson: With each new design, our customers will need enough new wafer packs to meet the volume production capacity need for those new devices. With the increase in wafer pack designs, we've been adding resources in both our US and Philippines operations to expand our already successful application and support team there. We're also continuing to add capability and capacity in the Philippines to meet the support needs of our growing install base in Asia. Another key highlight is that we've now received customer acceptance of both configurations of our new fully automated Fox wafer pack aligner, which allows hands-free operation of wafer pack handling and alignment and is available either as a standalone unit or fully integrated with our Fox XP multi wafer systems.
Speaker 4: The increase in R&D is primarily due to costs associated with development programs for upmending features and performance of our new automated wafer pack aligners.
The increase in R&D is primarily due to costs associated with development programs for augmenting features and performance of our new automated wafer pack aligner.
Speaker 4: which enable new events, tests, and burning capabilities for three concovide and gallium nitri, power semiconductors. On AirSFox XP,
Which enable new events test and burn in capabilities for silicon carbide, and gallium nitride power semiconductors.
On airs Fox XP wafer level test and burn in systems.
Gayn Erickson: We recognize revenue for the standalone wafer pack aligners in the first quarter and after the close of the quarter, we receive customer acceptance and sign off of the aligners integrated with our Fox XP systems. The integrated aligners are integrated with Fox XP systems equipped with two key test system enhancements introduced over the last year. These Fox XP's include our new bipolar voltage channel module option for both positive and negative gate bias stress and burn in as well as our very high voltage channel module option.
Speaker 4: The first order for our stand along automated aligner was shipped during QO4 FISCO 2020.
The first order for our Standalone automated line that was shipped during Q4 fiscal 2020.
Speaker 4: most accepted by our customer in the first physical course.
It was accepted by our customer in the first fiscal quarter.
Speaker 4: We continue to invest in R&D to enhance our existing market leading products.
We continue to invest in R&D to enhance our existing market, leading products and to introduce new products to maintain our competitive advantages.
Speaker 4: and introduce new products to meeting our competitive advantages. And expand our app.
And expand our applications and addressable markets.
Speaker 4: Turning to the balance sheet, we continue to generate healthy cash flow and finish the quarter with a strong cash position.
Turning to the balance sheet, we continue to generate healthy cash flow and finished the quarter with a strong cash position.
Speaker 4: Our cash and cash equivalents increased to $51 million at the end of Q1. Up 6% from our total cash, cash equivalents and investments balance of $47.9 million at the end of Q4.
Our cash and cash equivalents increased to $51 million at the end of Q1.
Up 6% from our total cash cash equivalents and investments balance of $47 $9 million at the end of Q4.
Speaker 4: We generated 3.9 million in operating cash flow during the quarter, while also investing in inventory to support our growth strategy in fiscal 2020.
We generated $3 9 million in operating cash flow during the quarter, while also investing.
Gayn Erickson: The VHV channel module option, which together with our proprietary wafer packs and new inert gas control option for the Fox XP, enable high temperature reverse bias testing up to 2,000 volts at wafer level for silicon carbide and gallium nitride high voltage semiconductors that are used in power converter applications such as electric vehicle traction inverters and onboard chargers. Acceptance and production release of these Fox XP's with the integrated aligners and the associated revenue recognition provide a solid start to our second quarter revenue and paid the path for revenue recognition immediately upon all future shipments of these products to this customer and forecasted shipments to additional customers this fiscal year.
Investing in inventory to support our growth strategy in fiscal 2024.
Speaker 4: We have zero debt and continue investing our excess cash in money market funds or short-term investments to take advantage of favorable interest rates in a current macro environment.
We have zero debt and continue to continue investing our excess cash and money market funds or short term investments to take advantage of favorable interest rates and the current macro environment.
Speaker 4: Interest income earned in the first quarter was almost $600,000 Compared to $121,000 in the first quarter last
Interest income earned in the first quarter was almost $600000 compared to $121000 in the first quarter last year.
Speaker 4: In Q3 of last year, we announced an ATM at the market offering of up to $25 million in shares of the company's comments docked on the open mark.
In Q3 of last year, we announced an ATM at the market offering of up to $25 million in shares of the company's common stock on the open market.
Speaker 4: We received gross proceeds of $7.3 million on a sale of 209,000 shares in fiscal 2023. We did not sell any shares during our visit.
We received gross proceeds of $7 3 million on the sale of 209000 shares in fiscal 2020.
Gayn Erickson: So let me talk a little bit about our new customers. We're excited to have announced last month yet another new customer in silicon carbide. This is our sixth customer for silicon carbide wafer level burn in. This new customer is a US based multi billion dollar semiconductor supplier that serves several markets, including automotive community, consumer energy and industrial and medical markets. After conducting a detailed financial evaluation of air and air's Fox family of products, including multiple onsite visits to air's application lab, this new customer purchased an initial Fox NP system wafer pack aligner and multiple wafer packs for engineering qualification and small lot production of their silicon carbide power devices.
We did not sell any shares during our fiscal Q1.
Speaker 4: As of the end of the first fiscal quarter of 2024, the remaining amount available under the ATM offering was 17.7 million.
As of the end of the fiscal first fiscal quarter of 2020 for the remaining amount available under the ATM offering was $17 7 million.
Speaker 4: It is our expectation that we will sell shares against this ATM offering during this fiscal year. At times and prices that are most advantageous throughout shareholders and to the
It is our expectation that we will sell shares against this ATM offering during this fiscal year at times in prices that are most advantageous to our shareholders and to the company.
Speaker 4: Now turning to our outlook for the current fiscal 2024. That ends on May 31, 2024.
Now turning to our outlook for the current fiscal 2024 that ends on May 31 2024.
Speaker 4: We continue to believe in the company's world trajectory. As our differentiated products and technologies continue to attract and win new customers who desire more cost-effective and more efficient wave-of-level test and burning solutions.
We continue to believe in the companies will trajectory, let's say, our differentiated products and technologies continue to attract and win new customers, who desire a more cost effective and more efficient wafer level test and burn in solutions.
Gayn Erickson: This system is also configured with our new bipolar voltage and very high voltage options that enable new advanced test and burning capabilities for silicon carbide power semiconductors. This customer has indicated that as their production capacity increases, they intend to quickly move to our Fox XP multi wafer test and burning systems for high volume production. In addition to the automotive electric vehicle device market opportunity, this customer is also focusing on the enormous opportunity for silicon-carbide power devices and industrial, solar and other power applications.
Speaker 4: As GAME mentioned, we are reaffirming our previously provided guidance for four-year total revenue to be at least 100 million representing growth of over 50% year-over-year and gap net income of at least 28 million dollars, representing earning growth of greater than 90% year-over-year.
As Scott mentioned.
We are reaffirming our previously provided guidance with full year total revenue to be at least $100 million representing growth of over 50% year over year.
GAAP net income of at least $48 million, representing earnings growth of greater than 90% year over year.
Speaker 4: Lastly, looking at the investor relations calendar. Our annual shareholders meeting will be held on Monday, October 23rd, at the company headquarters here in Fremont, California at 5 p.m.
Lastly, looking at the Investor Relations calendar.
Our annual shareholders' meeting will be held on Monday October 23rd at the company headquarters here in Fremont, California, and five P. M.
Gayn Erickson: Including this newest customer, the last two announced customers has selected our systems primarily for applications other than electric vehicles, which include industrial, solar, and commuter electric trains. This further extends our application space beyond the enormous opportunity we see in silicon-carbide for electric vehicle traction inverters and onboard and off-board chargers. These additional applications expand our market opportunity beyond the 4.5 million six-inch equivalent silicon-carbide wafers that William Blair forecast will be needed per year by 2030 just for electric vehicles.
Speaker 4: If you're interested in attending, we appreciate RSVP if possible. So we can plan for attendance accordingly.
If you're interested in attending we appreciate and RF RSVP if possible. So we can plan for attendance accordingly.
Speaker 4: Please feel free to contact myself or Jim Buies of MKR, our investor relations firm to let us know.
Please feel free to contact myself or Jim Byers of MK or our Investor relations firm to let us know.
Speaker 4: We will also be participating in a couple of investor conferences in the next few months.
We will also be participating in a couple of investor conferences in the next few months on November 16, we will be participating in the Craig Hallum Alpha Select conference taking place in New York and on December 12, we will be back in New York to participate in the <unk> and U N Y C summit.
Speaker 4: On November 16th, we'll be participating in the Craig Hallum Alpha Select Conference, taking place in New York. And on December 12th, we'll be back in New York to participate in the 12th Annual NYC Summit. We hope to see...
Gayn Erickson: These new applications are driving an additional 2.8 million six-inch equivalent wafers annually by 2030 to address industrial, solar, electric trains, energy conversion, and other applications. It's also interesting to note that these last two customers did not need to see their wafers tested on our system before they moved forward to purchase from us. This need for testing before purchase was essentially a requirement with our early customer engagements, but it's clear that many of our potential new customers had become much more comfortable moving forward with air simply on our assurances that our solution will perform as committed.
We hope to see some of you at those conferences.
Speaker 4: This concludes our prepared remarks. We're now ready to take your questions. Operator, please go ahead.
This concludes our prepared remarks, we're now ready to take your questions.
Operator, Please go ahead.
We will now begin the question and answer session.
Speaker 1: You ask a question, you may press star then one on your telephone keypad.
To ask a question you May press Star then one on your telephone keypad.
Speaker 1: If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please
If you were using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
Speaker 1: At this time, we will pause momentarily to assemble our raft.
At this time, we will pause momentarily to assemble our roster.
Gayn Erickson: This allows the customers to accelerate their time to market. Having said that, we're happy to engage with customers either way. If they want to see their wafers tested first, we're happy to work with them. We have yet to lose a prospective customer after demonstrating our testing, burning capabilities on their wafers. In fact, we've never lost a head-to-head evaluation to a competitive product since introducing our FOXNP and XP configured with the Silicon Carbide and Gallium Nitride Test Resources.
Okay.
Speaker 1: Our first question is from Christian Schwab with Craig Hallum Capital Group. Please go ahead.
Our first question is from Christian Schwab Schwab with Craig Hallum Capital Group. Please go ahead.
Speaker 5: Good afternoon, guys. I'm the gross margin in the quarter at 48 and a half with weight per pack at greater than 50 percent of revenue. I would have assumed the gross margin would have been a little bit better than that. Is there something going on there for that?
Hey, good afternoon guys.
On the gross margin in the quarter at 48, and a half where wafer bags.
Greater than.
Revenue I would've assumed that gross margin would have been a little bit better than that is there something going on.
Gayn Erickson: Let me move on to our pipeline of prospective new customers for Silicon Carbide wafer level burn-in. In the last few weeks, we've attended two international conferences in Europe, and I personally met with more than a dozen companies in the Silicon Carbide market that are not currently using our solutions. We also met with all six of our current Silicon Carbide customers. These face-to-face meetings included multiple meetings with one of the market leaders in Silicon Carbide that we've been doing a significant automotive qualification of wafer level burn-in for well over two years.
There are for that.
Speaker 3: Yeah. So if you remember historically and actually consistently, our aligners have been amongst our lowest margin products.
Yeah.
So if you remember historically and actually consistently are a liners have been amongst our lowest margin products. We they are fully our IP, but we have contracted to have them completely built external.
Speaker 3: We, they are fully RIP, but we have contracted to have them completely built external to our facility here. And I wouldn't call them pass through because it's not that, but they tend to be on the lower end of the margin. So we had a couple of lineers, the automated lineers in there. And that kind of offset that by a couple of few points, I think.
To our facility here and I wouldn't call them pass through because it's not that but they tend to be on the lower end of the margin. So we had a couple on the liners.
Gayn Erickson: Canada lead, this is the longest and most extensive sales and benchmarking process I've ever experienced in my entire 30-plus year career. The good news is that we've made even more progress in the last few months with a very large number of waferers being run at our facility, followed by multiple meetings to review the data. Based on everything we've heard, our data, our data, cost of ownership products, including our new fully automated wafer pack aligner, particularly in the integrated configuration, they're all meeting their needs.
Automated liners in there and that kind of offset that by a couple a few points I think.
Speaker 3: So as our business increases and we start to see it candidly as we see more companies or more customers wanting to actually do an integrated aligner with every system, you know, that will have some, but generally overall it still sort of normalizes our systems level margins. But I think that's where, if you went through the map, that's where that came from.
So as our business increases and we start to see it candidly as we see more companies are more customers wanting to actually do an integrated aligner with every system.
That will have some but generally overall, it's still sort of normalizes our systems level margins.
But I think that's where if you went through the map, that's where that came from.
Speaker 5: And as far as mix that a go forward basis, you know, would you anticipate the remainder of the year returning back to North of 50% or is that gonna be tremendously mixed dependent quarter to quarter?
And then as far as mix on a go forward basis.
Gayn Erickson: We continue to feel confident that this customer will move forward with us using the FOXXP multi-wafer solution for their high volume needs, including initial purchase orders and system shipments this fiscal year. Our meetings also included face-to-face meetings with potential new Silicon Carbide companies who have now told us that they intend to place their first purchase orders with us over the next several months, including some that want us to ship systems, wafer packs, and aligners to them this fiscal year.
Would you anticipate.
Remainder of the year journey back to north of 50% or is that going to be tremendously mixed dependent quarter to quarter.
Speaker 4: Yeah, no, so that's right. So we still are tying 50% in a bow as a margin for the year.
Yeah, No that's right, so we're still targeting 50% and above.
Margin for the year and so.
What we're looking at.
Speaker 5: Okay, great. And then regarding future orders from different customers, I think you talked about meeting with your six current customers and 12 new customers.
Okay, Great and then.
Regarding future orders from from different customers.
Gayn Erickson: In the next few weeks, we'll also be meeting with a significant number of potential new customers as well as end users of Silicon Carbide devices in Asia, as we're seeing increasing activities and opportunities heating up there. I can tell you it's very exciting time in the Silicon Carbide and the electric vehicle markets right now, and we've never been busier. Let me add some further color on the Silicon Carbide Market Opportunity. A recent report from UBS forecast that the total Silicon Carbide market will be close to $8 billion in 2025, and over 30% of that total will be industrial applications.
I think you talked about meeting with Euro six current customers and new customers.
You know just as we think about backlog to support the $100 billion in revenue.
Speaker 5: Just as we think about, you know, backlog to support, you know, the hundred billion revenue, when should we assume, you know, potentially your third major customer coming in, as well as numerous other customers?
When should we assume you know potentially a third major customer coming in.
As well as numerous other customers I think you said over the next few months you anticipated that I'm just trying to trying to give you.
Speaker 3: I think you said over the next few months, you anticipated that. I'm just trying to do our best to give you, you know, kind of plenty of heads up on those. And I will, you know, tell you that our ability to guess the customer is not perfect either.
Plenty of heads up on those and I will.
I'll tell you that our ability to get the customers is not perfect either but just a little bit so of our current six customers.
Gayn Erickson: While the primary opportunity is still serving the electric vehicle automotive market, the industrial segment represents a material amount of dollars and a significant market opportunity. The report also focuses on the progression of electric vehicle batteries from 400 volts to 800 volts, which is the level generally recognized by the industry at which Silicon Carbide is mandatory to get the range and recharging speed consumers are demanding. Devices used in the traction inverters for 800 volt DC battery systems actually operate up to almost 1200 volts AC.
Speaker 3: but just a little bit. So of our current fixed customers.
Speaker 3: We think more than half of them certainly are top two largest customers. We're expecting orders.
I mean more than half of them certainly our top two largest customers were expecting orders for both bookings and shipments during this year.
Speaker 3: for both bookings and shipments during this year. I think more than half of the six customers are all gonna have bookings and revenue shift within the year. And then a number of new customers as well. So, and we kind of alluded to both with the GAN related and the large benchmark. You know, I'm feeling really good. It's kind of hard to put a finger on it. We probably shouldn't tell you exactly when they're gonna come anyhow, but we're certainly.
More than half of those six customers are all going to have bookings in revenue shift within the year.
And then a number of new customers as well, so and we kind of alluded to both with the Gan related and the large benchmark.
<unk>.
I'm feeling really good it's kind of hard to put a finger on it we probably shouldn't tie exactly when theyre going to come anyhow, but we're certainly China gave you enough hands.
Gayn Erickson: At this voltage, the devices will experience electrical arcing when tested at 1200 volts under normal testing environments, which creates a very real problem for conventional testers on wafer probers and probe cards. At such high voltages, the 1200 volt bias to the device will actually create an electrical arc through the air or on a wafer, even if surrounded by 100% nitrogen. This is basically how a spark plug works. However, this spark actually damages the devices permanently.
Speaker 3: trying to give you enough hints. I mean, I think everybody, and we're certainly clear here, you know, a $24 million backlog with what 20 million in the bank, we've got a lot of turns, and a lot of turns expected this year to do the $100 million, and we don't expect to finish the year with zero backlog either.
I think everybody and we're certainly clear here you know.
$24 million of backlog.
With what $20 million in the bank, we've got a lot of turns and a lot of turns expected. This year to do the $100 million and we don't expect to finish the year with zero backlog either.
Speaker 3: And for those that have come and seen our facility, and we're always really pretty open about that. And if you haven't planned it, if there's no other excuse to come for our shareholders meeting besides the glass of wine and hors d'oeuvres, you can come out and see our manufacturing floor, but it is billowing right now. And that is, you know, where a lot of the inventory is going, et cetera, and anticipation of this, you know, our lead times candidly continue to be world class at shorter than anybody else while we continue increased capacity.
And for those that have come in and seen our facility and we're always really pretty open about that.
Gayn Erickson: Air's proprietary wafer packs have individual chambers that encapsulate each wafer and allow us to control the temperature, gas make up, and pressure within this chamber on each wafer. Our proprietary gas and pressure control option allows us to test and burn in an entire wafer up to 2000 volts without arcing or damaging the wafer. By contrast, other competitive systems using standard wafer probers see arcing as little as 900 volts, which makes it impossible to do high voltage reverse bias test and burn in at the wafer level for devices aimed at these new 800 volt battery vehicles.
If you Havent planned if theres no other excuse to come for our shareholders' meeting besides a glass of wine in our Durham. So you can see our manufacturing floor, but it is below in right now and.
And that is where a lot of the inventories going et cetera in anticipation of this you know our lead times candidly continue to be world class at shorter than anybody else, while we continue to increase capacity.
Speaker 5: That's great gain, thank you for that color. And as far as the new customers then, I know you've talked previously about having multiple customers this year at 10%. So obviously it probably appears we have at least two, but should we anticipate three or four, or is it just two of us?
That's great. Thank you for that.
Colored as far as you know the new customers then I know you've talked previously about having multiple customers this year.
And you know so obviously, probably a period we have at least two but you know should we anticipate three or four or is it just too early to tell.
Gayn Erickson: Per UBS in 2023, 91% of the battery sold in electric vehicles are forecasted to be 400 volts and only 9% are 800 volts. But by 2026, UBS expects the percentage of 800 volt battery cars to be about 30%, which is why it appears so many silicon carbide suppliers are timing their major ramps to be in the 2025 to 2026 timeframe. So in the next couple of years, we expect air to benefit from both an increased number of electric vehicles being sold as well as a significant increase in silicon carbide needed for needing our solution for those electric vehicles.
Speaker 3: No, we're still, Chris and I were just going through that this morning again. Right now we're right at three or four. There's, you know, we certainly believe three and the four, there's like, I think there was like four or five, there are all in the three to six percent that anyone might be able to poke their head up or something. So I mean, from a diversity, you know, we're all excited because of how many customers, but let's not kid ourselves. We don't have hundreds of customers and never will in this space.
No. We're still Cristina I was just going through that this morning again.
Right now we're right at three or four.
We certainly believe three and the port there is like I think there was like four or five they're all in the 3% to 6% that anyone might be all poke their head up or something so I mean from a diversity.
We're all excited because of how many customers, but let's not kid ourselves, we don't have hundreds of customers and never will in this space, but we'll definitely have a much more diverse number of customers, which is nice, but we'll stick to the three to four I don't it's not clear how we would get to five necessarily but we might have.
Speaker 5: but we'll definitely have a much more diverse number of customers, which is nice. But we'll stick to the three to four. I don't, it's not clear how we would get to five necessarily, but we might have, you know, we don't call out the five percent customers, but we might have a good chunk of those too. Great. I don't have any other questions, Vince.
Gayn Erickson: We're also in extensive engagements with multiple gallium nitric suppliers. Gallium nitric is similar to silicon carbide in that both of these semiconductor compounds are considered wide band gap semiconductors that are able to withstand high voltage applications more directly than silicon. Gallium nitric semiconductor material has characteristics that make it optimal for lower power converter applications such as consumer power converters, solar microinverters, and industrial motor controllers, as compared with silicon carbide that is optimal for higher power, higher voltage applications such as traction inverters in electric vehicles, trucks, trains, and converters using charging infrastructure and storage.
We don't call out the 5% customers, but when we might have a good chunk of those two.
Great.
Have any other questions at this time Thanksgiving.
Thanks Christian.
Speaker 1: The next question is from Jed Doreshimer with William Blair. Please go ahead.
The next question is from Jed door Shimer with William Blair. Please go ahead.
Speaker 1: Hi, Sam. Hey, Gaint. Uh, and Chris, uh, I get some first question. I just wanted to dig in, uh, Christians touched on it and, uh, but just on the wafer pack of liners, um, the standalone that we're recognized in the quarter, uh, versus, uh, in congratulations on getting the fully integrated.
Hi, Thanks, Hey gain and Chris.
First question I, just wanted to dig in a Christian touched on it and but just on the wafer pack aligner.
The standalone that were recognized in the quarter versus that and congratulations on getting the fully integrated.
Gayn Erickson: One of our prospective gallium nitride customers is also a company that we've been doing automotive qualification work for their silicon carbide devices. They became very interested when we introduced them to the new higher voltage options, including the bipolar voltage for gate stress and the very high voltage for drain stress capability. They really love that we offer both a low-cost small footprint Fox NP for their engineering and new product introduction needs, but also a fully compatible Fox XP system for high volume production, including a hands-free integrated wafer pack of liner.
Speaker 6: systems signed off. Should I look at that is taking your, the effective backlog and subtracting the bookings so that the quarter would have been fixed million greater had those signed off in the quarter? Is that the right way to look at that? Or how would you...
Our systems signed up.
Should I look at that is is taking your.
The effective backlog and subtracting the bookings so that the quarter would've been $6 million greater had had those signed off in the in the quarter is that the right way to look at that or how would you suggest that.
Speaker 3: Yeah, I mean, as we got a little closer, we kind of anticipated that we didn't get really specific. We weren't even sure that the second one was going to book, that just I won't get into all the, I wouldn't have scored for revenue. So, you know, I guess theoretically we could have pulled in one and the other one was already in our plans, whether we told you or not, in our second quarter. I mean, between the two of them, I think it's closer to 8 million or so.
Yeah.
As we got a little closer we kind of anticipated that that we didn't get really specific we werent even ensure that the second one was going to book that will just I won't get into all that.
Gayn Erickson: Interestingly, in this case, the gallium nitride group at this company evaluated our system and has decided to move forward with us faster than the silicon carbide group that we've been working with for nearly three years. Stay tuned for more announcements on this in the near future. We're also engaged with another large gallium nitride supplier that is already a major supplier of IGBT in silicon carbide devices and has decided to move forward with an on-site evaluation.
<unk> scored for revenue so I guess theoretically we could have pulled in one and the other one was already in our plans whether we told you we're not in our second quarter.
I mean between the two of them I think it's closer to $8 million or so.
Speaker 6: got it. And that so to be clear, you sold these integrated systems of those two systems at the same customer, which I think Chris mentioned is the US customer.
Got it and that so to be clear you sold these integrated systems of that of those two systems at the same customer. So I think Chris mentioned in the U S customer that the did the Ah liners were recognized in.
Speaker 6: that the aligners were recognized in...
Gayn Erickson: We've agreed to place a Fox NP system on their floor for a defined period of time and they've already ordered multiple wafer packs that are not contingent on any evaluation terms for acceptance. We're very excited about this prospect as well as the opportunity to showcase our capabilities to the GAN team with the silicon carbide team watching closely. This company, which is one of the largest automotive semiconductors suppliers in the world, could very likely be one of the largest, if not the largest, gallium nitride semi-supplier in the world.
Speaker 6: the August quarter, but the rest of the two systems.
The August quarter, but the rest of the two systems went into September I, just want to make sure I have that right now.
Speaker 3: went into September . I just want to make sure I have that. No, no, I'm not sure everyone else can be a follow along with it. The way our revenue recognition works, which is very consistent with the industry and we're always very open, is that when we have a brand new product that, you know, that has never been accepted or released into production with a customer before, we will not score revenue on it or anyone like it until, can't believe the first one is accepted.
I'm not sure everyone else going to be a fall along with it.
Our revenue recognition works, which is very consistent with the industry and we're always very open is that when we have a brand new product.
Debt.
That has never been accepted or released into production with our customer before we will not score revenue on it or any one like it until candidly. The first one is accepted.
Gayn Erickson: The gallium nitride market is another potentially significant growth driver for our way-for-level solutions, particularly for automotive and photovoltaic applications where burn-in appears to be critical for meeting the initial quality and reliability needs for those markets. Many forecasters believe that the gallium nitride device market will be larger than silicon carbide due to its much larger application space in terms of power chargers for everyday use, data centers, solar, and industrial applications. While we're not yet certain how big this market could be for airs wafer-level test and burn-in systems, we will be working with several key players in the space this year to form a better determination. While we do expect to recognize some revenue for systems wafer-packs and aligners for gallium nitride applications this fiscal year, we continue to expect the significant majority of our revenue come from silicon carbide.
Speaker 3: And I won't get into perfunctory and all that. But it turns out the first customer shipments were of what we call standalone aligner. And it went to our lead customer who has been accepting XP's all along. So the only thing deferred, if you will, was the revenue for those two aligners. So when they accepted,
And I won't get into perfunctory, and all that but it turns out the first customer shipments were up what we call Standalone aligner and it went with our lead customer who has been accepting XP is all along so the only thing deferred if you will was the revenue for those two are liners.
So when they accepted they were just the tool liners. The weird thing is on the second lead customer second large customer that had the systems the XP and the aligner wear bolted together and so we end. The XP also had those new enhancements so can our previous CFO and Chris.
Speaker 3: The weird thing is on the second lead customer, second large customer that had the systems, the XP and the aligner were bolted together.
Speaker 3: And so we and the expi also had those new enhancements. So can our previous CFO and and and and and Christopher's on board as well. We do a circle around those and said the whole thing is an accepted until it's all accepted, which is a little weird.
On board as well we draw a circle around those who said the whole thing is an accepted until it's all accepted which is a little weird, but basically once the aligner was accepted then the XP and the aligner. It was all except at the same time and in that case both of them triggered.
Gayn Erickson: Now, let me move it on to silicon photonics wafer-level and simulated die-slash module burn-in market. We continue to be very enthusiastic about this market, which includes the current photonics transceiver market used in data and telecommunications and the upcoming application of silicon photonic integrated circuits for use in optical chip to chip communication, which we see as a major market opportunity. As we discussed on our previous call, we received our first order last May from a current major silicon photons customer for a new volume production FOXXP multi-wafer-test and burn-in system for use for their very high-power silicon photonics device waifers.
Speaker 3: But basically once the aligner was accepted, then the XP and the aligner, it was all accepted at the same time. And in that case, both of them triggered.
Speaker 4: Yeah, so they're both released and working now. Yeah, so to add to that, so that means going forward, whether they're manual auto aligners or integrated aligners.
And they are both released and working now yes. So.
To add to that so that means going forward, whether their menu auto alignments or integrated liners, we don't need to wait or whether they have the new options or anything it just shifts and go for revenue when we ship going forward.
Speaker 3: We don't need to wait for it, whether they have the new options or anything. It just ships and scores. We have a new, when we ship going forward.
Speaker 6: Well, that better than I expected. So, nice. I guess...
Well that better than I expected, so a nice I guess.
Speaker 6: Second question is just on this long courtship with this potential large customer. Any more details on sort of, I know it's the longest in your history gain and three years sounds like a long time for that process. Is there any more details you can provide on sort of what is, you know, is the next step? Um um
Second question is just on this long courtship with this potential.
Gayn Erickson: This system is configured to enable cost-effective production test of up to nine full waifers in parallel and up to 3,500 watts of power per wafer. The original application for this system was silicon photonics devices for fiber optic transceivers used in data centers and data and telecommunication networks. There's now been discussion about using the system for multi-chip modules embedded with processors for chip-to-chip optical communication. This customer is one of the world's largest semiconductor manufacturers and we expect to receive orders for additional production systems as they increase production of these devices.
Large customer.
Any more details on sort of a you know I.
No. It's the longest in your history gain in three years sounds like a long time for for that process.
Is there any more details you can provide on sort of what is is.
Is the next step.
Speaker 6: you know, a large order, is that what we should expect? And I ask that kind of...
A large order is that what we should expect and I ask that kind of.
Speaker 6: Also in the context of your capacity, as you're adding these customers, you know, I know you've talked about low lead times, but if you saw, you know, a large 20, 30, 40, whatever that number system type order, I would assume that that changes things in a good way.
Also in the context of your capacity as you're adding these customers I know you talked about low lead times, but if you saw.
Large $20 $30 40, whatever that number of system type order I would assume that that changes things in a good way.
Gayn Erickson: While we believe it will likely be several years before we see significant revenue generated from this optical chip-to-chip communications market, this order from our lead Silicon Photon's customer and their request for an accelerated shipping date is encouraging and provide some data to suggest this market opportunity could happen sooner. Our FOX Wafer Level Test and Brennan Solution with our proprietary Wafer Packed Full Wafer Contactors are great fit for the Silicon Photonics and Connector Market.
Speaker 3: Yeah, I mean, generally speaking, even if customers talk about O'Rain lots up front, my experience has been it's normally met with one or a small number of systems what say for production to begin with.
Yeah I mean.
Generally speaking.
Even if customers talk about Oregon lots upfront my experience has been its normally met with you know one or a small number of systems safer production to begin with and then a little bit of absorption.
Speaker 3: and then a little bit of absorption. That might change here because they're running out of time. I mean, and they've done way more evaluations than I've seen in the past. So.
That might change here, because they're running out of time and they've done way more evaluations than I've seen in the past. So I think that has a chance to collapse itself. Theres also engineering systems involved et cetera, So I'm not sure I Wanna perfectly carve it because I might end up being wrong.
Gayn Erickson: These next generation Silicon Photonics-based integrated circuits can require up to two to four times as much power for full-way for test-burning and stabilization, and our FOX new production system configuration which can be used to test and burn in these new optical IO devices, expands the market opportunity of the FOX XP system even further. The power and functionality of lasers used to transmit data are critically important to the performance of the communication channel, and air solutions not only weed out early life failures, but also improve the performance of the device to what photonics industry refers to as stabilization.
Speaker 3: I think that has a chance to collapse itself. There's also engineering systems involved, et cetera. So I'm not sure I want to perfectly carve it because I might end up being wrong. But engineering systems, first production systems, quantities.
But you know engineering systems first production systems quantities, perhaps we may get quantities with longer lead times, because it's getting pretty serious with companies now you know theyre, putting real capital in place, putting fabs and place making commitments to these very significant ramps that are happening.
Speaker 3: perhaps we may get quantities with longer lead times because it's getting pretty serious with companies now you know they're putting real capital in place putting fabs in place making commitments to these
Speaker 3: very significant ramps that are happening in the automotive guys in 2526, and I don't think they want to be cut short. So, my message, I guess, to my customers listening, I mean, we are able to ship more than anybody else. We literally can ship, you know, uh-oh.
The automotive guys in 'twenty five 'twenty, six and I don't think they want to be cut short so.
Gayn Erickson: During the fair stay or two of normal operation, the laser alpha characteristics change in an exponentially decaying manner, and must be stabilized until the decaying stops before the final product can be tuned to meet its performance specifications. Air can do this across an entire way for a fully integrated photonics integrated circuits within bedded or attached laser emitters. These fully integrated circuits with lasers are reportedly the highest performance and level of integration possible, which is optimal for integrating into a package along with a microprocessor, graphics processor, or artificial intelligence processor for optical chip-to-chip communication.
My message I guess to my customers listening I mean, we are able to ship more than anybody else, we literally can ship.
Now.
Two.
Speaker 3: call it 50, 80, 100 testers, call it Wafers or Blades of Capacity of Month. We're shipping more per month than the combined number of install base of every other competing alternative has ever shipped. But
Call it.
50, 8100 testers are call it wafers or blades of capacity a month.
Now we are shipping more per month than the combined number of installed base of every other competing alternative has ever shipped.
But.
Speaker 3: There's still a scenario where, you know, please get your orders in so that we can continue to make sure that we can address everybody's needs. But, you know, I just reiterate, obviously we're expecting significant amounts of orders in the fiscal year to be able to turn to make 100 million and then without, you know, zero backlog and we're sticking to our guns there.
There is still a scenario where.
Gayn Erickson: Air currently has six customers using our systems for production test of silicon photonics devices. Five use our NP and XP systems for wafer level test and burn in, and one uses both NP's NXP systems for engineering and production, burn in of individual-singulated-dion modules using our proprietary die packs. We're watching this market very closely and are working with some of the leaders in silicon photonics to ensure that we have the products and solutions available to meet their needs for this potentially significant market application.
Please get your orders in.
So that we can continue to make sure that we can address everybody's needs but.
I just reiterate obviously, we're expecting significant amounts of orders in the fiscal year to be able to turn to make a 100 million and without zero backlog and we're sticking to our guns there.
Speaker 6: Got it. Last question for me, just on Chris on the 300 basis points, declining growth margin, you answered this question with the Christian asked in terms of the next chapter, Dan, you did.
Got it last question for me just talk not Chris on the 300 basis point decline in gross margin you answered. This question with the Christian asked in terms of a mix shift or gain you did.
Gayn Erickson: To conclude, we're encouraged by the continued positive momentum we're seeing for silicon carbide and electric vehicles and also very excited about the expanding growth opportunities we're seeing in several additional markets with current and prospective customers. For the fiscal year, any May 31, 2024, we're reiterating our previously provided guidance for total revenue to be at least $100 million, representing growth of over 50% year over year, and gap net income of at least $28 million, representing earnings growth of greater than 90% year over year. We look forward to updating your on our progress throughout the fiscal year.
Speaker 6: But operating margins drop by 500 basis points. Is there something else that drove the incremental 200 or is that just the aligners that in mixteShift that contributed the extra op-off?
But operating margins dropped by 500 basis points is there something else that drove that the incremental 200 or is that just the ah liners that and mix shift that contributed the the extra.
<unk> contraction there.
Speaker 4: Yes, really primary on the aligners that decreased the margin.
Yes, it's really primarily on airliners that.
<unk> the margin here.
Speaker 3: Okay. Yeah, you know what I'll do. Let me, I'm gonna give a little bit more color. We didn't talk about this. In our agreement with respect to the CM that was building these things for us.
Okay.
I'll tell you what.
Let me I'm going to give a little bit more color, we didnt talked about this.
In our agreement with respect to the Sam that was building these things for US we actually had some NR re charges in there they're not necessarily directly tied to cost of sales, but they were timed with the timing of it. So the first units actually have a higher incremental cost.
Chris Siu: Now with that, let me turn it over to Chris before we open up the line for questions. Thank you, Gay.
Speaker 3: We actually had some NRE charges in there. They're not necessarily directly tied to cost of sales, but they were timed with the timing of it. So the first units actually have a higher incremental cost to us.
Chris Siu: Good afternoon, everyone. We're pleased to announce an under strong quarter for air test systems after the record fiscal 2023. On today's call, I will summarize our results for the fiscal first quarter. We exceeded the consensus on both our top and bottom line. First quarter revenue was $20.6 million, up 93% from $10.7 million in Q1 of last year. Strong demand for wafer packs contributed to the significant year-over-year increase in revenue in the first quarter.
Speaker 3: then I think the one's going forward. Now, I think the first four or five units had that. So anyhow, it was worse than would be expected if that helps.
To US then I think the ones going forward I think the first four or five units had that so anyhow.
It was worst than would be expected if that helps.
Speaker 6: It does. Sorry, one last one. What percentage was your largest customer in the quarter?
It does I'm sorry, one last one.
What percentage was your largest customer in the.
In the quarter.
Chris Siu: Waver pack and die pack consumables revenue accounted for 55% of our total revenue in the first quarter, compared to just 5% of revenue in the prior year quarter. As we have noted before, customers typically purchase our fox systems ahead of wafer packs and subsequently stack of purchases of wafer packs. We see continued momentum for new wafer pack designs with existing and new customers to meet their customer and market requirements. Non-gap net income, which excludes the impact of stop-based compensation was 5.2 million, or 18 cents per diluted share for the first quarter.
Speaker 4: Number one customer is 8% very high. 88%.
It's number one customer is eight 8% very high.
88%.
Thank you.
Speaker 1: Again, if you have a question, please press star then one.
Again, if you have a question. Please press Star then one.
Speaker 1: The next question is from Dylan Patel with Semi Analysis. Please go ahead.
The next question is from Dilip Patel with semi analysis. Please go ahead.
Speaker 7: Hey, thanks for taking my question. I wanted to ask about how I think through the number of wafers per tester, right? So, you know, there's all the various different configurations that you've sort of options you've had for various different customers. You know, some people want to do the bipolar voltage channel modules and some people want to do high voltage, some people want to go negative. I'm curious, can you sort of...
Hey, Thanks for taking my question I wanted to ask about how I think through the number of wafers per tester right. So you know there's all the various different configurations that you've sort of options you have had for for various different customers. You know some people want to do the bipolar voltage channel modules and some people want to do high voltage some people want to go negative.
Chris Siu: This compares to non-gap net income of 1.3 million, or 5 cents per diluted share in the first quarter of fiscal 2023. Bookings in the first quarter were 18.4 million, up from 15.2 million in the preceding Q4, and down slightly by 4% from 19.1 million in the first quarter of fiscal 2023. Included in our Q1 bookings are announced, orders for additional wafer packs, contactors of 60 million from our lead sleep concubine customer.
I'm curious can you sort of outlay how to think through.
Speaker 7: outlay how to think through, you know, what is the, you know, the test time for these various systems, for various options and then, you know, sort of how many, how many can be tested per Fox XP, you know, because some of these are nine per system versus 18. And yeah, I would love to hear, you know, that sort of rationale.
What is the you know the test time for these various systems for various options and then sort of how many how many can be tested per Fox XP right.
Because some of these are nine per system versus 18, and yes, I would love to hear that that sort of rationale alright well.
Speaker 3: All right, well, as I described this, I simply want you to listen in terms of just the simple math because mostly what I'll describe is the simple math, but obviously the pieces, well, what is...
As I described this I simply want you to listen in terms of just the simple math, because mostly what I'll describe as the simple math, but obviously the pieces will what is.
Speaker 3: you know, customers A, B, and C's test time. And I want to give a little bit of color on that when I'm done. From a simple math perspective, the N-P systems have two wafers. They're usually used for engineering. And if you want to do small-lot production, you can test two wafers at a time.
Customers <unk> test time, and I want to give a little bit of color on that when I'm done from a simple math perspective, the NP systems of two wafers, they're usually used for engineering and if you want to do small lot production you can test two wafers at a time.
Chris Siu: Backlog as of quarter end was 22.3 million, up 14% from a year ago, with 1.7 million bookings received, primarily from a new US customer that we announced previously, in the first four weeks of the second quarter of fiscal 2024. We now have an effective backlog of 24 million. Gap growth margin for the first quarter came in at 48.4% up from 42% in Q1 last year. The increase in growth margin reflects a favorable product mix of higher margin wafer packs, also contributing to the increase in growth margin in the first quarter, with the overall higher revenue level compared to Q1 last year.
Speaker 3: So if your test time was 24 hours, you would get two wafers per day off of that. If your test time or cycle time is 12 hours, you could get four wafers a day off of that. The XP, which is fully compatible blades, which are effectively each tester uniquely can test a wafer.
If your chest time was 24 hours you would get to wafers per day off of that if your test time or.
Call. It cycle time is 12 hours you could get for wafers, a day off of that DXP, which is fully compatible blades, which are effectively the each tester uniquely contest a wafer.
Speaker 3: has either 9 or 18. Following the same math, you would either get 9 or 18 wafers a day at 24 hours or two times that at 12 hours or four times that at six hours.
Has either nine or 18 following the same math you would either get nine or 18 wafers a day at 24 hours or two times out at 12 hours or four times added six hours. So I'm not trying to be coy, but that's the way of thinking about the capacity off of it now the real debate is in the discussion as well what's the test time.
Chris Siu: Operating expenses in the first quarter were 5.9 million, up 45.8% from 4 million in Q1 last year. The year-over-year increase is primarily due to previously noted increased headcount related expenses to support our worldwide sales and marketing efforts in our R&D programs. Our investments in sales and marketing staff continue to have a positive impact on expanding our customer engagement and marketing reach to support revenue growth. The increase in R&D is primarily due to calls associated with development programs for augmenting features and performance of our new automated wafer pack aligner, which enabled new advanced test and burning capabilities for three concovai and gallium nitry, power semiconductors, on the AirSFox XP waver level test and burning systems.
Speaker 3: So I'm not trying to be coy, but that's the way of thinking about the capacity of it. Now the real debate is, and the discussion is, what's the test time?
Well.
Speaker 3: If you get into the, what's called the, the bathtub curve of reliability, and that should, if you go type in bathtub curve and reliability, you can find all kinds of articles out there to talk about it. Basically, when a device is first manufactured, all of a semiconductor device.
If you get into the what's called the.
The bathtub curve of reliability.
And that Shouldnt. If you go type in bathtub curve and reliability you can find all kinds of articles out to talk about it basically when a device is first manufactured all semiconductor devices.
Chris Siu: The first order for our stand-alone automated aligner was shipped during Q4 fiscal 2023 was accepted by our customer in the first fiscal quarter. We continue to invest in R&D to enhance our existing market leading products and to introduce new products to maintain our competitive advantage, and Expand Our Applications and Addressable Markets. Turning to the balance sheet, we continue to generate healthy cash flow and finish, according with a strong cash position. Our cash and cash equivalence increased to $51 million at the end of Q1, up 6% from our total cash, cash equivalence and investments balance of $47.9 million at the end of Q4.
Speaker 3: As soon as they are functionally good, they have a likelihood of failure at that point in time. And as time goes on,
As soon as they are functionally good they have a likelihood of failure at that point in time and as time goes on.
Speaker 3: The likelihood that they fail actually decreases. This was observed a long time ago and is very consistent across all semiconductor processes. So what that looks like is the likelihood of failure drops as time goes and then at some point it stops dropping. It's the bottom of the bathtub purge.
Yeah.
The the likelihood that they fail actually decreases this was observed a long time ago and is very consistent across all semiconductor processes. So what that looks like is the likelihood of failure drops as time goes and then at some point it stops dropping at the bottom of the bathtub curve.
Speaker 3: You know, 20 years from now they start failing again and that's the other end of the bathtub curve.
20 years from now they start failing again and that's the other end of the bathtub curve.
Speaker 3: What's important is, depending on the expectation of the customer or the application, is whether or not the failure rate upon shipment is good enough. And if it is too high, you do things like stress and burn in, which is what we supply, to decrease and move it down the curve. The higher the quality, the more screening or burn in, you need to do to move it down the curve. And that is generally energy and time.
Whats important is depending on the expectation of the customer or the application.
Is whether or not the failure rate upon shipment is good enough and if it is too high you do things like stressed and burn in which is what we supply to decrease and move it down the curve.
The higher the quality the more screening our burn and you need to do to move it down the curve and that is generally energy and time.
Chris Siu: We generated 3.9 million in operating cash flow during the Q4 while also investing in inventory to support our growth strategy in fiscal 2024. We have zero debt and continue investing our excess cash in money market funds or short-term investments to take advantage of favorable interest rates in a current macro environment. Interest income earned in the first quarter was almost $600,000, compared to $121,000 in the first quarter last year. In Q3 of last year, we announced an ATM at the market offering of up to $25 million in shares of the company's common stock on the open market.
Speaker 3: So an example we've tried to use in certain applications like the inverter of the automobile, probably the most highest reliability requirement out there. Because on an inverter it might have 12 or 24 chips in a single module or 48 in a single inverter on the Tesla for example, and Tesla Platis three of those. So they have 144 chips in there.
No.
An example, we've tried to use in certain applications like the inverter of of the automobile probably the most highest reliability requirement out there because on an inverter it might have 12 or 24 chips in a single module.
Or.
Up 48 in a single and Burger on the Tesla for example in Tesla Plaid is three of those so they are a 144 chips in there.
Speaker 3: The requirement is none of those 144 chips fail during the whole life of the car. Okay. There's also chips.
The requirement is none of those 144 chips fail during the whole life of the car. Okay. There's also chips.
Chris Siu: We received gross proceeds of $7.3 million on the sale of 209,000 shares in fiscal 2023. We did not sell any shares during our fiscal Q1. As of the end of the fiscal, first fiscal quarter of 2024, the remaining amount available under the ATM offering was $17.7 million. It is our expectation that we will sell shares against this ATM offering during this fiscal year, at times and prices that are most advantageous throughout shareholders and to the company.
Speaker 3: See, somewhere else in power and in the onboard charger, there's only three chips.
Say somewhere else and empowering.
And the onboard charger theres only three chips.
Speaker 3: So those three chips have the same requirement. They can't fail in the life of the car. But there's only three of those versus 144. So by the very nature of that, the onboard charger perception wise could be burnt in last.
So those three chips have the same requirement they can't fail in the life of the car, but there's only three of those versus 144. So by the very nature of that the onboard charger perception wise could be bird Gen Lasse if.
Speaker 3: if you want to quote get away with it. This was a huge topic at the conferences last, the last two weeks in Europe at the Power Semiconductor and the Executive Summit on Power Semiconductors. And reliability was a huge discussion. And that is what is the reliability requirement of the automotive space?
If you Wanna get away with it.
This was a huge topic at the conferences last.
The last two weeks in Europe at the power semiconductor and the executive summit on power semiconductors, and reliability was a huge discussion and that is what is the reliability requirement of the automotive space.
Chris Siu: Now turning to our outlook for the current fiscal 2024, that ends on May 31, 2024. We continue to believe in the company's real trajectory, as our differentiated products and technologies continue to attract and win new customers who desire more cost-effective and more efficient waiver-level test and burning solutions. As Gabe mentioned, we are reaffirming our previously provided guidance for four-year total revenue to be at least $100 million, representing growth of over 50% year-over-year and gap net income of at least $28 million, representing earning growth of greater than 90% year-over-year.
Speaker 3: Last week was at Hyundai had a recall.
Last week was at Hyundai had a recall.
Speaker 3: of cars. The cars were 2015 and older and they had to recall 3.5 million cars because 22 cars had some brake leakage event that caused the fire and 22 overheating. They had 44 cars out of 3.5 million that had an event and they're recalling 3.5 million cars that are over 10 years old.
Of cars the cars were 2015 and older.
And they had to recall $3 5 million cars, because 22 cars had some break leakage event that caused a fire and 22 overheating did 44 cars out of $3 $5 million that had an event and then recalling three and a half million cars that are over 10 years old.
Speaker 3: Okay. So what is the failure rate? Okay. For an EV that's going to last 10 years or longer.
Okay. So what is the failure rate.
Okay for an EV, that's going to last 10 years or longer.
Chris Siu: Lastly, looking at the investor relations calendar, our annual shareholder's meeting will be held on Monday, October 23, at the company headquarters here in Fremont, California's IPM. If you're interested in attending, we appreciate our SVP if possible, so we can plan for attendance accordingly. Please feel free to contact myself or Jim Buyers of MKR, our investor relations firm to let us know. We will also be participating in a couple of investor conferences in the next few months.
Speaker 3: And if you said, well, 44 out of a million is not bad.
And if you said well 44 out of a millions not bad.
Speaker 3: 44 out of 3.5 million required every one of those cars to be recalled.
44 out of three and a half million required every one of those cars to be recalled.
Speaker 3: So, you know, we get into this whole discussion and I get kind of passionate about it. Like, what's the right number?
So you know.
We get into this whole discussion and I get kind of passionate about it like what's the right number.
Speaker 3: You know what? Companies don't all have the same expectations of quality. We get a pretty front-line view. I can tell you sometimes it upsets me. I don't, you know, not everybody's the same. Here's my opinion. I wouldn't drive a car that had less than 12 to 24 hours of burn in other silicon carbide. I wouldn't do it. So it's important. That's why we use these numbers. Today we have said, burn in times on average across the industry are more than 12 hours.
Companies don't all have the same expectations of quality, we get a pretty frontline view.
Chris Siu: On November 16, we'll be participating in the Craig Hallum Alpha Select Conference, taking place in New York, and on December 12, we'll be back in New York to participate in the 12th Annual NYC Summit. We hope to see some of you at this conference.
Can tell you sometimes it upsets me I don't not everybody has the same here's my opinion I wouldn't drive a car that had less than 12 months to 24 hours of burn another silicon carbide, alright, I wouldn't do it so.
It's important that's why we use these numbers today, we have said burn in times on average across the industry are more than 2012 hours.
Speaker 3: and we think over time they will get down to that. We will see, but it's gonna be the car manufacturers that dictate that.
Gayn Erickson: This concludes our prepared remarks.
And we think over time, they will get down to that we will see but it's going to be the car manufacturers that dictate that and I can tell you we've met with a number of them and we're meeting with more in the next two weeks. They are very opinionated about what's needed I've never heard one of them not demand a high level of burn in further automotive parts.
Operator: We're now ready to take your questions. Operator, please go ahead. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster.
Speaker 3: And I can tell you we've met with a number of them and we're meeting with more in the next two weeks. They are very opinionated about what's needed. I've never heard one of them not demand a high level of burn-in for the automotive parts.
Speaker 3: Now that's very clear in the automotive space. So enough of my high horse here, Dylan, sorry, I'll let you up like that, but I hope that gives you some clarity.
Now that's very clear in the automotive space, So enough of my high Horsehair Dylan sorry.
You're up like that but.
I hope that gives you some clarity.
Speaker 7: That's great. And then I kind of wanted to cool in on a question or a statement that you had in the sort of the Prepared remarks.
That's great and then I kind of wanted to cooling on a question or a statement that you had in the sort of the prepared remarks, which was.
Speaker 7: which was, you know, you're seeing more electrical vehicles with their own specific design for inverters. Are you saying that like, you know, like XYZ, you know, major auto EM will want a specific inverter design from,
Christian Schwab: Our first question is from Christian Schwab with Craig Hallam Capital Group. Please go ahead. Hey, good afternoon, guys. I'm a gross margin in the quarter at 48 and a half with wait for packs at greater than 50 percent of revenue. I would have assumed the gross margin would have been a little bit better than that. Is there something going on there for that? Yeah, so if you remember historically and actually consistently, our aligners have been amongst our lowest margin products.
Youre seeing more electrical electric vehicles with their own specific design for Inverters are you, saying that like you know like Xyz major auto OEM will want a specific inverter design from.
Speaker 7: a their supplier and then that's going to require a different chip design or different device designed and someone else or or I assume that you know everyone would have pretty similar designs for their inverters. That would that mean that there's more sort of XP's or sorry.
And their supplier and then that's going to require a different chip design or different device designed and someone else or or.
I assume that everyone would have pretty similar designs for their inverters.
Would that mean that there's more sort of X P. R.
Speaker 7: Available for providers or sorry Wayf? her Because of this yes
Wafer product for liners are far away from her because of this year.
Speaker 3: Yeah, and I know more than I can share, but I still don't think I know everything in this space around this. But yeah, people with seemingly the same power are dictating specific requirements of the chip size. It gets into thermal trade-offs, voltage trade-offs, power trade-offs, acceleration trade-offs.
Yes.
And I know more than I can share, but I still don't think I know everything in this space around this but yeah people with seemingly the same power are dictating specific requirements of the chip size.
Christian Schwab: They are fully our IP, but we have contracted to have them completely built external to our facility here. And I wouldn't call them pass-through because it's not that, but they tend to be on the lower end of the margin. So we had a couple of aligners, the automated aligners in there, and that kind of offset that by a couple of few points, I think. So as our business increases and we start to see it candidly as we see more companies or more customers wanting to actually do an integrated aligner with every system, that will have some, but generally overall, it still sort of normalizes our system's level margins.
It gets into thermal tradeoffs voltage tradeoffs power tradeoffs acceleration tradeoffs how.
Speaker 3: How much power you have on a hand? What kind of efficiency you have? And so I'm actually kind of surprised that even the same automotive supplier will dictate multiple different flavors and then the next automotive guy won't buy the same ones. So I'm sure it drives our customers crazy because I'm sure they way rather everybody buy one. There's probably some element where they don't want to commoditize it either though. I mean if they all made exactly the same chip, well then you know maybe the customer
How much power you have on hand, what kind of efficiency you have and so I'm actually kind of surprised that even the same automotive supplier will dictate multiple different flavors and then the next automotive guy won't buy the same ones. So I'm sure. It drives our customers crazy because I'm sure the way rather everybody by one there's probably some element where the.
Christian Schwab: But I think that's where if you make that a go forward basis, would you anticipate the remainder of the year returning back to North of 50 percent, or is that going to be tremendously mixed dependent quarter to quarter? Yeah, no, that's right. So we still tying 50 percent above as a margin for the year. And that's what we're looking at.
They don't want to commoditize, it either though I mean, if they all made exactly the same chip will then maybe the the customers with commoditize everything faster, but then that is for US there is more and more wafer pack designs and I know I said specific call automotive, but candidly a lot of the new.
Speaker 3: come out of size everything faster. But the net is for us there is more and more way for peck designs. And I know I said, it's basically called automotive, but I can't believe a lot of the new industrial designs, there's a much broader array of those too. And that's those designs have been increasing too.
<unk> designs Theres, a much broader array of those two and that those designs have been increasing too.
Speaker 3: So in the past, I think it might have been like a year ago, you mentioned that sort of, you know, you'd expect people to change wafer packs maybe every two to three years or designs every two to three years. Is that, do you think that still remains the case? Or do you think that people will have to have more wafer packs relative, you know, say a next peak and fit 18 or nine of them? They might have more than that 18 or nine because there's three or four different designs across their three or four different major customers. And then they might have to switch them out more often. I'm just trying to, you know, get a good look at that. So I'm pretty sure I would have said because I remember I probably was probably saying three or four years. I think two to three might be aggressive, but we weren't sure.
So in the past I think it might have even been like a year ago. You mentioned that sort of you would expect people to change wafer pack. Maybe every two to three years or designs. Every two to three years is that do you think thats still remains the case or do you think that people will have to have more wafer packs relative to say the next peak and fit 18 or nine of them they might have more than that 18 or nine because theres three or four different dizzy.
Gayn Erickson: Okay, great. And then regarding future orders from different customers, you know, I think you talked about, you know, meeting with your six current customers and 12 new customers, you know, just as we think about, you know, backlog to support, you know, the hundred billion revenue, when should we assume, you know, potentially your third major customer coming in as well as numerous other customers? I think you said over the next few months, you anticipated that.
<unk> across their three major customers and then they might have to switch them out more often and I'm just trying to get a get a cab so I'm pretty sure I would've said, because I remember as I, probably was pricing three or four years I think two to three might be aggressive, but we werent sure.
Speaker 3: We know in memory, for example, every 18 months to 24 months, the pro cards are all swapped out. That's probably the most extreme. Generally speaking, auto mode of last longer.
We now like in memory. For example, every one like 18 months to 24 months. The wafer probe cards are all swapped out that's probably the most extreme generally speaking automotive last longer but the issue with silicon carbide is its in this sort of infant phase where people are going to gen. Two gen. Three gen. Four gen five they're going for.
Gayn Erickson: I'm just trying to do our best to give you, you know, kind of plenty of heads up on those, and I will, you know, tell you that our ability to guess the customers is not perfect either, but just a little bit. So of our current six customers, we, I mean, more than half of them certainly are top two largest customers. We're expecting orders for both bookings and during this year. I think more than half of the six customers are all going to have bookings and revenue shift within the year.
Speaker 3: But the issue with silken carbide is it's in this sort of infant phase where people are going to, you know, Gen 2, Gen 3, Gen 4, Gen 5. They're going from 150 to 200 millimeter. And as those happen.
150 to 200 millimeter.
And as those happen there is more evolution to me if you could look at it over 15 years. My guess is there's more activity in the next five to seven years, then there will be in the back half of seven years, but for sure we're going to see customers with more than one wafer pack per blade like on 18 blade or 18 tests.
Speaker 3: There is more evolution. To me, if you can look at it over 15 years, my guess is there's more activity in the next five to seven years than there will be in the back half of seven years. But for sure, we're gonna see customers with more than one wafer pack per blade.
Gayn Erickson: And then a number of new customers as well. So, and we kind of alluded to both with the GAN related and the large benchmark, you know, I'm feeling really good. It's kind of hard to put our finger on it. We probably shouldn't tell exactly when they're going to come anyhow, but we're certainly trying to give you enough hints. I mean, we, I think everybody, and we're certainly clear here, you know, a $24 million backlog with what 20 million in the bank.
Speaker 3: like an 18 blade or 18 tester XP. You know, if you ask me in three years, what do I think? I bet you, for every wafer practice in the system, there's a couple on the shelf.
Her XP.
If you ask me in three years to White, what do I think I bet you. There for every wafer practice in the system. There is a couple of on the shelf.
Speaker 3: that wouldn't shock me for just how they will do it to be customer demand.
That wouldn't shock me for just how they will do it to meet customer demand.
Okay. Thank you so much.
Thanks Sterling.
Speaker 1: Once again, if you have a question, please press star then one.
Gayn Erickson: We've got a lot of turns, and a lot of turns expected this year to do the $100 million, and we don't expect to finish the year with zero backlog either. And for those that have come and seen our facility, and we're always really pretty open about that. And if you haven't planned it, if there's no other excuse to come for our shareholders meeting, besides a glass of wine and hors d'oeuvres, you can come out and see our manufacturing floor, but it is billowing right now.
Once again, if you have a question. Please press Star then one.
Speaker 8: The next question is from Larry Shlabina, which Labina capital. Please go ahead. OK. Hey Larry. Speak.
The next question is from Larry Solow being out which Levine of capital. Please go ahead.
Okay.
Hey, Larry.
<unk>.
So I'm looking at my notes.
When do you expect the follow on order from.
Gayn Erickson: And that is, you know, where a lot of the inventory is going, et cetera, and anticipation of this, you know, our lead times candidly continue to be world-class at shorter than anybody else while we continue increased capacity. That's great, Gabe, thank you for that color. As far as the new customers, I know you've talked previously about having multiple customers this year at 10%, so obviously it probably appears we have at least two, but should we anticipate three or four, or is it just two early to Dell?
We recently accepted.
Speaker 8: Holy Automated XP. They use those machines almost four months. When they be needing some more capacity here soon.
Fully automated XP.
They use those machines almost four months.
Would they be meeting some more capacity here soon.
They're going to need more capacity soon.
How's that.
Speaker 3: Oh, um, yeah, no, I think I think I think I think they're going to buy more systems and we're going to ship them within our fiscal year.
[laughter].
Yes.
No I do I think I think they're going to buy more systems, and we're going to ship them within our fiscal year.
Yes.
Speaker 8: And then the three year long development company that you referred to that you said they were going to go with GAN first before Silicon carbide is that that way heard is that correct?
And then the three year long development company that you referred to the you said they were going to go with Gan first before silicon carbide is a good one is that correct.
Gayn Erickson: No, we're still, Chris and I were just going through that this morning again. Right now we're right at three or four, there's, you know, we certainly believe three and the four, there's like, I think there was like four or five that are all in the three to six percent that anyone might be able to poke their head up or something. So I mean, from a diversity, you know, we're all excited because of how many customers, but let's not kid ourselves, we don't have hundreds of customers and never will in this space, but we'll definitely have a much more diverse number of customers, which is nice, but we'll stick to the three to four. I don't, it's not clear how we would get to five necessarily, but we might have, you know, we don't call out the five percent customers, but we might have a good chunk of those too.
Speaker 3: kind of stitch myself into a little bit of a, I didn't get myself much wiggle room.
Kind of stitch myself into a little bit of.
I didn't give myself much wiggle room.
It appears that way yes.
Speaker 8: And if it goes that way, would you expect them to start with an NP first and then progress through an XP or they jump right to an XP? Do you have a sentiment? I would, yeah, I would think it would be an NP first. Yep.
And in it.
If it goes our way would you expect them to the store with an M. P. First and then progress through the next few are they jumped breakthrough in <unk>.
Yeah, I would think it would be in <unk>.
Speaker 8: Okay, on the OptigoIO, the customer that asked for Accelerate Delivery, should we sell for our model plan on fiscal year, fiscal year, to you know, the...
Okay on the optical Ohio with customer that.
As for accelerated delivery should we so for model plan.
On the school year fiscal year Q.
The February quarter.
Christian Schwab: Great. I don't have any other questions at this time. Thanks, Gabe. Okay, thanks, Christian.
Speaker 3: I think you spelled out that it was going to be in the calendar first quarter. But does that mean should we assume that it would definitely happen in the February quarter of fiscal? I don't know yet. I mean, they had originally talked about and we acknowledged the order for Q1 which could have been through a mark shipment. Recently, they're like, you know, sooner or the better. So we're actually trying to pull it in.
I think you spell it out that it was going to be in the calendar first quarter.
Operator: Thank you.
Jed Dorsheimer: The next question is from Jed Dorsheimer with William Blair. Please go ahead. Hi.
Does that mean the should.
Should we assume that it will definitely happen in the February quarter for school.
Gayn Erickson: Hey, Gabe, and Chris, I get some first question. I just wanted to dig in, Christian touched on it, but just on the wafer pack of liners, the standalone that we're recognized in the quarter versus in congratulations on getting the fully integrated systems signed off. Should I look at that is, is taking your, you know, the effective backlog and subtracting the bookings so that the quarter would have been fixed million greater had, had those signed off in the, in the quarter, is that the right way to look at that?
No yes. It means they had originally they had originally talked about and we acknowledged the order for Q1, which could have been through our March shipment.
Recently, there like <unk>.
Sooner the better so we're just trying to pull it in.
Speaker 8: And so you're in charge of that, we should figure the February quarter then.
And.
So you're in you're in charge of that.
We should trigger.
We recorded them.
Speaker 3: That's what we're working on, but they're listening too. So we're trying our best to pull it in.
That's what we're working on but they.
They're listening to so we're trying our best to pull it in.
Speaker 3: It's awesome. It's coming along really nicely. There's a couple of things that we're still working through from qualification and thermal uniformity and things, but the system's being built up.
It was awesome I mean, its kind of its coming along really nicely. There's a couple of things that we're still working through from a.
Gayn Erickson: Or, you know, how would you suggest that? Yeah, I mean, as we got a little closer, we kind of anticipated that that we didn't get really specific, we weren't even sure that the second one was going to book that just I won't get into all the, wouldn't have scored for revenue. So, you know, I guess theoretically, we could have pulled in one and the other one was already in our plans, whether we told you or not in our second quarter.
No.
Qualification in thermal uniformity and things, but the system is being built up we're actually building. It in the integrated configuration. It will not be docked to our new aligner, but it can easily be docked to it. So it's been configured in the new configuration that will allow it.
Speaker 3: We're actually building it in the integrated configuration. It will not be docked to our new aligner, but it can easily be docked to it. So it's being configured in the new configuration that will allow it to just be rolled up against the new aligner.
To just be rolled up it against the new aligner.
Gayn Erickson: I mean, between the two of them, I think it's closer to 8 million or so. Got it. And, and that so to be clear, you sold the integrated systems of that, of those two systems at the same customer, which I think Chris mentioned is the US customer, that the, that the aligners were recognized in the August quarter, but the, the rest of the two systems went into September. I just want to make sure I have that.
Speaker 3: So it can go in and all fully automated for them. All they have to do is buy the aligner and we can bolt on a 300 millimeter front end on this thing overhead transport or robotics. And it's fully sex jam integrated into high volume manufacturing floor.
So it can go on and are fully automated from Brazil.
I have to do is buy the aligner and we can bolt on a 300 millimeter front end on this thing overhead transport or robotics and <unk>.
It's fully sex jam integrated into high volume manufacturing, Florida.
Yeah.
Speaker 8: That sounds really exciting. You know, we've seen articles written at Taiwan Semi is pursuing something similar, optical I.O. And...
Okay that sounds.
Really exciting.
We've seen articles written the Taiwan semi is pursuing.
Something similar optical oil.
Gayn Erickson: No, and I'm not sure everyone else can be a fall along with it. The way our revenue recognition works, which is very consistent with the industry and we're always very open, is that when we have a brand new product that, you know, that has never been accepted or released into production with a customer before, we will not score revenue on it or anyone like it until, candidly, the first one is accepted, and I won't get into a perfunctory and all that, but it turns out the first customer shipments were of what we call stand-alone liner and it went to our lead customer who has been accepting XP's all along.
<unk>.
Speaker 8: Would they be speaking enough to be accessing your X-DU place in X-P and Taiwan at a no-sa?
Would they be sneaky enough to be accessing your.
Could you. Please the next P in <unk>.
Taiwan.
Also.
Speaker 8: Would they be accessing that machine to do their stabilization and reliability testing?
Would they be.
Accessing that machine to do their stabilization and reliability testing.
Speaker 3: versus coming directly. You know what? It's funny. Sometimes when you ask me a question, I'll just ignore you, but they are not right now. I don't want people to be left with the opinion that they are. But I think, you know, the...
Versus Kumar directly.
It's funny, sometimes when you asked me a question I'll just ignore you, but they are not right now I don't want people to be left with the opinion that they are.
But I think the folks it's pretty it's pretty interesting, we're trying to read up and we're talking to.
Speaker 3: it's pretty it's pretty interesting we're trying to read up and we're talking to you know key players in the space you know amd intel and vidia have all been sort of pounding this drum it seems like it's been picking up on this and then tsmc and global foundries in particular want to play
Gayn Erickson: So the only thing deferred, if you will, was the revenue for those two aligners. So when they accepted, they were just the two aligners. The weird thing is on the second lead customer or second large customer that had the systems. The XP and the aligner were bolted together and so we and the XP also had those new enhancements. So can our previous CFO and and and and Chris was on board as well.
Key players in this space AMD, Intel and Nvidia have all been sort of pounding the drum and it seems like it's been picking up on this and then TSMC and Globalfoundries in particular want to play they want to be a part of this.
Speaker 3: they want to be a part of this and you know it's very interesting when you start thinking that that it's not just the chip to chip that makes uh... silicon photonics in the chip itself there's photons
Very interesting when you start thinking that that it's not just the chip to chip that makes silicon photonics in the chip itself Theres photons.
Gayn Erickson: We drew a circle around those and said the whole thing isn't accepted until it's all accepted, which is a little weird. But basically once the aligner was accepted then the XP and the aligner was all accepted at the same time and in that case, both of them triggered. And they're both released and working now. Yeah. So. So to add to that, so that means going forward, whether they menu all the aligners or indicate aligners, we don't need to wait for whether they have the new options or anything. It just ships and score a new when we ship going forward. Well, that better than I expected. So nice. I guess.
Speaker 3: firing around inside on big bus planes that are transmitting these multi-gigabyte buses.
Hiring around inside on big bus planes that are trends, meaning these multi gigabyte buses.
Speaker 3: And it just, you know, what semiconductors will look like in a decade versus what they are now, it's gonna drastically change based upon silicon photonics. And for us, not only are processors burned in general, by the way, but, you know, our focus has really been on this product, has been on the burning of the fiber optic transceiver, the integrated laser.
And then just what semiconductors will look like in a decade versus what they are now it's going to drastically change based upon silicon photonics and for us not only our processors bird and in general by the way, but our focus has really been on this product has been on the burn in.
The fiber optic transceiver the integrated laser.
Speaker 3: But there's also burning opportunities. And this is, as you know, because you've asked a lot of questions over the quarters, a lot of the play with bringing out the new aligner was not just Silicon Carbide.
But theres also burn and opportunities and this is as you know because you asked a lot of questions over the quarters a lot of the play with bringing out the new aligner was not just silicon carbide.
Gayn Erickson: Second question is just on this long courtship with this potential large customer. Any more details on sort of. But you know, I know it's it's the longest in your history gain and three years sounds like a long time for for that process. Is there any more details you can provide on sort of what is, you know, is the next step. You know, a large order is that what we should expect and and I asked that kind of.
Speaker 3: You know, the soaking carbide guys and the gang guys are delighted by it. But that really wasn't, I'm not gonna sit here and tell you, we started this project before we really saw the soaking carbide take off and we did it because the mainstream way for level burn-in for processors, automotive microcontrollers and memory.
The silicon carbide, guys and the gas guys are delighted by it but that really wasn't I am not going to sit here and tell you. We started this project before we really saw the silicon carbide takeoff and we did it because of mainstream wafer level burn in for processors.
Automotive Microcontrollers and memory, we think for sure. It's just too high volume you can't be handling wafer packs in Milwaukee and between a cart and a thing.
Speaker 8: We think for sure it's just too high volume. You can't be handling wafer packs and walking them between a cart and a thing. So that's what we did for, we're thrilled to death. And the system is where the systems are working really well. We're getting really good feedback. We got another customer in here today. I know that's teasing. And they're super impressed with it. And we're just pretty proud of it. I guess we're nervous, right? Another customer that you say for what, what work?
Gayn Erickson: Also in the context of your capacity, as you're adding these customers, you know, I know you've talked about low lead times, but if you saw, you know, a large 20, 30, 40, whatever that number system type order, I would assume that that changes things in a good way. Yeah, I mean, generally speaking, you know, even if customers talk about oring lots upfront, my experience has been it's normally met with, you know, one or a small number of systems say for production to begin with.
So that's what we did for we're thrilled to death and the system is where the systems are working really well, we're getting really good feedback we got another customer in here today, I know thats teasing and Super impressed with it and.
We're just pretty much out of it I guess Werner.
Another customer did you say for what what mortgage.
Speaker 8: I didn't say that. So, I know, how did you describe them? I'm sorry, I missed it. I just did another customer that's in here looking at it and they're very excited and they gave it to really good feedback. I thought you mentioned what market they're in. So, you know, obviously Taiwan on semi would be serving AMD and Nvidia, that's why I was asking, you know, I know you mentioned in the past that they're interested and I would think it would come through Taiwan on semi.
Didn't say that.
Hello.
How did you describe them I'm, sorry, I just had another customer that's in here looking at it and they're very excited and they gave us some really good feedback.
Gayn Erickson: And then a little bit of absorption. That might change here because they're running out of time. I mean, and they've done way more evaluations than I've seen in the past. So I think that has a chance to collapse itself. There's also engineering systems involved, et cetera. So I'm not sure I want to perfectly carve it because I might end up being wrong. But, you know, engineering systems, first production systems, quantities, perhaps we may get quantities with longer lead times because it's getting pretty serious with companies now.
What markets are and so obviously.
Obviously, Taiwan semi would be serving.
And video that's why I was asking.
Mary mentioned in the past so if they are interested in it.
It would come through Taiwan, Soma, that's worth it.
Speaker 8: So you kind of led me to my last question. As you stated, the XP was developed initially for memory, the lack of the automation held it back.
What was the real soon.
So you kind of led me to my last question is.
As you stated the XP was developed initially for memory.
Lack of the automation held it back.
Speaker 8: Now that it's fully accepted and it's in the market please.
No.
Gayn Erickson: You know, they're putting real capital in place, putting fabs in place, making commitments to these very significant ramps that are happening in the automotive guys in 2526. And I don't think they want to be cut short. So, you know, my message, I guess to my customers listening. I mean, we are able to ship more than anybody else. You know, we literally can ship, you know, up to. Call it 50, 80, 100 testers, call it wafers or blades of capacity of month, you know, we're shipping more per month than the combined number of install base of every other competing alternative has ever shipped.
Fully accepted and that's in the marketplace.
Speaker 8: When you're going to get an evaluation tool to
When are you going to get.
The evaluation tool to.
Speaker 8: our big US memory maker that's planning on building several fans in the US.
Our big U S memory makers are planning on building.
So it will fabs in the U S.
Speaker 3: As we've alluded to and we're serious about it, we are actively pursuing the memory space again.
As we've alluded to and we're serious about it we are at.
Actively pursuing the memory space again.
Speaker 3: We have had conversations and design reviews not with everybody, but some of the folks that are candidly closer proximity, but not only.
We have had conversations and design reviews, not with everybody, but some of the folks that are candidly closer proximity but not only.
Speaker 3: on it and that continues on, including with some meetings over the next few weeks. It's a little awkward, but shareholders need to sort of understand. We actually have financial bonuses tied to every executive and the staff to get into memory.
On it and that continues on including with some meetings over the next few weeks.
It's a little awkward, but shareholders need to sort of understand we actually have financial bonuses tied to every executive and staff to get into memory.
Gayn Erickson: But there's still a scenario where, you know, please get your orders in so that we can continue to make sure that we can address everybody's needs. But, you know, I just reiterate, obviously we're expecting significant amounts of orders in the fiscal year to be able to turn to make a hundred million and then without, you know, zero backlog. And we're sticking to our guns there. Got it.
Speaker 3: That includes me and everyone of my staff members. They are multi-year plans, but we're always getting into memory. That has been my passion. That's what the test was originally designed for and we're not giving up.
That includes me and every one of my staff members. They are multi year plans are but yes.
We're always getting into memory that has been my passion, that's what the test. It was originally designed for and we're not giving up.
Speaker 8: Well, you're the memory guy, so you're gonna take a nap.
Well you have the memory guys.
It happened.
Speaker 8: So, great to see the progress.
So thank you Larry.
Chris Siu: Last question for me, just on that, Chris, on the 300 basis point, the climbing growth margin, you answered this question with the Christian asked in terms of mixed shift or gain you did. But operating margins dropped by 500 basis points. Is there something else that drove the incremental 200 or is that just the aligners that in mixed shift that contributed the extra off contraction there? Yes, really primary on the aligners that, you know, decreased the margin here.
Great to see the progress.
Hopefully.
Speaker 8: Hopefully exceed your goals, looks like it's possible. It's all, everything comes together. So we'll be paying attention. Thanks, Larry.
Hopefully exceed your goals it looks like it's possible with all everything comes together, so we'll be paying attention. Thanks.
Thanks, Larry.
Are you guys.
Speaker 1: The next question is a follow up from Dylan Patel with Semi Analysis. Please go ahead. No question at this time.
Thank you.
The next question is a follow up from <unk> Patel with semi analysis. Please go ahead.
No question at this time, sorry mismatch the phone.
Okay.
Speaker 1: This concludes our question and answer session. I'd like to turn the conference back over to gain Ericsson for any closing or more.
This concludes our question and answer session I would like to turn the conference back over to gain Eriksson for any closing remarks.
Speaker 3: Thanks operator. I really appreciate everybody for joining us on the call again and spending an hour with us. And as always, we make ourselves available as much as we can. I will tell you we are traveling like crazy right now, but we're trying our best to get to everybody.
Thanks, Operator, I really appreciate everybody for joining us on the call again and spending an hour with us and.
Chris Siu: Okay. Yeah, you know, let me, I'm going to give a little bit more color. We didn't talk about this in our agreement with respect to the CM that was building these things for us. We actually had some NRE charges in there. They're not necessarily directly tied to cost to sales, but they were timed with the timing of it. So the first units actually have a higher incremental cost to us than I think the ones going forward now. I think the first four or five units had that. So anyhow, it was worse than would be expected if that helps. It does.
As always we make ourselves available as much as we can I will tell you. We are traveling like crazy right now, but we're trying our best to get to everybody. We do have our shareholders' meeting on the 23rd.
Speaker 3: We do have our shareholders meeting on the 23rd, they're generally like a lot of shareholders, they're not that exciting or anything, but we do have them here. We will be here with executives to do Q&A, and we typically will throw a smoke on you and walk you to the manufacturing areas. So if you can and want to join us, just give us a heads up and we'd love to meet you there.
They are generally like a lot of shareholders. They are not that exciting or anything but we do have them here, we will be here with executives to do Q&A and we typically will throw smart on you and walk you through the manufacturing area. So if you can and want to join US just give us a heads up and we'd love to meet you there and with that we'll turn it back over.
Jed Dorsheimer: I'm sorry, one last one. What percentage was your largest customer in the in the quarter? Number one customer is 8%. Very high. 88%. Great. Thank you.
Speaker 3: And with that, we'll turn it back over and take care. We will all talk to you next quarter. Bye-bye.
Operator: Again, if you have a question, please press star then one.
And take care of we will talk to you next quarter Bye bye.
Speaker 1: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
Dylan Patel: The next question is from Dylan Patel with semi-analysis. Please go ahead. Hey, thanks for taking my question. I wanted to ask about how I think through the number of wafers per tester. There's all the various different configurations that you've sort of options you've had for various different customers. Some people want to do the bipolar voltage channel modules, and some people want to do high voltage, some people want to go negative. I'm curious, can you sort of outlay how to think through what is the test time for these various systems for various options and then how many can be tested per Fox XP. Some of these are nine per system versus 18. I would love to hear that sort of rationale.
Okay.
[music].
Gayn Erickson: As I described this, I simply want you to listen in terms of just the simple math because mostly what I'll describe is the simple math. But obviously, the pieces, well, what is customer's A, B and C's test time? I want to give a little bit of color on that one I'm done. From a simple math perspective, the NP systems have two wafers. They're usually used for engineering. And if you want to do small-lot production, you can test two wafers at a time.
Gayn Erickson: So if your test time was 24 hours, you would get two wafers per day off of that. If your test time or call it cycle time is 12 hours, you could get four wafers a day off of that. The XP, which is fully compatible blades, which are effectively each tester uniquely can test a wafer, has either nine or 18. Following the same math, you would either get nine or 18 wafers a day at 24 or two times that at 12 hours or four times that at six hours. So I'm not trying to be coy, but that's the way of thinking about the capacity off of it.
Gayn Erickson: Now the real debate is, and the discussion is, what's the test time? Well, if you get into the, what's called the, the bathtub curve of reliability, and that shouldn't, if you go type in bathtub curve and reliability, you can find all kinds of articles out there to talk about it. Basically, when a device is first manufactured, all semiconductor devices, as soon as they are functionally good, they have a likelihood of failure at that point in time, and as time goes on, the likelihood that they fail actually decreases.
Gayn Erickson: This was observed a long time ago, and it's very consistent across all semiconductor processes. So what that looks like is the likelihood of failure drops as time goes, and then at some point it's stopped dropping, and it's the bottom of the bathtub curve. 20 years from now they start failing again, and that's the other end of the bathtub curve. What's important is, depending on the expectation of the customer or the application, is whether or not the failure rate upon shipment is good enough.
Gayn Erickson: And if it is too high, you do things like stress and burn in, which is what we supply to decrease and move it down the curve. The higher the quality, the more screening or burn in, you need to do to move it down the curve, and that is generally energy and time. So an example we've tried to use in certain applications, like the inverter of the automobile, probably the most highest reliability requirement out there, because on an inverter, it might have 12 or 24 chips in a single module.
Gayn Erickson: Or, you know, 48 in a single inverter on the Tesla, for example, and Tesla paid us three of those. So they have 144 chips in there. The requirement is none of those 144 chips fail during the whole life of the car. There's also chips, say somewhere else in a power in the onboard charger, there's only three chips. So those three chips have the same requirement. They can't fail in the life of the car. But there's only three of those versus 144. So by the very nature of that, the onboard charger, perception wise, could be burnt in less if you want to quote, get away with it.
Gayn Erickson: This was a huge topic at the conferences last the last two weeks in Europe at the power semiconductor and the executive summit on power semiconductors and reliability was a huge discussion. And that is what is the reliability requirement of the automotive space? Last week was at Hyundai had a recall of cars. The cars were 2015 and older. And they had to recall 3.5 million cars because 22 cars had some brake leakage event that caused the fire and 22 overheating.
Gayn Erickson: They had 44 cars out of 3.5 million that had an event and they're recalling 3.5 million cars that are over 10 years old. So, what is the failure rate for an EV that's going to last 10 years or longer? And if you said, well, 44 out of a million is not bad, 44 out of three and a half million required every one of those cars to be recalled. So, you know, we get into this whole discussion and I get kind of passionate about it.
Gayn Erickson: Like, what's the right number? You know what? Companies don't all have the same expectations of quality. We get a pretty front-line view. I can tell you, sometimes it upsets me. I don't, you know, not everybody's the same.
Gayn Erickson: Here's my opinion. I wouldn't drive a car that had less than 12 to 24 hours of burn and other silicon carbide. I wouldn't do it. So, it's important. That's why we use these numbers. Today, we have said burning times on average across the industry are more than 12 hours. And we think over time they will get down to that. We will see. But it's going to be the car manufacturers that dictate that.
Gayn Erickson: And I can tell you we've met with a number of them and we're meeting with more in the next two weeks. They are very opinionated about what's needed. I've never heard one of them not demand a high level of burn in for their automotive parts.
Gayn Erickson: Now, that's very clear in the automotive space.
Dylan Patel: So, enough of my high horse here, Dylan. Sorry, I'll let you up like that. But I hope that gives you some clarity. That's great.
Gayn Erickson: And then I kind of wanted to clue in on a question or a statement that you had in the sort of the prepared remarks, which was, you know, you're seeing more electrical vehicles with their own specific design for inverters. Are you saying that like, you know, like XYZ, you know, inverter design from, you know, their supplier, and then that's going to require a different chip design or different device design than someone else or, or I assume to that, you know, everyone would have pretty similar designs for their inverters.
Gayn Erickson: Would that mean that there's more sort of XP's, or sorry, wafer pack, or sorry wafer pack, or because of this, yeah. Yeah. And I know more than I can share, but I still don't think I know everything in this space around this, but yeah, people with seeming the same power are dictating specific requirements of the chip size. It gets into thermal trade-offs, voltage trade-offs, power trade-offs, acceleration trade-offs. How much power you have on hand, what kind of efficiency you have.
Gayn Erickson: And so I'm actually kind of surprised that even the same automotive supplier will dictate multiple different flavors, and then the next automotive guy won't buy the same ones. So I'm sure it drives our customers crazy because I'm sure they way rather everybody buy one. There's probably some element where they don't want to commoditize it either though. I mean, if they all made exactly the same chip, well then, you know, maybe the the customers would commoditize everything faster.
Gayn Erickson: But the net is for us, there is more and more wafer pack designs. And I know I said, it's specifically called automotive, but I can't believe a lot of the new industrial designs, there's a much broader array of those too, and that's those designs have been increasing too.
Gayn Erickson: So in the past, I think it might have been like a year ago, you mentioned sort of, you know, you'd expect people to change wafer packs maybe every two to three years or designs every two to three years, is that? Do you think that still remains the case? Or do you think that people will have to have more wafer packs relative to, you know, say a next peak and fit 18 or 9 of them?
Gayn Erickson: They might have more than that 18 or 9 because there's three or four different designs across their three or four different major customers. And then they might have to switch them out more often. I'm just trying to, you know, get a good look at that.
Gayn Erickson: So I'm pretty sure I would have said because I remember I probably was probably saying three or four years. I think two to three might be aggressive, but we weren't sure. We know like in memory, for example, every like 18 months to 24 months, the wafer, the pro cards are all swapped out. That's probably the most extreme. Generally speaking, automotive lasts longer, but the issue with Silicon Carbide is it's in this sort of infant phase where people are going to, you know, Gen 2, Gen 3, Gen 4, Gen 5.
Gayn Erickson: They're going to come from 150 to 200 millimeter. And as those happen, there's more evolution. To me, you know, if you can look at it over 15 years, my guess is, there's more activity in the next five to seven years than there will be in the back half of seven years. But for sure, we're going to see customers with more than one wafer pack per blade. Like an 18 blade or 18 tester XP, you know, if you ask me in three years, what do I think I bet you there for every wafer practice in the system? There's a couple on the shelf. That wouldn't shock me for just how they will do it to be customer demand.
Larry Chlebina: Okay, thank you so much. Thanks, Dylan.
Larry Chlebina: Once again, if you have a question, please press star, then one.
Larry Chlebina: The next question is from Larry Shlabina, which will be in a capital, please go ahead. Okay, Larry. The, sorry, I'm looking at my notes, the, what do you expect to follow on order from the recently accepted, fully automated XP? So they use those machines almost four months, wouldn't they be needing some more capacity here soon? They're going to need more capacity soon. How's that? So, I think they're going to buy more systems and we're going to ship them within our fiscal year.
Larry Chlebina: Yes. And then the three year long development company that you referred to that you said they were going to go with GAN first before silicon carbide. Is that that way heard? Is that correct? Kind of ditch myself into a little bit of a, I didn't get myself much wiggle room. It appears that way. Yes. And if it goes that way, would you expect them to start with an NP first and then progressive an XP or they jump right to an XP?
Larry Chlebina: Do you have a sense? Yeah, I would, I would think it would be an NP first. Yep. Okay, on the optical IO, the customer that asked for accelerate delivery, should we sell for a model plan on fiscal year, fiscal year Q? You know, the February quarter. I think you spelled out that it was going to be in the calendar first quarter, but does that mean, should we assume that it would definitely happen in the February quarter fiscal?
Larry Chlebina: I don't know yet. I mean, they had originally talked about and we acknowledged the order for Q1 which could have been through a mark shipment. Recently, they're like, you know, sooner or the better. So, we're actually trying to pull it in. So, you're in charge of that. We should figure the February quarter then. That's where we're working on, but they're listening too. So, we're trying our best to pull it in. It's awesome.
Larry Chlebina: I mean, it's kind of, it's coming along really nicely. There's a couple of things that we're still working through from, you know, qualification and thermal uniformity and things, but the systems being built up. We're actually building it in the integrated configuration. It will not be docked to our new aligner, but it can easily be docked to it. So, it's being configured in the new configuration that will allow it to just be rolled up against the new aligner.
Larry Chlebina: So, it can go in and all fully automated for them. All they have to do is buy the aligner and we can bolt on a 300-millimeter front end on this thing, overhead transport or robotics, and it's fully working. We've seen articles written that Taiwan Semi is pursuing something similar optical I.O. And would they be speaking enough to be accessing your XPU, place an XP in Taiwan at an OSAC? Would they be accessing that machine to do their stabilization and reliability testing versus coming directly?
Larry Chlebina: You know what? It's funny. Sometimes when you ask me a question, I'll just ignore you, but they are not right now. I don't want people to be left with the opinion that they are. But I think, you know, the folks, it's pretty interesting. We're trying to read up and we're talking to, you know, key players in the space, you know, AMD Intel and Nvidia have all been sort of pounding this drum and seems like it's been picking up on this.
Larry Chlebina: And then TSMC and global foundries in particular want to play. They want to be a part of this. And you know, it's very interesting when you start thinking that it's not just the chip to chip that makes silicon photonics. In the chip itself, there's photons firing around inside on big bus planes that are transmitting these multi-gigabyte buses. And it just, you know, what semiconductors will look like in a decade versus what they are now, it's going to drastically change based upon silicon photonics.
Larry Chlebina: And for us, not only are processors burned in general, by the way, but, you know, our focus has really been on this product, has been on the burning of the fiber optic transceiver, the integrated laser. But, you know, there's also burning opportunities. And this is, as you know, because, you know, not just silicon carbide, you know, the silicon carbide guys and the gang guys are delighted by it. But that really wasn't.
Larry Chlebina: I'm not going to sit here and tell you we started this project before we really saw the silicon carbide take off. And we did it because the mainstream wafer level burn in for processors, automotive microcontrollers and memory. We think for sure it's just too high volume. You can't be handling wafer packs and walking in between a heart and a thing. So that's what we did for we're thrilled to death. And the system is work.
Larry Chlebina: The systems are working really well. We're getting really good feedback. We got another customer in here today. I know that's teasing. And they're super impressed with it. And, you know, we're just pretty proud of it. I guess we're nervous. Right. Another, another customer that you say for what, what market? I didn't say that. How did you describe them? I'm sorry. I just did another customer that's in here looking at it. And they're very excited.
Larry Chlebina: And they gave it all the good feedback. I thought you mentioned what market they're in. So, you know, obviously Taiwan semi would be serving AMD and Nvidia. That's why I was asking. You know, I know many mentioned in the past that they're interested. I would think it would come through Taiwan semi. I was interested in that. So you kind of led me to my last question. As you stated, the XP was developed initially for memory, the lack of the automation held it back.
Larry Chlebina: Now that it's fully accepted and it's in the marketplace, when you're going to get an evaluation tool to our big US memory maker that's planning on building several fans. What are the odds of a US as we've alluded to and we're serious about it. We are, you know, actively pursuing the memory space again. We have had conversations and design reviews, not with everybody, but some of the folks that are candidly closer proximity, but not only on it, and that continues on, including with some meetings over the next few weeks.
Larry Chlebina: It's a little awkward, but, you know, shareholders need to sort of understand, we actually have financial bonuses tied to every executive and the staff to get into memory. That includes me and everyone of my staff members. They are multi year plans are, you know, but, you know, we're always getting into memory that has been my passion. That's what the test was originally designed for and we're not given up. Well, you're the memory guy, so you're going to make it happen. So great to see the progress. Hopefully, hopefully exceed your goals. It looks like it's possible with all everything comes together, so we'll be paying attention. Thanks Larry. Thank you, you guys. Thank you.
Dylan Patel: The next question is a follow up from Dylan Patel with semi-analysis. Please go ahead. No question at this time. Sorry, I missmashed the phone.
Operator: It's okay.
Gayn Erickson: This concludes our question and answer session. I'd like to turn the conference back over to gain Ericsson for any closing remarks. Thanks operator. I really appreciate everybody for joining us on the call again and spending an hour with us. And as always, we make ourselves available as much as we can. I will tell you we are traveling like crazy right now, but we're trying our best to get to everybody. We do have our shareholders meeting on the 23rd.
Gayn Erickson: They're generally like a lot of shareholders. They're not that exciting or anything, but we do have them here. We will be here with executives to do Q&A, and we typically will throw a smock on you and walk you to the manufacturing area. So if you can and want to join us, just give us a heads up and we'd love to meet you there.
Operator: And with that, we'll turn it back over and take care. We will all talk to you next quarter. Bye-bye.
Operator: The conference is now concluded. Thank you for attending today's presentation.
Operator: You may now disconnect.