Q4 2024 Aehr Test Systems Earnings Call

Greetings.

Speaker Change: Welcome to the Aehr Test System's fiscal 2024 fourth quarter and full year financial results call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Operator: Fourth Quarter and Full Year Financial Results. At this time, all participants are in a listen-only mode.

Operator: A question-and-answer session will follow the formal presentation. If you require operator assistance during the conference, please press star zero on your telephone. Please note, this conference is being held. I will now turn the conference over to your host, Jim Byers at MKR Investor Relations. You may begin. Thank you, operator. Good afternoon, and welcome to Aehr Test Systems' fiscal 2024 fourth quarter and full year financial results conference call. With me on today's call are Aehr Test Systems President and Chief Executive Officer Gayn Erickson and Chief Financial Officer Chris Siu.

Speaker Change: Please note, this conference is being recorded. I will now turn the conference over to your host, Jim Byers at MKR Investor Relations. You may begin.

Jim Byers: Thank you, Operator. Good afternoon and welcome to Aehr Test Systems Fiscal 2024 Fourth Quarter and Full Year Financial Results Conference Call. With me on today's call are Aehr Test Systems President and Chief Executive Officer Gayn Erickson and Chief Financial Officer Chris Siu.

Operator: Before I turn the call over to Gayn and Chris, I'd like to cover a few items. This afternoon, right after the market closed, Aehr Test issued a press release announcing its fiscal 2024 fourth quarter and full year results. That release is available on the company's website at Aehr.com.

Jim Byers: Before I turn the call over to Gayn and Chris, I'd like to cover a few items.

Speaker Change: This afternoon, right after market closed, Aehr Test issued a press release announcing its fiscal 2024 fourth quarter and full year results. That release is available on the company's website at Aehr.com. There were two other announcements issued today and those are also posted to the company's website.

Jim Byers: There were two other announcements issued today, and those were also posted on the company's website. This call is being broadcast live over the internet for all interested parties, and the webcast will be archived on the investor relations page of the company's website. I'd like to remind everyone that on today's call, management will be making forward-looking statements that are based on current information and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.

Speaker Change: This call is being broadcast live over the internet for all interested parties, and the webcast will be archived on the investor relations page of the company's website. I'd like to remind everyone that on today's call, management will be making forward-looking statements that are based on current information and estimates.

Speaker Change: 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.

Airtest Systems: These factors 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 Systems undertakes no obligation to update the forward-looking statements.

Jim Byers: These factors are discussed in the company's most recent periodic, 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 Sys undertakes no obligation to update these forward-looking statements. And now, with that said, I'd like to turn the conference call over to Gayn Erickson, President and CEO.

Airtest Systems: And now with that said, I'd like to turn the conference call over to Gayn Erickson, President and CEO . Gayn?

Gayn Erickson: Thanks, Jim. Good afternoon, everyone, and welcome to our Fiscal 24 fourth quarter and full-year earnings conference call. Thanks for joining us today.

Gayn Erickson: Thanks, Jim. Good afternoon, everyone, and welcome to our fiscal 24 fourth quarter and full-year earnings conference call. Thanks for joining us today.

Gayn Erickson: I'll start with a quick summary of the highlights of the fiscal fourth quarter and full year we just completed in May, and spend some time giving an update on the key markets areas we are targeting for semiconductor wafer-level test and burn-in, including some new emerging opportunities. I also want to go over the exciting news we announced today with the acquisition of In-Cal Technology, which has some incredible products addressing the ultra-high-power semiconductor market, including a significant number of AI processor makers. Then Chris will go over the financials in more detail and provide our guidance for the new fiscal year. After that, we'll open up the lines to take your questions.

Gayn Erickson: I'll start with a quick summary of the highlights of the fiscal fourth quarter and full year we just completed in May and spend some time giving an update on the key markets areas addressing for semiconductor wafer-level test and burn-in, including some new emerging opportunities.

Gayn Erickson: I also want to go over the exciting news we announced today with the acquisition of In-Cal Technology which has some incredible products addressing the ultra-high power semiconductor market including a significant number of AI processor makers.

Gayn Erickson: Then Chris will go over the financials in more detail and provide our guidance for the new fiscal year. After that, we'll open up the lines to take your questions.

Gayn Erickson: Starting with our financial results, as we reported in our pre-announcement last week, our full-year revenue and net income results exceeded our previously provided guidance and surpassed analysts' consensus. Although we saw customer push-outs of silicon carbide devices due to slower electric vehicle demand in the second half of our fiscal year, we still achieved another record for annual revenue for Aehr of $66.2 million. On the bottom line, gap net income was $33.2 million, or $1.12 per share, which includes a tax benefit resulting from the release of the company's full income tax valuation allowance of approximately $20.8 million recognized in the fourth quarter.

Chris P. Siu: Starting with our financial results, as we reported in our pre-announcement last week, our full-year revenue and net income results exceeded our previously provided guidance and surpassed analysts' consensus.

Speaker Change: Although we saw customer push-outs of silicon carbide devices due to slower electric vehicle demand in the second half of our fiscal year, we still achieved another record for annual revenue for Aehr of $66.2 million.

Speaker Change: On the bottom line, gap net income was $33.2 million, or $1.12 per share.

Chris P. Siu: which includes a tax benefit resulting from the release of the company's full income tax valuation allowance of approximately $20.8 million, recognized in the fourth quarter.

Chris P. Siu: Chris will talk more about that. In the past year, wafer-level test and burn and silicon carbide power semiconductors used in electric vehicles or EVs were a key driver of our business, and we anticipate that market will continue to be a key contributor to revenue in the current fiscal year. We're also seeing traction with several emerging opportunities for our test and burn solutions in new target markets and expect bookings and revenue across a much broader range of customers and markets this fiscal year.

Chris P. Siu: Chris will talk more about that.

Chris P. Siu: This past year, wafer-level tests and burning of silicon carbide power semiconductors used in electric vehicles, or EVs, were a key driver of our business.

Speaker Change: And we anticipate that market will continue to be a key contributor to revenue in the current fiscal year. We're also seeing traction with several emerging opportunities for our test and burning solutions in new target markets and expect bookings and revenue across a much broader range of customers and markets this fiscal year.

Chris P. Siu: These new target markets include Quality, Reliability, and Production, Test, and Burn-In of Artificial Intelligence Process. Wafer-level burn in a flash memory device is used in solid-state disk drives. Burn-in of semiconductors used in hard disk drive magnetic rewrite heads.

Speaker Change: These new target markets include quality, reliability, and production test and burn-in of artificial intelligence processors.

Speaker Change: wafer level burn in a flash memory device is used in solid-state disk drives.

Speaker Change: Burn-in of semiconductors used in hard disk drive magnetic rewrite heads.

Gayn Erickson: Wafer-level burn-in of gallium nitride power semiconductors used in data centers and solar power converters, and Stabilization and Burning of Silicon Photonics Integrated Circuits used for optical I-O communication between chipsets and processors. I'll cover at least a little about each of these key markets, beginning with wafer-level test and burn in of silicon carbide devices. We continue to have a high level of confidence in this market, which remains an enormous opportunity for us.

Speaker Change: Wafer-level burn-in of gallium nitride power semiconductors used in data centers and solar power conversion.

Speaker Change: and stabilization and burn-in of silicon photonics integrated circuits used for optical I-O communication between chipsets and processors.

Speaker Change: I'll cover at least a little on each of these key markets beginning with wafer level test and burning of silicon carbide devices.

Speaker Change: We continue to have a high level of confidence in this market, which remains an enormous opportunity for Aehr.

Gayn Erickson: While most forecasters are saying that the inflection point for silicon carbide in electric vehicles is now the second half of 2025 or even 26, from our many meetings with semi suppliers, tier ones, and electric car companies themselves, it's even more clear now that silicon carbide is the plan of record for electric vehicles and preferred over IGBT. Virtually every car manufacturer is designing new electric vehicles with silicon carbide modules, which absolutely need reliability tests and burn-in to screen out failures that otherwise will show up in the life of the vehicle. Burning in the dye at the wafer level before the modules, before they're put into modules, is significantly more cost effective with a much higher yield than doing this at the module level.

Speaker Change: While most forecasters are saying that the inflection point for silicon carbide and electric vehicles is now the second half of 2025 into 26,

Speaker Change: From our many meetings with semi-suppliers, tier 1s, and electric car companies themselves, it's even more clear now that silicon carbide is the plan of record for electric vehicles and preferred over IGBT.

Speaker Change: Virtually every car manufacturer is designing new electric vehicles with silicon carbide modules, which absolutely need reliability tests and burn-in to screen out failures that otherwise will show up in the life of the vehicle.

Speaker Change: Burn-in of the dye at the wafer level before the modules, before they're put into modules, is significantly more cost-effective with much higher yield than doing this at the module level.

Gayn Erickson: We believe we're in a strong position to win more than our fair share of this business, as we believe we have the industry-leading wafer-level burning solution. This past year, we engaged with a significant number of new silicon carbide device and module suppliers related to their anticipated capacity needs, and we remain engaged with these and all major players in the market, including many in China. We continue to make great progress with our previously announced benchmarks and engagements and believe these potential customers are committed to wafer-level burn-ins to meet their requirements for known good dye for dye sales and for their power modules.

Speaker Change: We believe we're in a strong position to win more than our fair share of this business as we believe we have the industry-leading wafer-level burning solution.

Speaker Change: This past year we engaged with a significant number of new silicon carbide device and module suppliers.

Speaker Change: related to their anticipated capacity needs and we remain engaged with these and all major players in the market including many in China.

Speaker Change: We continue to make great progress with our previously announced benchmarks and engagements and believe these potential customers are committed to wafer-level burn-in to meet their requirements for known good dye for dye sales and for their power modules.

Gayn Erickson: The silicon carbide market continues to be an enormous opportunity for us, and we're seeing more and more auto suppliers that are committed to using silicon carbide in their EVs, as well as roadmaps that are based on modules for their electric motor power inverters.

Speaker Change: The silicon carbide market continues to be an enormous opportunity for us and we're seeing more and more auto suppliers that are committed to silicon carbide in their EVs as well as roadmaps that are based on modules for their electric motor power inverters.

Gayn Erickson: We're also seeing growing demand for silicon carbide devices beyond the EV market, such as solar data center and other industrial applications for power conversion. We remain very enthusiastic and believe we're well positioned to continue to grow our business in silicon carbide and expect to receive first orders from a significant number of additional silicon carbide customers by the end of this fiscal year. Today we announce that we received over $12.7 million in orders from one of our silicon carbide customers for wafer-packed full wafer contactors to be used for production needs for wafer-level burning and screening other silicon carbide devices for the EV market.

Speaker Change: We're also seeing growing demand for silicon carbide devices beyond the EV market, such as solar, data center, and other industrial applications for power conversion.

Speaker Change: We remain very enthusiastic and believe we're well positioned to continue to grow our business in silicon carbide and expect to receive first orders from a significant number of additional silicon carbide customers by the end of this fiscal year.

Speaker Change: Today we announce that we received over 12 or 12.7 million dollars in orders from one of our silicon carbide customers for wafer pack full wafer contactors to be used for production needs for wafer level burn and screening other silicon carbide devices for the EV market.

Gayn Erickson: We're excited about our continued partnership with this customer and to receive these orders to help them meet their needs for new device designs. As these orders illustrate, when our customers win new designs from their customers, or they change device designs, wafer patterns, or sizes, these customers need to order new wafer pack contactors from Aehr to fulfill these design changes. This consumable type of revenue grew in fiscal 2024 for us, representing 57% of total revenue.

Speaker Change: We're excited about our continued partnership with this customer and to receive these orders to help them meet their needs for new device designs.

Speaker Change: As these orders illustrate, when our customers win new designs from their customers,

Speaker Change: or they change device designs, wafer patterns, or sizes, these customers need to order new wafer pack contactors from Aehr to fulfill these design changes.

Speaker Change: This consumable type of revenue grew in fiscal 2024 for us, representing 57% of total revenue as systems orders growth slowed, but new designs and variety of devices increased, causing incremental wafer pack sales on the install base.

Gayn Erickson: As systems orders growth slowed, but new designs and variety of devices increased, causing incremental wafer pack sales on the installed base, As we look ahead, we believe that silicon carbide remains a very large market opportunity for air as more and more EV manufacturers adopt silicon carbide, and we believe we're well positioned to continue to capture market share. We expect to add a significant number of silicon carbide customers both this fiscal year and the next fiscal year as demand for silicon carbide ramps up in the second half of 2025 and into 2026.

Speaker Change: As we look ahead, we believe that silicon carbide remains a very large market opportunity for air as more and more EV manufacturers adopt silicon carbide, and we believe we're well positioned to continue to capture market share.

Speaker Change: We expect to add a significant number of silicon carbide customers, both this fiscal year and the next fiscal year, as silicon carbide ramps into the second half of 2025 and into 2026.

Gayn Erickson: Now let me talk about the AI processor market. Last month, we announced we're working with an AI accelerator company to move their AI processor testing burden to the wafer level, and we have secured a commitment from them to evaluate our Fox solution for the production level testing burden of their high-power processors. This company recognizes the potential of production test and burn-in of their accelerators while still in wafer form before they're integrated into the end application product, which would prove to be more cost-effective and significantly more scalable than doing the screening later in their manufacturing process.

Speaker Change: Now let me talk about the AI processor market.

Speaker Change: Last month we announced we're working with an AI accelerator company to move their AI processor test and burn-in to wafer level and have secured a commitment from them to evaluate our Fox solution for production level test and burn-in of their high-power processors.

Speaker Change: This company recognizes the potential of the significant benefits of production test and burn-in of their accelerators while still in wafer form before they are integrated into the end application product.

Speaker Change: which would prove to be more cost-effective and significantly more scalable than doing the screening later in their manufacturing process.

Gayn Erickson: We think this is an amazing opportunity to replace the current package and system-level tests for AI processes for large language model development, and we believe we can meet this enormous challenge with the current capabilities of our new high-power FOXxB system, which can deliver up to 3,500 watts per wafer test. We're working on this benchmark as I speak here in the lab right now, and we expect to complete the evaluation in the next couple of months.

Speaker Change: We think this is an amazing opportunity to displace the current package and system level tests for AI processors for large language model development, and we believe we can meet this enormous challenge with the current capabilities of our new high-power FOXxB system with up to 3,500 watts per wafer testing.

Speaker Change: We're working on this benchmark as I speak here in the lab right now and expect to complete the evaluation in the next couple of months.

Gayn Erickson: Upon successful demonstration of wafer-level test results and throughput, we expect they will utilize our new high-power Fox XP systems for production of their next-generation AI processors starting this fiscal year. The rapidly growing AI market is still in the early stages, and we see a significant opportunity in this market for our FOX wafer-level production systems, as I just discussed. However, in addition, given the unique challenges of testing very high-power devices related to AI processors, there's a very real need for a significant amount of engineering qualification and process development, as well as a significant new opportunity for production reliability screening at the package part. AI semiconductors are amongst the highest power consumption devices in the entire semiconductor industry, with power levels of recent devices up to 1,000 watts or more, well beyond typical processors.

Speaker Change: Upon successful demonstration of wafer-level test results and throughput, we expect they will utilize our new high-power FOX XP systems for production of their next-generation AI processors starting this fiscal year.

Speaker Change: The rapidly growing AI market is still in the early stages, and we see a significant opportunity in this market for our FOX wafer-level production systems, as I just discussed.

Speaker Change: However, in addition, given the unique challenges of testing very high-power devices related to AI processors, there's a very real need for a significant amount of engineering qualification and process development, as well as a significant new opportunity for production reliability screening at the package part level.

Speaker Change: AI semiconductors are amongst the highest power consumption devices in the entire semiconductor industry, with power levels of recent devices up to 1,000 watts or more, well beyond typical processors.

Gayn Erickson: These power levels open a new market that requires new, unique test solutions. I'm personally very excited and proud to announce today our acquisition plans for In-Cal Technology, a manufacturer of highly acclaimed, reliably tested burn-in solutions for a wide range of semiconductor devices in the market. They have a particularly strong new product family of ultra-high-powered test solutions for AI accelerators, graphics and network processors, and high-performance computing processes. Their ultra-high power package part test capabilities, combined with Aehr's industry-leading lineup of wafer-level test and reliability solutions, uniquely position us to fully capitalize on the rapidly growing opportunity within the AI semiconductor market as a turnkey provider of reliability and tests that spans from engineering to high-volume InCal is in a unique position with intimate knowledge and working relationships with a significant number of AI industry leaders, providing a front row seat to the technology needs of those customers.

Speaker Change: These power levels open a new market that requires new, unique test solutions.

Gayn Erickson: They're shipping systems today for use by a broad range of companies, with many of these companies projecting needs to move to high-volume production level burn-in of these devices. Both Aehr and In-Cal believe there's a tremendous opportunity to grow this business substantially. In-Cal has world-class system hardware and software architectures and customers that have a high degree of customer loyalty for their products.

Speaker Change: I'm personally very excited and proud to announce today our acquisition plans for In-Cal Technology, a manufacturer of highly acclaimed, reliably tested burn-in solutions of a wide range of semiconductor devices and markets.

Speaker Change: They have a particularly strong new product family of ultra-high-powered test solutions for AI accelerators, graphics and network processors, and high-performance computing processors.

Speaker Change: Their ultra-high-power package-part test capabilities, combined with Aehr's industry-leading lineup of wafer-level test and reliability solutions,

Speaker Change: You uniquely position us to fully capitalize on the rapidly growing opportunity within the AI semiconductor market as a turnkey provider, a reliability and test that spans from engineering to high volume production.

InCal: InCal is in a unique position with intimate knowledge and working relationships with a significant number of AI industry leaders, providing a front row seat to the technology needs of those customers.

Speaker Change: They're shipping systems today for use by a broad range of companies, with many of these companies projecting needs to move to high-volume production level burn-in of these devices.

Speaker Change: Both Aehr and In-Cal believe there's a tremendous opportunity to grow this business substantially. In-Cal has world-class system hardware and software architectures, and customers that have a high degree of customer loyalty for their products.

Gayn Erickson: Aehr brings worldwide sales and support infrastructure, as well as high-value manufacturing capacity and capabilities that together we feel will quickly address customer demand for a very high global growth rate for AI and other high-power semiconductors. We also bring R&D resources, technology, and processes, and the financial resources to be able to enhance and accelerate new needs that customers may have. This unique combination strongly positions us to capitalize on the significant opportunity within the AI market.

Speaker Change: Aehr brings worldwide sales and support infrastructure, as well as high-value manufacturing capacity and capabilities that together we feel will quickly address customer demand, a very high global growth rate of AI and other high-power semiconductors.

Speaker Change: We also bring R&D resources, technology and processes, and the financial resources to be able to enhance and accelerate new needs that customers may ask for.

Speaker Change: This unique combination strongly positions us to capitalize on the significant opportunity within the AI market.

Gayn Erickson: Interestingly, we share several subcontract manufacturers and have similar supply chains, as well as our strategy for in-house assembly and final test of our system. I have known the founders and management team for a very long time, including their CEO, Alberto Salamone, who has been in the test and burn-in business for many years and who will be joining Aehr as an executive vice president to lead our package burn-in business. NCAL is located less than four miles away from Aehr's headquarters here in Fremont, California, with all employees located at that facility.

Speaker Change: Interestingly, we share several subcontract manufacturers and have similar supply chains, as well as our strategy for in-house assembly and final test of our systems.

Speaker Change: I have known the founders and management team for a very long time, including their CEO Alberto Salomone, who has been in the test and burn-in business for many years, and who will be joining Aehr as an executive vice president to lead our package part burn-in business.

Speaker Change: NCAL is located less than four miles away from Aehr's headquarters here in Fremont, California, with all employees located at that facility. This makes combining the two companies simpler and straightforward.

Gayn Erickson: This makes combining the two companies simpler and straightforward. We believe that between the wafer level and the package part, the reliability test and burn-in market for AI processors exceeds $100 million annually, and with this combined product portfolio, we have the opportunity to capture a meaningful share of this market within this fiscal year. So moving on to the NAND flash memory market, we've been in discussions for several years with multiple flash memory companies related to our FOX wafer-level testing burdens.

Speaker Change: We believe that between wafer level and package part, the reliability test and burn-in market for AI processors exceeds $100 million annually, and with this combined product portfolio, we have the opportunity to capture a meaningful share of this market within this fiscal year.

Speaker Change: So moving on to the NAND flash memory market. We've been in discussions for several years with multiple flash memory companies related to our FOX wafer-level test and burden systems.

Gayn Erickson: These companies have provided us feedback on the definition and capabilities required for a next-generation wafer-level test and burn-in system for their high-volume production roadmaps. This included feedback on our systems, wafer packs, and particularly on our automation using our new fully automated wafer pack aligners. We see the NAN flash market as a key market opportunity for our systems and wafer packs, with the long-term potential to also move into DRAM wafer-level testing and burnouts.

Speaker Change: These companies have provided us feedback on the definition and capabilities required for a next-generation wafer-level test and burn-in system for their high-volume production roadmap.

Speaker Change: This included feedback on our systems, wafer packs, and particularly on our automation using our new fully automated wafer pack aligner.

Speaker Change: We see the NAN flash market as a key market opportunity for our systems and wafer packs with long-term potential to also move into DRAM wafer-level testing and burn-in.

Gayn Erickson: This last quarter, we secured an engagement from one of the major flash memory suppliers to evaluate the Fox XP system with our proprietary wafer pack full wafer contactors for wafer-level test and burn-in of their flash memory devices. This application is for 100% test and burn-in of a device to be used in high reliability applications, such as enterprise storage.

Speaker Change: This last quarter, we secured an engagement from one of the major flash memory suppliers to evaluate the FOX XP system with our proprietary wafer-packed full wafer contactors for wafer-level tests in Vernon of their flash memory devices.

Speaker Change: This application is for 100% test and burn in a device that can be used in high reliability applications such as enterprise storage.

Gayn Erickson: This is a benchmark that's going to take us throughout the fiscal year to complete and includes the development of a new high-density wafer pack for production wafer-level burnin, a 300-millimeter NAND wafer. We see this as a multi-year opportunity and expect to have preliminary results and feedback during this fiscal year. Our goal is to come to an agreement for the customer-specific development of a test cell with the potential for revenue contribution in our fiscal 2026, which begins next June.

Speaker Change: This is a benchmark that's going to take us throughout the fiscal year to complete and includes the development of a new high-density wafer pack for production wafer-level burn-in of 300-millimeter NAND wafers.

Speaker Change: We see this as a multi-year opportunity and expect to have preliminary results and feedback during this fiscal year.

Speaker Change: Our goal is to come to an agreement for customer-specific development of a test cell with the potential for revenue contribution in our fiscal 2026 that begins next June .

Gayn Erickson: We're very excited to have accomplished this critical goal this past year and believe this is the front end of an exciting and potentially enormous opportunity for our solution. Another interesting market opportunity is the hard disk drive market. One of the new market opportunities for wafer-loaded burn-in are semiconductors used in hard disk drives for data storage.

Speaker Change: We're very excited to have accomplished this critical goal this past year, and believe this is the front end of an exciting and potentially enormous opportunity for our solutions.

Speaker Change: Another interesting market opportunity is hard disk drive market. One of the new market opportunities for Waveflow burn-in is semiconductors used in hard disk drives for data storage.

Gayn Erickson: Some of you may recall that in 2019, prior to the COVID-19 epidemic, we announced an order and shipment of our FOX-CP, which is our single wafer test and reliability solution for logic, memory, and photonics devices. This was a key win with a major customer who purchased the system for wafer-level testing burn-in devices in a very high-volume application for enterprise and data center markets. They had forecasted to ramp up production over several years, but the pandemic impacted their plans.

Speaker Change: Some of you may recall that in 2019, prior to the COVID-19 epidemic, we announced an order and shipment of our FOX-CP, which is our single wafer test and reliability solution for logic, memory, and photonics devices.

Speaker Change: This was a key win with a major customer who purchased the system for wafer-level test and burn-in devices in a very high-volume application for enterprise and data center market.

Speaker Change: They had forecasted to ramp into production over several years, but the pandemic impacted their plans.

Gayn Erickson: After a multi-year product development and qualification process and impact due to COVID-19, this customer, who we've now disclosed is in the hard disk drive space, has introduced their product and is now forecasting the production ramp to begin in our current fiscal year, most likely in the second half. We believe this will drive orders for multiple CP production systems and wafer packs and could even be a 10% customer for us this year.

Speaker Change: After a multi-year product development and qualification process, and impact due to COVID-19,

Speaker Change: This customer, who we've now disclosed is in the hard disk drive space, has introduced their product and is now forecasting the production ramp to begin in our current fiscal year, most likely in the second half.

Speaker Change: We believe this will drive orders for multiple CP production systems and wafer packs and could even be a 10% customer for us this year.

Gayn Erickson: All right, turning to silicon photonics, Brennan. Within the silicon photonics market, we shipped the first order from a major silicon photonics customer for a new high power configuration of the XP system late in our third fiscal quarter. This new configuration expands our market opportunity by enabling cost-effective volume production tested wafers of next-generation photonic ICs that are targeted for use in the new optical I-O or co-packaged optics market. NVIDIA, AMD, and Intel are examples of companies that have all discussed the potential for adding optical chip-to-chip communication for performance improvement and power savings for AI processors and high-performance computing chips. Optical I-O has the potential to be a game changer for semiconductors, as it breaks the bottleneck of data transmission bandwidth limitations of electrical I-O.

Speaker Change: All right. Turning to the silicon photonics burn-in mark.

Speaker Change: Within the silicon photonics market, we shipped the first order from a major silicon photonics customer for new high-power configuration of the XP system late in our third fiscal quarter.

Speaker Change: This new configuration expands our market opportunity by enabling cost-effective volume production test of wafers of next-generation photonic ICs that are targeted for use in the new optical I-O or co-packaged optics market.

Speaker Change: NVIDIA, AMD, and Intel are examples of companies that have all discussed the potential for adding optical chip-to-chip communication for performance improvement and power savings for AI processors and high-performance computing chips.

Speaker Change: Optical I-O has the potential to be a game-changer for semiconductors as it breaks the bottleneck of data transmission bandwidth limitations of electrical I-O.

Gayn Erickson: 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. Aehr's new high-power system configuration can be used to test and burn up to nine of these new optical I-O device wafers at a time, up to 3,500 watts of power per wafer. This is absolutely unique in the market because we're not aware of any other solution that can test even one of these wafers in a single touchdown, much less nine of them at a time like we do. While the timing of these devices and volume ramps is not clear, we're watching this market very closely to ensure that we have the products and solutions available to meet the needs of our customers for this potentially significant market application.

Speaker Change: 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.

air: Aehr's new high-power system configuration can be used to test and burn in up to nine of these new optical I-O device wafers at a time, up to 3,500 watts of power per wafer.

Speaker Change: This is absolutely unique in the market, as we're not aware of any other solution that can test even one of these wafers in a single touchdown, much less nine of them at a time like we can.

Speaker Change: While the timing of these devices and volume ramps are not clear, we're watching this market very closely to ensure that we have the products and solutions available to meet the needs of our customers for this potentially significant market application.

Gayn Erickson: Now, let me lastly talk about the Gann Market Update. This past year, we announced our first order for a FOX wafer-level test and burning system for gallium nitride, or GAN, devices. While silicon carbide will be the semiconductor material choice for EV traction inverters, GaN is expected to gain significant penetration in the onboard charging market, as well as other automotive, solar, and data center power conversion applications.

Speaker Change: Now let me lastly talk about the GAN market opportunity.

Speaker Change: This past year we announced our first order for a FOX wafer-level test and burning system for gallium nitride or GAN devices.

Speaker Change: While silicon carbide will be the semiconductor material choice for EV traction inverters, GAN is expected to gain significant penetration in the onboard charging market as well as other automotive, solar, and data center power conversion applications.

Gayn Erickson: We are working with several of the GAN market leaders and have received a significant number of wafer pack orders throughout the year for gallium nitride reliability tests and qualification of our system. We have now received our first forecast for wafer-level production burn-in systems to be delivered during this fiscal year. We continue to be encouraged by this market and believe it will be a significant in-market size for semiconductors and has the potential to be a solid market opportunity for air solutions.

Speaker Change: We're working with several of the GAN market leaders and received a significant number of wafer pack orders throughout the year for gallium nitride reliability tests and qualification of our systems.

Speaker Change: We have now received our first forecast for wafer-level production burn-in systems to be delivered during this fiscal year.

Speaker Change: We continue to be encouraged by this market and believe it will be a significant in market size for semiconductors and has the potential to be a solid market opportunity for Aehr solutions.

Gayn Erickson: Looking ahead, we expect fiscal 2025 to be an exciting year for AIR. Silicon Carbide is poised to be a key contributor to revenue again this year, but we also expect bookings and revenue from across a much broader range of customers and markets, as I discussed. We have a lot of opportunities in front of us, and we look forward to reporting on our progress throughout the fiscal year. With that, I will turn the call over to Chris before we open up the line for questions. Thank you, Gayn. Good afternoon, everyone.

Speaker Change: Looking ahead, we expect fiscal 2025 to be an exciting year for AIR. Silicon Carbide is poised to be a key contributor to revenue again this year, but we also expect bookings and revenue from across a much broader range of customers and markets, as I discussed.

Speaker Change: We have a lot of opportunities in front of us, and we look forward to reporting on our progress throughout the fiscal year. With that, let me turn the call over to Chris before we open up the line for questions.

Chris P. Siu: On today's call, I will summarize our results for fiscal year 2024, as well as the fourth quarter, and then I'll provide our guidance for fiscal year 2025. Starting with the 4-year results, we reported record revenue of $66.2 million, up 2% year-over-year. Our full-year gap growth margin was 49.1%, compared to 50.4% in the prior year. Our fully non-GAAP net income increased to a record $35.8 million, or $1.21 per diluted share, which includes the impact of a tax benefit resulting from the release of the company's full income tax valuation allowance of approximately $20.8 million, compared to non-GAAP net income of $17.3 million, or $0.59 per diluted share, in fiscal 2023.

Chris P. Siu: Thank you, Gayn. Good afternoon, everyone. On today's call, I will summarize our results for fiscal year 2024 as well as the fourth quarter, and then I'll provide our guidance for fiscal year 2025.

Chris P. Siu: Starting with the full-year results, we reported record revenue of $66.2 million, up 2% year-over-year. Our full-year gap growth margin was 49.1%, compared to 50.4% in the prior year.

Chris P. Siu: Our fully non-GAAP net income increased to a record $35.8 million.

Chris P. Siu: or $1.21 per diluted share, which includes the impact of a tax benefit resulting from the release of the company's full income tax valuation allowance of approximately $20.8 million.

Chris P. Siu: compared to non-GAAP net income of $17.3 million, or $0.59 per dilute share, in fiscal 2023.

Chris P. Siu: In fiscal 2024, we generated $1.8 million in operating cash flow. Our annual bookings in fiscal 2024 were $49 million compared to $78.3 million in the prior fiscal year. The decrease was mainly due to customer pushouts of forecasted orders related to silicon carbide devices due to slower electric vehicle demand in the second half of our fiscal year.

Chris P. Siu: In fiscal 2024, we generated $1.8 million in operating cash flows.

Chris P. Siu: Our annual bookings in fiscal 2024 were $49 million compared to $78.3 million in the prior fiscal year.

Chris P. Siu: The decrease was mainly due to customer push-outs of forecasted orders related to silicon carbide devices due to slower electric vehicle demand in the second half of our fiscal year.

Chris P. Siu: Our backlog as of year-end was 7.3 million. With $13.5 million in bookings received in the first six weeks of the first quarter of fiscal 2025, we now have an effective backlog of $20.8 million. Looking at our financial results for the fourth quarter, total revenue was $16.6 million, down 25% from $22.3 million in Q4 last year. WaferPak revenues were $12.4 million and accounted for 75% of total revenue in the fourth quarter, which is significantly higher than the 38% of total revenue in the prior year Q4.

Chris P. Siu: Our backlog as of the end was $7.3 million, with $13.5 million in bookings received in the first six weeks of the first quarter of fiscal 2025. We now have a defective backlog of $20.8 million.

Chris P. Siu: WaferPak revenues continue to represent a significant revenue stream for our business due to the strong demand for new WaferPak designs from our existing and new customers as they win new end-customer designs and look to meet their market requirements. Gap gross margin for the fourth quarter came in at 50.9%, down from 51.5% in Q4 last year. The decrease in gross margin is primarily due to lower revenue, resulting in a higher overhead absorption rate and lower manufacturing efficiency.

Chris P. Siu: Looking at our financial results for the fourth quarter, total revenue was $16.6 million, down 25% from $22.3 million in Q4 last year.

Chris P. Siu: WaferPak revenues were $12.4 million and accounted for 75% of total revenue in the fourth quarter, which is significantly higher than the 38% of total revenue in the prior year Q4.

Gayn Erickson: Waverpack revenues continue to represent a significant revenue stream for our business due to the strong demand for new waverpack designs, from our existing and new customers as they win new and customer designs and look to meet their market requirements. Gap grows margin for the fourth quarter came in at 50.9%, down from 51.5% into your last year. The decrease in gross margin is primarily due to lower revenue, resulting in a higher overhead absorption rate and lower manufacturing efficiencies. Upgrading expenses in the fourth quarter were 5.9 million, consistent with 5.8 million in Q4 last year. To slight year-over-year increase is primarily driven by increased headcount related expenses to support our R&D programs and DNA requirements, which were partially offset by lower professional fees.

Chris P. Siu: WaferPak revenues continue to represent a significant revenue stream for our business due to the strong demand for new WaferPak designs from our existing and new customers as they win new end-customer designs and look to meet their market requirements.

Chris P. Siu: Gap growth margin for the fourth quarter came in at 50.9%, down from 51.5% in Q4 last year. The decrease in growth margin is primarily due to lower revenue, resulting in a higher overhead absorption rate and lower manufacturing efficiencies.

Chris P. Siu: Operating expenses in the fourth quarter were $5.9 million, consistent with $5.8 million in Q4 last year. The slight year-over-year increase is primarily driven by increased headcount-related expenses to support our R&D programs and GNA requirements, which were partially offset by lower professional fees. We continue to invest in R&D to enhance our existing market-leading products and to introduce new products to maintain our competitive advantages and expand our applications and addressable markets. For example, during Fiscal 2024, we invested significant resources to augment the features and performance of our automated wafer pack aligner and developed a new high-power configuration of our FOX XP system for volume production wafer-level burning and stabilization of next-generation Zikon Photonics integrated circuit

Chris P. Siu: Operating expenses in the fourth quarter were $5.9 million, consistent with $5.8 million in Q4 last year.

Chris P. Siu: A slight year-over-year increase is primarily driven by increased headcount-related expenses.

Chris P. Siu: to support our R&D programs and G&A requirements, which were partially offset by lower professional fees.

Gayn Erickson: We continue to invest in R&D to enhance our existing market leading products and to introduce new products to meeting on competitive advantages and expand our applications and addressable markets. During fiscal 2024, we have invested significant resources to augment the features and performance of our automated waverpack aligner, developed a new high power configuration of our FoxXB system for volume production waver level burning and stabilization of next-generation z-conflutonics integrated circuits.

Chris P. Siu: We continue to invest in R&D to enhance our existing market-leading products, and to introduce new products to maintain our competitive advantages and expand our applications and addressable markets.

Chris P. Siu: During Fiscal 2024, we have invested significant resources to augment the features and performance of our automated wafer pack aligners.

Chris P. Siu: We developed a new high-power configuration of our FOX XP system for volume production wafer-level burning and stabilization of next-generation Zikon Photonics integrated circuits.

Chris P. Siu: At the end of the fourth quarter, we released a full income tax valuation allowance and recorded deferred tax assets and a tax benefit of $20.8 million. We will lease this valuation allowance as we believe it is more likely than not that the company will realize the deferred tax asset. Non-GAAP net income for the fourth quarter, which includes the impact of the tax benefit mentioned earlier but excludes the impact of stop-based compensation and acquisition-related costs, was $24.7 million, or $0.84 per diluted share, for the fourth quarter, compared to non-GAAP net income of $6.9 million, or $0.23 per diluted share, in the fourth quarter of fiscal 2023.

Gayn Erickson: At the end of the fourth quarter, we will release the full income tax valuation allowance and record it for a tax asset and a tax valuation allowance as we believe it is more likely than not that the company will realize the different tax assets. Non-GAAP net income for the fourth quarter, which includes the impact of the tax benefit mentioned earlier, but excludes the impact of stock-based compensation and acquisition-related costs, was 24.7 million, or 84 cents per dollar a year for the fourth quarter. Compared to non-GAAP net income of 6.9 million, or 23 cents per dollar a year in the fourth quarter of fiscal 2023.

Speaker Change: At the end of the fourth quarter, we released a full income tax valuation allowance and recorded deferred tax assets and the tax benefit of 20.8 million.

Speaker Change: We will lease this valuation allowance as we believe it is more likely than not that the company will realize the deferred tax assets.

Speaker Change: non-GAAP net income for the fourth quarter, which includes the impact of the tax benefit mentioned earlier, but excludes the impact of stock-based compensation and acquisition-related costs.

Speaker Change: was $24.7 million, or $0.84 per diluted share for the fourth quarter, compared to non-GAAP net income of $6.9 million, or $0.23 per diluted share in the fourth quarter of fiscal 2023.

Chris P. Siu: Moving to the balance sheet, we finished the year with a strong cash position. Our cash and cash equivalents were $49.2 million at year end, up slightly from our cash and short-term investments of $47.9 million at the end of Q4 last year. With a solid balance sheet, we'll fund the acquisition of In-Cal technology using our cash-on-hand and common stock. We'll continue to invest in scaling our business, entering new markets, and supporting new opportunities.

Gayn Erickson: Moving to the balance sheet, we finished a year with a strong cash position. Our cash and cash equivalents were $49.2 million at the end, up slightly from our cash and short-term investments of $47.9 million at the end of Q4 last year. Where they saw the balance sheet, we will fund the acquisition of income technology using our cash on hand and common stock. We will continue to invest in scaling our business and entering new markets and supporting new opportunities. We generated $1.2 million operating cash flows during the quarter; we have zero debt and continue to invest our excess cash in money market funds.

Speaker Change: Moving to the balance sheet, we finished the year with a strong cash position. Our cash and cash equivalents were $49.2 million at the end, up slightly from our cash and short-term investments of $47.9 million at the end of Q4 last year.

Speaker Change: With a solid balance sheet, we'll fund the acquisition of In-Cal technology using our cash-on-hand and common stock. We'll continue to invest in scaling our business and entering new markets and supporting new opportunities.

Chris P. Siu: We generated $1.2 million in operating cash flows during the quarter. We have zero debt and continue to invest our excess cash in money market funds. Interest income earned during this higher interest rate involvement was $592,000 in the fourth quarter compared to $487,000 in the same quarter last year. As of the end of Q4, the remaining amount available under the previously announced $25 million ATM offering was $17.7 million. We did not sell any shares during fiscal 2024.

Speaker Change: We generated $1.2 million in operating cash flows during the quarter. We have zero debt and continue to invest our excess cash in money market funds.

Gayn Erickson: Interest income earned during this higher interest rate involvement was $592,000 in the fourth quarter. Compared to $487,000 in the same quarter last year.

Speaker Change: Interest income earned during this higher interest rate involvement was $592,000 in the fourth quarter, compared to $487,000 in the same quarter last year.

Gayn Erickson: As of the end of Q4, the remaining amount available under the previously announced 25 million ATM offering was $17.7 million. We did not sell any shares during fiscal 2024. It remains our plan to only sell shares against this ATM offering at times and prices that are most advantageous to our shareholders and to the company.

Speaker Change: As of the end of Q4, the remaining amount available under the previously announced $25 million ATM offering was $17.7 million.

Chris P. Siu: It remains our plan to only sell shares against this ATM offering at times and prices that are most advantageous to our shareholders and to the company. Today we announce that we have changed the company's fiscal year end from May 31st to a 4-4-5 fiscal calendar ending on the Friday closest to May 31st. The first fiscal year under the new financial calendar began on June 1st, 2024, and it will end on May 30th, 2025.

Speaker Change: We did not sell any shares during Fiscal 2024.

Speaker Change: It remains our plan to only sell share against this ATM offering at times and prices that are most advantageous to our shareholders and to the company.

Gayn Erickson: Today we announce that we have changed the company's fiscal year from May 31 to a 445 fiscal calendar ending on the Friday closest to May 31. The first fiscal year under the new financial calendar began on June 1, 2024, and will end on May 30, 2025. Our first quarter in fiscal 2025 will end on August 30, 2024. This change is expected to improve the comparability of the company's financial results between periods.

Chris P. Siu: Our first quarter in fiscal 2025 will end on August 30, 2024. This change is expected to improve the comparability of the company's financial results between periods. Now turning to our outlook for the current fiscal year 2025. For the fiscal year ending on May 30, 2025, we expect total revenue of at least $70 million, which includes the acquisition of Intel technology. As mentioned earlier, we released the Full Income Tax Valuation Allowance and recorded deferred tax assets in the fourth quarter of fiscal 2024.

Speaker Change: Today, we announce that we have changed the company's fiscal year end from May 31st to a 4-4-5 fiscal calendar ending on the Friday closest to May 31st.

Speaker Change: The first fiscal year under the new financial calendar began on June 1, 2024 and will end on May 30, 2025.

Speaker Change: Our first quarter in fiscal 2025 will end on August 30, 2024.

Speaker Change: This change is expected to improve the comparability of the company's financial results between periods.

Chris P. Siu: Beginning in the first quarter of fiscal 2025, we expect to incur income tax expenses. For fiscal 2025, we expect a net profit before taxes of at least 10% of revenue. Lastly, looking at the investor relations calendar, Aehr Test will be meeting with investors virtually at the Needham 5th Annual Semiconductor and Semicab Conference on Wednesday, August 21.

Gayn Erickson: Now, turning to our outlook for the current fiscal 2025. For the fiscal year ending on May 30, 2025, we expect total revenue of at least 70 million, which includes acquisition of income technology. As we mentioned earlier, we released a full income tax valuation allowance and recorded different tax assets in the fourth quarter of fiscal 2024. Beginning in the first quarter of fiscal 2025, we expect to incur income tax expenses. For fiscal 2025, we expect a net profit before taxes of at least 10% of revenue.

Speaker Change: Now turning to our outlook for the current fiscal 2025.

Speaker Change: For the fiscal year ending on May 30, 2025, we expect total revenue of at least $70 million, which includes the acquisition of Intel technology.

Speaker Change: As we mentioned earlier, we released the Full Income Tax Valuation Allowance and recorded deferred tax assets in the fourth quarter of Fiscal 2024.

Speaker Change: Beginning in the first quarter of fiscal 2025, we expect to incur income tax expenses.

Speaker Change: For fiscal 2025, we expect a net profit before taxes of at least 10% of revenue.

Gayn Erickson: Lastly, looking at the investor relations calendar, Aet Test will be meeting with investors virtually at the need of fifth annual semi-conductor and semi-cap conference on Wednesday, August 21st. And then the following week, we'll be meeting with investors in person on Tuesday, August 27th at the Jeffrey's Technology Summit taking place in Chicago. We hope to meet some of you at this conference.

Chris P. Siu: And then the following week, we'll be meeting with investors in person on Tuesday, August 27th, at the Jefferies Technology Summit taking place in Chicago. We hope to meet some of you at these conferences. This concludes our prepared remarks. We are now ready to take your questions. Operator, please go ahead.

Speaker Change: Lastly, looking at the investor relations calendar, Aehr Test will be meeting with investors virtually at the Needham 5th Annual Semiconductor and Semicab Conference on Wednesday, August 21st.

Speaker Change: And then the following week, we'll be meeting with investors in person on Tuesday, August 27th, at the Jefferies Technology Summit taking place in Chicago. We hope to meet some of you at these conferences.

Gayn Erickson: This concludes our prepared remarks. We're not waiting to take your questions.

Speaker Change: This concludes our prepared remarks. We are now ready to take your questions. Operator, please go ahead.

Operator: Operator, please go ahead. Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tunnel indicates your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, where we pull for questions.

Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone. The confirmation tone will indicate your line is in the question queue.

Operator: You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. This question comes from Christian Schwab with Craig Hallam. Hey, congratulations, guys, on the acquisition. Gayn, if you look at the Inkel acquisition, I assume that the company is a growth company. Can you give us an idea of approximately how much revenue of the 70 million is Inkel? Probably the easiest question that I'll try and answer as best I can.

Speaker Change: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad.

Speaker Change: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment please while we poll for questions.

Matthew Winthrop: First question comes from Question, Question, Schlob with Craig Adam, please proceed. Hey, congratulations, guys, on the acquisition. Dean, if you look at the in-cal acquisition, I assume the company is a growth company.

Speaker Change: Our first question comes from Christian Schwab with Craig Hallam. Please proceed.

Christian David Schwab: Hey, congratulations guys on the acquisition. Gayn, if you look at the In-Cal acquisition, I assume that the company is a growth company. Can you give us an idea of approximately how much revenue of the 70 million is In-Cal?

Gayn Erickson: Can you give us an idea of approximately how much revenue of the 70 million is in-cal?

Christian David Schwab: So one of the challenges is we need to close it first. And they made about $12 million over the last 12 months. And so, you know, plus or minus a month or two, even at that same run rate, plus or minus a million or two or something like that. Candidly, we're taking a pretty cautious stance. But if you use those kind of numbers, like $1 million per month from the time we close it, it's probably a good number.

Gayn Erickson: All of the easiest questions that I'll all try to answer, especially Ken. So, one of the challenges is we need to close it first. And they did about $12 million over the last 12 months. And so, you know, plus or minus a month or two, even if that same run rates or plus or minus a million or two or something like that. On Canada, we're taking a pretty cautious stance, but if you use those kind of numbers, like a million dollars per month for when from the time we close it, it's probably a good number.

Speaker Change: Probably the easiest question that I'll try and answer as best I can. So one of the challenges is we need to close it first.

Speaker Change: and they did about 12 million dollars over the last 12 months and so you know plus or minus a month or two even at that same run rate plus or minus a million or two or something like that. Candidly, we're taking a pretty cautious

Speaker Change: stands. But if you use those kind of numbers, like a million dollars per month from the time we close it, it's probably a good number. But it gets into a lot of the strategy that's going on. There's been a number of customers that they've been engaged with that have

Gayn Erickson: But we've, it gets into a lot of the strategy that's going on. There are a number of customers that they've been engaged with that we have reason to believe, either directly or indirectly, our engagement is going to help them with respect to their manufacturing plans. And so we've taken a pretty conservative forecast based upon kind of their current run rates at that $70 million. And, you know, we would expect it to grow from there. So again, just trying to take a pretty conservative stance right now. And we'll know a lot more after we do all the customer visits here over the next several weeks. No, that's not fair.

Gayn Erickson: But we, you get to know a lot of the strategy that's going on. There's been a number of customers that they've been engaged with that have. We have reason to believe either directly or indirectly. Our engagement is going to help them with respect to their manufacturing plans. And so, we've taken pretty conservative forecast based upon kind of their current run rates in that 70 million. And we would expect it to grow from there. So, again, just trying to take a pretty conservative stance right now.

Speaker Change: We have reason to believe, either directly or indirectly, our engagement is going to help them with respect to their manufacturing plans.

Speaker Change: And so we've taken a pretty conservative forecast based upon kind of their current run rates in that $70 million. And, you know, we would expect it to grow from there.

Gayn Erickson: And we'll know a lot more after we do all the customer visits zero over the next several weeks.

Speaker Change: Again, just trying to take a pretty conservative stance right now, and we'll know a lot more after we do all the customer visits here over the next several weeks.

Matthew Winthrop: No, that's fair; thank you. As you mentioned on the Silicon carbide side, that you would expect to, you know, qualify this fiscal year with a number of companies in China, given their increased presence in the Silicon carbide market and ability to maybe lower prices faster than others and gain further share, you know, how many customers, you know, by the end of the fiscal year, would you hope to be engaged with?

Christian David Schwab: Thank you. As you mentioned on the silicon carbide side, you would expect to, you know, qualify this fiscal year with a number of companies in China, given their increased presence in the silicon carbide market, their ability to maybe lower prices faster than others, gain further share, you know, how many customers by the end of the fiscal year, which you hope to be in. Okay, well, I hope to be engaged with fewer customers because I can't. I feel like we are running the cup runneth over with the number of engagements because as soon as they become customers, then we stop talking about the engagement and trying to be serious there, actually. I think what you probably meant is, how many are we now adding as customers? And if I may put that in your words, I haven't put a specific number on it.

Speaker Change: No, that's fair. Thank you. As you mentioned on the silicon carbide side, that you would expect to qualify this fiscal year with a number of companies.

Speaker Change: in China, given their increased presence in the silicon carbide market and ability to maybe lower prices faster than others and gain further share. You know, how many customers

Speaker Change: You know, by the end of the fiscal year, which you hope to be engaged with.

Gayn Erickson: Okay, well, I hope to be engaged with fewer customers, because I can't, I like, feel like we are a cup run at the over with the number of engagements, because as soon as you become customers, then we stop talking about the engagement and trying to be serious, they're actually, I think what you probably met, does how many are we now adding as customers and if I may put that in a word, I'm put a specific number on it, I mean, we've got some internal targets that we're going for, but I would say, you know, several plus, if you look at our current forecast in funnel, there's, I mean, there's, in terms of, you know, well qualified, perfectly capable have fans, it's well over a dozen, just pure Silicon carbide players, these are guys that are customers from us yet.

Speaker Change: Okay, well...

Speaker Change: I hope to be engaged with fewer customers because I can't, I feel like...

Speaker Change: We are cup runneth over with the number of engagements because as soon as they become customers, then we stop talking about the engagement and trying to be serious there actually.

Speaker Change: I think what you probably meant is, how many are we now adding as customers?

Speaker Change: I've put a specific number on them and we've got some internal targets that we're going for, but I would say, you know,

Gayn Erickson: I mean, we've got some internal targets that we're going for, but I would say, you know, several plus, if you look at our current forecast and funnel, there are, I mean, there are, in terms of, you know, well qualified, perfectly capable, have fabs, it's well over a dozen just pure silicon carbide players that aren't customers from us yet. I mean, it might be close to two dozen total if you look at everybody.

Speaker Change: several plus

Speaker Change: If you look at our current forecast and funnel, there's, I mean, there's...

Speaker Change: In terms of, you know, well-qualified, perfectly capable, have fabs...

Gayn Erickson: And we, as we discussed it last year, there'll probably be more questions about China. We are engaged with multiple Chinese suppliers as well and would hope to add, you know, one or more of those as customers also over the next year and a half or so. The reason I'm hedging a little bit on the year and a half is we know that there are people that are talking about bringing on capacity in the second half of 25.

Speaker Change: It's well over a dozen just pure silicon carbide players. These are guys that aren't customers from us yet.

Gayn Erickson: I might be close to two dozen total if you look at everybody, and we, as we discussed about it last year, there were probably more questions on China. We are engaged with multiple Chinese suppliers as well and would hope to add, you know, one or more of those as customers also with the next year and a half or so.

Speaker Change: I mean, it might be close to two dozen total if you look at everybody.

Speaker Change: And as we discussed about it last year, the paperwork questions on China, we are engaged with multiple Chinese suppliers as well and would hope to add one or more of those as customers also over the next year and a half or so.

Gayn Erickson: The reason I'm hedging a little bit on the year and a half is we know that there are people that are talking about bringing on capacity in second half of 25, and we're just trying to figure out when the first tools would be installed. I mean, I can still win them and maybe install the darn thing in the fall, and that would still be a win for us, but the timing relative to the over under our June 1st fiscal year is a bit of a, a bit of a pain right now.

Speaker Change: The reason I'm hedging a little bit on the year-and-a-half is we know that there are people that are talking about bringing on capacity in second half of 25.

Gayn Erickson: And we're just trying to figure out when the first tools would be installed, i.e., I can still win them and maybe install the darn thing in the fall, and that would still be a win for us. But the timing relative to the over-under of our June 1st fiscal year is a bit of a... It's a bit of a pain right now, so...

Speaker Change: And we're just trying to figure out when the first tools would be installed, i.e. I can still win them and maybe install the darn thing in the fall, and that would still be a win for us. But the timing relative the over-under or June 1st fiscal year is a bit of a pain right now.

Matthew Winthrop: So, okay, that's fair. Thank you for that clarity, game, and then my last question on the AI accelerator large language model. You know, can you give us an idea if you're successful there on the new customer, you know, how big could that be?

Gayn Erickson: Okay, that's fair. Thank you for that clarity, Gayn. And then my last question, on the AI accelerator large language model, can you give us an idea if you're successful there on the new customer? You know, how big could that be?

Gayn Erickson: Okay, that's fair. Thank you for that clarity, Gayn. And then my last question, on the AI accelerator large language model, you know, can you give us an idea if you're successful there on the new customer, you know, how big could that be?

Gayn Erickson: Yeah, we're trying to get our arms around that as well. You know, it's a little weird to talk about who it is or who it isn't, but I've actually just, and this might get me in trouble someday, but, you know, it's not NVIDIA. I've been trying to be pretty clear with people because it's just not fair. I guess at some point, you know, if NVIDIA ever goes with us, what am I going to say? But they are a revenue-generating company today. They have customers. They're doing very well. It's pretty exciting.

Gayn Erickson: Yeah, we're trying to get our arms around that as well, you know, it's a little weird to talk about who it is or who it isn't, but I've actually just, and I, this might get me in trouble someday, but you know, it's not a video, I've been trying to be pretty clear with people because it's just not fair, I guess at some point, you know, the video goes with us, now what am I going to say, but they, they give it, they are a revenue generating company today, they have customers, they're doing very well, it's pretty exciting, I can't, you know, there's some discussions about being able to go public with them once, once we have successfully demonstrated it, they really would have a huge benefit by moving their system level test burn in two way for level, and I can't decide if who's more excited about this, if it's us or them, with them cheering us on to please hopefully make this work for them.

Speaker Change: Yeah, we're trying to get our arms around that as well. You know, it's a little weird to talk about who it is, or who it isn't, but I've actually just, and this might get me in trouble someday, but you know, it's not NVIDIA. I've been trying to be pretty clear with people because it's just not fair. I guess at some point...

Speaker Change: You know, if NVIDIA ever goes with us, now what am I going to say? But they are a revenue generating company today.

Speaker Change: They have customers. They're doing very well. It's pretty exciting. There's some discussion about being able to go public with them once we have successfully demonstrated it. They really would have a huge benefit.

Gayn Erickson: I can't, you know, there's some discussion about being able to go public with them once we have successfully demonstrated it. They really would have a huge benefit by moving their system level test burn-in to the wafer level. And I can't decide if who's more excited about this, if it's us or them, with them cheering us on to please, hopefully, make this work for them. This is an interesting one because we are doing some pretty unique things that I'll just share a little bit about, but I'm also holding things to my chest because of competitive reasons. I just don't want to give away any of our secrets.

Speaker Change: by moving their system-level test burn-in to wafer-level. And I can't decide who's more excited about this, if it's us or them.

Speaker Change: with them cheering us on to please hopefully make this work for them. This is an interesting one because we are doing some pretty unique things that I'll just share a little bit about, but I'm also holding things to my chest because of competitive reasons. I just don't want to give away any of our secrets.

Gayn Erickson: This is an interesting one because we are doing some pretty unique things that I'll just share a little bit about, but I'm also holding things to my chest because of competitive reasons. I just don't want to give away any of our secrets. But, you know, the idea to actually be putting, you know, I mentioned, you know, two 3000 watts on a wafer, 3500 watts on a wafer. If you're actually close to this technically, you would know that all AI processors at these geometries are, you know, in lithographies, are all one bolt or they're about parts.

Gayn Erickson: But the idea to actually be putting 2,000, 3,000 watts on a wafer or 3,500 watts on a wafer. If you're actually close to this technically, you would know that all AI processors at these geometries and lithographies are all one volt or thereabout parts. What that means is, if you're going to do 3,000 watts, you're putting 3,000 amps onto a wafer. Okay, people's heads spin with the idea of putting, you know, 1000 amps, much less two or more 1000 amps on a wafer.

Speaker Change: But, you know, the idea to actually be putting, you know, I mentioned, you know, 2,000, 3,000 watts on a wafer, 3,500 watts on a wafer. If you're actually close to this technically, you would know that all AI processors

Speaker Change: at these geometries are, you know, and lithographies are all one volt or thereabout parts. What that means, if you're going to do 3,000 watts, you're putting 3,000 amps onto a wafer.

Gayn Erickson: With that means, if you're going to do 3000 watts, you're putting 3000 amps onto a wafer. Okay, people had spent with this idea of putting, you know, 1000 amps, much less two or more 1000 amps on a wafer.

Speaker Change: Okay, people's heads spin with this the idea of putting you know a thousand amps much less two or more thousand amps on a wafer

Gayn Erickson: And so what we're doing is quite novel, and we're using the VoxXP system that we shift first to optical AI. At the last quarter, we mentioned that we were working on something else on the side. Stay tuned. But that's what we were alluding to. The development of that system in terms of the power being able to put that much power out and remove that much power, because you have to remove it all through the wafer itself, is totally novel. How we deliver that power for optical AIO is actually interestingly a little higher voltage and lower current, whereas in the AI it's higher current lower voltage.

Gayn Erickson: And so what we're doing is quite novel. And we're using the Fox XP system that we shipped first for optical AI in the last quarter. We mentioned that we were working on something else on the side. Stay tuned. But that's what we were alluding to. The development of that system in terms of power, being able to put that much power out and remove that much power, because you have to remove it all through the wafer itself, is totally novel. How do we deliver that power for optical I.O.

Speaker Change: And so what we're doing is quite novel, and we're using the Fox XP system that we shipped first to Optical AI. At the last quarter we mentioned that, that we were working on something else on the side, stay tuned, but that's what we were alluding to.

Speaker Change: The development of that system in terms of the power.

Speaker Change: Being able to put that much power out and remove that much power because you have to remove it all through the wafer itself.

Gayn Erickson: is actually, interestingly, a little higher voltage and lower current, whereas in the A.I., it's higher current and lower voltage. But the thermal challenge is the same, so we have a lot of confidence in that. We're working through that with this right now, and I walked in back just now and was talking to the Operations guys. They're working on multiple wafers right now with multiple wafer packs. So it looks encouraging, and stay tuned.

Speaker Change: is totally novel.

Speaker Change: How we deliver that power for optical I.O. is actually, interestingly, a little higher voltage and lower current.

Gayn Erickson: But the thermal challenge is the same. So we have a lot of confidence to that. We're working through that with this right now, and word where I walked in back just now was talking to the apps guys. They're working on this on multiple wafers right now with multiple wafer packs.

Siu: Where as in the AI, it's higher current and lower voltage, but the thermal challenge is the same. So we have a lot of confidence through that. We're working through that with this.

Siu: right now and we're... I walked in back just now and was talking to the apps guys. They're working on this on multiple wafers right now with multiple wafer packs. So it looks encouraging and stay tuned. I've got my fingers crossed that we can work through all this stuff and we think...

Gayn Erickson: So looks encouraging and stay tuned. I've got my fingers crossed that we can work through all this stuff, and we think. We're pretty confident that we can make this work, and the customers hoping and cheering us on to make it work.

Gayn Erickson: I've got my fingers crossed that we can work through all this stuff, and we think we're pretty confident that we can make this work, and the customer is hoping and cheering us on to make it work. Great. Thanks, Gayn.

Siu: We're pretty confident that we can make this work and the customer is hoping and cheering us on to make it work.

Matthew Winthrop: Great thanks again.

Christian David Schwab: I'll get back on the queue and let some other people ask questions. Thank you. Okay. Thank you. Once again, if you have a question or a comment, please press star 1. The next question comes from Jed Dorsheimer with William Blair. Jed, please press star 1.

Matthew Winthrop: I'll get back in the queue and let some other people ask questions. Thank you. Okay. Thank you.

Speaker Change: Great. Thanks, Gayn. I'll get back in the queue and let some other people ask questions. Thank you. Okay. Thank you.

Operator: Once again, if you have a question or a comment, please press star one.

Jed Dorsheimer: The next question comes from Jed Dorsheimer with William Blair. Jed, please proceed. Hi. Yeah. Thanks for taking my question and again. Congrats on the acquisition.

Speaker Change: Once again, if you have a question or a comment, please press star 1.

Jonathan Dorsheimer: Hi, yeah, thanks for taking my question, and congrats on the acquisition. I guess just from a framing perspective, is it fair to say that next year is largely going to be driven by silicon carbide, maybe a little bit by gallium nitride as you invest in some of these other very interesting and high volume markets? Um, the way we've actually got the forecast right now is we've taken, either, https://www.youtube.com or the link in the description below.

Speaker Change: Yeah, thanks for taking my question and Gayn, congrats on the acquisition.

Gayn Erickson: I guess just from a framing perspective, is it fair to say that this next year is largely going to be driven off of silicon carbide, maybe a little bit in gallium nitride, and is you invest in some of these other very interesting in high volume markets. The way we've actually got the forecast right now is we've taken a pretty conservative staff at the silicon carbide things, and so I think we're, you know, we could do well over 30% you know, a new customers and new markets in that 70 million dollar number. So you know if you look at the hard disk drive application, every mention could be like a 10% customer.

Speaker Change: I guess just from a framing perspective, is it fair to say that next year is largely going to be driven off of silicon carbide, maybe a little bit in gallium nitride as you invest in some of these other very interesting and high volume markets?

Speaker Change: The way we've actually got the forecast right now is we've taken a pretty conservative stab at the silicon carbide things and so

Gayn Erickson: I think we're, You know, we could do well over 30%. You know, I had new customers and new markets in that $70 million number. So, you know, if you look at the hard disk drive application, I already mentioned, it could be like a 10% customer, the production forecast for the AI is 10% or certainly of the 70 million. The flash memory will not be, we don't, you know, I think that's not going to be for revenue. We don't have any in there for this, but we hope to secure an order for maybe the next year's revenue.

Speaker Change: I think we're, you know, we could we could do well over 30%, you know, add new customers and new markets in that 70 million dollar number.

Speaker Change: So you know if you look at the hard disk drive application I already mentioned could be like a 10% customer. The production forecast for the AI is a 10 percenter of certainly of the 70 million.

Gayn Erickson: The production forecast for the AI is a 10% or certainly at the 70 million. The flash memory will not be. We don't, you know, I think that's not going to be for revenue. We don't have any in there for this, but we hope to secure in order for maybe the next year revenue. And then the gan could with the production capacity that we've shown that could maybe be a 10% customer or more as well. So you got you got 10 you know three different 10% or is and none of those are silicon carbide and then I feel like I'm missing one there's too many of them.

Speaker Change: The flash memory will not be. We don't, you know, I think that's not going to be for revenue. We don't have any in there for this, but we hope to secure an order for maybe the next year revenue.

Gayn Erickson: And then the GAN could, with the production capacity that we've been shown, that could maybe be a 10% customer or more as well. So you've got three different 10%ers, and none of those are silicon carbide. And then I feel like I'm missing one. There are too many of them.

Speaker Change: And then the GAN could, with the production capacity that we've been shown, that could maybe be a 10% customer or more as well.

Speaker Change: So you've got three different 10 percenters, and none of those are silicon carbide.

Speaker Change: And then, I feel like I'm missing one. There's too many of them. But then, within the customer base, we are seeing some of the customers, candidly, we thought were going to close this year.

Gayn Erickson: But then within the customer base, we are seeing some of the customers that, candidly, we thought were going to close this year that had moved out in time, but then the fabs are coming. So I think being able to secure that first wave, but several of those guys, at least keeping a single production, if not multiple production systems, could happen by May as well. So I guess, yes, silicon carbide is still going to be really strong.

Gayn Erickson: But then within the customer base we are seeing some of the customers candidly we thought we're going to close this year that it moved out in time. But then the phabes are coming, so I think being able to secure that first way. But you know, you several of those guys at least getting a single production, if not multiple production systems could happen by May as well. So I guess yes, silicon carbide is still going to be really strong. We think that even within silicon carbide, there will be born diverse. Then sort of the you know the the six customers they have and only two of them really were 10% type customers. Will actually see more customers that could be you know material to us.

Speaker Change: that had moved out in time, but then the fabs are coming. So I think being able to secure that first way, but, you know.

Speaker Change: you know several of those guys at least keeping a single production if not multiple production systems could happen by by May as well. So I guess yes silicon carbide is still going to be really strong we think that

Gayn Erickson: We think that even within silicon carbide, we'll be more diverse than sort of the six customers they have, but only two of them really were 10% type customers. We'll actually see more customers that could be, you know, material to us. But they are the leading edge to the fabs that will be coming online in 2025, late in 2026. Got it. That's helpful. Thank you.

Speaker Change: even within silicon carbide will be more diverse.

Speaker Change: Then sort of the six customers they have, but only two of them really were 10% type customers. We'll actually see more customers that could be material to us.

Gayn Erickson: But they are the leading edge to the phabes that will be coming online in 25, late in 26. Got it. That's helpful. Thank you.

Speaker Change: but they are the leading edge to the fabs that will be coming online in 25, late in 26.

Jonathan Dorsheimer: And then could you just help me connect the dots if I use, you know, You said $12 million with two months of $1 million, so $10 million for In-Cal. It would suggest that the core business is kind of, you're guiding for a conservative or down year at the low end of $60 million. But on the operating income, if it's immediately accretive, which I think was stated in there, are you making a significant investment in the OpEx to cause eBit to come down by six or so percentage points, or is that something going on in gross? Yeah, you know what? I'd say it's mostly the prior rather than the gross margin of it.

Gayn Erickson: And then, could you just help me connect the dots? If I use, you know, you said 12 million with two months of a million, so, you know, 10 million for Intel, it would suggest that the core business is kind of your guide them for a conservative or down year at the low end of 60 million. But on the operating income, if it's immediately accretive, which I think was stated in there, are you making a significant investment in the ought backs to cause the EBIT to come down by six or so percentage points, or is that something going on in gross margin?

Speaker Change: Got it. That's helpful. Thank you. And then could you just help me connect the dots if I use, you know.

Speaker Change: You said 12 million with two months of a million, so, you know, 10 million.

Speaker Change: for INCAL, it would suggest that the core business is kind of, you're guiding for a conservative or down year at the low end of $60 million.

Speaker Change: But on the operating income, if it's immediately accretive, which I think was stated in there,

Speaker Change: Are you making a significant investment in the OpEx to cause the EBIT to come down by six or so percentage points, or is something going on in gross margin?

Gayn Erickson: Yeah, you know what it's, I'd say it's, there's, it's mostly the prior than the gross margin of it. We've actually made incremental expense investments, some of which, candidly, was an anticipation of much higher revenue this year, but it was things like the additional infrastructure we put in place in sales, support infrastructure for all the selling that's going on. And eventually, those need to turn into orders, as we are now very diversified in terms of the number of engagements at a high level, but they obviously need to come to fruition. Otherwise, you put all these dollars in place, and they're not helping.

Gayn Erickson: We've actually made incremental expense investments, some of which, candidly, were in anticipation of much higher revenue this year. But it was things like the additional infrastructure we put in place in sales support infrastructure for all the selling that's going on. And eventually, those need to turn into orders, as we are now very diversified in terms of the number of engagements at high level. But they obviously need to come to fruition. Otherwise, you put all these dollars in place, and they're not helping.

Speaker Change: Yeah, you know what, I'd say it's mostly the prior than the gross margin of it. We've actually made incremental expense investments.

Speaker Change: Some of which, candidly, was in anticipation of much higher revenue this year, but it was things like the additional infrastructure we put in place in sales support infrastructure for all the selling that's going on. And eventually those need to turn into orders.

Speaker Change: as we are now very diversified in terms of the number of engagements at high level.

Speaker Change: But they obviously need to come to fruition, otherwise you put all these dollars in place and they're not helping.

Gayn Erickson: So there's explicit direct sales costs associated with that. We also have in our forecast. It's a little different than last year. The mix of our customers changing with some new customers includes customers that today were engaged in both directly end with local reps in those countries. And they have a commission structure in them that is higher up front than later. So we have a, you know, a pretty material. I think it's $7,800,000 or so in external commissions on. It would seem to be the same dollars, but it's actually dollars that are bought by new customers in new markets or new new countries that is kind of messed us up a little bit.

Speaker Change: So there's explicit direct sales.

Gayn Erickson: So there's explicit direct sales costs associated with that. We also have in our forecast, which is a little different than last year, the mix of our customers changing, with some new customers, including customers that today are engaged both directly and with local reps in those countries. And they have a commission structure in them that is higher up front than later. So we have a pretty material amount of $700,000, $800,000 or so in external commissions on what would seem to be the same dollars, but it's actually dollars that are bought by new customers in new markets, or new countries. That kind of messed us up a little bit. But I mean, good money spent, for sure. But that's another one.

Speaker Change: , and Matt Smith. We also have in our forecast, it's a little different than last year, the mix of our customers changing with some new customers includes customers that today were engaged in both directly and with local reps in those countries.

Speaker Change: and they have a commission structure in them that is higher up front than later. So we have a, you know, a pretty material, I think it's...

Speaker Change: $700,000, $800,000 or so in external commissions on

Speaker Change: would seem to be the same dollars, but it's actually dollars that are bought by new customers in new markets or new countries that is kind of messed us up a little bit. But I mean, good money spent for sure. But that's another one.

Gayn Erickson: But I mean, good money spent for sure, but that's another one. And then, you know, we've got some of the legal things, legal costs that we've talked about with respect to. I was going to use the code name with the acquisition, right, that are going on. And there's a few other things just respect to some profit sharing and some other things are slightly different year on year.

Gayn Erickson: And then, you know, we've got some of the legal things, legal costs that we've talked about with respect to, I was going to use their code name with the acquisition, right, that are going on. And there are a few other things just with respect to some profit sharing and some other things are slightly different year on year. We definitely are making investments in R&D this year. Both incremental to the, I'll call it, the wafer level burn-in product line. We have to get used to thinking about that.

Speaker Change: And then, you know, we've got some of the legal things, legal costs that we've talked about with respect to, I was going to use their code name, with the acquisition.

Speaker Change: Right?

Speaker Change: that are going on. And there's a few other things just respect to some profit sharing and some other things are slightly different year on year. We definitely are making investments in R&D this year, both

Gayn Erickson: We do, we definitely are making investments in R&D this year. Both incremental to the, I'll call it the wafer level burn-in product line. We have to get used to thinking about that, but also will be making some incremental investments in the package part. We'll talk more about that roadmap as we close that deal, but some things that we're already, you know, contemplating and working on. It's interesting.

Speaker Change: incremental to the, I'll call it the wafer-level burn-in product line. We have to get used to thinking about that, but also we'll be making some incremental investments in the package part.

Gayn Erickson: But also, we'll be making some incremental investments in the package part. We'll talk more about that roadmap as we close that deal. But some things that we're already, you know, contemplating and working on. It's interesting; we just did our strap planning last week.

Speaker Change: We'll talk more about that roadmap as we close that deal.

Speaker Change: But some things that we're already, you know, contemplating and working on. It's interesting, we just did our strat planning last week.

Gayn Erickson: We just did our, our strap planning last week. And we're looking at the R&D programs. And while things like Sierra, the automated liner, and some enhancements. The Silk and Carbide road maps are pretty much in play. I mean, we're meeting the customer needs with all the different capabilities that we need. So the bulk of the R&D resources this year are all in the other markets that we've talked about in pure execution against some things against the gay and guys, the hard disk drive, the flash memory side of things, and the AI. All kind of incremental to our platform, so nothing like, you know, boil the ocean. But it's kind of fun to watch us being able to start, you know, putting more energy behind these other markets.

Gayn Erickson: And we're looking at the R&D programs, and while things like Sierra, the automated aligner, and some enhancements, the silicon carbide roadmaps are pretty much in play. I mean, we're meeting the customer needs with all the different capabilities that we need. So the bulk of the R&D resources this year are all in the other markets that we've talked about in pure execution against the GAN guys, the hard disk drive, the flash memory side of things, and the AI.

Speaker Change: And we're looking at the R&D programs, and while things like Sierra, the Automate Aligner, and some enhancements, the silicon carbide roadmaps

Speaker Change: are pretty much in play. I mean, we're meeting the customer needs with all the different capabilities that we need.

Speaker Change: So, the bulk of the R&D resources this year are all in the other markets that we've talked about in pure execution against some things against the GAN guys, the hard disk drive, the flash memory side of things, and the AI.

Gayn Erickson: All kind of incremental to our platform, so nothing like, you know, boiling the ocean, but it's kind of fun to watch us being able to start, you know, putting more energy behind these other markets.

Speaker Change: All kind of incremental to our platform, so nothing like boil the ocean, but it's kind of fun to watch us being able to start putting more energy behind these other markets.

Gayn Erickson: Got it. And then we'll start that.

Jonathan Dorsheimer: And then, well, that begs, I guess, my final question. So, given these changes. You know, as you start to grow in these other areas, how do you see, has there been a shift? I would assume that once you cover those incremental investments,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, If you were to think that our OPEX is approximately the same going forward this year, that makes sense, like it went up, but our revenues didn't go up.

Gayn Erickson: Big the, I guess my final question. And so given these changes, you know, as you start to grow with these other areas, how do you see, has there been a shift in, I would assume that once you cover those incremental investments, you'll have a contribution margin that drops, how does that leverage look? Is it. You know, add an 80 million or 100 million, how do you, how are you thinking about getting back to that 20% operating margin or above. You know, without, I mean, you and you guys have created your models on there. If you were to think that our op-ex is approximately the same going forward this year, something like it went up, but our revenues didn't go up.

Speaker Change: Got it. And then we'll...

Speaker Change: I guess my final question, so given these changes,

Speaker Change: As you start to grow in these other areas, how do you see, has there been a shift in, I would assume that once you cover those

Speaker Change: incremental investments.

Speaker Change: you'll have a contribution margin that drops. How does that leverage look? Is it, you know, at 80 million or 100 million? How do you how are you thinking about getting back to that 20% operating margin or or above?

Jonathan Dorsheimer: I think we put the infrastructure in place majorly to be able to continue to grow, get back to our 100 million plus run rate that we were on without incremental expenses. So I mean, I would be careful ratcheting it down.

Speaker Change: You guys have created your models on there. If you were to think that our OPEX is approximately the same going forward this year, does that make sense? Like it went up, but our revenues didn't go up.

Gayn Erickson: I think we put the infrastructure in place, majorly to be able to continue to grow, get back to our 100 million plus run rate that we were on without incremental expenses. So, I mean, I would be careful rationing it down, but if you would just look at similar gross margins and then just incremental revenue, you could draw a line and connect the dots as to when we get back to 20, you know, 25% plus net profits.

Speaker Change: I think we put the infrastructure in place majorly to be able to continue to grow, get back to our 100 million plus run rate that we were on without incremental expenses.

Gayn Erickson: But if you just looked at similar gross margins and then just incremental revenue, you could draw a line and connect the dots as to when we get back to 20, you know, 25% plus net profits pre-tax. Got it. I'll jump back in the queue.

Speaker Change: So, I mean, I would be careful ratcheting it down, but if you would just look at similar gross margins and then just incremental revenue, you could draw a line and connect the dots as to when we get back to 20, you know, 25% plus net profits pre-tax.

Matthew Winthrop: I'll jump back in the queue. I appreciate it. Thank you.

Speaker Change: Got it. I'll jump back in the queue. I appreciate it. Thank you.

Jan Grover: Okay, the next question comes from Jan Grover with Grover McBain.

Jonathan Dorsheimer: I appreciate it. Thank you. The next question comes from Jan Gruber. Gruber, McBain, please proceed. John, that's you. He just misspelled your name, mispronounced your name a little bit.

Speaker Change: Okay, the next question comes from Jan Gruber with Gruber McBain. Please proceed.

Jan Grover: Please proceed.

Jan Grover: John, that's you. He just misspelled your name.

Gayn Erickson: Miss, pronounce your name a little bit. Yeah, you know, I mean, good presentation, a lot of prospects, but what I, but I don't understand is with the acquisition, all these prospects, you know, you can get flash member 30% in new things with the disk drive. Why is there no revenue growth, excluding the acquisition? Yeah, I think, I think the, you're, you're getting it right.

Speaker Change: John , that's you. He just misspelled your name, mispronounced your name a little bit.

John Gruber: Yeah, I mean, good presentation, a lot of prospects. But what I don't understand is, with the acquisition. All these prospects you... You know, you can get FlashMember 30% off on new things, disk drives. Why is there no revenue growth excluding the acquisition?

Jan Gruber: Yeah, you know, I mean, good presentation, a lot of prospects, but what I don't understand is with the acquisition

Speaker Change: All these prospects you...

Jan Gruber: You know, you can get FlashMember 30% in new things, disk drives. Why is there no revenue growth excluding the acquisition?

Gayn Erickson: Yeah, I think I think you're you're getting it right. I mean, I think in Jet kind of put some numbers together, and that's probably not a bad model to think about. It's really about the, you know, the push-outs that we saw with respect to the silicon carbide ramp, things we were expecting people to be coming in pretty strong and so we're just looking at soft forecasts right now.

Speaker Change: Yeah, I think you're getting it right. I mean, I think in gen, you've got to put some numbers together, and that's probably not a bad model to think about. It's really about the push-outs that we saw with respect to the silicon carbide ramps.

Gayn Erickson: I mean, I think in jet. I'm going to put some numbers together, and that's probably not a bad model, think about. It's really about the, you know, the pushouts that we saw with respect to the silicon carbide ramps that, you know, things we were expecting people to be coming in pretty strong. And I made it right a little nicer than that.

Speaker Change: That, you know, things we were expecting people to be coming in pretty strong.

Gayn Erickson: And we're just looking at software cast right now. We have multiple customers in our forecast that, you know, are going to buy one or two systems and not a lot of big ones. So our key customers themselves, for example, and again, we give, if you just look at the big silicon carbide guys. So let's just back up so I'm not talking about my customers in general, but, or who they are. But I think if you look at the top four Silicon Carbide customers, they all guided down this year. And so, you know, there have been people that are, you know, we're wondering how bad it was going to be for us, and can we even continue to maintain our growth while they're having a soft year followed by a strong year.

Speaker Change: And we're just looking at soft forecasts right now. We have multiple customers in our forecast that are going to buy one or two systems and not a lot of big ones.

Gayn Erickson: We have multiple customers in our forecast that are going to buy one or two systems and not a lot of big ones. So, our key customers themselves, for example, and again, if you just look at the big Silicon Carbide guys, so let's just back up, so I'm not talking about my customers in general or who they are, but I think if you look at the top four Silicon Carbide customers, they all went down this year. And so, you know, there have been people that have been, you know, we were wondering how bad it was going to be for us.

Speaker Change: So, our key customers themselves, for example, and again, if you just look at the big silicon carbide guys, so let's just back up, so I'm not talking about my customers in general, or who they are, but I think if you look at the top four silicon carbide customers, they all guided down this year.

Speaker Change: And so, you know, there have been people that are, you know, we're wondering how bad it was going to be for us and can we even continue to maintain our growth while they're having a soft year followed by a strong year.

John Gruber: And can we even continue to maintain our growth while they're having a soft year followed by a strong year? So I think I think we're the right thing to do right now is to communicate this. If we see strength in the second half come in harder than we are currently conservatively forecasting, then we'll guide up at that time.

Gayn Erickson: So I think I think we're, it's the right thing to do right now is to communicate this. If we see strength in the second half come in harder than we are currently conservatively forecasting, then we'll guide up at that time.

Speaker Change: So I think it's the right thing to do right now is to communicate this. If we see strength in the second half come in harder than we are currently conservatively forecasting, then we'll guide up at that time.

Gayn Erickson: Thank you. Okay. Thanks, John. The next question is from... Matt Winthorpe.

Gayn Erickson: Thank you.

Matthew Winthrop: Okay. Thanks, Jon. Okay, the next question comes from Matt Winthrop with Equitali. Please proceed. Equitable. I don't know. Hey, guys, how are you doing? Thank you. I'm Chris. Thanks, Patrick. Sort of on a global basis. I have never seen a company turn or you turn as excited. A hundred and eighty degrees from how gallery you were the last two calls. Is there anything you can put your finger on with our, our cycle shorter? Well, you guys super lucky had a lot of things in the fire that all started to turn. What do you, what do you attribute that sort of much more upbeat and such a rapid sort of positive, at least potentially positive outlook going forward?

Speaker Change: Thank you.

John: Okay. Thanks, John .

John: Okay, the next question comes from Matt Winthorpe with.

Matt Smith: Tally, please proceed. Equitable. Hey, guys. How are you doing, Gayn?

Speaker Change: Equitaly, please proceed.

Matt Smith: Equitable, I don't know. Hey guys, how you doing, Gayn?

Gayn Erickson: I'm good. Thanks, Matt, sort of on a global basis. I have never seen a company turn, or you, turn as excited, 180 degrees from how angry you were on the last two calls. Is there anything you can put your finger on? Are cycles shorter?

Pat: I'm good. Thanks, Pat.

Speaker Change: It's sort of on a global basis.

Speaker Change: I have never seen a company turn, or you, turn as excited 180 degrees from how gower you were the last two calls.

Speaker Change: Is there anything you can put your finger on? Are cycles shorter? Were you guys super lucky, had a lot of things in the fire that all started to turn? What do you attribute that's sort of much more upbeat and such a rapid...

Matt Smith: Were you guys super lucky, had a lot of things in the fire that all started to turn? What do you attribute that's sort of much more upbeat and such a rapid... a sort of positive, at least potentially positive outlook. [inaudible] When we forecasted last year, we weren't, you know, our forecast was bigger than what we told you guys, okay? Not that anyone thought 100 million was conservative, but I did

Speaker Change: sort of positive, at least potentially positive outlook going forward.

Gayn Erickson: She's mad. I feel like I'm always a pretty optimistic and upbeat guy. So, you know, we call. Well, I mean, that's kind of weird.

Speaker Change: Jeez, Matt, I feel like I'm always a pretty optimistic and upbeat guy, so, uh... Um, you know, well, I mean, that's kind of weird, and, you know, I know you mean that professionally, not on a personal level, but I'll just say on a personal level, I feel like...

Gayn Erickson: You know, I know you mean that professionally, not how to personal level, but I just say on a personal level. I feel like, you know, in January and February, you know, we had customers when we forecasted last year. We weren't, you know, our forecast was bigger than what we told you guys. Not that anyone thought a hundred billion was conservative, but I did. We had these customers that were anticipating those fabs going in. And then by the time we got to November and December, you started to see some of the, you know, just scared and they just helped.

Matt: You know, in January and February, you know, we had customers.

Speaker Change: When we forecasted last year, our forecast was bigger than what we told you guys, okay? Not that anyone thought $100 million was conservative, but I did.

Gayn Erickson: We had these customers that were anticipating those fabs going in, and then by the time we got to November and December, you started to see some of the wheels getting wobbly, and people got kind of scared, and they just held. We absolutely were, you know, completed benchmarks or finished with people that we thought would have been buying two, three, four months ago, and they just pushed out. And it just sort of seemed, as a lot of these things are, you know, if you look at the kind of technology adoption cycle. I can draw it, but if I could draw it in everyone's mind, you know, you're going up this hill, it actually accelerates a little bit, then it turns over and goes down, turns around again, and then it goes up strong. That sort of technology adoption cycle exists in a lot of And when you are turned down that first time, it's pretty scary.

Speaker Change: We had these customers that were anticipating those fabs going in and then by the time we got to November and December , you started to see some of the wheels getting wobbly and people got kind of scared and they just held.

Gayn Erickson: We absolutely were, you know, completed benchmarks or finished with people that we thought would have been buying, you know, two, three, four months ago, and they just pushed out. And it just sort of seemed as a lot of these things are, you know, if you look at the kind of technology adoption cycle, I can draw it, but if I can draw it in everyone's mind, you know, you're going up this hill. It actually accelerates a little bit, then it turns over and goes down. Turns around again and then goes up strong. That sort of technology adoption cycle has existed in a lot of different things.

Speaker Change: We absolutely were, you know, completed benchmarks or finished with people that we thought would have been buying, you know, two, three, four months ago, and they just pushed out.

Speaker Change: And it just sort of seemed, as a lot of these things are, you know, if you look at the kind of technology adoption cycle, I can draw it, but if I can draw it in everyone's mind, you know, you're going up this hill, it actually accelerates a little bit, then it turns over and goes down.

Speaker Change: turns around again and then goes up strong. That sort of technology adoption cycle has existed in a lot of different things. And when you turn down that first time, it's pretty scary.

Gayn Erickson: And when you turn down that first time, it's pretty scary. And people like, oh gosh, that's it. You know, we went from, you know, a year and a half ago, our entire business model was built around the crazy idea of one of the things that was driving the silicon carbide, and it wasn't always about silicon carbides. But that 30% of EVs, a 30% percent of automobiles in 2030 would be EVs, or 30 million. At that time, people were like, "Come on, is that even possible or not?" By around fall, people were saying, "Oh, it's going to be way higher than that."

Gayn Erickson: And people are like, oh gosh, that's it. You know, a year and a half ago, our entire business model was built around the crazy idea, one of the things that was driving the silicon carbide, and it wasn't always about silicon carbide, but that 30% of EVs, 30% of automobiles in 2030 would be EVs or 30 million. At that time, people were like, come on, is that even possible or not?

Speaker Change: And people are like, Oh, gosh, that's it. You know, we went from, you know, a year and a half ago, our entire business model was built around the crazy idea, one of the things that was driving the silicon carbide, and it wasn't always about silicon carbide.

Speaker Change: But that 30% of EVs, or 30% of automobiles in 2030 would be EVs, or 30 million. At that time, people were like, come on, is that even possible or not?

Gayn Erickson: By around fall, people were saying, oh, it's going to be way higher than that and way sooner than that, which we never repeated. And it was as if everybody and their brother was going to be driving an EV. But we didn't buy into that because we were looking at the fabs. I'm looking at the ground, and there's dirt.

Speaker Change: By around fall, people were saying, oh, it's going to be way higher than that and way sooner than that, which we never repeated.

Gayn Erickson: And way sooner than that, which we never repeated. And it was just if everybody in their brother was going to be driving an EV, but we didn't buy into that because we were looking at the fabs. I'm looking at the ground and there's dirt. And they're not putting that fabric yet. But people were talking about it with such enthusiasm. And even our customers were starting to get as excited. And then they went to the opposite, like, oh, gloom is doomed. You know, everyone's all gloomy. The reality is they're not; you go and you talk to them.

Speaker Change: And it was as if everybody and their brother was going to be driving an EV, but we didn't buy into that because we're looking at the fabs. I'm looking at the ground and there's dirt, and they're not putting that fab in yet, but people were talking about it with such enthusiasm.

Gayn Erickson: And they're not putting that fab in yet, but people were talking about it with such enthusiasm. And even our customers were starting to make us excited. And then they went to the opposite, like, oh, gloom is doom. Everyone's all gloomy. The reality is they're not. You go, and you talk to them.

Speaker Change: And even our customers were starting to get us excited. And then they went to the opposite, like, oh, gloom is doom. You know, doom, you know, everyone's all gloomy. The reality is they're not. You go and you talk to and we have the opportunity, which is the first time in my whole career.

Gayn Erickson: We had the opportunity, which is the first time in my whole career. I'm talking to my customer's customer. Or if you call OEMs the tier one customer, if you're in the automotive book, we're actually the customer's customer's customer, sitting with them face-to-face, talking about burn-in times and quality and reliability. Scary, talking about multiple companies' burn-in times and test times and things.

Gayn Erickson: We have the opportunity, which is the first time in my whole career. I'm talking to my customers' customer. Or if you call OEMs, the Tier 1's customer, if you're in the automotive, okay? We're actually the customer's customer's customer's customer's customer's customer's customer. Siting with them face-to-face, talking about burn-in times, and quality and reliability, and scary, talking about multiple companies' burn-in times and test times and things. Not because I'm sharing anything, I can guarantee that, but they're really trying to drive for higher quality and higher burn-in through the market, and some of those players are going to start building their own silicon, or silicon carbide in this case, to drive for their own quality requirements. Very interesting.

Speaker Change: I'm talking to my customer's customer, or if you call OEMs the Tier 1's customer, if you're in the automotive book, we're actually the customer's customer's customer.

Speaker Change: sitting with them face-to-face talking about burn-in times and quality and reliability.

Speaker Change: and Gary talking about multiple companies' burn-in times and test times and things. Not because I'm sharing anything, I can guarantee that. But they're really trying to drive...

Gayn Erickson: But they're really trying to drive for higher quality and higher burn-in through the market. And some of those players are going to start building their own silicon, or silicon carbide, in this case, to drive for their own quality requirements. Very interesting. You see these people, and you see their roadmap, and they're putting in place massive factories. And, by the way, way more so outside the U.S. than in the U.S.

Gary: for higher quality and higher burn in and, you know, through the market. And some of those players are going to start building their own silicon or silicon carbide, in this case, to drive for their own quality requirements. Very interesting.

Gayn Erickson: You see these people, and you see their roadmap, and they're putting in place massive factories. And by the way, way more so outside the U.S. than the U.S. is really kind of its own thing, and the market penetration is going to end up being less than you'll see in Korea and you're hoping, certainly China, but even in Japan. But you start talking to the big chap to the NOMS as we have, the Korean OEMS as we have, the China OEMS as we have, and the European OEMS as we have, you can see through their eyes, this is serious, it's not going to be 30% tomorrow, but it gave ease or certainly coming, and that gives me reason to believe that we'll be okay, and that our business is going to be strong, and more and more data to support why you need long way for little burn and test times.

Gary: You see these people and you see their road map and they're putting in place massive factories.

Gayn Erickson: The U.S. is really kind of its own thing, and the market penetration is going to end up being less than you'll see in Korea and Europe, and certainly China, but even in Japan. But when you start talking to the big Japanese OEMs, as we have, the Korean OEMs, as we have, the Chinese OEMs, as we have, and the European OEMs, as we have, you can see through their eyes that this is serious. It's not going to be 30% tomorrow, but EVs are certainly coming.

Gary: And by the way, way more so outside the U.S. than the U.S. The U.S. is really kind of its own thing, and the market penetration is going to end up being less than you'll see in Korea and Europe .

Gary: Certainly China, but even in Japan. But you start talking to the big Japan OEMs as we have, the Korean OEMs as we have, the China OEMs as we have.

Gary: and the European OEMs as we have. You can see through their eyes this is serious. It's not going to be 30% tomorrow but EVs are certainly coming.

Gayn Erickson: And that gives me reason to believe that we'll be okay, and that our business is going to be strong, and more and more data to support why you need a long wait for little burn-in test times. I continue to get reminders of that, including news even from the last few days again.

Gary: and that gives me reason to believe that we'll be okay and that our business is going to be strong and more and more data to support why you need long wafer-level burn-in test times. I continue to get reminded of that including news even the last few days again.

Gayn Erickson: I continue to get reminded of that, including news, even the last few days again, okay. On top of that, our whole story, if you will, is about semiconductors growing from 600 billion to over a trillion dollars by the end of the decade. More and more semiconductors need reliability tests, because in reality, they have, they're not on semiconductors, nobody was using compound semiconductors, like they thought it was silicon carbide, gallium nitride, the elements putting into optical, they only burn in. More and more memory, stacked memory, HBM memory, flash memory going to SSDs, processors, AI processors, they only need to be burned in, because they're going to the applications where the reliability is not good enough for them to last long term. And as people go ahead of a genius integration, multi chip modules, or whatever you want to call it, it was driving for a way full of a burnin, and now we even see it's beyond that even with the package challenges that's going on with the AI.

Gayn Erickson: On top of that, our whole, um, story, if you will, is about semiconductors growing from $600 billion to over a trillion dollars by the end of the decade. More and more semiconductors need reliability tests because, in reality, they're not getting more reliable. Compound semiconductors, nobody was using compound semiconductors like they're talking about with silicon carbide, gallium nitride, the elements being put into optical, they all need

Gary: On top of that, our whole

Gary: Story, if you will.

Gary: is about

Gary: Semiconductors growing from 600 billion to over a trillion dollars by the end of the decade.

Gary: More and more semiconductors need reliability tests because in reality

Speaker Change: They have, they're not getting more reliable. Compound semiconductors, nobody was using compound semiconductors, like they're talking about with silicon carbide, gallium nitride, the elements putting into optical, they all need burn-in.

Gayn Erickson: More and more memory, stacked memory, HBM memory, flash memory going to SSDs, processors, AI processors, they all need to be burnt in because they're going into applications where the reliability is not good enough for them to last long. And as people go to heterogeneous integration, or multi-chip modules, or whatever you want to call it, it was driving for wafer-level burn-in. And now we even see it's beyond that, even with the package challenges that are going on with the AI. So, yeah, if you're reading into it, I'm enthusiastic. We're in a really good spot that's not temporary. This is an upward draft where we saw some softness.

Speaker Change: More and more memory, stacked memory, HBM memory, flash memory going to SSDs, processors, AI processors, they all need to be burnt in.

Speaker Change: because they're going into applications where the reliability is not good enough for them to last long-term.

Speaker Change: And as people go to heterogeneous integration, or multi-chip modules, or whatever you want to call it, it was driving for wafer-level burning.

Speaker Change: And now we even see it's beyond that even with the package challenges that's going on with the AI. So, yeah, if you're reading into it, I'm enthusiastic. We're in a really good spot that's not temporary. This is an upward draft.

Gayn Erickson: So yeah, if you're reading into it, I'm enthusiastic. We're in a really good spot that's not temporary. This is an upward draft where we saw softness; we're going to be fine. We've highly differentiated, sought-after products, and we have certainly other manufacturing capacity inventory to meet those needs. And so, yeah, you know, we're going to do well. Sorry.

Matt Smith: We're going to be fine. We have highly differentiated, sought-after products. And we certainly have the manufacturing capacity and inventory to be able to meet those needs. And so, yeah, we're going to do well. That, my friend, is a fantastic answer. Keep on plugging, and we'll keep watching. I appreciate everything you do.

Speaker Change: Where we saw a softness, we're going to be fine. We have highly differentiated, sought-after products. And we certainly have the manufacturing capacity and inventory to be able to meet those needs. And so, yeah, you know, we're going to do well.

Matthew Winthrop: And that, and my friends, the fantastic answer, keep on plug-in, and we'll keep watching. I appreciate everything you do again. Thanks, Matt. Thank you.

Speaker Change: That, my friend, is a fantastic answer. Keep on plugging. We'll keep watching. I appreciate everything you do, Gayn.

Thomas Robert Diffely: Thanks, Matt. Thank you. This question comes from Tom Diffely with DA Davidson. Please proceed. Yes, good afternoon.

Gayn Erickson: Thanks, Matt. Thank you. Yeah.

Tom DeFelli: Okay, the next question comes from Tom DeFelli with DA Davidson. Please proceed. Yes.

Speaker Change: Okay, the next question comes from Tom Diffely with DA Davidson. Please proceed.

Thomas Robert Diffely: Thanks for the question. Gayn, curious, you know, when you look at the book of business you had a year ago, when there was $100 million you thought you'd get for the year versus where you are today, I assume most of that was silicon carbide, and a lot of that's been pushed out. So I guess the first part of the question is, how far have some of these programs been delayed or pushed out?

Tom DeFelli: Good afternoon. Thanks for the question. Again, curious, you know, when you look at the book of business you had a year ago, when there's a hundred million dollars you thought you'd get for the year, versus where you're today, I see most of that was silicon carbide, and a lot has been pushed out. So I guess the first part of the question is, how far have some of these programs been delayed or pushed out? Obviously, some of them look like they're about a year behind schedule, and then the second part of the question is: how have they all been pushed out, or if some of them been kept?

Tom DeFelle: Yes, good afternoon. Thanks for the question. Again, curious, you know, when you look at the book of business you had a year ago, when there's $100 million you thought you'd get for the year.

Speaker Change: versus where you are today.

Speaker Change #100: I assume most of that was silicon carbide and a lot of that's been pushed out.

Speaker Change: So, I guess the first part of the question is, how far have some of these programs been delayed or pushed out? You know, obviously some of them look like they're about a year behind schedule. And then the second part of the question is, have they all been pushed out or have some of them been canceled?

Speaker Change: yeah so uh okay so it feels like

Speaker Change: mostly pushed out. I, you know, so if I, that's actually, I like the way you phrase that because it helps you remember. I'm good at remembering what I thought at the time. If I were looking at my forecast and my funnel last year, I had like three big guys that were all planning to be buying in the spring.

Speaker Change: two new ones and more from one of our the big lead guys. Oh, I'm sorry. I'm sorry. Four big guys.

Speaker Change: One of them struggled to build some products, another one ended up doing well with their package part because of the way the customer mix.

Pat: the other one had some slowdowns, another one, the value, and two others, actually Pat's right, there's five of them, two others were in the midst of evaluations and they didn't end up pulling the trigger because they pushed out their fabs.

Pat: So, I mean, I just, that's, you know, 10 million here, 20 there, 15 there, and you've got to do this. And so a lot of it just sort of shifted out in time. Every single one of those is still absolutely committed to wafer-level burn-in.

Pat: and Modules and their fab capacities have pushed what they what they told the street and themselves one year ago is is definitely pushed out from that now but every one of those fabs is

Speaker Change #101: Well, it's not true. Most of those fabs have all been continued to be reiterated and reannounced I think there's some people that might have pushed this fab out a little bit further

Speaker Change #101: So if you look at the OEMs, in some cases, some of the big guys, like if you look at Korea, Japan, and Europe , their ramps were always 25-26.

Speaker Change #102: It feels like these early EBs were like foot soldiers, like, you know, forward, whatever they call it, you know, scouts.

Pat: to test the water, but their big programs are yet to come. And some of those haven't even changed their mind. This is still the exact same schedule they were on, but now it's just getting closer.

Pat: You know, it feels like to me that it's about, um...

Pat: you know, a one to one and a half year push out of most of those guys, and I believe it'll come back. The difference is I don't think anybody believes, you know, no one's saying, oh, it's going to be 60% penetration by the end of the decade. They're back more to the 30% kind of number, which is a lot of systems for us.

Gayn Erickson: Obviously, some of them look like they're about a year behind schedule. And then the second part of the question is, have they all been pushed out? Or have some of them been canceled?

Speaker Change #105: Yeah, okay, and then the second question would be, you know, think back to a year ago again, and when you think about the car makers themselves, are they all still on the silicon carbide path or have some of them decided to stick with silicon a little bit longer?

Speaker Change #103: Yeah, so I think it's, they're more towards silicon carbide than they were a year ago.

Thomas Robert Diffely: Yeah, so, okay, so it feels like mostly pushed out. I, you know, so if that's actually the way you phrase it, because it helps you remember. I'm good at remembering what I thought at the time. If I were looking at my forecast and I funneled last year, I had like three big guys that were all planning to be buying in the spring, two new ones, and more from one of our big lead guys. Oh, I'm sorry.

Gayn Erickson: I'm sorry, four big guys, right? One of them struggled to build some products. Another one ended up doing well with their package part because of the way the customer mix. The other one had some slowdowns. Another one, the value, and two others. Actually, that's right; there are five of them.

Gayn Erickson: Two others were in the midst of evaluations, and they didn't end up pulling the trigger because they pushed out their fabs. So I mean, I just think it was, you know, 10 million here, 20 there, 15 there, and you kind of do this. And so a lot of it just sort of shifted out in time.

Gayn Erickson: Every single one of those is still absolutely committed to wafer-level burning, and modules and their fab capacities have pushed what they told the street and themselves one year ago is definitely pushed out from that now, but every one of those fabs is, Well, it's not true. Most of those fabs have all continued to be reiterated and reannounced. I think there are some people that might have pushed this fab out a little bit further.

Speaker Change #103: And I can, I, I can.

Gayn Erickson: So if you look at the OEMs, in some cases, some of the big guys, like if you look at Korea, Japan, and Europe, their ramps were always 25-26. It feels like these early EVs were like foot soldiers, like, you know, forward, whatever they call it, scouts to test the water, but their big programs are yet to come, and some of them haven't even changed their minds. This is still the exact same schedule they were on, but now it's just getting closer.

Thomas Robert Diffely: So, you know, it feels like to me that it's about, you know, a one to one and a half year push out of most of those guys, and I believe it'll come back. The difference is I don't think anybody believes it. You know, no one's saying, oh, it's going to be 60% penetration by the end of the decade. They're back more to the 30% kind of number, which is a lot of systems for us.

Speaker Change #104: Yeah, I have specific examples of it, I'd be careful of it, but some of the examples were, you know, people were like, well, I'm

Thomas Robert Diffely: Yeah. Okay. And then the second question would be, you know, think back to a year ago, and when you think about the car makers themselves, are they all still on the silicon carbide path, or have some of them decided to stick with silicon a little bit longer? Yeah, so I think they're more inclined to use silicon carbide than they were a year ago. And I can, I can.

Gayn Erickson: Yeah, I have specific examples of it. I'd be careful of it. But some of the examples were, you know, people were like, well, I'm, So a lot of cars, as you know, have more than one engine in them, okay? And if you look at two years ago, it was very common, people understood, that Tesla put the IGBT in the front, and silicon carbide was the first one in the back, always. So if you had a single engine, it would be silicon carbide.

Speaker Change #106: So a lot of cars, as you know, have more than one engine in it, okay? And if you look at two years ago, it was very common, people understood, that Tesla put the IGPT in the front.

Speaker Change #106: And silicon carbide was the first one in the back always. So if you had a single engine, it was silicon carbide. If you had two, it was silicon carbide in the back and IGBT in front. IGBT is silicon for everybody else that's knowing, okay?

Gayn Erickson: If you had two, it was silicon carbide in the back and IGBT in the front. IGBT is silicon for everybody else that's knowing, okay? They had different properties, et cetera. My car that I'm driving, I have a Model S, has two silicon carbide engines in it, the inverters.

Speaker Change #106: They had different properties, et cetera. My car that I'm driving, I have a Model S, has two silicon carbide.

Thomas Robert Diffely: So we've heard that more and more from the OEMs, they actually prefer to just use silicon carbide, and candidly, because costs have come down and availability is up, they can afford to do that. I'm trying to think. There's other things I have that's more under NDAs and stuff I can't share, but I believe more and more. One thing that shocked me when I was in China is how the Chinese OEM guys really talked to silicon carbide with preference. Now, there are still models that they're going to have a second engine in IGBT, but there are more and more silicon carbide in all modules as a preference.

Speaker Change #107: Engines and the Inverters. So, we've heard that more and more from the OEMs, they actually prefer to just use silicon carbide. And, candidly, because cost has come down and availability is up, they can afford to do that.

Speaker Change #107: Try to think. There's other things I have that's more under NDAs and stuff I can't share, but I believe more and more. One thing that shocked me when I was in China is how the China OEM guys really talked to silicon carbide with preference.

Speaker Change #107: Now, there's still models that they're going to have a second engine in IGBT, but it's more and more silicon carbide in all modules.

Gayn Erickson: So I'd say more conviction about silicon carbide and more about modules than a year ago. Great. All right. I appreciate the perspective, and thanks for the time.

Speaker Change #107: as a preference. So I'd say more conviction to silicon carbide and more to modules than a year ago.

Speaker Change #108: Great. All right. I appreciate the perspective and thanks for the time.

Thomas Robert Diffely: Thanks, Tom. Okay, we have a follow-up. This is Christian Schwab with Craig Hallam.

Tom DeFelle: Thanks Tom.

Speaker Change #109: Okay, we have a follow-up coming from Christian Schwab with Craig Hallam. Please proceed.

Christian David Schwab: Great. Thanks. Let's have a quick follow-up, Gayn. We did hit China and silicon photon. Whether you expect those to be revenues in fiscal 25 or 26. Um, okay.

Christian David Schwab: Great. Dave, please have a quick follow-up, Gayn. We did hit China and silicon photonics. Whether you expect those to be revenues in fiscal 25 or 26?

Gayn Erickson: Yeah. So, uh, I think we have a forecast for China. Uh, well, yeah, I guess I just said it. We have a forecast for China this year.

Speaker Change #110: Okay, yeah, so I think we have forecasts for China. Well, yeah, I guess I just said it. We have forecasts for China in this year. And silicon photonics, I think we have some as well. Pretty conservative.

Christian David Schwab: Um, and Silicon Photonics, I think we have some as well, pretty conservative. Assumptions right now, yeah, like I don't think we have it assumed to be 10% this year. Could it be?

Speaker Change #111: Assumptions right now? Yeah, like I don't think we have that assumed to be a 10% this year. Could it be? Sure.

Gayn Erickson: Sure, but you know the problem with silicon photonics... at least the Optical I.O. is, and again, obviously, there's more than I can share, so my job is pretty clean, but, you know, those companies that would drive that road map, hold those cards close to their chests, right? They're not out.

Speaker Change #111: But, you know, the problem with the silicon photonics, at least the optical I-O, is, and again, obviously, there's more than I can share, so my job is pretty clean, but, you know, those companies that would drive that roadmap hold those cards close to their chest.

Christian David Schwab: There's no market. It's you ask, you tell me what Nvidia, AMD, and Intel are going to do, and the other AI processors, and I'll tell you what the optical IO market will look like. And they're not talking publicly about it. So we know a little bit more than we can share. We'll just watch.

Speaker Change #111: Right? They're not out. There's no market. You tell me what NVIDIA, AMD, Intel is going to do, and the other AI processors, and I'll tell you what the optical I-O market will look like.

Speaker Change #111: and they're not talking publicly about it. So we know a little bit more than we can share. We'll just watch and we'll have to be careful being the canary to let everybody know what's going on. But, you know, if people start announcing optical IO chip-to-chip, you can just think to yourself, that's good for us.

Gayn Erickson: And we'll have to be careful being the canary to let everybody know what's going on. But if people start announcing optical I-O chip to chip, you can just think to yourself, that's good for us. And China right now is all silicon carbide customers. They have GAM, too, by the way.

Speaker Change #111: And China right now is all silicon carbide customers. They have GAM, too, by the way. Their current engagements are...

Christian David Schwab: Their current engagements are all silicon. Carbide today. Yeah, for China. By the way, a couple more things on China, a little bit more color for people, okay?

Speaker Change #112: All silicon carbide today.

Speaker Change #113: Yeah, for China.

Speaker Change #113: By the way, a couple more things on China, a little bit more color for people, okay?

Gayn Erickson: To us, China is not all one market. And I know people are listening to this, okay? There are companies that are going to build extensions and do things in China that are, say, not Chinese companies, right? And they're very protective of their IP, and they want to be very careful with it. And so if you sell to them outside of China, and they want you to build in China, we love those guys, right? That's not the same, even though it would be in China, okay?

Speaker Change #113: To us, China is not all one market.

Speaker Change #113: And I know people are listening to this.

Jim Byers: and Jim Byers.

Speaker Change #114: There are companies that are going to...

Jim Byers: build extensions and do things in China.

Jim Byers: that are, say, not Chinese companies.

Jim Byers: And they're very protective of their IP, and they want to be very careful with it.

Jim Byers: And so, if you sell to them outside of China, and they want you to build in China...

Gayn Erickson: Second, we have companies that are OEMs today that are using our products. Well, they use silicon carbide that's built on our product, and they know it. They drive the test times.

Jim Byers: We love those guys, right? That's not the same, even though it would be in China, right? Second is that we have companies that are OEMs today, that are using our products. Well, they use silicon carbide that's built on our product, and they know it.

Gayn Erickson: They know what's going on, etc. They have a high preference for our equipment, and they've talked about potentially dual sourcing in China, okay? Well, in that case, they said, hey, we want to use your system because we like the same capabilities and all. Well, we like those guys a lot as well.

Jim Byers: They drive the test times. They know what's going on, etc. They have a high preference for our equipment, and they've talked about potentially dual sourcing in China. Okay, well in that case they've said, hey, we want to use your system because we like the same capabilities and all. Well, we like those guys a lot as well.

Gayn Erickson: There are other companies that are actually building products themselves. Think of trains and planes or cars, and they want to build silicon carbide. What I can tell you is those companies are so paranoid and so acutely aware of the relationship between burn-in times and quality that they are like, I will dictate a specific burn-in process at a specific quality. It's really important to me, and I like what your system does, and it matters. I like those guys, right? There are other guys that are saying, I want to buy a bunch of systems from you. I've tried some stuff locally.

Speaker Change #115: There's other companies that are actually building products themselves, think of trains and planes or cars, and they want to build silicon carbide. What I can tell you is those companies are so paranoid and so acutely aware of the relationship between burn-in times and quality.

Speaker Change #115: that they are like, I will dictate a specific burn-in process at a specific quality. It's really important to me.

Speaker Change #116: and I like what your system does and it matters. I like those guys, right? There's other guys that are saying, I want to buy a bunch of systems from you, I've tried some stuff locally, I'm not sure how well it works, blah, blah, blah. I'm like, well, how many systems are you talking about?

Gayn Erickson: I'm not sure how well it works, blah, blah, blah. I'm like, well, how many systems are you talking about? If you want to buy a bunch from me, I like that a lot.

Gayn Erickson: It does make me a little nervous about, you know, overall IP concerns there. And then we have companies that say, I'd like to buy an engineering system. Yeah, we're not interested.

Speaker Change #117: If you want to buy a bunch from me, I like that a lot. It does make me a little nervous about, you know, the overall IP concerns there. And then we have companies that say, I'd like to buy an engineering system. Yeah, we're not interested.

Gayn Erickson: I mean, there's there's a spread. If you're committed to us and you can show us some preference and show us that you're willing to help us protect our IP, even though we have patents all over the place, you get preferential treatment. So, enough on China.

Speaker Change #121: I mean, there's a spread. If you're committed to us and you can show us some preference and show us that you're willing to help us protect our IP, even though we have patents all over the place, you get

Gayn Erickson: I hope that helps give you a little more clarity. If that doesn't, then my last question... of Potential Clarity. You talked about OPEX being flat and aggregate year over year because you overspent this year. Does that include INCAL, or is that a comment on your... No, no, my Off X this year is higher than last year, is what I said. So if you look at the numbers, you know, and I think if you just sort of look linear across, you'll find there's maybe three, three and a half million bucks missing. Doug, wait, wait. What happened here?

Speaker Change #117: preferential treatment, if you will.

Speaker Change #117: So, enough on China. I hope that helps give you a little more clarity, though.

Speaker Change #120: That does, and then my last question was just a means of potential clarity.

Speaker Change #118: You talked about OPEX being flat and aggregate year over year because you overspent this year. Does that include INCAL, or is that a comment on your business that when INCAL... No, no, my OPEX this year... I'm sorry, my OPEX this year is higher than last year, is what I said.

Speaker Change #119: So if you look at, if you look at the numbers, you know, and I think if you just sort of look linear across, you'll find there's maybe three, three and a half million bucks missing.

Christian David Schwab: We're actually, that's the result of several areas of expenditures. I forgot to throw Chris under the bus a little bit too, because we're also spending more money on finance and other things that we did for SOX compliance and stuff. But we have incremental expenses in R&D, we have incremental expenses in legal, we have incremental expenses in commissions, we added more people in sales, and we have a little bit more finance side of things, and then a sprinkling of some bonuses tied around the company, kind of to represent those dollars. Okay, I guess just for clarity, Cal, again, for Cal, how much should we assume is their core?

Speaker Change #119: Wait a minute, what happened here? That's a result of several areas of expenditures. I forgot to throw Chris under the bus a little bit, too, because we're also spending more money on finance and other things that we did for SOX compliance and stuff.

Speaker Change #119: But we have incremental expenses in R&D, we have incremental expenses in legal, we have incremental expenses in commissions, we added more people in sales, and we have a little bit more finance side of things, and then a sprinkling of some bonuses tied around the company, kind of to represent those dollars.

Gayn Erickson: Okay, I guess just for clarity, Gayn, for INCAL, how much should we assume is their quarterly op-ex?

Gayn Erickson: All right, we haven't done that yet, that's good. Well, right now, the forecaster's outlook, we have already included it in the calculation, in the forecast, yeah, in the model right now. It's a relatively small company. We will, I mean, I think we've shared about this before, but you know, as our headcount goes up there, they have about 24 employees. They have a lease for the next couple years that's right down the street from us.

Gayn Erickson: All right, we haven't done that yet. That's good. Well, right now the forecaster outlook we have already include them in the in the calculation in the forecast. Yeah, in the model right now. It's a relatively small company we will I mean I think we've shared about this before but you know as our head count goes up there they have about 24 employees.

Gayn Erickson: They have a lease for next couple of years that's right down the street from us.

Christian David Schwab: We haven't talked about Synergy. Synergies aren't going to come through people. No way.

Gayn Erickson: You know, we need to, but, you know, over time, we probably won't need that second building potentially. You know, those kind of things, but we're not, you know, we don't need, we're not needing to scrounge to try and do any expense reductions or things like that. No way.

Gayn Erickson: We haven't talked about synergies. Synergies aren't going to come through people. No way. You know, we need to, but you know, over time we don't need that second building potentially. You know, those kind of things, but we're not, you know, we don't need, we're not.

Gayn Erickson: I mean to scrounge to try and do any expense reductions or things like that. No way. We're going to spend more money with those guys

Christian David Schwab: We're going to spend more money on those. Okay, got it, I got it. Thanks, Gayn, thanks for the added clarity. Thank you. One last round for folks, please. Anyone else with a raised hand?

Gayn Erickson: Okay, got it. I got it. Thanks, Gayn. Thanks for the added clarity.

Gayn Erickson: Thank you.

Gayn Erickson: One last round for folks. Pete, anyone else with a raised hand?

Operator: The next question comes from Shahar Cohen with Listed. Hi guys, congrats on the amazing turnaround and the justification into other things sick. A question about Intel. First, how much of their current revenue is from the legacy Advantist sub-manufacturing, if you can disclose that? And B, what is their Sonoma family, which, as I read on the website, is that the one that's supposed to do the high watt testing

Speaker Change #122: The next question comes from Shahar Cohen with Listed Capital. Please proceed.

Shahar Cohen: Hi guys, congrats for the amazing turnaround and the justification to other being sick. A question about InCal.

Shahar Cohen: First, how much of their current revenue is from their legacy Adventist, you know, sub-manufacturing if you can disclose?

Speaker Change #124: And B, to what their Sonoma family, which as I read in the website, is that the one that's supposed to do the high, what?

Shahar Cohen: Is that already used in the testing of AI applications? And is that already used by NVIDIA? And did the entire company see a major revenue growth in the last year or so, as one should expect? Or do you expect them to grow significantly in 2025 versus 2024 calendar year? OK, all right, Shahar, you've done your homework.

Speaker Change #125: testing is that already used in in testing of AI application and that already used by NVIDIA and did they incur

Speaker Change #125: Major revenue growth in the last

Speaker Change #125: year or so, as one should expect.

Speaker Change #125: or do you expect them to grow significantly?

Speaker Change #125: in 2025 versus 2024.

Speaker Change #126: Thank you. Thank you.

Gayn Erickson: So you're going to make me back up and let people know, try and catch up with you a little bit. All right, so InCal is made up of two sources of revenue. They have a test and burn in business, which is made up of really three families of burn-in systems: low power, medium power, and high power.

Speaker Change #127: All right, Shahar, you've done your homework, so you're going to make me back up and let people know, try and catch up with you a little bit. All right, so in Cal...

Speaker Change #128: is made up of two sources of revenue. They have a test and burning business, which is made up of really three families of burning systems.

Gayn Erickson: Their Alpine line of systems is their low power, Tahoe is their mid power, and Sonoma is their high power. They're all fully compatible from a software perspective. They all have a similar hardware and software architecture, but a very unique platform concept that I think from a tester guy. The Alpine system uses test electronics and power supplies that are shared over multiple burn-in boards and multiple devices on each burn-in board, making it one of the lowest cost, most cost-effective burn-in systems on the market. We struggled to ever compete with that product line before.

Speaker Change #128: Low power, medium power, and high power.

Speaker Change #128: Their Alpine line of systems

Speaker Change #128: is the low power

Speaker Change #128: Tahoe is their mid power, Sonoma is high power. They're all fully compatible from a software perspective.

Speaker Change #128: They all have a similar hardware and software architecture, but a very unique platform concept that I think from a tester guy.

Speaker Change #128: The Alpine system uses test electronics and power supplies that are shared over multiple burn-in boards and multiple devices on each burn-in board, making it one of the lowest costs.

Speaker Change #128: most cost-effective burden systems on the market. We struggled to ever compete with that product line before.

Gayn Erickson: Their Tahoe system is a mid-power system, candidly similar in many of the features to our old ABTS system or our current ABTS system, but it has power supplies and pin electronics that power each burn-in board for more capability and more power with individual temperature control and amazing software. And Sonoma uses, again, similar pin electronics and power supplies, but per device, allowing them to actually locally generate extremely high current. Differentiate you within millimeters of the device, very similar to how the application works, which is one of its key differentiators.

Speaker Change #128: Their Tahoe system is a mid-power system, candidly similar in many of the features to our old ABTS system.

Speaker Change #128: or our current ABTS system, but it has power supplies and panel electronics that power each burn-in board for more capability and more power with individual temperature control and amazing software.

Speaker Change #128: And Sonoma uses, again, similar print electronics and power supplies, but per device.

Speaker Change #128: allowing them to actually locally generate extremely high currents.

Speaker Change #129: within millimeters of the device very similar to how the application works which is one of its key differentiators and that allows them to be able to be used for these really high power like AI devices.

Shahar Cohen: And that allows them to be able to be used for these really high-powered AI devices. Sonoma is, in fact, what has really been growing for them. They have multiple customers on each of their platforms, and there is revenue in all three of those segments, even within our fiscal year going forward, and we're currently committed to meeting the needs of those customers. We have no plans to abandon any of those roadmaps, okay?

Speaker Change #130: The Sonoma is, in fact, what has really been growing for them. They have multiple customers on each of their platforms, and there is revenue in all three of those segments, even within our fiscal year going forward, and we're currently committed to meeting the needs of those customers. We have no plans to abandon any of those roadmaps, okay?

Shahar Cohen: But Sonoma is where a lot of the real growth is, and customers want to pull it into production where we can help them. You mentioned something that we haven't talked about publicly, but I'll go ahead and mention it. They actually also do some repair business for kind of a third-party repair authorization, and we haven't talked about that yet. That's something ahead of us. We've pulled that out of the revenue from last year, so we didn't talk about how much revenue they got from that business, okay? So thank you very much for the call; really helpful. Any more color you can provide on the Sonoma growth rate? Maybe that was or maybe not expected?

Speaker Change #130: But Sonoma is where a lot of the real growth is and customers want to pull it into production.

Speaker Change #131: what we can help them with. You mentioned something that we haven't talked about publicly, but I'll go ahead and go mention it. They actually also do some repair business.

Speaker Change #132: for kind of a third-party repair.

Speaker Change #132: Authorization. And we haven't talked about that yet. That's something ahead of us. We've pulled that out of the revenue.

Speaker Change #132: from last year. So we didn't talk about how much revenue they did in that business. So the kind of million dollar run rate is without that business.

Speaker Change #133: Got you. So, thank you very much for the call, really helpful. Any more call or you can provide on the Sonoma growth rate maybe that was or maybe expected?

Gayn Erickson: Yeah, well, we're just going to stay pat on this for right now. I mean, and I'm not trying to be super elusive; we want to go see all of the customers and be able to build that up. But, you know, we'll probably get you more information. In general, also, we don't normally forecast too much going forward on all the different product lines, just for competitive reasons, too. But that's the area that I think that we are both companies most excited about trying and helping.

Speaker Change #134: Yeah, well, we're just gonna stay pat on this for right now. I mean, and I'm not trying to be super elusive. We want to go see all of the customers and be able to build that up, but you know, we'll we'll probably get you more information. In general also, we don't normally forecast too much going forward on all the different product lines just for competitive reasons, too.

Speaker Change #134: But that's the area that I think that we're both companies are most excited about.

Gayn Erickson: Although there's a bunch of Tahoe customers, too, that are asking for production volumes. So the mid-power and high-power systems are pretty interesting, and they've been growing, and you know, we would hope that we can help accelerate that growth. All right. Thank you very much.

Speaker Change #135: to try and help, although there's a bunch of Tahoe customers, too, that are asking for production volumes. So, there's the mid-power and high-power systems are pretty interesting, and they've been growing, and, you know, we would hope that we can help accelerate that growth.

Larry Edward Chlebina: The next question comes from Larry Chlebina with Chlebina Capital. Larry Chlebina, Aehr Test Sys, is going to evolve into possibly getting into heterogeneous PC chips. You know, high-volume PC chips are all going heterogeneous. Bye.

Speaker Change #136: All right. Thank you very much.

Speaker Change #136: Okay, the next question comes from Larry Chlebina with Chlebina Capital. Please proceed.

Larry Edward Chlebina: Hey, Larry.

Speaker Change #138: We've all been to possibly getting into heterogeneous PC chips, you know, high-volume PC chips are all going heterogeneous.

Gayn Erickson: Perhaps, yes. I mean, it's very interesting the dynamics in the test space that have gone on with the ADVENT, a system level test, which is highly adapted to test methodologies, as well as application-specific test methodologies that have really changed the way people look at semiconductor tests. And then with heterogeneous integration, or the idea you take these chiplets and you take all these devices, and you put them all together on even a silicon substrate. Sometimes, a silicon substrate has DRAM in it. It actually has active things inside of it.

Speaker Change #138: Bye!

Speaker Change #139: Perhaps, yes. I mean it's very interesting the dynamics in the test space that have gone on with the ADVENT, a system level test.

Speaker Change #140: which is, you know, highly adapted design for test methodologies as well as application specific.

Speaker Change #140: Test methodologies that have really changed the way people look at semiconductor tests

Speaker Change #140: And then with the heterogeneous integration, or the idea you take these chiplets, and you take all these devices, and you put them all together onto even a silicon substrate, sometimes a silicon substrate has DRAM in it, it actually has active things inside of it, and you have this...

Larry Edward Chlebina: And you have this. You know, a multi chip module unlike anything you've ever seen before, made up of, you know, a couple of compute processors, four or six stacks of high bandwidth memory, a couple of optical IO interfaces on it, etc. And you think each one of those devices I mentioned today has 100% burn in. Where are you going to do it? Do you want to do it at the package level when all those pieces are there? The answer is not if you can help it, you want to move all that stuff to a dye level.

Speaker Change #140: You know multi-chip module unlike you've ever seen before made up of you know a couple of compute processors You know four or six stacks of high bandwidth memory a couple of optical IO interfaces on it

Speaker Change #140: etc and you think each one of those devices I mentioned today has 100% burn in. Where are you going to do it?

Speaker Change #140: You want to do it at the package level when all those pieces are there? The answer is not if you can help it. You want to move all that stuff to dye level and wafer is the best way to handle the dye.

Gayn Erickson: And wafer is the best way to handle the dye. And so, you know, this whole topic just gets me excited as a nerdy test guy, because that's all good for us, and the, you know, bringing in, I keep using their code name, but INCAL, to be able to help us because they're doing, you know, the burning of those heterogeneous packages, right? I've seen them, you know; it's pretty cool. And you're watching what they're doing, and I can't help but think, well, boy, maybe we can also help some of this stuff go to wafer level, and if not, we have the package. You know, the beauties all have both.

Speaker Change #141: And so, you know, all of this whole topic just gets me excited as a nerdy test guy because that's all good for us.

Speaker Change #140: and the, you know, bringing on, I keep using their code name, but InCal to be able to help us because they're doing, you know, the burning of those heterogeneous packages, right?

Speaker Change #140: I've seen them, you know, it's pretty cool and you're watching what they're doing and I can't help but think well boy Maybe we can also help some of this stuff go to MIT to wafer level and if not, we got the package that with you know, the beauties all have both and That's where I was going next

Larry Edward Chlebina: And that's where I was going next. Yeah, it opened up the possibility to go wafer level on some of those projects. Perhaps.

Speaker Change #140: And that opened up the possibility to go wafer level on some of those projects.

Gayn Erickson: And if not, we've got them covered. I mean, I, you know, it's just way better to be able to say, you know, whatever you want. But I just think there are opportunities, and you start seeing it all blurring together. You're like, wait a minute, you've got this optical IO wafer level. You have heterogeneous, you've got, you know, stacks and stacks of high bandwidth memory. How can we get back to wafer level? Now you've got a processor that you can put into test modes and do a, you know, a long cycle burn-in in a much more scalable and lower power mode than at the system level. That might not only be an enabler for scale, but might even have you might be able to even get enough electricity to do it.

Speaker Change #140: perhaps and if not we got them covered I mean I you know it's just way better to be able to say you know whatever you want but I just think there's opportunities and you start seeing it all blurring together you're like wait a minute you got this optical IO wafer level

Speaker Change #140: You've got heterogeneous, you've got, you know, stacks and stacks of high bandwidth memory.

Speaker Change #140: How can we get back to wafer level? Now you've got a processor that you can put into test modes and do a, you know, a long cycle burn-in in a much more scalable, also lower power mode than at the system level.

Speaker Change #140: That might not only be an enabler for scale, but you might even be able to get enough electricity to do it.

Larry Edward Chlebina: And, you know, you're like, wow, it's a target-rich environment, and being able to go and actually sit down with these companies that are building them for their own use or building them for sale or building them for rent or building them, you know, it's exciting. Okay, one last question on the slash memory opportunity. I tried getting you on this at the CEO summit as this is the opportunity for a new fab.

Speaker Change #142: And, you know, you're like, wow, there's just, it's a target rich environment.

Speaker Change #146: And being able to go and actually sit down with these companies that are building them for their own use, or building them for sale, or building them for rent, or building, you know, it's exciting.

Speaker Change #143: Okay, one last question. On the flash memory opportunity, I tried getting you on this at the CEO summit, as is the opportunity in a new fab?

Larry Edward Chlebina: Or is it possibly in an existing FAB? It requires higher power than maybe existing systems can handle. This was probably one of the many questions you asked me that I said I couldn't answer till I answered for everybody, huh? You were going to answer it on the conference call, so here we go. So I think I can see both.

Speaker Change #144: Or is it possibly in an existing fab since it requires higher power than maybe existing systems can handle?

Speaker Change #145: This was probably one of the many questions you asked me that I said I can't answer till I answer for everybody, huh? You said you were going to answer it on the conference call, so here you go. All right, so I think I can see both.

Gayn Erickson: Generally speaking, people think about making big changes when it's time to do a new fab, right? So it's an easier thing to think about the new fabs that are coming online between DRAM and flash over the next, you know, four, five, six, seven years. However, having spent, you know, 20 years of my life building memory testers, I, you know, every five years I was replacing the memory tester I sold them five years ago, which sounds crazy, but you get to a point where, through parallelism, power, or capability, you can't even use the old tool.

Speaker Change #147: Generally speaking, people think about making big changes when it's time to do a new fab, right? So it's an easier cut to think about the new fabs that are coming online between DRAM and flash over the next, you know, 4, 5, 6, 7 years.

Speaker Change #148: However, having spent, you know, 20 years of my life building memory testers...

Speaker Change #147: Every five years, I was replacing the memory tester I sold them five years ago, which sounds crazy, but you get to a point where through parallelism or power or capability.

Larry Edward Chlebina: And this is true with a lot of ATE systems today. Like, you know, I was part of HP Agilent, VeriG; we were acquired by Advantest. Advantest has the 93,000 platform now that we designed at HP back in the late 1990s. And today, those 93Ks are fully compatible.

Speaker Change #147: You can't even use the old tool and this is true with a lot of ATE systems today Like, you know, I was part of, you know, HP Agilent, Verigy We're acquired by Advantest. Advantest has the 93,000 platform now that we designed in HP back in the late 90s

Speaker Change #147: And today those 93Ks are fully compatible. People may have hundreds and hundreds of these on their floor, but they'll buy a new board that goes into that machine each year to meet new capabilities.

Gayn Erickson: People may have hundreds and hundreds of these on their floor, but they'll buy a new board that goes into that machine each year to meet new capabilities. So in some ways, we built our platform similar to the Fox system. The very first Fox system we built was for flash memory, right? And people that know our history know that at the time, it felt like we were too small and a little too risky.

Speaker Change #147: So, in some ways, we built our platform similar, like the FOX system. The very first FOX system we built was for flash memory.

Speaker Change #149: Okay, and people that know our history know that at the time it was like we were too small and a little too risky and Along came a couple of companies that said you know what we're willing to look the other way on your risk Because what you have is novel and unique and I need it

Larry Edward Chlebina: And along came a couple of companies that said, you know what? We're willing to look the other way at your risk, because what you have is novel and unique. And I need it. One of them happened to be one of the part the biggest phone manufacturer in the world for facial recognition.

Speaker Change #149: One of them happened to be one of the, or the biggest phone manufacturer in the world for facial recognition.

Gayn Erickson: And another one was what is now the biggest silicon photonics company in the world for their platform. That part went into multiple different customers, multiple different applications, silicon carbide, now GAN, and these other applications where people are interested in using it. But memory is still a core target for us, and we think that we can get into that. My installed base, those customers have critical technical needs going forward in their roadmap that are going to require them to make changes. The equipment they have will not work.

Speaker Change #149: and another one was what now is the biggest silicon photonics company in the world for their platform.

Speaker Change #150: That part laid into multiple different customers, multiple different applications, Silicon Carbide, now GAN, and these other applications where people are interested in using it. But memory is still a core target for us, and we think that we can

Speaker Change #150: get into that. My install base, those customers have critical technical needs going forward in their roadmap that is going to require them to make changes. The equipment they have will not work.

Larry Edward Chlebina: And at that point, we could displace, you know, seemingly perfectly good systems in their fabs with new ones that are better. So I think it can be even greater for both.

Speaker Change #150: And at that point, we could displace, you know, seemingly perfectly good systems in their fabs with new ones that are better.

Speaker Change #150: So, I think it can be...

Gayn Erickson: I'll take one right now. I'll let you know, we're excited. This is a big deal to us that this committee people don't make this commitment lightly. And oh, by the way, there's another one we're talking about expenses. I'm gonna spend some money on this flash development this year.

Speaker Change #150: Be great if it be both.

Speaker Change #150: Me too.

Speaker Change #151: I'll take one right now. I'll take, you know, we're excited. This is a big deal to us that people don't make this commitment lightly. And, oh, by the way, there's another one. We're talking about expenses. I'm going to spend some money on this flash development this year.

Larry Edward Chlebina: You know, it's expensive what we're going to be doing. And we're going to, you know, build up some wafer packs, we're going to be doing some technology, we're going to do some prototyping, we're going to put a bunch of manpower on it. We may not make a dime this year, and it will be all that OPEX's money is worth because of this. I think this market needs it. I think flash first and DRAM.

Speaker Change #151: It's expensive, what we're going to be doing, and we're going to build up some wafer packs, we're going to be doing some technology, we're going to be doing some prototyping, we're going to put a bunch of manpower on it. We may not make a dime this year, and it will be all that OPEX's money worth spent.

Gayn Erickson: And I think we're in a great position architecturally to be able to address that. And so any one of those deals is enormous. Well, it's worthwhile doing this. All right. Thanks, Gayn. Have a good night. Thanks, Larry. There are no further questions in queue. All right, folks, thank you very much. I know that we ran a little longer than usual.

Speaker Change #151: because I think this market needs it. I think Flash First and DRAM and I think we're in a great position architecturally to be able to address that and so any one of those deals is is enormous.

Speaker Change #151: Well, it's worthwhile doing, that's for sure. All right. Thanks, Gayn. Have a good night. Thanks, Larry. Thank you.

Speaker Change #152: There are no further questions in queue.

Speaker Change #152: All right.

Gayn Erickson: We really appreciate everyone's time. We'll figure out how to make these as concise as possible as our story is no longer focused on a narrow market or two and a couple of new customers. So we'll find a way to be able to summarize and make it easier to digest.

Speaker Change #153: Folks, thank you very much. I know that we ran a little longer than normal. We really appreciate everyone's time We'll figure out how to make these as concise as possible as our story is no longer focused on a narrow

Speaker Change #153: Mark it or two, and a couple of you customers. So we'll find our way to be able to be able to summarize and make it easier to digest. But we're really excited about this, excited to head into the new year.

Operator: But we're really excited about this, excited to head into the new year, and we welcome our new friends from Intel. We're throwing a lunch for them in a couple of days, so we're excited to have them come over and meet the crew. And we'll keep you guys updated on a quarterly basis. Have a good one, and take care. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Speaker Change #153: We welcome our new friends from INCAL. We're throwing a lunch for them in a couple of days, and we're excited to host them to come over and meet the crew, and we'll keep you guys updated on a quarterly basis. Have a good one and take care.

Speaker Change #154: This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.