Q1 2025 Aehr Test Systems Inc Earnings Call

Greetings.

Speaker Change: Welcome to the Air systems fiscal 2025 first quarter 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. Please note. This conference is being recorded I will now turn the conference.

Speaker Change: Over to your host Jim Byers at N K R. Investor Relations you may begin.

Jim Byers: Thank you operator, good afternoon, and welcome to Air Test systems first quarter fiscal 2025 financial results Conference call.

Jim Byers: With me on todays call are Eric has systems', President and Chief Executive Officer gain Erickson.

Speaker Change: And CFO, Chris you.

Speaker Change: Before I turn the call over to gain and Chris I'd like to cover a few quick items. This afternoon. After market close Air Test issued a press release announcing its first quarter of fiscal 2025 result.

Speaker Change: That release is available on the company's website at air Dotcom.

Speaker Change: This call is also being broadcast live over the Internet for all interested parties and the webcast will be archived on the Investor Relations page of Air's website.

Speaker Change: I'd like to remind everyone that on today's call management will be making forward looking statements. Today that are based on current information and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements.

Speaker Change: These factors that may cause results to differ materially.

Speaker Change: And those in the forward looking statements are discussed in the company's most recent periodic and current reports.

Speaker Change: Filed with the SEC. These forward looking statements, including guidance provided during today's call.

Speaker Change: There are only valid as of this state in your test systems undertakes no obligation to update the forward looking statements.

Gain Erickson: And now I'd like to turn the conference call over to gain Erickson, President and CEO.

Gain Erickson: Thanks, Tim Good afternoon, everyone and welcome to our first quarter fiscal 2025 earnings conference call. Thanks for joining us today.

Gain Erickson: Just as a heads up we do these live and I manage to have a cough with a little bit of a tickle. So I don't think I'm gonna be you'll get through with all of this without coffee, but if I'm. Good I'll hit the mute button and you won't catch up but I apologize if I caught in the middle here.

Speaker Change: Like to start with a quick summary of the highlights of the quarter and spend some time, giving an update on what we're seeing across the key markets areas addressing for semiconductor test and burn in including increasing traction in some new markets.

Speaker Change: I also plan to spend a little time on our latest expansion in the burn in market with our acquisition of in cab technology. This last quarter, then Chris will go over the financials in more detail and after that we'll open up the lines to take your questions.

We finished the first quarter with revenue and non-GAAP net income ahead of consensus estimates and are off to a good start to our fiscal year silicon carbide wafer level burn in test systems and full wafer contactor are poised to be a key contributors to revenue against this year.

Speaker Change: We're also forecasting material bookings and revenue contributions from several other markets. This fiscal year as we're successfully executing our strategy to expand our test and burn in products into other large and fast growing markets such as artificial intelligence processors gallium nitride power semiconductor Howard hard disk drive components.

Speaker Change: And flash memory devices.

Gayn Erickson: My plan is to cover each of these markets, beginning with the Wave of Level Test in Burn-In for Silicon Carbide devices. We've been seeing a stabilization and increasingly positive discussions within the Silicon Carbide Power Simic Connector Market over the past quarter. The Silicon Carbide Market continues to feel like a typical new technology adoption cycle, which often starts with early enthusiasm and rapid growth projections from early adopters.

Speaker Change: I plan to cover each of these markets beginning with wafer level test and burn in for Silicon carbide devices.

Speaker Change: We've been seeing a stabilization and increasingly positive discussions within the silicon carbide power semiconductor market over the past quarter.

Speaker Change: Silicon carbide market continues to feel like a typical new technology adoption cycle, which often starts with early enthusiasm and rapid growth projections from early adopters, followed by a period of adjustment and slower growth in a bottle that bottoming of that growth before higher growth resumes to new highs.

Gayn Erickson: Followed by a period of adjustment and slower growth, and a bottoming of that growth before higher growth resumes to new highs. Electric vehicle suppliers are clearly moving toward silicon carbide and integrated modules, combining silicon carbide MOSFETs into single packages to meet the industry's power, efficiency, and cost-effectiveness demands. Some EV suppliers are shifting to integrated modules containing up to 32 or more devices in a three-phase inverter module, due to the need for extensive test and burn-in of these devices to ensure reliability for mission-critical applications such as EVs. The benefits of conducting the screening at the Wave of Level before integrating them into modules are very clear.

Speaker Change: Electric vehicle suppliers are clearly moving towards silicon carbide and integrated modules, combining silicon carbide MOSFET into single packages to meet the industry's power efficiency and cost effectiveness demands. Some EV suppliers are shifting to integrated modules containing up to 32 or more devices in a three phase inverter module.

Speaker Change: Due to the need for extensive test and burn in of these devices to ensure reliability for mission critical applications, such as Evs the benefits of conducting the screening at the wafer level before integrating them into modules are very clear.

Gayn Erickson: The process improves yields, reduces costs, and this is driving demand for Wave of Level Burn-In, an area where air tests stands as the low cost leader and proven solution for this critical testing. In recent weeks, air has presented several industry shows, including the Power-Up Conference in Italy three weeks ago, as well as the ISCS Power Simic Connector and the Ice Cream Conferences in the US over the past two weeks. The overall message from these conferences is that EV manufacturers are standardizing on modules. With some even moving towards integrated inverter systems supplied by the semiconductor companies themselves, instead of the traditional tier one suppliers of the past, who served as a middleman.

Speaker Change: The process improves yields reduces costs.

Speaker Change: And this is driving demand for wafer level burn in an area, where air test stands as the low cost leader and proven solution for this critical testing.

Speaker Change: In recent weeks Air has presented at several industry shows, including the power up conference in Italy, three weeks ago, as well as the Ics power semiconductor and the.

Speaker Change: Ice cream conferences in the U S over the past two weeks.

Speaker Change: The overall message from these conferences is that EV manufacturers are standardizing on modules with some even moving towards the entire integrated inverter systems supplied by the semiconductor companies themselves instead of the traditional tier one suppliers of the past who served as a middleman.

Gayn Erickson: The key takeaway from these trade conferences, as well as conversations with EVs, auto-OEMs, is the critical importance of the testing and burn-in process to eliminate early life failures that would otherwise occur once these devices are integrated into inverters or full drive units in electric vehicles. Silicon carbide suppliers have varying opinions and standards when it comes to quality, leading to significant shifts in market share, as some suppliers struggle to meet the integration and quality demands of EV manufacturers. For air, this presents a positive opportunity as the market shifts towards suppliers that are capable of delivering integrated systems and high quality products.

Speaker Change: The key takeaway from these trade conferences as well as conversations with <unk> Auto Oems is the critical importance of the testing and burn in process to eliminate early life failures that would otherwise occur. Once these devices are integrated into Inverters are full drive units in electric vehicles.

Speaker Change: <unk> carbide suppliers have varying opinions and standards when it comes to quality leading to significant shifts in market share as some suppliers struggled to meet the integration and quality demands of EV manufacturers.

For Air this presents a positive opportunity as the market shifts towards suppliers that are capable of delivering integrated systems and high quality products.

Gayn Erickson: We're making steady progress on our previously announced benchmarks and engagements with new silicon carbide device and module suppliers. We're confident that we will add several new Silicon Carbide customers this year, establishing our solution as their tool of record for volume production. Additionally, silicon carbide is gaining traction and applications beyond electric vehicles, such as solar, industrial, and data centers, which will expand our addressable markets. We're highly optimistic about a Silicon Carbide business and expected to gain momentum over the next few quarters. Our silicon carbide customers are forecasting capacity expansion needs in calendar 2025. With several anticipating purchases of one or two systems in early 2025, followed by production volumes in the second half of the year and ramping further into 2020 set.

Speaker Change: We're making steady progress on our previously announced benchmarks and engagements with new Silicon carbide device and module suppliers. We're confident that we will add several new silicon carbide customers. This year, establishing our solution as a tool of record for volume production and.

Speaker Change: Additionally, silicon carbide is gaining traction in applications beyond electric vehicles, such as solar industrial and data centers, which will expand our addressable markets.

Speaker Change: We're highly optimistic about our silicon carbide business and expect it to gain momentum over the next few quarters, our silicon carbide customers are forecasting capacity expansion needs in calendar 2025, with several anticipating purchases of one or two systems. In early 2025, followed by production volumes in the second half of the year and ramping further into <unk>.

Speaker Change: 26.

Gayn Erickson: Separate from incremental system capacity increases, we continue to see strong demand for a box way for packed full-way for contactors for silicon carbide and other markets for our installed base of box XP and box NP way for low-tested and burn-in systems driven by a record number of new device design started this past quarter. These designs are expected to lead to additional ways for packed purchases for engineering qualification, as well as to volume production orders as advanced to production. We had another solid quarter for way for packed sales, generating over $12 million in revenue for way for packs alone in the first quarter.

Separate from incremental system capacity increases.

Speaker Change: We continue to see strong demand for our Fox wafer pack full wafer contactor for silicon carbide and other markets for our installed base of Fox XP and Fox NP wafer level test and burn in systems, driven by a record number of new device device design started this past quarter.

Speaker Change: These designs are expected to lead to additional wafer pack purchases for engineering qualification as well as to volume production orders as you advance to production we.

We had another solid quarter for wafer pack sales generating over $12 million in revenue for wafer packs alone in the first quarter.

Gayn Erickson: Now let me move on and discuss our progress with testing and burning in gallium nitride power semiconductors. We're now in negotiations with our first gallium nitride customer or gang customer for volume production way for low-tested and burn-in other devices. We've been working closely with them, and over the past year, they have purchased and we have delivered a significant number of way for packs to successfully qualify a wide range of gang device types aimed at multiple different markets, including consumer, industrial, and automotive. In addition, we had increased discussions and engagements with multiple potential new gang suppliers about their needs.

Speaker Change: Now, let me move on and discuss our progress with testing and burning and gallium gallium nitride power semiconductors.

Speaker Change: We're now in negotiations with our first gallium nitride customer again customer for volume production wafer level test and burn in of their devices. We've been worked really working closely with them and over the past year. They are purchased and we have delivered a significant number of wafer packs to successfully qualify a wide range of Gan device types aimed.

Speaker Change: At multiple different markets, including consumer industrial and automotive in.

Speaker Change: In addition, we had increased discussions and engagements with multiple potential new Gan suppliers about their needs.

Gayn Erickson: The data collected from multiple gang companies shows that these devices will lead burn-in to meet the requirements of many of the markets they're targeted for, particularly industrial and automotive applications. We believe gang is a significant up-and-coming technology for power semiconductors. With a forecasted compound annual growth rate of more than 40 percent, to over $2 billion in gang devices sold annually by 2029, gang has the potential to be a significant market opportunity for errors way for level solutions. It's also interesting to note that several of our current and prospective customers value the fact that air can provide proven test and burning capabilities that successfully address both silicon carbide and the gang devices.

Speaker Change: The data collected from multiple again companies shows that these devices will need burn in to meet the requirements of many of the markets, they're targeted for particularly industrial and automotive applications. We believe Gan is a significant up and coming technology for power semiconductors with a forecasted compound annual growth rate of more than 40.

Speaker Change: <unk> to over $2 billion in Gan devices sold annually by 2029 Gan has the potential to be a significant market opportunity for arris wafer level solutions.

Speaker Change: It's also interesting to note that several of our current and prospective customers value. The fact that Eric can provide proven test and burn in capabilities that successfully address both silicon carbide and again devices.

Gayn Erickson: The testing of each is quite different. However, we can address the requirements of each market with the unique proprietary features and capabilities in the same system on our facts box platform. We continue to make investments in our platform with new capabilities and enhancements that enable us to provide value to these customers, expand our markets, and maintain our leadership position as a low-cost proven solution.

Speaker Change: The testing of each is quite different.

Speaker Change: However, we can address the requirements of each market with the unique proprietary features and capabilities in the same system on our Fox Fox platform.

Speaker Change: We continue to make investments in our platform with new capabilities and enhancements that enable us to provide value to these customers expand our markets and maintain our leadership position as a low cost proven solution.

Gayn Erickson: So moving on to the artificial intelligence processor market. Last quarter, we announced that an AI accelerator company committed to evaluating our Fox solution for a wait for level test and burn in other high-power processors. This evaluation is very far along at our free-month facility, where multiple waiters are being tested using our proprietary wait for packs, and new high-power Fox XP and NP systems, which provide up to 3,500 watts of power delivery and thermal control per wafer. We are delivering over 2,000 amperes of current to a single 300 millimeter wafer, allowing us to burn in a large number of processors in parallel with our proprietary test mode.

Speaker Change: So moving on to the artificial intelligence processor market.

Speaker Change: Last quarter, we announced that an AI accelerator company committed to evaluating our Fox solution for wafer level test and burn in other high power processors. This evaluation is very far along at our Fremont facility, where multiple wafers are being tested using our proprietary wafer packs and new high power Fox XP NP.

Speaker Change: Systems, which provide up to 3500 watts of power delivery and thermal control per wafer.

Speaker Change: We are delivering over 2000 and peers are current to a single 300 millimeter wafer, allowing us to burn in a large number of processors in parallel with our proprietary test modes.

Gayn Erickson: This company is working closely with us to be able to use the FOXXB system for wafer-level production burn and other processors, which would prove to be more cost-effective and significantly more scalable than doing the screening later in their manufacturing process. We think this presents a significant opportunity to displace 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. This evaluation is progressing very well, and once we demonstrate successful wafer-level test results in throughput, we anticipate they will adopt our high-power FOXXB systems for production of the next generation AI processors, beginning this fiscal year.

This company is working closely with us to be able to use the Fox XP system for wafer level production burn in of their processors, which would prove to be more cost effective and significantly more scalable than doing the screening later in their manufacturing process.

Speaker Change: We think this presents a significant opportunity to displace the current package and system level test 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 Fox XP system.

Speaker Change: This evaluation is progressing very well and once we demonstrate successful wafer level test results and throughput we anticipate they will adopt our high power Fox XP systems for production of their next generation AI processors, beginning this fiscal year.

Gayn Erickson: As we've noted before, based on the production forecast, we believe they could potentially be more than a 10% customer for us this fiscal year alone.

Speaker Change: As we've noted before based on their production forecast, we believe they could potentially be more than a 10% customer for us this fiscal year alone.

Gayn Erickson: Turning to our acquisition of NCAL. During the quarter, we announced and completed our acquisition of NCAL technology, expanding our product portfolio to include NCAL's highly acclaimed package-part reliability burn-in and test solutions, particularly its ultra-high-power capabilities for AI processors, GPUs, and high-performance computing processors. These advanced high-power capabilities combine with air's industry leading lineup of wafer-level test and reliability solutions positioned us strongly to capitalize on the significant and rapidly growing opportunities in the AI semiconductor market. This acquisition greatly expands our addressable market, enabling us to provide a comprehensive turnkey solution for reliability and testing from engineering to high-volume production to the rapidly growing AI semiconductor market.

Speaker Change: Turning to our acquisition of income.

Speaker Change: During the quarter, we announced and completed our acquisition of <unk> technology, expanding our product portfolio to include <unk> highly acclaimed packaged part reliability burn in and test solutions, particularly its ultra high power capabilities for AI processors, Gpus and high performance computing processes. These.

Speaker Change: These advanced high power capabilities combined with <unk> industry, leading lineup of wafer level test and reliability solutions position us strongly to capitalize on the significant and rapidly growing opportunities in the AI semiconductor market.

Speaker Change: This acquisition greatly expands our addressable market, enabling us to provide a comprehensive turnkey solution for reliability and testing from engineering to high volume production to the rapidly growing AI semiconductor market.

Gayn Erickson: We're excited to bring the combined strengths of both companies to market as we begin engaging with NCAL's customers, including many AI industry leaders. Customer feedback on this acquisition has been overwhelmingly positive, with several meetings held over the past few weeks where some customers indicated increased forecasts for engineering qualification as well as for volume production. Last month, we were pleased to announce the first volume production orders for NCAL's new Sonoma ultra-high-power semiconductor test and burn-in solution for test of AI processors. These orders were placed by a large-scale data center hyper-scaler that provides computing power and storage capacity to millions of users worldwide today.

Speaker Change: We're excited to bring the combined strengths of both companies to market as we began engaging with <unk> customers, including many AI industry leaders.

Speaker Change: Customer feedback on this acquisition has been overwhelmingly positive with several meetings held over the past few weeks, where some customers indicated increased forecast for engineering qualification as well as for volume production.

Speaker Change: Last month, we were pleased to announce the first volume production orders for Intel's, New Sonoma Ultra high power semiconductor test and burn in solution for test of AI processors.

Speaker Change: These orders were placed by a large scale data center hyperscale or that provides computing power and storage capacity to millions of users worldwide today.

Gayn Erickson: We've also had many customers express interest in NCAL's medium-powered Tahoe system, which is being used today across multiple market applications for both qualification and volume production. This includes multiple medical companies that use the Tahoe system's special capabilities for production test and burn-in of devices in a critical medical device application. This speaks to the special capabilities of these systems and the quality of their hardware and software to meet the critical traceability requirements of the U.S. Food and Drug Administration. The integration with NCAL is progressing well, and employees from both companies have been very positive about the combination.

Speaker Change: We've also had many customers expressed interest in <unk> medium power Tahoe system, which is being used today across multiple market applications for both qualification and volume production.

Speaker Change: This includes multiple medical companies that use the Tahoe system special capabilities for production test and burn in of devices in a critical medical device application.

Speaker Change: This speaks to the special capabilities of these systems and the quality of their hardware and software to meet the critical traceability requirements of the U S food and drug administration.

Speaker Change: The integration with <unk> is progressing well and employees from both companies have been very positive about the combination we have already shipped several systems since the acquisition and within <unk> being just down the road from US we plan to consolidate personnel and manufacturing into air is much larger Fremont facility by the end of the fiscal year.

Gayn Erickson: We've already shipped several systems since the acquisition, and with NCAL being just down the road from us, we plan to consolidate personnel and manufacturing into our much larger free-month facility by the end of the fiscal year. As we've mentioned before, we're underway with an upgrade in remodeling of our Fremont headquarters this year; in fact, right now. And our ensuring our facility infrastructure meets the needs of both companies. We expect this ramp to drive orders for multiple Fox CP production systems and wafer pack contactors, with shipments likely occurring in the second half of this fiscal year.

Speaker Change: As we've mentioned before we're underway with an upgrade in remodeling of our Fremont headquarters. This year in fact, right now and are ensuring our facility infrastructure meats.

Speaker Change: Meets the needs of both companies.

Speaker Change: So turning to our hard disk drive market last quarter, we also announced a key customer in the hard disk drive space that is now forecasting a production ramp up starting this fiscal year for new high volume data storage device application. This customer is finalizing their capacity requirements and we expect this ramp to drive orders for multiple Fox CP production.

<unk> and wafer pack contractors with shipments likely occurring in the second half of this fiscal year as we've noted before they could even be a 10% customer for us as well.

Gayn Erickson: As we've noted before, they could even be a 10% customer for us as well. As some of you may recall, this is a major customer that we announced in 2019 pre-COVID that purchased our Fox CP, our single wafer test and burn-in solution for wafer level test and burn-in other devices in this very high volume application for enterprise and data center market.

As some of you may recall this is a major customer that we announced in 2019 pre COVID-19 that purchased our Fox CP, our single wafer test and burn in solution for wafer level test and burn in of their devices and this very high volume application for enterprise and data center market.

Gayn Erickson: We see the data storage market, along with various devices supporting the global 5G expansion, as new growth opportunities for our systems. As these markets require devices with exceptionally high levels of quality and long-term reliability.

Speaker Change: We see the data storage market, along with various devices supporting the global <unk> expansion as new growth opportunities for our systems as these markets require devices with exceptionally high levels of quality and long term reliability.

Gayn Erickson: And lastly, let me talk about the NAND flash memory market. We're excited about the ongoing progress of our benchmark with a leading flash memory manufacturer we announced last quarter. This benchmark is aimed at assessing the potential of our Fox XP solution for wafer level test and burn in other flash memory devices. This evaluation focuses on providing 100% turn in 100% test and burn-in for devices intended for high reliability applications such as enterprise storage. We're currently developing a new high pin count fine pitch wafer pack that can support flash memory requirements, but can also support DRAM testing should customers choose to pursue DRAM burn and in the future.

Speaker Change: And lastly, let me talk about the NAND flash memory market.

Speaker Change: We're excited about the ongoing progress of our benchmark with a leading flash memory manufacturer, we announced last quarter. This benchmark is aimed at assessing the potential of our Fox XP solution for wafer level test and burn in of their flash memory devices.

Speaker Change: This evaluation focuses on providing 100% turning 100% test and burn in for devices intended for high reliability applications, such as enterprise storage. We're currently developing a new high pin count fine pitch wafer pack that can support flash memory requirements, but can also support DRAM testing.

Speaker Change: Should customers choose to pursue DRAM burn in in the future RF.

Gayn Erickson: Our objective remains to complete the proof of concept by the end of this fiscal year, positioning us to secure a commitment from this customer to develop a production test cell with the potential to contribute to revenue in our fiscal 2026, which both begins next June. As I've noted before, we believe this is the front end of an exciting and potentially enormous opportunity for our solutions, and we see the NAND Flash market as a key market opportunity with long-term potential to also move into DRAM wafer level test and burn in. With all these customer engagements, market opportunities, and the products to address them, we're very optimistic about the year ahead, and we're reaffirming our financial guidance for revenue growth and profitability for the year.

Speaker Change: Our objective remains to complete the proof of concept by the end of this fiscal year positioning us to secure a commitment from this customer to develop a production test cell with the potential to contribute to revenue in our fiscal 2026, which begins next June.

Speaker Change: As I've noted before we believe this is the front end of an exciting and potentially enormous opportunity for our solutions and we see the NAND flash market is a key market opportunity with long term potential to also move into DRAM wafer level test and burn in.

Speaker Change: With all these customer engagements market opportunities and the products to address them. We're very optimistic about the year ahead, and we are reaffirming our financial guidance for revenue growth and profitability for the year with that let me turn it over to Chris before we open up the line for questions.

Gayn Erickson: Without, let me turn it over to Chris before we open up the line for questions.

Chris Siu: Thank you, Gay. Before I turn to a review of our financial results, I'd like to note that over the past 12 months, it has invested financial and human resources in improving our own infrastructure to support the continuing growth of our business. Recently, when live with a new enterprise resource planning system in September, that would provide more sophisticated functionalities and capabilities to support decision making and compliance. We expand our policies and procedures in various functions to provide more internal control and structure. We have made improvements in our supply chain and engaged with contract manufacturers that offer more value at the quality components and services to support our growth.

Chris: Thank you.

Chris: Before I turn to a review of our financial results I would like to note that over the past 12 months <unk> has invested financial and human resources and improving our own infrastructure to support the continued growth of our business.

Chris: We recently went live with our new enterprise resource planning system in September that will provide more sophisticated functionalities and capabilities to support decision, making and compliance.

Chris: We spend our policies and procedures in various functions to provide more internal control and structure.

Chris: We have made improvements in our supply chain and engage with contract manufacturers that offer more value added quality components and services to support our growth.

Chris Siu: I would like to thank our teams for the dedication and strong execution, with a more robust infrastructure in place, with more ready than ever to support both our organic and inorganic growth. Also, as Gay noted, the integration of our INCOW acquisition, which closed on July 31st, is progressing well. Our plan is to consolidate personnel and manufacturing into AERS' free-month facility by the end of the fiscal year. With the upgrade and the remodeling of our free-month headquarters underway, we are ensuring our facility infrastructure meets the needs of both companies.

Chris: I would like to thank our teams for their dedication and strong execution.

Chris: With a more robust infrastructure in place, we are more ready than ever to support both our organic and inorganic growth.

Speaker Change: Also as Gaye noted the integration of <unk>.

Speaker Change: <unk> acquisition, which closed on July 30 <unk>.

Speaker Change: Progressing well.

Speaker Change: Our plan is to consolidate personnel and manufacturing into areas Fremont facility by the end of the fiscal year.

Speaker Change: With the upgrade and the remodeling of our Fremont headquarters underway.

Speaker Change: We are ensuring our facility infrastructure and meets the needs of both companies.

Chris Siu: Now, turning to our Q1 performance, which included one month of financial results from the INCOW acquisition. Our Q1 results exceeded analyst consensus on both the top and bottom lines. Under the current challenging market and macroeconomic environment, first quarter revenue was 13.1 million, down 36% from 20.6 million in Q1 last year. Demand for Wavapak's contributed to the majority of our total revenue in the first quarter. Wavapak revenues came in at 12.1 million, and accounted for 92% of our total revenue in the first quarter. Significantly higher than 55% of the prior year's first quarter revenue. Wavapak revenues continued to represent a significant recurring revenue stream for our business.

Speaker Change: Now turning to our Q1 performance, which included one month of financial results from the <unk> acquisition.

Q1, we sold exceeded analysts' consensus on both the top and bottom lines.

Under the current challenging market and macroeconomic environment first quarter revenue was $13 1 million down 36% from $20 6 million in Q1 last year.

Speaker Change: Demand for our wafer packs contributed to the majority of our total revenue in the first quarter.

Speaker Change: Wafer pack revenues came in at $12 1 million and accounted for 92%, although total revenue in the first quarter significantly higher than 55% of the prior year's first quarter revenue.

Speaker Change: Wafer pack revenues continued to represent a significant recurring revenue stream for our business as our customers continue to utilize the available installed base of Fox XP systems for new custom customer design wins and purchase additional new wave of packs from air to test and burn in this new devices.

Chris Siu: As our customers continued to utilize their available install base of FoxxP systems for new customer design wins, and purchased additional new Wavapak, some air to test and burn in these new devices. Non-GAP growth model for the first quarter came in at 54.7%, compared to 48.7% year over year. The increase in non-GAP growth margin was primarily due to favorable product mix of higher margin Wavapak's. Non-GAAP operating expenses in the first quarter were 5.5 million, essentially flat, compared to 5.4 million in Q1 last year. We incurred income tax expense in Q1, and our effective tax rate was 18.9%.

Speaker Change: non-GAAP gross margin for the first quarter came in at 54, 7% compared to 48, 7% year over year.

Speaker Change: The increase in non-GAAP gross margin was primarily due to a favorable product mix of higher margin wafer packs non.

Speaker Change: non-GAAP operating expenses in the first quarter were $5 5 million essentially flat compared to $5 $4 million in Q1 last year.

Speaker Change: We incurred income tax expense in Q1, and our effective tax rate was 18, 9%.

Chris Siu: Non-GAAP net income for the first quarter, which excludes the impact of stock-based compensation, acquisition-related costs, and monetization of intangible assets acquired through the income acquisition, was 2.2 million or 7 cents per dollar share for the first quarter, compared to non-GAAP net income of 5.2 million or 18 cents per dollar share in the first quarter of fiscal 2024. Our bad luck as of Q1 was 16.6 million.

Speaker Change: non-GAAP net income for the first quarter, which excludes the impact of stock based compensation acquisition related costs and amortization of intangible assets acquired through the <unk> acquisition was $2 2 million or seven.

Speaker Change: Per diluted share for the first quarter compared to non-GAAP net income of $5 $2 million or <unk> 18 per diluted share in the first quarter of fiscal 2024.

Speaker Change: Our backlog as of Q1 was $16 6 million.

Chris Siu: Now turning to our cash flows and the balance sheet. We generated 2.4 million in operating cash flows in Q1. Our cash, cash equivalent, and restricted cash were 40.8 million at the end of Q1, down from $49.3 million at the end of Q4 last year. Resulting from the 10.6 million of our cash on hand used to fund the acquisition of income technology during the quarter. We have zero debt and continue to invest our excess cash in money market funds. Interest income earned during this high interest rate environment was $681,000 in the first quarter, up 17% from the same quarter last year.

Speaker Change: Now turning to our cash flows and the balance sheet.

Speaker Change: We generated $2 4 million in operating cash flows in Q1 <unk>.

Speaker Change: Our cash cash equivalents and restricted cash were $40 8 million at the end of Q1 down from $49 3 million at the end of Q4 last year.

Speaker Change: The resulting from the $10 $6 million of our cash on hand used to fund the acquisition of <unk> technology during the quarter.

Speaker Change: We have zero debt and continue to invest our excess cash and money market funds.

Speaker Change: Interest income earned during this high interest rate environment was $681000 in the first quarter up 17% from the same quarter last year.

Chris Siu: Our previous S3 registration statement, which was filed in September 2021, expires recently. Since we did not sell any shares through the ATM offering during the open trading window in August, about 42.7 million of ATM that could have been sold under the previous S3 was not utilized. As part of our good corporate governance practices, we plan to file a new S-3 with the Securities and Exchange Commission soon to support potential future financing needs. Once approved, the new S3 self-filing will be good for three years.

Speaker Change: Our previous S. Three registration statement, which was filed in September 2021 expired recently.

Speaker Change: Since we did not sell any shares through the ATM offering during the open trading window in August.

Speaker Change: $42 $7 million of ATM that could have been sold under the previous estimate was not utilized.

Speaker Change: As part of our good corporate governance practices, we plan to filed a new S. Three with the Securities and Exchange Commission soon to support potential future financing needs.

Speaker Change: Once approved the new S. Three itself self filing will be good for three years.

Chris Siu: Now turning to our outlook for the current fiscal 2025 that ends on May 30, 2025. As Gay mentioned, we are reforming our previously provided guidance for the fiscal year of total revenue of at least 70 million and net profit before taxes of at least 10% of revenue. We expect approximately 85% of our forecasted annual revenue to come from waiver level burning and around 15% from package part burning driven by our acquisition of INCAL.

Now turning to our outlook for the current fiscal 2025 that ends on May 32025, as Jim mentioned, we are affirming our previously provided guidance for the fiscal year of total revenue of at least $70 million and net profit before taxes of at least 10% of revenue.

Speaker Change: We expect approximately 85% of our forecasted annual revenue to come from wafer level burn in and around 15% from packaged part burn in driven by our acquisition of income.

Chris Siu: Lastly, looking at the investor relations calendar, AETES will meet with investors at the LDM MicroMain event in Los Angeles on Tuesday, October 29th. And then the following month, we will participate in a Quake Halum Alpha conference in New York on Tuesday, November 19th. Then on Tuesday, December 17th, we head back to New York City to attend NYC Summit. After the new year, we will participate virtually at the NIM Growth Conference on Thursday, January 16th, 2025. We hope to see some of you at this conference.

Speaker Change: Lastly.

Speaker Change: Looking at the Investor Relations calendar test will meet with investors at the LD Micro main event in Los Angeles on Tuesday October 29.

And then the following month, we will participate in the Quake Hallum Alpha Conference in New York on Tuesday November 19.

Speaker Change: And on Tuesday December 17, we heading back to New York City to attend to NYSE summit.

Speaker Change: After the new year, we will participate virtually at the Needham growth conference on Thursday January 16 2025.

Speaker Change: Hope to see some of you had this conferences.

Operator: This concludes our prepared remarks. We're now ready to take your questions.

Speaker Change: This concludes our prepared remarks, we're now ready to take your questions. Operator. Please go ahead.

Operator: I'll pray to please go ahead. Thank you.

Speaker Change: Thank you at this time, we will be conducting a question and answer session.

Operator: 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 tone will indicate your line is in the question queue. You may press star two if you would 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 keys. One moment, please, while we poll for questions. Once again, please press star one if you have a question or a comment.

Speaker Change: Like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would 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 keys, one moment. Please while we poll for questions once again.

Speaker Change: Press Star one if you have a question or comment.

Christian Schwab: Okay, our first question comes from Christian Schwab with Greg Halum. Please proceed.

Okay. Our first question comes from Christian Schwab with Craig Hallum. Please proceed.

Christian Schwab: Hey, this is Christian.

Christian Schwab: And this is Christian again, so can you.

Gayn Erickson: So can you on the silicon carbide, the additional customer commentary about getting to additional customers this year? Are these customers that you've been working with in the past, and alongside that, can you give us the idea of how you would anticipate that ramping in near-term and then over time? I mean, can they become as material and your current and larger customer and larger customer?

Christian Schwab: On the silicon.

Speaker Change: The additional customer.

Speaker Change: Jerry about getting two additional customers this year.

Christian Schwab: Are these customers that you've been working with in the past.

Christian Schwab: And alongside that can you give us an idea of how.

Christian Schwab: You would anticipate that ramping.

Christian Schwab: And near cherish them overtime.

Christian Schwab: Material.

Christian Schwab: Yes.

Christian Schwab: Current largest customer important goodbye.

Gayn Erickson: Okay. Sure. It's actually some of the same old story of some of the folks that we anticipated would have bought their first systems last spring, really, that we're now basically the ramps and decision time lanes have pushed. So I'd say two or three of those are actually sort of the same guys; that's just kind of a year later. But there's also... Two, I think in our forecast anyhow, or high likelihood forecast, that are, we're not anticipated last year, that have, you know, come online over the last, we've been working with them over the last, you know, say, three to six months, engaged in paper benchmarks and other financial things that are also looking very good.

Christian Schwab: Okay sure.

Christian Schwab: Yes, it's actually some of the same old story.

Christian Schwab: Some of the folks that we anticipated would have bought their first systems last spring really.

Christian Schwab: We're now basically their ramps and decision timelines have pushed so I'd say two or three of those are actually sort of the same guys. That's just kind of a year later.

Christian Schwab: But there is also.

Christian Schwab: Two.

Christian Schwab: I think in our forecast anyhow are high likelihood forecast that are were not anticipated last year that have.

Christian Schwab: Come online over the last we've been working with them over the last say three to six months.

Christian Schwab: <unk> engaged in paper benchmarks and other financial things that are also looking very good so.

Gayn Erickson: So, I wouldn't ask you to go say I'm going to win six new customers, but there's the potential for it. The interesting thing is what it feels like, from, you know, probably their end markets, why they all feel similar, is everyone seems to be talking about putting, you know, like first tools in place, somewhere between the end, literally the very end of this year till, I don’t know, springtime frame till maybe May, kind of within our fiscal year, which we think that the wind feels like it’s, you know, maybe one or two systems. And then they ramp into the fall based upon a number of the EV data center, even maybe some potential solar winds that are driving capacity by that time frame.

Christian Schwab: I wouldn't ask you to go and say I'm going to win six new customers, but there is that there is the potential for it.

Christian Schwab: The interesting thing is what it feels like from.

Christian Schwab: Probably there end markets, while they all feel similar is everyone seems to be talking about putting first tools in place.

Christian Schwab: Somewhere between the end literally the very end of this year till I don't know spring timeframe till may be may kind of within our fiscal year, which we think that when it feels like it's maybe one or two systems and then they ramp into the fall based upon a number of the EV data center.

Christian Schwab: Sure.

Christian Schwab: Even maybe some potential solar winds that are driving capacity by that timeframe.

Gayn Erickson: And that aligns with the, you know, the physical buildings. You know, one of the things that was going on about a year ago is there's sort of this excitement. I'll use that word around how fast everything's going to be adopted. You know, I'm looking at a, you know, a land of dirt. And it's like, that building is not going to ship MOSFETs next year. I don't know what people are thinking, but it's too aggressive. Now, you know, the forecast seemed to align with the physical buildings, with the OEMs that are, you know, describing which cars they're going into, etc.

And that aligns with the.

The physical buildings, one of the things that was going on about a year ago and there's sort of this.

Christian Schwab: Excitement I'll use that word around how fast everything is going to be adopted.

Christian Schwab: Im looking at.

Christian Schwab: Land of dirt and it's like that building is not going to ship MOSFET next year I don't know what people are thinking, but it's too aggressive now.

Christian Schwab: The forecast seem to align with the physical buildings with the Oems that are describing which cars are going into et cetera.

Gayn Erickson: You know, and are still forecasting those cars you're moving forward. And this includes, you know, OEMs that include China, other Asia, Korea, the US, and particularly European suppliers.

Christian Schwab: And are still forecasting those cars moving forward and this includes.

Christian Schwab: That would include China Other Asia Korea.

Christian Schwab: And particularly European suppliers so.

Gayn Erickson: So, I hope that helped to explain it.

Christian Schwab: I hope that helped to explain it.

Christian Schwab: I guess it still wasn't clear to me.

Speaker Change: I guess it wasn't clear to me.

Gayn Erickson: Oh, the five, five of your five potential, or six potential customers are, you know, can you give us like real colors? Yeah, the size. You're right. I forgot to say that. I didn't actually didn't mean to drop that. So, I would say, you know, one of the things that, and you heard it in my prepared remarks, it's very, you know, and I have been constant at these public conferences. Vernon has been asked to speak as well. We have tested enough wafers. I mean, we've tested more silicon power by customers' wafers than anyone by far, to where we have a huge cross section of data.

Speaker Change: Bye now.

Speaker Change: Again, Joe.

Speaker Change: Potential across commodities.

Speaker Change: Alright.

Speaker Change: Yes, Youre right I forgot to say that I didn't ask you didn't mean to drop that so.

Speaker Change: I would say one of the things that and you heard it in my prepared remarks.

Speaker Change: It's very and I have been constant at these public conferences Vernon has been asked to speak as well.

Speaker Change: We have tested enough wafers I mean, we've tested more silicon carbide customers wafers than anyone by far to where we have a huge cross section of data and we just simply make this statement that if you want to do automotive quality down to sub part per million failure rates.

Gayn Erickson: And we just simply make the statement that if you want to do automotive quality down to subpart per million failure rates of these things, you need to do an extended burn-in, not just a simple screen, that's measured in hours. And I would say that each of the customers that we're talking to right now, that's what they're saying. They're all talking about, you know, these extended multi-hour, 612 plus, even up to 24, to begin with our burn-in times that would be consistent with the automotive guys. And it's been repeated by the OEMs as a critical requirement.

Speaker Change: So these things yet need to do an extended burn in not just a simple screen.

Speaker Change: That's measured in hours and I would say that each of the customers that we're talking to right now that's what they're saying, they're all talking about these extended multi hour 612, plus even up to 24 to begin with our burn in times that would be consistent with the automotive guys and it's been repeated.

Speaker Change: By the Oems as a critical requirement so with that you can do the same modeling that we did before which is okay. It's a wafer fab. It has 4000 wafer starts per week, let's say or whatever it is and you multiply.

Gayn Erickson: So, with that, you can do the same modeling that we did before, which is, okay, it's a wafer fab. It has 4,000 wafer starts per week, let's say, or whatever it is. And you multiple, you know, you say it's got, say, a 6 or 12 or 18 hour burn-in time and 18 wafers. So, these are customers that have the potential to buy significant volumes, perhaps even as big as our biggest customer to begin with. We also believe that our largest customer is doing extremely well in the market and is going to grow substantially both in capacity and design wins over the next several years.

Speaker Change: Say, it's got say six or 12 or 18, our burn in time.

Speaker Change: Wafer. So these are customers that have the potential to buy <unk>.

Speaker Change: Significant volumes, perhaps even as big as our biggest customer to begin with we also believe that our largest customer is doing extremely well in the market and is good.

Speaker Change: Going to grow substantially both in capacity and design wins over the next several years. So they seem to be doing very very well in the market.

Gayn Erickson: So, they seem to be doing very, very well in the market.

Christian Schwab: Okay. I guess is my second last question. On the E.I. Processor opportunity, I know last quarter you highlighted, of course, is not an individual that you're dealing with. But can you give us any type of color there? It's, you know, given, you know, a 10% customer that's only like $7 million for the sales, you know, some kind of thinking that that should be a much more substantial number than that over time. But maybe you can give us a little bit of color of the open-ended opportunity there. Yeah. So, so, you know, we can track the units.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Last question.

AI processor.

Speaker Change: I know last quarter, you highlighted of course not in many major.

Speaker Change: Daily.

Speaker Change: Can you give us any color there.

Speaker Change: Given.

10% customer.

Speaker Change: Right.

Speaker Change: That's only like $7 million sales.

Hum.

Speaker Change: Im kind of thinking that that should be a much more substantial than that over time, but maybe you can give us a little bit of color.

Open ended opportunity there, yes, so so.

<unk>.

We can track the units we understand the test time, the test times processors are quite long.

Gayn Erickson: We understand the test time. The test times on processors are quite long. We know it's 100% burn-end. And we know and can track failures and see what's going on. And there's some interesting tricks and things that are going on there. So, the data is all supporting the capability and feasibility of doing wafer level burn-end. And, you know, we can see, and now candidly through the in-cal acquisition, where we're testing a large number of A.I. processors, you can see what they're testing and why they're testing it. No one's getting out of burn-end of A.I. processors anytime soon.

Speaker Change: We know it's 100% burn in.

Speaker Change: And we know and can track failures and see what's going on and there are some interesting tricks and things that are being that are going on there. So the data is all supporting the capability and feasibility of doing wafer level burn in.

Speaker Change: Can see and know candidly through through the <unk> acquisition, where we're testing a large number of AI processor, you can see what their testing and why they are testing. It no. One is getting out of burn in of AI processors anytime soon so.

Gayn Erickson: So, you know, we haven't given any more color related to which of the processor guys it is. We have said, you know, we just simply said it's not in India, because it just would be unfair to throw that around and how people imply that. But it is a revenue-generating A.I. Processor company today. Okay. And, you know, it's certainly, it's currently different than any of in-cows customers that didn't help you because I haven't told you who they are either. But we've actually had one in one of the conversations we had with one of the Intel, Intel customers that are currently testing A.I.

Speaker Change: We are.

Speaker Change: We haven't given any more color related to which of the <unk>.

Speaker Change: Processor guys. It is we have said, we just simply said, it's not an <unk> because it just would be unfair to throw that around a map people imply that but.

Speaker Change: It is a revenue generating AI processor company today okay.

And.

It's certainly.

Speaker Change: It is currently different than any of <unk> customers.

Speaker Change: That didn't help you because I haven't told you who they are either.

But we've actually had one in one of the conversations we had with one of the.

Speaker Change: Intel <unk> customers that are currently testing AI processors on their systems.

Gayn Erickson: Processors on their systems. They lean forward and we're super interested to hear more about our wafer level burn-end, which is not a surprise to us. And so, you know, I think that there'll be a mix, and we're not picking sides. There's some real advantages of moving the A.I. processor, and ultimately the DRAM to wafer level. But there's also some real challenges with it, depending on customers and test modes, et cetera. And so, we can serve them with the package part burning capabilities of Intel. But, you know, everybody, I mean, most people have heard the story. Go back and listen to it.

Speaker Change: They leaned forward and we're super interested to hear more about our wafer level burn in which is not a surprise to us.

Speaker Change: And so I think that there'll be a mix and we're not picking sides.

Speaker Change: There's some real advantages of moving the AI processor and ultimately the DRAM to wafer level, but there is also some real challenges with it depending on customers and test modes et cetera, and so we can serve them with the package part burn in capabilities of <unk>, but <unk>.

Everybody I mean, most people have heard the story go back and listen to it.

Gayn Erickson: You know, our whole strategy has been that with this massive increase in semiconductors that are, in fact, getting less reliable, showing up in more applications where reliability matters. And then people putting them on multi-chip modules. It's a huge opportunity for testing burn-end in particular for wafer level.

Speaker Change: Our whole strategy has been that with this massive increase in semiconductors that are in fact getting less reliable showing up in more applications, where reliability matters and then people putting them on multi chip modules. Its a huge opportunity for test and burn in in particular for wafer level.

Gayn Erickson: I noticed that today, just probably, you know, AMD introduced the MI325X. Did you see it? It looks like it has eight core processors and another eight stacks of HBM memories.

Speaker Change: <unk>.

Speaker Change: I had noticed that today just public.

Speaker Change: <unk> introduced the <unk> hundred 25 ex did you see it looks like it is eight core processors, another eight stacks of HBM memories.

Gayn Erickson: You know what happens with one of those core processors dies in Vernon, so the value proposition concept of moving it from package to way for totally still makes sense. But now we also have both so little pitch for us as a company, and I can tell you I know I use that phrase. If you've heard me, I usually like to say we have a front row seat, guys. We have the front row seat. This is a fantastic. I have sat in meetings in the last four to six weeks with some of the names of the names, and I'm hearing about their requirements and their actual processor. We're testing the next gen, the one after that. We're engaged with them to deliver their requirements. They're very excited because of our capabilities and thermal, our engineering capabilities, our manufacturing capacity capability, their applications support around the world.

Speaker Change: What happens with one of those core processors dies in Vernon.

Speaker Change: So the value proposition concept of moving from package to wafer totally still makes sense, but now we also have both.

Speaker Change: So little pitch for us as a company and I can tell you I know I use that phrase if you've heard me I, usually like to say, we have a front row seat guys. We have the front row seat. This is a fab.

Speaker Change: I have sat in meetings in the last four to six weeks with some of the names of the names and hearing about their requirements in there.

Speaker Change: Their actual processor, we're testing the nexgen and the one after that we're engaged with them to deliver their requirements. There very excited because of our capabilities and thermal our engineering capabilities, our manufacturing capacity capability and our application support around the world. So very excited about it and I think there'll be leverage in <unk>.

Gayn Erickson: So I'm very excited about it, and I think they'll be leverage in both directions.

Gayn Erickson: I know we can already use some stuff from from air to make in cows products better, and I think there'll be opportunities for customers that are using in cow that may want to do away for level burn in step as well from us, so I'm I couldn't be more excited about this, and it's super fun.

Both directions I know, we can already use some stuff.

Speaker Change: From air to make <unk> products, better and I think there'll be opportunities for customers that are using <unk> that may want to do a wafer level burn in step as well from us So I'm.

Couldnt be more excited about this and it's super fun.

Speaker Change: Thanks, Chris.

Speaker Change: No. Other question. Thank you okay. Thanks.

Operator: Operator.

Operator.

Operator: We caught him sleeping. Hello. Sorry about that. I had enough function with the meeting.

Speaker Change: We call them sleeping Hello, sorry about that had a malfunction with me once again, if you have a question or comment. Please indicate so by pressing star one on your Touchtone phone.

Operator: Once again, if you have a question or a comment, please indicate so by pressing store one on your touch-tone phone.

Jed Dorsheimer: The next question comes from Jed Dorsheimer with William Blair. Please proceed. Hey, yeah, thanks for taking the question again, Chris. I guess first question again, thanks for the clarity, and Chris, thanks for the breakdown for the year on the air business.

Speaker Change: The next question comes from Jed <unk> with William Blair. Please proceed.

Speaker Change: Hey, Thanks for taking the questions gain Chris I guess.

Speaker Change: First question again.

Speaker Change: Thanks for the clarity and Chris Thanks for the breakdown for the year on the air business.

Jed Dorsheimer: You know I haven't seen previously you would press release wins and you know I know that you did on the the wafer fact that kind of flowed through this quarter but I was wondering in the 16 million of backlog could you give any further detail in terms of the contribution of mix there is we haven't seen any press releases that that's you know to get an idea of what that constitutes.

Speaker Change: I haven't seen.

Speaker Change: Previously you would press release.

Wins, and I know that you did on the wafer pack.

Speaker Change: Through this quarter, but I was wondering in the $16 million of backlog could you give any further detail in terms of the contribution of mixed there is we haven't seen any press releases.

Speaker Change: <unk>.

To get an idea of what that constitutes.

Gayn Erickson: Yeah, I'm going to take a path of that right now. I get it, Jed. I understand we haven't, in fact, for those so had to have noticed. I think this is the first quarter in eight quarters we didn't do the effective backlog. I don't know if everybody else notices we're really struggling with that we we kind of corner of ourselves here in that the only press release we did this quarter was the production Sonoma production system. Right, and we quantified it; we said it was six systems. Then, as we went to look at the backlog and the breakdown, it was like, oh, it highlighted too much. You can imply that most of the back, the incremental sales in the month were from that, and so we just checked it out and said we're not going to see it because we simply don't want to try and give precise data to our competitors, to their competitors, etc.

I'm going to take a pass on that right now I get it yet I understand we haven't.

Speaker Change: For those <unk> had to have noticed I think this is the first quarter in eight quarters. We didn't do the effective backlog I don't know if everybody else notice we are really struggling with that we kind of corner of ourselves here in that the only press release, we did this quarter was the production Sonoma.

Speaker Change: Production system, right and we quantified it we said it was six systems.

Speaker Change: Then as we went to look at the backlog and the breakdown. It was like Oh. It highlighted too much you can imply that most of the incremental.

Speaker Change: Incremental sales in the month were from that and so we've just chickened out and said, we're not going to say it because we simply don't want to triangulate and give precise data to our competitors to their competitors et cetera, because actually in the industry people sort of figured out who it was so I apologize for that but.

Gayn Erickson: Because actually in the industry, people have sort of figured out who it was, so I apologize for that. But you know specifically in the air business, if you will. You know we have been material orders; we have been press releasing the materiality is kind of increasing in as we've been getting more and more wafer pack orders coming in that don't seem to press release. Out of that, we're still trying to balance that. I would consider any new production when, as we are forecasting material, and we will announce it again. We'll either typically give you a price and be vague about the quantity or give you the quantity and be vague about the price, just sort of as a process rule.

Speaker Change: Specifically in the in the Air business, if you will.

We have been material orders, we have been press releasing.

Speaker Change: The materiality is kind of increasing as we've been getting more and more wafer pack orders coming in that don't seem to press release out of that.

Speaker Change: We're still trying to balance that.

Speaker Change: I would consider any new production wins.

Speaker Change: As we are forecasting material and we will announce it.

Speaker Change: <unk> will either typically give you a price and be vague about the quantity arguably the quantity and be vague about the price just sort of as a process rule, but.

Gayn Erickson: But in real I will share that actually you know a reasonable chunk of that backlog is from from in Cal. and, you know, NCAL's forecast is looking, I'll call it in the bag, if and with, you know, a reasonable amount of upside. We'll see as we get closer. But they're; they have much longer lead times than us. We'll probably tighten that up a little bit, but they typically have about a six-month lead time. And so, you know, everything for this quarter is in backlog, for example. In fact, some of the next quarters are already in backlog for those guys, whereas Aehr tends to run much shorter lead times.

Speaker Change: I will share that actually.

Speaker Change: A reasonable chunk of that backlog is from from income.

Speaker Change: <unk>.

<unk> forecast is looking.

Speaker Change: I'll call it in the bag, if and with <unk>.

Speaker Change: A reasonable amount of upside, we'll see as we get closer.

Speaker Change: But.

Speaker Change: They are they have a much longer lead times than us, we'll probably tighten that up a little bit but they typically have about a six month lead time and so everything for this quarter is in backlog for example.

Speaker Change: Some of the next quarters already in backlog for those guys, whereas air tends to run much shorter lead times.

Gayn Erickson: And the result of that is you have a little less visibility. I think they're probably better off than us, but the customers do like our short lead times.

Speaker Change: And the result of that is you have a little less visibility I think they are probably.

Speaker Change: Better off than us, but the customers do like our short lead times.

Jed Dorsheimer: Got it. That's helpful.

Speaker Change: Got it.

Gayn Erickson: I guess maybe, and I know you don't want to give more, but let me just ask it anyways. If I look at the wafer pack, which was all of the, you know, product revenue in the quarter, do you see a more balanced, in this current quarter, is it more balanced with respect to system leaving decal aside, system in? Yes, yes, for sure, for sure. Yeah, and they shift towards, you know, non-sick systems too, which is pretty fun, right? So, we'll start seeing. We're forecasting some of the other areas.

Speaker Change: That's helpful. I guess, maybe and I know you.

Speaker Change: You don't want to give more but let me just ask it anyways.

Speaker Change: If I look at the wafer pack, which was all of the prop.

Speaker Change: Product revenue.

Speaker Change: In the quarter.

Speaker Change: Do you see a more balanced in this current quarter or is it more balanced with respect to system.

Speaker Change: Leaving <unk> aside system and yes, yes, yes for sure, yes, and a shift towards <unk>.

Speaker Change: Non sic systems, too, which is pretty fun.

Speaker Change: Right. Okay. So we'll start seeing.

Speaker Change: We're forecasting.

Speaker Change: Some of the other areas.

Speaker Change: <unk>.

Gayn Erickson: I mean, we really never were all only about silicon carbide. It was just fantastic. We still love it. We still love that market. But the other markets are heating up and consuming much of every single day for us, candidly. Got it.

Speaker Change: It's actually.

Speaker Change: We really never were all only about silicon carbide, which is fantastic we still love it we still love that market, but these other markets are heating up and consuming much of every single day for us candidly.

Speaker Change: Got it and then.

Gayn Erickson: And then, what's your attachment on the automate? What do you expect the attach rate for automated aligners with the systems? Do you see that? Yeah, that's in it.

Speaker Change: What's your attach rate on the automated what do you expect the attach rate for automated a liners with.

Speaker Change: With the systems do you see that is yes.

Gayn Erickson: We were actually just discussing that today. It's still a mix. Customers, we have customers that are forecasting systems with manual aligners still. I personally love the automated aligner, but you know, cost a little bit more. And you can have an automated aligner that is offline to feed multiple chambers. Or you can have an automated aligner that is integrated with the system. And then we have several customers that are forecasting fully integrated, absolutely positively. Nobody can do anything. I don't want to touch it. You know, like that operation. So it's a mix going forward. It's a mix going.

Speaker Change: We were we were actually just discussing that today, it's still a mix.

Speaker Change: Customers, we have customers that are forecasting systems with manual liners still.

Speaker Change: I personally love the automated aligner, but cost a little bit more and you can have an automated aligner that is offline to feed multiple chambers or you're going to have an automated aligner that is integrated with the system and then we have several customers that are forecasting fully integrated absolutely positively nobody can.

Speaker Change: Do anything I don't want to touch it lights out operation. So it's a mix going forward.

Gayn Erickson: By the way, by contrast to two years ago, it was all manual, right? And I'd say, as we go forward, I feel like it should be more than half would be automated aligners. But kind of there's still some customers that are talking about manual aligners. Okay.

Speaker Change: And by the way by contrast, two years ago. It was all manual right and I'd say as we go forward I feel like it should be more than half would be automated aligner.

Speaker Change: But there.

There is still some customers that are talking about manual liners. So okay.

Gayn Erickson: And I'll just keep going with a couple more here if you don't mind. What's the mix for your silicon carbide visibility or expectations between 150 versus 200 millimeter? Well, we have a lot of 200 millimeter wafers that we're testing today. We have two minute wafers we're testing today. Verne might tell you we've tested if anyone who's made a 200-millimeter silicon carbide wafer has been tested in this facility and most likely at their facility on our equipment. If that helps you with some hints, of course, we haven't told you who they are. I think our data seems very consistent with what's out there.

Speaker Change: And I'll.

Speaker Change: I'll, just keep going with a couple more here if you don't mind.

Speaker Change: What's the mix in for your Silicon carbide.

Speaker Change: Visibility or expectations between 150 versus 200 millimeter.

Speaker Change: Well.

Speaker Change: We have a lot of 200 millimeter wafers that we're testing.

We have we have too many wafers we're testing today.

Speaker Change: Yeah Vernon might tell you we've tested anyone who has made a 200 millimeter silicon carbide wafer has been tested in this facility and most likely at their facility on our equipment that helps you with some hints of course, we haven't told you who they are.

I think our data it seems pretty consistent with what's out there there are 200 millimeter wafers theyre coming out.

Gayn Erickson: There are 200-millimeter wafers. They're coming out. It's still the dominant is 150-millimeter wafers. We think that, you know, 200 will become more and more, particularly in 2025. And, you know, from our system for people listening, the Fox system itself can test all-size wafers. 4, 6, 8, and 12-inch, or if you're so inclined, 100-152-100 and 300-millimeter; the wafer pack can work with any of them. We can actually design. In the same system, you can be testing 150-millimeter silicon carbide and 200-millimeter carbide. You just have to design the wafer pack contactor for the bigger wafer, okay, or the smaller wafer.

Speaker Change: Still the dominant is the 150 millimeter wafers, we think that 200 will become more and more particularly in 2025.

Speaker Change: <unk>.

Speaker Change: And.

Speaker Change: From our system for people listening the Fox system itself can test.

Speaker Change: All sized wafers 468, and 12 inch or if you're so inclined $101 50 203 hundred millimeter.

The wafer pack can work with any of them, we can actually design.

The same system that can be testing 150 millimeter silicon carbide in 200 millimeter carbon you just have to design the wafer pack contactor for the bigger wafer, okay or the smaller wafer. So it's sort of I don't care to us and we wouldn't have as much visibility as say a tool supplier, who only sells 200 or $1 50.

Gayn Erickson: So it's sort of a don't care to us. And we wouldn't have as much visibility as a tool supplier who only sells 250, and, you know, their make or break. The customers, you know, it's probably not as dramatic for us. So, you know, it's coming.

Speaker Change: They make or break the customers, it's probably not as dramatic for us.

Speaker Change: So.

Speaker Change: It's coming.

Gayn Erickson: I would probably leave it to you guys to have better visibility of exactly when the cutover is. Got it.

Speaker Change: Wed probably leave it to you guys have better visibility of exactly when the cutover is.

Got it and then last question for me on.

Gayn Erickson: And then last question for me on, you know, is you historically new customers have tended to purchase a Fox NP for evaluation before switching over to the XP. And we haven't seen many NPs, you know, leave the docs.

Speaker Change: Historically, new customers that attended to.

Speaker Change: Purchase of Fox NP.

Speaker Change: For evaluation before switching over to the XP.

And we haven't seen many NPS.

Speaker Change: Hi.

Speaker Change: The docs so what are your expectations on some of the.

Gayn Erickson: So what are your expectations on some of the, you know, on the ramp of these new customers, both in the silicon carbide as well as in other applications in terms of how that cadence will look? Just give me a second here. I'm not coughing. I think four of the next five customers start with XP's. Okay. All right. How I coughed. You got me there. Yeah. So it's interesting. So they're kind of skipping it. In some cases.

Speaker Change: On the ramp of these new customers both in silicon carbide as well as in other.

Speaker Change: Other applications in terms of how that cadence will look.

Speaker Change: Just give me a second here I'm not coughing.

Speaker Change: I think for the next five customers start with Xps.

Speaker Change: Okay, Alright, I Coughed, you got me there.

Speaker Change: Yes, so it's interesting so theyre kind of skipping it in some cases.

Gayn Erickson: Now, I can be wrong, folks, but, and we like, I mean, they co-exist. But, yeah, I mean, I think Vernon's got some quotes out to people that just say I'm just going right to an XP. So, yeah. Got it. Sorry.

Speaker Change: Now I could be wrong folks, but and we like I mean, they co exist.

Speaker Change: <unk>, but.

Speaker Change: Yes.

Speaker Change: <unk> got some quotes out to people that just say I'm, just going right to NXP.

Speaker Change: So yes.

Speaker Change: Got it sorry last one promise is that because you do the testing you've been I know you have this program where you have that.

Gayn Erickson: Last one, promise. Is that because you do the testing you've been, I know you have this program where you have that, you know, dedicated room where you do some in-house testing for your customers. Do you think that's what shortened, or do you think it's a greater comfort around the process? Okay. I mean, we're testing their way for some of those people. We've been testing it for God knows forever. Right. We've done full characterization process control. We've done, you know, qualifications, the whole thing. They kind of, they're like, all right, skip it. Let's go. We get it now.

Speaker Change: Dedicated room, where you do some in house testing for your customers do you think thats whats shortened or do you think it's a greater comfort around mode process. Okay.

Speaker Change: Honestly, but but both for sure I mean, we're testing their wafer as some of those people we've been testing it for God knows forever right. We've done full characterization and process control, we've done qualifications of whole thing they've kind of like all right skip it we get it now so there is a level of comfort.

Gayn Erickson: You know, so there's a, there's a level of comfort. You know, and us testing the way first has a lot to do with it.

Speaker Change: And.

Speaker Change: US testing the wafers has a lot to do with it.

Gayn Erickson: Thomas Diffely, Christian Schwab, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, Larry Chlebina, announced a product yet, but AMD and Nvidia were both alluding to it and their roadmap. And so I've been kind of repeating, you know, where is it going, because we've made some investments in partner with companies in anticipation of the potential for this widespread adoption of optical communication between ships.

Speaker Change: Appreciate the color. Thanks.

Speaker Change: Once again, if you have a question or comment please indicate so by pressing star one on your Touchtone phone. The next question comes from Matthew Winthrop.

Speaker Change: Please proceed.

Matthew Winthrop: Hi, Dan how are you Sir.

Dan: I am good Sir.

Matthew Winthrop: Congratulations on.

Matthew Winthrop: And all the excitement in your outlook.

Speaker Change: I had a quick question I was looking at last quarter's release, and you always make a point of saying a customer or a large customer of ours, usually mention names and there is a certain side I've thought about where you say optical io or co packaged optics for companies like Nvidia.

AMD and Intel, which have all had discussed blah blah blah.

Speaker Change: We use names like that or having leasing in years and I know you are not alluding that their direct customers of yours and you probably touched upon this with your meetings, but I was wondering.

Speaker Change: Later can you expand on that and is that from the new acquisition detail. Thank.

Speaker Change: No I mean, okay. So the context and what we've said in there for people that are listening in is one of the areas and we in fact on this conference call. This is probably the first time in many quarters I Didnt have.

Speaker Change: Subsection on Silicon Photonics, so silicon photonics is more than just putting a laser on a piece of silicon. It's actually the entire photonics engine for communication and folks like Ibm's and Intel's have literally worked on this for 20 to 30 years because.

Speaker Change: Silicon or electrical transmission line, our electronics can only go so fast there are physical limitations, because adams actually have mass to them and we're within approximately a generation we're running at say 200 gigabit transmission.

Speaker Change: <unk> rates or <unk> 112 in this range you are at a point, where you actually cannot make the electronics go any faster. So people have anticipated that that the bandwidth requirements of communication and data would get to a point, where you are bandwidth limited you literally could.

Speaker Change: Make the transmission line faster or smaller or what the answer has always been fiber optic transmission, our photonics space, but the practicality and the cost of that had never really been coming together Intel was one of the most visible companies, who now what six years ago finally for.

Speaker Change: It out to sort of on a wafer scale come out with a complete silicon photonics engine that will allow them to make the entire transceiver. If you will in a chip.

Speaker Change: And that chip they started by putting into fiber optic transceivers fiber optic clips in data centers.

Speaker Change: They successfully did that because of the the semiconductor performance. If you will and there is other companies that are trying to do or doing similar types of things.

Speaker Change: Just and I'm not representing Intel him just to talk about public Intel has since sold the fiber optic business. The actual transceiver business, but kept the semiconductor business as what we believe from their public statements because of the criticality of it of the need for it to go into co package optics.

Speaker Change: Or to put it on processors and for chip to chip communication.

Speaker Change: When I started talking about this two years ago is barely even discussed until hadn't even announced a product yet, but AMD and Nvidia, where both alluding to it in their roadmap and so I've been kind of repeating.

Where is it going because we've made some investments in partner with companies in anticipation of the potential for this widespread adoption of optical communication between chips way different than just the data center okay.

Gayn Erickson: Way different than just the data center, right?

Gayn Erickson: At that time, for clarity, and it's kind of fun, because you look back on it, you know, the whole AI thing. This is the pre ChatGPT. It was, it wasn't clear where it was coming from. We were like, well, maybe it's going to be in servers, you know, it certainly be in the data farms. What we've seen in the news now is folks like Intel, AMD, and Nvidia have talked about the massive data crunch challenge with, now, the AI processing capability of these large language models in these clusters. How are you going to get this all done?

At that time for clarity and its kind of fun because you look back on it the whole AI thing. This is the pre chat GPT.

It was it wasn't clear where it was coming from we were like well, maybe it's going to be in servers.

Speaker Change: Going to be in the data farms, what we've seen in the news now is folks like Intel AMD and Nvidia have talked about the massive data Crunch challenge with now the AI processing capability of these large language models in these clusters. How are you going to get this all done and so we're now seeing roadmaps that.

Gayn Erickson: And so, we're now seeing road maps that talk about, well, what you do is you put this little optical IO part in the chip, and the chip-to-chip communication is not through an electrical transmission line, it's through an optical transmission line.

Speaker Change: Talk about well what you do is you put this little optical Io part in the chip and the chip to chip communication is not through an electrical transmission line, it's through an optical transmission line.

Gayn Erickson: That's it. So that's, that's the name dropping. I'm not trying to say who and who is in our customer, but it's those three in particular are the ones, the big dogs that are going to drive the road map. And if you go talk to market forecasters, there's no market for it, there's an market, well, no, there's an market until Nvidia, AMD, or Intel make one, and then there's a market, you know, and then it'll be massive. So we've just been trying to explain to people, you know, why did we make these investments? I mean, the customer's about the equipment from us; it's good margin for us, but will it take off and be a big market?

Speaker Change: So that's the name dropping I'm not trying to say, who and who is in our customer but it's those three in particular are the ones. The big dogs that are going to drive the roadmap.

Speaker Change: And if you go talk to market forecasters. They go there is no market for it or is there isn't a market well no there isn't a market until Nvidia AMD or Intel make one and then there's a market.

Speaker Change: And then it'll be massive so.

Speaker Change: <unk> been trying to explain to people why did we make these investments I mean, the customers bought the equipment from us. It's good margin for us, but will it take off and be a big market you got to ask those guys I'm bet I would bet and we have chosen as a company to bet that market will take off when exactly I don't know, but things seem to be moving fast.

Gayn Erickson: You got to ask those guys. I'm betting I would bet, and we have chosen as a company to bet that market will take off. When exactly, I don't know, but things seem to be moving faster at a pace faster than historically.

<unk> at.

Speaker Change: At a pace faster than historically, so I got my fingers crossed but we are ready and ready to go for this we have the tools and we're very excited about it in that same 3500 watt system that we developed for the optical AI.

Gayn Erickson: So I got my fingers crossed, but we are ready and ready to go for this. We have the tools, and we're very excited about it, and that same 3,500 watt system that we develop for the processor, which is pretty cool.

Speaker Change: Is being leveraged for the actual AI processor, which is pretty cool.

Speaker Change: Got it okay that's terrific.

Gayn Erickson: So, fight it to say, this concept is not when you announce your reaffirming guidance for the year. This is all maybe someday in the future, so this is a potential up five, maybe. Oh, when you say that.

Speaker Change: To say this concept is not when you announced.

You are reaffirming guidance for the year. This is all.

Speaker Change: Maybe someday in the future.

Speaker Change: So this is a potential up five maybe.

I'd definitely say that.

Gayn Erickson: I mean, no one's asked me; I'll just, I'll cough it up. We actually have very little silicon photonics revenue this fiscal year. I think we have a bunch of wafer packs and a bunch of design related things, but I think currently we have very little capacity. But we are, we've had some requests and we've asked for lead times and things like that. We could actually ship a number of systems or upgrades of systems still in the fiscal year. It's the upside or downside of all the inventory we bought candidly, but we have the, and in a month, the answer is yes, that, you know, there's pros and cons to that, right?

No. One has asked me I'll just I'll cough. It up we actually had very little Silicon Photonics revenue. This fiscal year I think we have a bunch of wafer packs and a bunch of design related things, but I think currently we have very little capacity, but we are we have had some requests and we've asked for lead times and things like that.

We could actually ship a number of systems or upgrades of systems still in the fiscal year, it's the upside or downside of all the inventory we bought candidly.

Speaker Change: But we have the capacity of being able to build all these systems.

Okay. Thank you.

Speaker Change: I mean, one in a month the answer is yes.

Speaker Change: There's pros and cons to that right that means they can wait a month to ask right. So, but I feel really good about our position.

Gayn Erickson: That means they can wait a month to ask, right? So, but I feel really good about our position.

Gayn Erickson: Go again.

Operator: Thank you, sir.

Speaker Change: Thank you Sir.

Operator: Thank you.

Speaker Change: Thank you.

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

If you have a question or comment please press star one once again. Please press star one if you have a question or comment.

Operator: Any other takers? Okay.

Speaker Change: Any other takers.

Speaker Change: Okay. It looks like we have no further questions alright, no further thanks, Jonathan Q Youre very welcome I'd like to turn it back to management for closing remarks.

Operator: Looks like we have no further questions. All right. No further questions. Thank you. You're very welcome.

Gayn Erickson: I'd like to turn it back to management for closing remarks. All right. I think we missed anything. Question. Okay. So folks, thank you very much. I really appreciate it. For people joining in, and as always, if you're near, we always invite you to come by. It's a little hectic and messy around here right now, as we're doing some basic construction and things like that, but we still have customers coming through. We've, I think there are three or four this week. We have another one tomorrow. So we'll invite you in if you happen to be in the Silicon Valley; we'd love to host you.

Speaker Change: Alright.

Speaker Change: I think we missed anything Chris.

Speaker Change: Okay. So folks. Thank you very much I really appreciate it.

Speaker Change: People joining in and.

Speaker Change: As always if you're near we always invite you to come by is it a little hectic and messy around here right. Now is we're doing some basic construction and things like that but we still have customers coming through I think there are three or four this week.

Speaker Change: Another one tomorrow so.

Speaker Change: We'll invite you in if you happen to be in the Silicon Valley, We'd love to host you if not maybe well see it one of the trade shows or the investor conferences, and we look forward to giving an update on the quarter as things go at the next quarter event take care.

Gayn Erickson: If not, maybe we'll see it.

Gayn Erickson: One of the trade shows or the investor conferences, and we look forward to giving an update on the quarter as things go at the next quarter of end. Take care.

Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

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