Aehr Test Systems - Earnings Call - Q2 2021

Transcript

Speaker 0

Day, and welcome to the Airtel Systems Second Quarter Fiscal twenty twenty one Financial Results Call. Today's conference is being recorded. At this time, I'd to turn the conference over to Mr. Jim Byers of MKR Investor Relations. Please go ahead, sir.

Thank you, operator. Good afternoon, and welcome to AirTech Systems' Second Quarter Fiscal twenty twenty one Financial Results Conference Call. With me on today's call are AirTech Systems' President and Chief Executive Officer, Gayn Erickson and Chief Financial Officer, Ken Spence. Before turn the call over to Gayn and Ken, I'd like to cover a few quick items. This afternoon, Airtest issued a press release announcing its second quarter fiscal twenty twenty one results.

That release is available on the company's website at ayr.com. This call is being broadcast live over the Internet for all interested parties, and the webcast will be archived in the Investor Relations section of the company's website. 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 that are

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subject to a number of

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risks and uncertainties that could cause actual results to differ materially from those

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in the forward looking statements.

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These factors that may cause results to differ materially from those in the forward looking statements are discussed in the company's most recent periodic and current reports filed with the SEC. These forward looking statements, including guidance provided during today's call, are only valid as of this date, and AirGen Systems undertakes no obligation to update the forward looking statements. And now with that said, I'd like to turn the call over to Gane Erickson, President and CEO of Enerjet Systems.

Speaker 2

Thanks, Jim, and good afternoon to those joining us on the conference call online and also listening on the call over the web. During the call, kind of go over the second quarter financial results during the call, but first, I'll send Pina to provide some details around the challenges we experienced during the quarter and how we responded. Then I'll turn to what we're seeing now and why we think things are moving in the right direction. And then following our remarks, we'll open up the lines for your questions. As we anticipated on last quarter's call, our bookings and revenue for the first half of our fiscal year were negatively impacted due to several customer specific production ramp delays and push outs of forecasted orders due to COVID nineteen related impacts as well as the continued challenging global business environment created by the COVID nineteen pandemic.

These customers continue to indicate they believe the push outs are temporary and they will require additional system capacity and consumables in the current fiscal year. We continue to be optimistic about generating significant bookings and revenue increases in the second half of this fiscal year compared to the first half based on these customer forecasts and the initial order flow we began to see already starting in the second half. At the beginning of the third quarter, just last month, we announced that we received a design win for a new high volume production test and burn in application through a critical new mobile sensor application. This engagement with a new customer, who is a supplier of sensors to a mobile a major mobile device manufacturer, began with an initial $4,300,000 order for an initial test cell consisting of a FOX XP collection system bearing system, a set of die pack trailers, and a FOX automated die pack loader and motor. This initial test is expected to ship during this fiscal third quarter and we expect follow on capacity orders from this customer in this fiscal year for additional test system capacity, die pack carriers and a die pack auto loader solution for AMR.

The product has selected for this application, which we were awarded due to our unique technical capabilities and the cost effectiveness of our solution that is critical to this application, which will require 100% test, learning, traceability, and validation of these devices. Our highly differentiated box solution achieved this test requirement and met the customer's low cost of test targets due to the significantly higher parallelism that can be obtained on our FOX XP systems and DIPOX. During the second quarter, we also received a design win on an initial order from our lead customer for multiple BiPAP carriers for testing burning of the next generation sensor modules for major major devices. Having trouble today. This order expands deployment of our test solutions to additional devices with this large multinational customer, and we're excited to engage with them earlier in the design cycle for this product.

The customer will use our proprietary die pads for production qualification, test, and burn in of these devices. We expect this to turn to volume production orders for additional die packs and had anticipated beginning shipment of the incremental die pack capacity in our fiscal third quarter. However, this customer recently told us this capacity need is likely to be delayed until after our current fiscal year and instead they're pushed into the first or second quarter of our next fiscal year that begins in June. We continue to be optimistic about the mobile center market space and continue to see increasing interest in our FOX systems and BiPOS for collection, testing and burn in a complex two d and three d sensors in multiple mobile applications. Since the beginning of the current third quarter, we've received multiple follow on orders and are seeing an increase in bookings forecast for our proprietary WaferPaks and Dipaks consumables across multiple market segments while installed base of FOX Vapor and Simulated Dying Module test systems.

This reflects customer capacity and continue their needs for our previously announced design wins from customers for devices in silicon photonics, silicon carbide, mobile sensors and flash memory. We're forecasting additional DiePaks and LaserPaks orders during the second half of the fiscal twenty twenty one from our installed base for recent applications in these key market segments. As we've noted before, Air's proprietary test and burn in solutions include customized WaferPaks and DiePaks that are needed not only for new systems orders, but also for each new design win or each new device added to production task. As we increase our installed base of FOX systems with current and new customers, particularly with our FOX NP and XP multi wafer and simulated die module test and building systems, we expect that consumer business will continue to grow in absolute value and as a percentage of our total sales. Over the long term, we expect these recurring consumable sales to account for up to 05% even more of our total overall revenue.

In Q4 of our prior fiscal year, we announced a new design win with a new Tier one customer for a FOX NP system that we shipped in Q1. This customer is a global leader of communication transceivers for data center, telecom, five g infrastructure, and is forecasting to transition to our FOX XP wafer level testing burn in systems during this fiscal year to meet their volume production forecast. In addition to the order we expect to receive this fiscal year, we expect them to continue to place additional systems and consumer orders over the next several years. We also announced that we've begun a new relationship with a new customer that is the world's largest outsourced semiconductor assembly and test supplier. During the first quarter, we began an initial marketing and sales campaign with this customer for our FOX P family of products, including air wafer packs and die packs for production test, phoning, the library screening of devices that fill wafer, simulated die, and modules.

This campaign is generating discussions with multiple potential new customers and continues to gain momentum with new customers including yet another opportunity as late as the last few weeks. They have asked us that we not name them publicly yet as they see their move into the silicon photonics assembly packaging and test space as a strategic initiative. They want to gain market share with some critical target customers before going public with what they see as a competitive advantage of being able to provide a total solution including full wafer level testing equipment before assembly of the silicon photonics engines into the transceiver modules. We expect to make this partnership public in due course. We continue to expand the device wins and released the production of the FOX X2 for silicon carbide devices during the first quarter and second quarter.

We added a couple of new device design wins for the new high voltage silicon carbide devices on our FOX XP system with our lead customer. They are using the FOX XP system for high volume production burn in and infant mortality screening of silicon carbide devices at wafer level for a few key applications, including electric and hydroelectric vehicles. They are forecasting additional bookings and capacity needs for our FOX XP systems and WaferPaks during this fiscal year and for years into the future. For those who are not familiar with silicon carbide is a very impressive material for high power and particularly high voltage devices for applications such as the need of electric and hybrid electric vehicles, power trains, and electric vehicle charging infrastructure. As such, most if not every EV or HEB automotive company is moving to silicon carbide based power drive and charging systems.

The challenge with silicon carbide, it is known to have high infant mortality rates. But after a reliability burning screen, these pickups can be completely removed to provide extremely reliable devices for these mission critical applications. Aehr is able to provide a complete solution for one of the key reliability screening tests of an entire waveform at a time while testing and monitoring every device for failures during the burden process to provide critical information on those devices. This is an enormously valuable capability that allows our customers to screen devices that would otherwise fail after they're packaged into multi die modules where the yield impact is 10x or even 100x of cost. The critical capability that only our solution can provide in the market today is the ability to test 100% of the buy on a wafer in a single insertion while providing a 100% traceability of possible results at every single device, including exactly what time during the test and billing cycle the device fails.

This is a critical feature for this customer to provide confidence to their customers that are that they are removing all order like failures prior to shipment. This customer has made public presentations and industry conferences tiding the cost and quality assurance and damages of our FOX solution compared to traditional package or module level test. Our systems are not only able to test a 100% of devices at four or six inches as well as the ability to test 12 inch wafers, But we can test and burn in 18 wafers at a time on a single FOX XT system. We continue to see the total available opportunity for silicon carbide and silicon photonics wafer level and simulated die chest markets to be approximately $250,000,000 of needed capacity, including consumables based on total wafer starts, yields and test times. The silicon carbide semiconductor device market is growing at a tremendous rate with unit growth of high power devices expected to grow at over 50% CAGR from 2019 to 2025 per year of research.

Turning to our packaged part business. As we talked about before, we have started to see forecast for renewed demand for packaged part burn in applications, particularly from customers seeking high voltage capability reflecting a move towards higher voltages and other market requirements devices and automobiles. We expect to see bookings resume from certain current air customers this fiscal year and also expect to generate additional new opportunities with our planned introduction of a new packaged part diamond product that has a very high voltage test capability. We're being relatively conservative with our forecast in package called bromine as this segment still seems to be heavily impacted by COVID-nineteen delays in customer evaluations. Still, we do see the need for high voltage capabilities in both wafer level and packaged part with a high growth opportunity for air and expect orders from several new customers, including both Tier one and Tier two level customers for packaged part burning systems this fiscal year and next.

As we look to the second half of this fiscal year and beyond, we remain actively engaged in discussions with a large and growing group of potential new Tier one and Tier two customers that are considering using AIR's products to support several high market growth opportunities. These not only include silicon photonics and silicon carbide production burning, but also applications for automotive, memory in general, and microcontroller applications. The breadth of opportunity for our products makes us more and more excited about the broad based adoption of wafer level building. We continue to receive specific forecast from existing customers for additional new capacity and expected additional bookings and shipments and revenue for our systems and consumables. These customers are in key growth segments that we have started to already penetrated, including silicon carbide, and they have already purchased initial systems from us and are either in production or sampling the customers.

They have told us explicitly that they plan for and will require additional capacity utilizing our FOX XP systems to test the data with 18 full wafers at a time or diphaxes up to ten twenty four devices in each of nine blades per system. These customers have asked us to anticipate and secure specific capacity to meet their needs and have indicated they expect to place orders for this capacity this fiscal year. We're certainly excited about this strong level of interest. At the same time, COVID-nineteen related impacts have affected our customers and hindered our ability to forecast the timing of these orders. We continue to engage in ongoing discussions with a large number of potential new customers.

However, these discussions have clearly been slowed by travel related restrictions due to the COVID nineteen pandemic and related precautions taken by several new potential customers worldwide, including policies for limited on-site engineers. This absolutely has delayed evaluations and initial orders for air systems and container products in the first six months of this fiscal year. Given this fiscal year's guidance has been almost entirely based on current customer forecast, we are taking a more conservative approach to our fiscal year forecast at this time and revising our revenue guidance for fiscal twenty twenty one to be between $20,000,000 and $25,000,000 while continuing to expect to be GAAP profitable for the fiscal year. Through the fiscal year second half revenue range of 16,000,000 to $21,000,000 this new revenue range reflects significantly increased revenue in the second half compared to first half revenue of under $4,000,000 As we look into the '1, we remain optimistic about the growth opportunities for our systems and controllers with our installed base of customers as well as our ability to expand the number of customers using our family of factory solutions. We have additional potential customer engagements that could provide upside to our revenue for the fiscal year as well.

We remain we maintain our confidence in the long term demand for our products, the attractiveness of the key markets that we serve, and our belief that we will come out of this worldwide pandemic stronger than we were and with more production customers, more applications, and higher value products. Our key customers are serving some of the highest growth markets, including data centers, five g infrastructure, sensors and technology for smartphone and tablet, electric and hybrid electric vehicles, and memory and data storage and computing data computing data centers, mobile devices, and hundreds of applications that are keeping the world connected. As a result, we believe our products will be in high demand this year and for years to come. And with that, let me turn it over to Ken before we open up the line for questions. Thank you, Dean, and good afternoon, everyone.

As Dean noted, our revenue and bookings for the first half of the fiscal year were negatively impacted by several customer specific production ramp delays and pushouts of forecasted orders and the continued challenging global business environment created by the COVID-nineteen pandemic. However, these customers continue to indicate they believe the push outs are temporary. Based on these customer forecasts and the initial order flow we have started to see since the beginning of the third quarter, we expect significant bookings and revenue increases in the second half of this fiscal year. At the same time, as we discussed on previous earnings calls, we have taken significant actions to control spending and maintain our cash position as a result of customer orders pushouts and delays in production ramps. In our fourth quarter of the prior fiscal year, we completed the restructuring that resulted in permanent savings of approximately $120,000 per year and also required mandatory vacation days to reduce costs.

Starting in our current fiscal year, we implemented additional temporary cost reduction initiatives across the company. These measures included 30% pay reductions for our executive staff that took effect starting last quarter. The total of all cost reductions resulted in savings of over $550,000 in the second quarter. With our recent booking and improved forecast for the second half of the year, the temporary pay reductions for non officers were eliminated starting in the current fiscal third quarter. The pay reductions for our executive staff remains in place.

It is also important to note that even with these cost controls, our operational capacity and bandwidth have not been negatively impacted, and our main focus continues to be growing our revenue base within the large market opportunities that Gene mentioned earlier. Now turning to the financial results. Net sales in the second quarter were 1,700,000.0 down 16% from $22,000,000 in the preceding first quarter and down 76% from $6,900,000 in the second quarter of the previous year. The sequential decrease from the preceding Q1 reflects a decrease of $484,000 in wafer level burn in revenues, partially offset by an increase in customer service revenues of $155,000 The reduction in wafer level burn in revenues was primarily due to a decrease in system revenues of $630,000 which was partially offset by an increase in WaferPakDiPak revenues of $146,000 The decrease from Q2 last year includes a decrease of $5,100,000 in wafer level burn in revenues. This was primarily due to a decrease in system revenues of $2,800,000 and a decrease in WaferPakDiPak revenues of $2,300,000 Customer service revenues were flat compared to prior year.

There were no packaged part system revenues in Q2 'twenty one or Q2 'twenty. Non GAAP net loss for the second quarter was $1,700,000 or $07 per diluted share. This compares to non GAAP net loss of $2,000,000 or $09 per diluted share in the preceding first quarter, which excludes the impact of stock based compensation expense and a $2,400,000 adjustment related to the closure of our Japan subsidiary and non GAAP net income of $456,000 or $02 per diluted share in the second quarter of the previous year. On a GAAP basis, net loss for the second quarter was $2,000,000 or $08 per diluted share compared to GAAP net income of $107,000 or $0.00 per diluted share in the preceding quarter and GAAP net income of $251,000 or $01 per diluted share in the second quarter of the previous year. Gross profit in the second quarter was 377,000 or 22% of sales, up $150,000 compared to gross profit of $227,000 or 11% of sales in the preceding first quarter and down from gross profit of $3,200,000 or 47% of sales in the second quarter of the previous year.

The increase in gross margin from the preceding quarter is primarily due to a decrease in unabsorbed overhead costs to cost of sales due to an increase in manufactured parts and inventory and a change in product mix. WaferPakDiPak consumable revenues accounted for 46% of revenues in the second quarter compared to 31% in the preceding first quarter. The decrease in gross margin percentage from the second quarter last year is primarily due to an increase in unabsorbed overhead cost to cost of goods sold due to lower revenue levels and an increase in royalty cost as a percent of sales. Operating expenses in the second quarter were $2,300,000 down 93,000 or 4% from $2,400,000 in the preceding first quarter and down $631,000 or 21% from $3,000,000 in the second quarter of last year. The decrease in operating expenses from the preceding first quarter is primarily due to decrease in R and D expenses of $80,000 The decrease from the second quarter last year includes a decrease in SG and A of $656,000 primarily due to cost reduction initiatives implemented in fiscal twenty twenty one.

SG and A was $1,500,000 in the second quarter, flat from the preceding first quarter and down $656,000 from $2,200,000 in the prior year second quarter. R and D expenses were $820,000 in the first quarter, down from $900,000 in the preceding first quarter and up from $795,000 in the prior year second quarter. Turning to the balance sheet for the second quarter. Our cash and cash equivalents were $3,400,000 at November 30, down $2,900,000 compared to $6,300,000 at the end of the preceding quarter. Accounts receivable at quarter end was $1,400,000 up $313,000 from $1,100,000 at the preceding quarter end relating to timing of revenue in the second quarter compared to Q1.

Inventories at November 30 were $9,100,000 up $955,000 from 8,100,000 at the preceding quarter end. The increase in inventories includes an increase in labor and overhead of $371,000 related to an increase in manufactured parts and inventory. Property and equipment was $683,000 compared to $622,000 at the preceding quarter end. Customer deposits and deferred revenue, short term and long term, were $75,000 a decrease of $331,000

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compared to $406,000

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at the preceding quarter end, related primarily to the decrease in backlog from prior quarter. Our current and long term debt of $1,700,000 is related to funds received during the fourth quarter of the last fiscal year under the Paycheck Protection Program, or PPP. The company applied for forgiveness of the PPP loan on 11/06/2020, and the Small Business Administration has ninety days to review the application review and approve the application. Bookings in the second quarter totaled $1,600,000 and did not reflect any system orders. Backlog at November 30 was 1,100,000 down $147,000 compared to $1,200,000 at the end of the preceding first quarter.

Since the start of our current fiscal third quarter, the company has received a $4,300,000 order from a new customer for a FOX XP test cell and also additional WaferPak DiePak consumable orders, improving our overall backlog. Now turning to our outlook for fiscal twenty twenty one. As Dan mentioned, COVID related impacts continue to affect our customers' customers, creating delays in unanticipated orders and overall caution with our customers that has resulted in delays of some of our customer collection ramps. With that in mind, we are taking a more conservative approach to our forecast for the second half of the fiscal year. As such, we are revising our revenue guidance for fiscal 'twenty one down to between $20,000,000 and 25,000,000 while continuing to expect to be profitable on a GAAP basis for the fiscal year, which includes the impact of the net gain on the dissolution of Airtest Systems Japan and the anticipated loan forgiveness of the PPP loan.

This new revenue range still reflects a significant ramp in the back half of the fiscal year compared to the first half. This concludes our prepared remarks. We are now ready to take your questions. Operator, please go ahead.

Speaker 0

Thank you. And we'll take our first question today from Christian Schwab with Craig Hallum.

Speaker 1

Hi, guys. This is Kyle on behalf of Christian. Thanks for letting us ask a few questions. First hi, question guys. So first question, so on multiple, I think you called it a dozen previously, more than a dozen Q1, Q2 potential customers' engagements you have, either the silicon photonics or car buyers as well as other customers.

In the next couple of quarters of fiscal year and into next year, should we expect a majority of orders from these customers? Or how many of these customer pipeline would you expect to turn into orders?

Speaker 2

Okay. That's a good question and kind of tees up how we are looking at our forecast. And I know there's, you know, we had lots of feedback with respect to people on how we look at our forecast and what we're doing. And primarily, what we we discussed is forecast for revenues and less about exactly what the bookings are. And obviously, booking come before the revenues because you book ship get revenue.

Right right along, when we started off the year, we we tried to be clear in communicating that when we set the expectation for the year, we had we're basically communicating the majority of the forecast was only with installed base customers. Customers that were already one that were already communicating to us that they intended to buy more. Arguably, believed to be a conservative stance at that time because the alternative was just sort of looking into when it's called it, you know, and what's gonna happen, etcetera, how do we how do we anticipate. So, you know, we we quite frankly just listen to what our customers are telling us. Generally speaking, when you look at forecast, you actually forecast not only what the customers specifically tell you, but you anticipate winning new deals or that the customer will be in for something.

And that, to me, is always a bit of a challenge to do. In our latest, if you will, guidance, we again took now our current specific customers including the deal that we just won again and what are they specifically telling us. You know, this is what we and the board have decided is our best way to communicate our guidance because it's, you know, we have clear line of sight to those deals. It also helps to explain when I in my con my prepared comments, it says, oh, and then we have other deals. So, again, I just wanna make sure people understand that most of what we are talking about when we guide is I have, you know, customer a has told me they need this configuration for this price by this month, and that's how we build up our forecast.

The downside, of course, to that is, you know, if the customer needs something, we can be wrong in, you know, specific incremental steps. And this is we just try to do our best at doing that out. In that range, if you want to interpret, and this is, I guess, computer thing that's crazy, you know, what they tell us is right there in the middle of that. Okay? So, you know, and you said, okay, there's some downside and upside, and we're just we're trying to be as as appropriate as we can in this environment to give people some guidance while we continue to be, you know, still re amending the business to ensure that we are profitable.

By the way, in that range, we could also interpret we're profitable at the low end, so we must be pretty profitable at the high end. And that's a fair way of thinking about it. So there's still dynamic range within that purchase. Now, you specifically asked about customers and, you know, the the product tier one and tier two. And just for folks that have not listened in the last couple of few calls, we were deciding tier ones as customers that were significantly large enough to do maybe 6 to $10,000,000 a year on a, we call it, average of a year.

Whereas, maybe a tier two might be 1 to 3,000,000. It's not how much we love those customers, but just sort of the buying power, which is a combination of their size, the markets they've served, etcetera. And we have a number of both of those, both as customers that are already qualified, you know, as new opportunities. So back to your question, in terms of do we anticipate in our forecast for current customers absolutely include, you know, some of our biggest current and solid customers as well as some of the smaller guys. And in in the case of the tier one that we announced that we won, you know, in late May at the end of the last fiscal year, you know, as they shift from buying the first, you know, NPI system to production, we are we we see them being a tier one customer.

I mean, they're they're physically a very large company and have a significant forecast with us. And so that's an example where where, you know, they bought small to begin with. We consider mature one. They were already a customer, but they'd only bought a small amount, and they're about to buy, you know, a, call it, a significant Tesla from us. So we have that in silicon photonics for certain.

We have many more customers. We have both, I think, five or six customers that are already qualified for silicon photonics. And then we have a, you know, over twice that many companies we engage with on the silicon photonics in the photonic space. You can in our revenue forecast, primarily, there's no revenue in the ways that we shared with you related to new customers coming in. You know, one of the challenges that right now is the reality is we're one month into our third quarter.

And while we do have inventory, there's, you know, only so much time until even with large orders, we're not gonna be able to necessarily ship it out before the May. And so, you know, I think as we anticipate this year, you can see that the bookings, for example, would continue to be strong as the ramp is mostly just shifted, which would afford us to have, you know, a really good strong backlog going into next year. Related to just new customers going forward, again, we're not talking we try not to forecast all the bookings and things like that. But for certain, we do have over this next eighteen months and certainly in the next year, anticipate that we will win a number of new customers across several segments, including silicon photonics, silicon carbide, as well as some new applications basis that we haven't spent a lot of time talking about, but we, you know, kind of alluded to in the memory and, like, the controller states and some other things. There's actually a lot of activity and a lot of discussion in the market around way for what we're learning right now.

But I think one of the things that and I know I'm saying a lot of financing this. One of the challenges right now is there's a lot of folks that are you know, the semiconductor industry, I wanna make sure people understand, is actually doing really well right now, which seems to be a big disconnect with respect to, you know, why is error having a couple of the worst quarters in in in recent memory. They sent this is kind of a straightaway, if you will, where everyone going as fast as they can. You know, the the microns of the world, many semiconductor companies, they're basically buying exactly what they're doing and they're just going fast. There's actually not a lot of kind of new development.

There's not a lot of new process terms. People are kinda just sticking to their meeting and doing exactly what they're doing. And so in a scenario like us where we where we're just leaning into these new silicon photonics, silicon carbide applications, some of those customers have kind of pulled back, slowed down those ramps to their customers. And as a result, you know, the bulk of our business was involved in this API or this new product introduction space. I I have to say one more thing here.

Last quarter, I mentioned it. It was absolutely dead on that, you know, prior to then, everybody was just completely holding their breath. They didn't, you know, we couldn't find any fear. They were just sort of things were just sort of moving laterally. But over the last, I think, three months, customers have realized they're not gonna wait for the pandemic to be over.

And the conversations are, you know, here's the order, it's coming, how you're gonna install it, you know, we we could maybe later in the call, I'll go into the actual tactical logistics of of flying in people and they're sitting in quarantine, then we do the installations and the the how to manage through all that. But we need to do that because we're building the entire bunch of systems in the second half.

Speaker 1

That great. I appreciate all that color again. Second question here. I wanna follow-up on on your new customer order, this $4,300,000 order. The customer is serving a large mobile manufacturer.

So I know we've kind of been surprised or maybe disappointed in the lack of follow through previously. So I'm just wondering if you could add some color and comments on your conviction that this this customer will turn into more meaningful revenue in the future. Just kind of your best expectations for that customer today. Thanks.

Speaker 2

Sure. And I let me add to your comment about are you doing a disappointing follow through? I'm not sure you use that word, but I'll use it. For those folks that are kinda new to us or not familiar with the story, we had a very large mobile manufacturer who, it turned out, was the initial lead customer on our new Fox family of both the level and similar with Diamond Magic products. And when they were first buying from us, there was an it was unclear yet how they would deploy the tool in terms of which high volume applications, how long the test time was, and then, as it turned out, what percentage of the devices were actually tested.

What we have made clear is that we've seen that market space, in this case, turn to what is called sampling, which means they do not test 100% of every single device using their tool. Instead, do it for quality reliability sampling, which I won't go into a lot of detail, but the the interpretive is if you're only doing a 5% or 1% sampling, you only buy 5% or 1% of what you could. So there's a huge dynamic range there. And the initial orders from these customers and these applications, we did not know whether they were going to be doing sampling or higher volume production. And and in fact, the the sampling rate was lower than expected and therefore rather than, you know, $1,015,000,000 dollars worth, they didn't buy $15,000,000 worth.

Now, specifically in this application, and we have to be really careful about what things we say. So I'm only gonna try and say the same things I've said before and specifically in the release. We have been told and are clear that this is actually a production burden, meaning that it's a 100% test. Right? So the good news is is it doesn't have the one or 5% multiplier times it.

The test time and the volume percentages, don't wanna get into. I never will. Technically, there's some even uncertainty exactly what applications it will go into. Although there are some of us that are getting to the programs and more more than we will ever talk about. All I will say at this point is that we have been told there is volume behind it.

We absolutely believe it and they are at this is at the one of the customers that's asking us to secure allocation of capital and and and slots, etcetera, for additional capacity this year. So I'm I my voice may not sound it. I'm actually really excited about this one. Will maintain a extra amount of conservativeness and believe it as I see it. But so far, so good.

And, you know, it doesn't take a lot of $4,300,000 test sales to add up and, you be in this level of revenue. So it was actually really encouraging. The other specific thing I wanna say on that, because it may come out somewhere else on this new customer, and I I really mean it to come out through my pores. I am actually really excited about this, not just because of the potential dollars, which are, you know, are significant, But that the customer specifically understood and selected this our system based upon its capability for 100% validation of the device. This part could have been tested with what is known in the industry of the packaged part burning system.

We sell them. Suddenly, one of the differences between a packaged part burning system with a traditional convection oven is that you tradition you have to use lots of shared resources. I won't go into it. All it means is you just do not have the traceability and the validation of every single device. The Fox products have as much as, you know, a 100 times the resources for available to the devices, which allows us to 100% know that that part got tested, as well as thermally conductive cooling and heating gives us the ability to certainly know it was actually burnt in properly.

Right? That is more expensive than packaged part. And in certain applications, we're able to to wafer level or send you over die to so many more in parallel that we can actually do it more cost effective while at the same time giving them much better data. They specifically call it spent more money to ensure that this device was a 100% burn in and clarity, and we had reason to understand why that was important to them. And that is super encouraging to me because, honestly, that's what we've been on touting for years and they get it.

And so that is just really encouraging and I think this is gonna lead towards more business and other opportunities that are similar to it because of the level of clarity of the, you know, the value of this type of payment. Fantastic. Okay?

Speaker 1

That's great. Appreciate that. And then last quick one, and then I'll turn the call over. A little bit of a modeling question, guess, as well as fundamental. Your implied second half guidance, with the visibility you have today, any color on Q3 versus Q4?

Would you expect Q3 and Q4 to be kind of similar in size or more of a progressive improvement through the end of the year and Q4 sequentially better? Any color there would be great. Thanks.

Speaker 2

I mean, I would I would actually, I guess we haven't really talked about it, but let me put it out there. I think it's pretty fair to say that Q4 would still be bigger than Q3, you know, given the the current situation of our backlog, albeit, you know, you you put the press release out for the that last order for the $4,300,000, and we have orders since then, by the way. We just haven't put out press releases on them. I I'm not sure if I even said it originally. I think we got it at, like, you know, 09:00 in the morning on the first.

It's like it missed our quarter by, you know, less than 12 certainly less than twenty four hours or something. It was pretty pretty sad. So it was a nice to sit there in backlog, but it was certainly in backlog from day one. So, you know, we do need a little bit of a running head start to make sure you can ship things. So, you know, we haven't announced any significant orders as we are expecting yet this quarter, but I would say it's fair that the second well, q four would be revenue wise larger than q three.

Bookings, I'm not sure. It might actually be spread out or even then. But I think revenue is going to be larger than fourth quarter.

Speaker 1

That sounds great. I appreciate it. That's all for me today. Thanks, Gene. Got it, sir.

Speaker 0

We'll now hear from John Thickthorn with Dielected Capital.

Speaker 3

Jean. Thanks for taking my question. I appreciate it. So a little bit of a follow on from the questions you just got asked in a slightly different way since you asked some of my questions. Hey, are are the Bulleit the Bulleit customer one with a $4,300,000 order and then the Bulleit customer two, are those different customers or same customer different ones?

Speaker 2

You know what? Actually, I actually I'm actually giving some feedback, John. I'm not sure if that's you. Okay. Seems to better now.

Okay. We had not made that clear, although I think most people had interpreted it. You probably did. You you did well and then close. So I I do wanna make it clear here.

The end customer is the same. Okay? But the subcon is different. The application and the device is different. That's a good thing for us.

And just because the end customer is the same, I can tell you, you don't just win one application and then you get another one. Internally, the groups can be different, the applications are different, etcetera. So this feels like a new win to us. Not certainly with the sub con, but even within the application and the group that it was running. And one of the reasons I think that we're getting excited about is because there's cross pollination going on in that customer to recognize and and, you know, they found us in this application.

They came looking for us. We said, can you do this? So that's that's the answer to them.

Speaker 3

Great. Great. That sounds that sounds exciting. And so without having to give any time line around it, what do you think the total revenue potential is in these two products, either one of them alone or two of

Speaker 2

them

Speaker 3

together, like, over whatever period of time. I don't well,

Speaker 2

I'll tell you what. I the one I I am gonna leave the my way out of this one a little bit. But one thing is is just looking historically, sometimes it's good to just point to people that has historically happened, so you can say, see it publicly out there. We have been having a couple of million dollars with the DiePaks in q four I would do to the last, you know, three, four years or so. Right?

And, normally, what we did is we did a set of DiePaks somewhere around fall, and then that turns into production along May. I kinda made it pretty specific. That's as we would have expected during this time, but they got pushed into the summer. So that's one example. So that type of device is generally done, you know, maybe a few million dollars a year of just the consumables.

This new application, I'm gonna just simply say there will be more. And, you know, a test sale is $4,300,000 or $4,000,000 or so, So they come in pretty good sized chunks. We have ranges of what it is, and we also know that all of the deep data is not in. And our visibility of this is actually still relatively limited. We we can see the capacity we need maybe in the next six or nine months or so.

But we will see as the device finally gets out and it's deployment in all the different devices, what the growth rate is. I'll tell you, I'll share one thing and I kinda I think this is okay to say. I have been told by the customers, you could think of even this one in the past, this is how big it is and how great it's gonna be, and then they have not bought that much. And this is a customer that has certainly done that before. This time, they told us less about how great it's gonna be, but it's more obvious from their options how big it's gonna be.

So I don't know if that's a good thing, but it seems like when they tell us how great it is, it isn't as good as it is. And maybe the fact that they haven't said as much this time, maybe that's a good sign or not. But we know it's going to it's a it's a good idea and getting the money and looking.

Speaker 3

But I I, you know, I have to believe that they need to plan their business, and so they have to give you some level of visibility. I mean, what are your lead times today? And do

Speaker 1

want to

Speaker 3

see how the scope of those lead times, like, you know, I I I mean, either lead time shifts or or can you help us with the idea as opposed to revenue guidance through year end? Like, where do you think your backlog is at year end? Maybe that will help us understand what you think the scope is as we move forward.

Speaker 2

I think what I will share with you is given that majority of what we have done with our forecast is basically shifted in time. I think it's fair to say that we believe, and I think if things play out as we expect, we should have a pretty strong backlog going into next year. And then that's kind of a weak way of describing it. But I, you know, I think, you know, it it would be a fairly substantial backlog going into the year, which is very different than it was this year when we went into this year and certainly last quarter. So I I you know, you actually asked a different question and I wanna answer that and that is, well, given the lead times and stuff, so how much visibility they would give you.

You know, there's pros and cons about having the a manufacturing capacity and infrastructure and supply chain to be able to ship significantly more than any of the revenue numbers we talked about. And I mean, you know, 10 times at least. So the downside is is that if as the customers come in and particularly this customer and other large tier one customers, they kinda build these guys and make sure you have the capabilities to serve them. Okay? So they know darn well that if they give us a multisystem order, that we can ship that in five to six months.

Okay? So, you know, they don't have to give us too much visibility. You know, we're not forecasting, you know, 40 systems with us and think that they're gonna ship those inside of six months. But, you know, even at $4,000,000 test sites, keep in mind, that's only one system to us. And we have no challenge shipping, you know, multiple of those per month with these new lead times.

And our typical lead times on the street are in the, you know, 16 to maybe 20 per week or so kind of the treatment configuration, the backlog and stuff. So they don't have to give us that much visibility.

Speaker 3

Okay. And so that was great, by the way, great weaseling out of answering your question. I applaud you. That was that was Black Belt CEO, Dodge. I'm I'm very impressed.

So the on the transceiver customer, that sounds kind of like a a new thing. What what what is the size of that opportunity? Maybe you could answer that one.

Speaker 2

Okay. So let me sorry. It's interesting. So first of all, it it it feels like all of these silicon photonics guys have kind of a similar pattern. And that is they start with one or two, what we call, blades, which is a one or two wafers of capacity to begin with.

We now can do that with our new Cox NP systems. And then when they go to production, they buy p systems that are either nine or 18 blades or something like that. And so I think a general rule is to think about it that way. In fact, each of our initial silicon carbide and so I'm sorry, silicon photonics customers have all seemingly started off that way. I think except the initial lead customer because we didn't have the n p systems to begin with.

But the first x p's they purchased, they would do all the quality and everything else, you know, two, three, four wafers at a time even though we shipped in a nine and eighteen grade system. So, you know, what it feels like is, oh, you buy, you know, a 3 quarter of a million or a million dollar forecast or something which is an IP system with a couple of wafers, And then we transition and we buy a 2 or $3,000,000 test cell as you move to production. And then we duplicate that over time. And the capacity of that just gets into what do you think is the market size. So there's if you look at silicon photonics and, you know, I I John, I think you've looked at them at it before.

Not everybody understands, but, you know, you you tell these numbers out with what is the silicon photonics. So silicon photonics is an industry description of an integrated device used for electrical to fiber optic or optical transmission. So to historically, fiber optic transceivers to and from, okay, are a a very complex module made up of lots of different IPs and mechanical and electrical structures and lasers and things all integrated into this little package that is being used in the data centers. It is used in telecommunication for across town. It's even used for underwire, undersea fiber optic transceivers.

They are the the cost of a transceiver can be from $3.04, $500 or more up to, you know, $10,000 for them. Well, the industry had been working for, you know, maybe a couple of decades. Companies like Intel, who said, listen, the world hasn't gone to fiber optics because the cost of those transceivers is just so expensive. We're not gonna have a fiber optic communications hub in our house if the transceiver is $900 per channel. Okay?

And this is actually one of the big misses in the nineteen ninety nine, two thousand hub on around why, you know, JDSU and the world's gonna go fiber optic and then it went nowhere. The reason is it was just too expensive. And so the world went another direction and other kind of communications protocols and all. But the need for fiber optic or the end, if you will, of RF and micro transmission through regular collapses, etcetera, is is running out of steam. And so folks like Intel will say, I have an idea.

I'm going to integrate all that stuff into one silicon and take the cost of the manufacturing advantages that you see with silicon manufacturing, and I'm gonna make a wafer with, you know, 500 or a thousand devices on it, and I'm gonna take the cost from hundreds, if not thousands of dollars down to tens of dollars. And that's what they're doing. Right? And there have been several other big companies, Cisco's of the world that have been making these investments, and the big deal is it allows the world to build a much higher bandwidth at much lower cost. I mean, like, you know, a tenth of the cost.

And when Intel introduced their first product in there, it was devastating to the industry because there were companies out there that were selling these products for $2,000 apiece or a thousand dollars apiece, And Intel was selling them for $400 and making huge margins on it. And so there are a lot of companies that went away. And so the industry analysts have said, wow, it's a there's been enormously elastic market. And it's The world put out as much silicon photonics devices as they can. They're gonna shift from copper based communication protocols to fiber optic communication based protocol.

So there's this elasticity where the cheaper they make it, the more they'll come. So up until recently, the whole story is there's not even close to enough manufacturing capacity out there to meet the market needs. The big players include Intel. Right? And people know that they happen to be just because they are a 10% customer of ours.

Okay? A favor than ours. But there are other players, some of which we have mentioned and some we haven't, that are in that space and it's sort of a wild west of everybody getting into it. The one thing that's interesting about the customer, and then back now to the customer that we went in May. Okay?

They are a large player in the transceiver business. Right? And they're getting into silicon photonics. So unlike a lot of the players in the space that aren't actually making transceivers and are just getting into silicon photonics, Okay? These guys are one of the biggest players in transceivers, and they're gonna shift their business to silicon photonics.

So there's you know, the ramp is different As soon as it works, they instead of selling c a to a customer, they can sell c b, and all the differences in the manufacturing cost and the reliability of the footprint is so much smaller that it's a better product for them. One other thing just one other thing in background on the whole silicon photonics space is that fiber optic communications is measured is is noted in both protocols and speed. And the speed of fiber optic communications were, like, 50 gigabit or something, which is very fast, by the way. But they're going to a hundred and two hundred and four hundred and eight hundred.

Well, it turns out, copper is completely running out of steam. It can't you know, the fastest with the fiber optic communication or non fiber optic communication is, like, a 112 gigabit. And as they go above that, they're gonna have to go to photonics. So there's there's other reasons in silicon for people to go to photonics as a communication protocol. And the good news is both photonics devices need not just a burn in, but an aging and stabilization that AirTouch provides with our wafer level solutions.

So people that are going to pull wafer silicon photonics are all looking at how do I do wafer level stabilization of these photonics devices. And that's what we offer with this FOX XP. And so that's why, right now, almost all of the players in the market are talking to But they I mean, it's unbelievable how they have, I'll call it, stalled in the last six months. We were trying to figure out how we were even gonna be dealing with all of the different benchmarks and all last summer when we put the new marketing and the cleanings in place in our facility last February. And right now, it's just sort of a lot of Zoom calls and stuff, but it's not only the activity that we think will come back as soon as we get through this pandemic stuff.

That specific customer has the ability to ramp significantly and that be bigger than our biggest customer in the space. And we do believe that in times already.

Speaker 3

Great. So you almost answered it in the last sentence, and I appreciated the warm up. Bigger than your biggest is would be great. So I'll give it to somebody else. My last comment is, once again, I would like to reiterate that I think your board should continue to see some turnover.

I appreciate it that there was some last year, but board should be refreshed. You did miss for six months, and I think you guys should either add or or I'd like to see some board members buy some stock or management. Like, we're all out here risking our capital. You're on this board for twelve to forty four years. Reach into your pocket.

Buy a share. Show us that you believe in the story also. It shouldn't all just be Christmas presents of gifts and pay to be a board member and have your four nice dinners a year. Shareholders would like to see you risking some capital alongside of us, and that is a message from me directly today. So thank you very much.

Speaker 2

Appreciate it.

Speaker 3

Yes. Good luck in the back half.

Speaker 2

Thank you.

Speaker 0

Next, we'll hear from Tom DiCely with D. A. Davidson.

Speaker 2

Yes. Hi. Thanks for letting me talk. Good to hear you guys. Just a couple of quick ones.

First is, when you look at the recent cost cutting you've done, has that impacted your ability to do trials with new customers or has it limited engagement with new customers at all? I would say no. I mean, we

Speaker 3

there in no way have

Speaker 2

we slowed down anything. I but my pause is things have slowed down that gives us some bandwidth that has allowed us to be cost cutting if you will. It's candidly the case. And, you know, Gordon or myself or anyone in my staff, you know, is working seven days a week anyhow, even though we all stepped up and said they're gonna take direct cash pay cuts, you know, till we get to profitability because it's the right thing to do. But I I don't I don't believe that is the case.

I don't think we're actually cutting off we're doing anything that's going on sales. That is the we are absolutely engaged in some marketing programs. Some people may not even give more color on that. But, you know, the clear focus right now with everyone in the company, including every single day of call is, you know, the pending purchase orders and the ones that we have, ensuring that we can install them and ship them as quickly as we can get paid at first. Okay.

Great. And then maybe just a quick question on the competitive front. I mean, the fact that things have stalled a little bit here for a few quarters, has that enabled any competitors to catch up with you? Or have you seen any competitors, you know, try to do what you're doing in this situation? So at this point, I would say we have not at all.

We have not seen any new competitors or we have not heard of anybody working on something that could be, you know, considered a multi worker system for doing the kind of things that we're doing. There's no conduction based multi or simulated die or module systems that we do with mobile customers. They just say that when we're competing, it's like we're competing with a package for billing system. It it it gets too interesting because, even then, we also sell those, I think arguably not much and or none this year. There still is a there are some markets where packaged part is cheaper and people are willing to make those trade offs.

It's very interesting that we have examples like in silicon carbide. There's even some automotive companies that are moving from package to wafer level, and so we see both sides. So we do these cost of ownership models and convince ourselves why the wafer level makes more sense. So what I'm trying to point out is when we're competing, we're competing, like, against package parts. And that is arguably an alternative, but very differentiated in terms of its value proposition, not only because we do more parallel, but we get the yield advantage by somebody doing an evaporator before it goes into a package or a multi chip module or something like that.

And so that's the primary still alternative to us, you know, real competitors. Okay. That's that's good to hear. Just so, you know, that you're not you actually need any business. It's just purely being delayed.

Yeah. And, Tom, let me make that very specific. We have not lost a deal. Okay? We have not actually said, oh, we lost to so and so, you know, and, you know, said, Hey, that happened, you know, in the entire last year.

I mean, nothing about the slowdown or push out as a result of us losing the deal. Okay. Great. And then finally, just a clarification. Starting this quarter with very little backlog, and you say going into next year with a fairly significant backlog or meaningful backlog, that means that new orders have to be quite a bit higher than the revenue.

The revenue in the second half year is could get you to grow quite nicely. So just wanna make sure that I understood you correctly when you said you'd have a fairly significant backlog going into 2021. That's been out, Tom. 2022. And and, again, that's correct.

And I the only the only caveat I just said is based upon what we are we understand and knowing that I believe that to be the case. Sorry. No. Thank you. Alright.

Go straight ahead. I mean, we we have we have we have specific customer forecast for the summer. And, you know, they need to get us orders before then. So yeah. Great.

In the summer, I bring that up because our fiscal year starts June 1. So anything in the summer is the next fiscal year. So that's fine. Yes. All right.

Thank you. Thanks, Tom.

Speaker 0

We'll take our last question from Larry Klabina with Klabina Capital.

Speaker 2

I got some quick questions on timing. Your mobile center new customer, when you talk about more systems that come, you talk about this fiscal year, is that plural? In other words, in q four, is there one more system that you're sure of or is there more is it more than one,

Speaker 0

just to clarify? Yeah.

Speaker 2

Let me let me make sure I understand. Okay. Because, you know, one of the one of the Larry is able to understand that this is very well for a little bit this event. One of the challenges is that ours in the test business, the typical a t adding test equipment and the test suppliers like in Bodfist, Teradigm, Cozy, for example, you know, Verigee that I came from before here. The testers in the wafer level test one wafer at a time.

So one tester equals one wafer. Our solutions, we make single wafer solutions with the CP, dual wafer solutions with the MP, and up to 18 wafers with an XP. So when we talk about systems and system capacity, it's sort of how do I interpret it. So, Larry, the advanced question Larry was asking is how many p's are you gonna get versus just how many what we call blades or testers within it? All we have stated, Larry, is and and tried to clarify is that there's absolutely more blade and systems, you know, testers with the capacity and more die packs and more loader and motors.

We they're not getting clarity yet as to do do you think there'll be multiple x p's in this fiscal year or not. I haven't I haven't done that yet. K? So you said so you're saying you're gonna have loaders, but if you you already got a loader on the on the system you're shipping this quarter. Do you they need what they need you obviously have another XP that you need that loader on with this That's at least that's at least fair.

I'll tell you what, I'll I'll I'll go this far. They need at least another XP die pack and loader. Okay. So at least there's one more system in q four. But, you know, when I see yes, it it it implies to me Plural maybe there's more than one.

But there's at least one. Is that correct? Yes. Hang on for me. And then on on your new NP, a certain photonics customer that's gonna buy the XP, is that is that expected in q three or q four, that that one?

Do know? I'm I'm expecting the order before I ship it, and I don't have the order yet. How's that? Yeah. But I I what would be the cutoff on that system if you got the order and Yeah.

I mean, I'll tell you what, we do have the ability to to ship things on relatively short lead time. But generally speaking, you know, inside of, like, eight weeks or twelve weeks, you're, you know, you're pushing it. So, you know, that goes to one of the original questions I think from Tyler, which is do you think q three and q four will be the same? I no. I don't.

I think q four will be larger. And so, know, we we we we have revenue. Yeah. We do have revenue in q three, which ends at the February, but we have not booked yet. And we definitely have revenue in q four we have not booked yet.

Okay. You haven't not over yet, but not everything that we booked in q three will ship in q three for certain. The GP customer for data center, is that still on track for at least getting off the ground before this fiscal year? And the data we have okay. I I mean, we haven't really gotten a part of this gets into how much forecast.

So to folks, I know it's been for some clarity. So we run a new customer, like, a year and a half ago for a data center related application that we continue to say it's for this, you know, extremely high value application. Right? We do continue to forecast that they will buy multiple systems for production and have every reason to believe that. They're absolutely using the tool today for early production ramp, etcetera.

We're trying to figure out when the ramp is. We know for certain the ramp is delayed because of coronavirus. Okay? I'm I'm quoting a 100%. Okay?

So and we have not seen any of it yet. So I don't know exactly when that is. So right now, I actually don't have that in our fiscal year in London because I have not specifically been told by them that they're gonna take it by me before I pulled it up. It doesn't mean that couldn't still happen, and we have the ability to ship, but there's just I don't have the visibility with them as I do with some of other customers. Well, I mean, mean, I have to pay for that system, that smaller system.

You could you could if you got an order in a reasonable period of time, you could ship it quicker until the next few weeks or weeks. Similar. I actually have some CP capacity textiles around. If you I kinda understand for those that have come and visited, I don't, you know, pictures of our products help a lot. So the product family of the FOX P is has three different chambers, we call it.

There's a single wafer, dual wafer, and multi wafer. And then in those chambers, are blades. The blades are interchangeable between all the customers. And then in those blades are channel modules specific to applications, but there's only three flavors and everybody is made up of the same two. So we just mix and match and configure the order.

So if so then we need a couple of c p systems, I could ship them almost immediately. Gonna shift a little bit to this mounted memory potential that's out there, I don't know, four years ago when we were developing the XP. There were some tabs that got initiated, and they were looking for somebody with a burning system at at the end of the line. I think they only told you Electron certainly weren't ready. The XP wouldn't even be bugged or a little protected.

Now, but and and hear about that application with the disaster. They I think they had a leak board board board system that worked around their IP, but it didn't work too well. Anyway, we get the sense that there's probably another one or two fabs that need to get off the mark shortly. It is you know, especially with all the opportunity, you got a full plate and and resources are limited. Doesn't that make sense to joint venture?

You need all you have a proven machine now. It's proven, the XP. It's the key technology for that application, but you need automation, which which is Mhmm. You don't have. Wouldn't it make sense to joint venture with something like a BPS automation?

Like, you know, we got 5,000,000,000 market cap. Would derisk the entire project. So you could get it off the mark. Certainly, could push XPs through your your facility. You now have a good ops manager to help you do that.

And so, you know, in order to secure that opportunity, it would be a monstrous I think it would dramatically reduce the risk for the customer if you present yourself in that manner. And, ultimately, if you could land something like that, you could you could live the rest of your life on the consumables because it'll be something like a thousand five packs or so on that. You could put that in Wafer stocks. On memory so I mean, we teed up a ton of stuff there, Larry. You you clearly done your homework.

Okay? I just wanna acknowledge several data points and maybe try and answer the one question that was embedded. So I wanna acknowledge, we do believe that some, but not even close to the majority of the memory companies have implemented vehicle auto gaming and only in flash memory today will not do that. We believe that long term, that it makes sense for all flash memory and potentially DRAM to go to wafer level running. And there's some specific reason that there's some it has taken some time, DRAM longer than Flash and they had a pretty good idea why.

K? The people that implemented wafer level burning first with Flash did it in a I would we believe it's a compromised way. And we've gotten specific feedback that they would like that they're gonna need more cost effective, higher parallelism, lower footprint, more automation in the future. And we do believe that long term that is And as long as I'm in the seat, we will always be trying to get into that space.

We have shared vaguely with people that I would vaguely repeat it again. Part of the the investment in us as a company is actually about poison of water related to automation and production cells of extending the XP of its capabilities. So it's more applicable and more effective for massively high volume applications such as memory. Right? And we are spending that money today.

So in this downturn, in addition to the investments we're making in WaferPaks, DiePaks, high voltage, package part and wafer level banding systems, we're also engaged on automation and some other things that we think are particularly appealing to multiple markets including specifically the menu guys. Okay? You're you alluded to the risk associated as a small company And certainly, a big part of the risk profile for three, four years ago was the XP was that a, you know, a glimmer in my eye or her eye, and it was a sketch on a piece of paper and that was too far of a fetch for a fab that's gonna need, you know, up to 100 x p's per fab to go after. I believe that we are on a path to be able to reduce that risk and that gives us opportunity. I will also tell people do not invest in our stock because you think we're gonna try a whole bunch of memory systems in the next six months.

But we are engaged in working on some things. And very specifically, where the engagement in that area slowed to a halt during COVID. Not for us, but everybody. The memory guys are absolutely just focused on getting what they were doing done and not being done. There's no way to be understanding any programs that that we're doing too on the way for all side of things right now.

But I do believe they're really engaged. So but your comment about should we partner with somebody, etcetera, I think that is, you know, I I understand. It makes sense. I don't wanna comment about potential partnership shipping for the inside. So I will acknowledge that could very well make sense to companies before they go out and try and spend hundreds of millions of dollars worth of chest on regular billing systems.

Yeah. Particularly, if you would just give your key technology or XP system out the door, which would be a tremendous boom deal. But also, the the consumable business would be, you know, like a business. Right. It's gonna be something reach out for life.

I believe that one of the critical weaknesses of the way people have deployed and one of the headwinds of why people have not been able to do wafer level burn in across a wider segment of flash as well as VM is the is the contact. Their own has proprietary technology with what we call a laser pack that can address it. So, I mean, I think that's one of the differentiated things. I actually think the tester is as well and the test on the automation, but for certain, the probe cards that are out there cannot address the DRAM, the high density, high power flash memory coming up, and it's something that Liquitex can. It seems like why why take on the automation?

That's really not the key technology. Just what we said is the key technology and, you know, by partnering with somebody, it would dramatically reduce the risk, see the customer, you know, just need to get get down the road. Just my thought, but hopefully, you know, you guys are seriously continuing from that date. I appreciate the feedback and stay tuned, Jay. Thank you.

Okay.

Speaker 0

That will conclude today's question and answer session. I would now like to turn the call over to management for any additional closing remarks.

Speaker 2

Okay. Well, thank you very much, operator, and thank you, everybody. We appreciate you listening in and taking some really good questions and doing some good questions. I absolutely want to acknowledge. We understand that, you know, the first half was, you know, certainly one of the, you know, less exciting times of ARRIS history even in recent memory.

But I I truly sit here at this edge and I'm so glad that 2020 is behind because it wasn't, you know, it wasn't just last six months. It was really early twenty twenty that we were feeling it. And, you know, starting up with this initial order, and there's none of the customers that telling us, it's not just COVID and all the other things going on in the world. We're actually more excited about twenty twenty twenty one. So I'll leave it there and appreciate it.

And as always, you know how to reach us reach out to us if you want to have follow on conversations, etcetera. Thank you very much, and we'll talk to you next quarter. Bye bye.

Speaker 0

That will conclude today's conference.

Speaker 2

Thank you

Speaker 0

for participation. You may now disconnect.