AEHR TEST SYSTEMS (AEHR) Q4 2020 Earnings Call Transcript

Transcript

Speaker 0

Good day and welcome to the Aehr Test Systems Fiscal twenty twenty Fourth Quarter and Full Year Financial Results Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jim Byers of the MKR Group. Please go ahead, sir.

Speaker 1

Thank you, operator. Good afternoon, and welcome to Airtest Systems' fiscal twenty twenty fourth quarter and full year financial results conference call. With me on today's call are Airtest Systems' President and CEO, Gayn Erickson and Chief Financial Officer, Ken Spank. Before I turn the call over to Gain and Ken, I'd like to cover a few quick items. This afternoon, Aehr Test issued a press release announcing its fiscal twenty twenty fourth quarter and full year results.

That release is available on the company's website at air.com. This call is being broadcast live over the Internet for all interested parties, and the webcast can be archived on the will be archived on the Investor Relations page of the company's website. I'd like to remind everyone that on today's call, management will be making forward looking statements today that are based on current information and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. These factors that may cause results to differ 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 Airtest Systems undertakes no obligation to update the forward looking statements.

Now with that said, I'd like to turn the call over to Gane Erickson, President and Chief Executive Officer. Gane?

Speaker 2

Thanks, Jim, and good afternoon to those joining us on today's conference call and also listening online. Ken will go over our fourth quarter and full year financial results later in the call, but first, I'll then spend a few minutes discussing our business and product highlights, including our continued progress with our wafer level and simulated diet testing burning solutions. And then we'll open it up for your questions. This past fiscal year, we made substantial progress with our new FOX products that strengthened our customer base, expanded our markets, and enhanced our operations and sales capabilities to capitalize on the significant market opportunities we see at home. While we are on track while we were on track to meet our expected guidance for fiscal twenty twenty due to the challenging global environment and uncertainty around the COVID pandemic, we experienced push outs of customer forecasted orders in our second fiscal half of our for our FOX two systems and consumables in data center and some five g end use applications for silicon photonics transceivers.

These customers have indicated the push outs are temporary and that they'll require the additional system capacity and consumables in the current fiscal twenty twenty one year. We'll cover the details supporting our optimism, but want to quickly state that we are reinstating guidance and expect expect FY '21 full year revenue to be between 25 and $28,000,000, up 12 to 26% and to be profitable for the year. With the increase in number of customers in production using our systems, the new market opportunities we added with new customers this year, our move to our higher margin POP systems and consumables, and the completion of our of our previously announced restructuring and sales enhancements this past year, going forward, we are well positioned to address our new market opportunities and are now profitable at a much lower revenue level. Let me walk you through some of the key business highlights for this last quarter and for the last fiscal year as we outlined in our earnings release. First highlight, we closed a new order with a major new customer in silicon photonics.

During the quarter, Air closed an initial order with a new customer that is a major global leader of communication transceivers for data centers, telecom, and five g infrastructure for our FOX full wafer level test and burn in system for production stabilization and test of their silicon photonics devices. This new customer is deploying our FOX NP system for initial production burn in and stabilization of their high performance silicon photonics devices and is forecasted to then transition to our FOX XP wafer level testing burn in systems during this fiscal year 2021 to meet their volume production forecast. We categorize this customer as a tier one customer, which we define as a customer with the resources and market size to be able to purchase six to ten million dollars per year or more of our systems and consumables. The next highlight is we closed an initial order with the world's largest OSAT. During the quarter, we closed an initial order with the world's largest outsourced semiconductor assembly and test supplier to use the FOX P family of products, including air wafer packs and die packs for production test, burn in, and reliability screening and device with full wafer singulated diode module.

They have already added our system to their list of tools and capabilities in their marketing and sales material to their customers, and we have begun some cross marketing and sales activities with them. Stay tuned for more updates and announcements. Next, Eyre added a key new market with the addition of wafer level burn in of silicon carbide devices. This year, we successfully took the initial order for and installed our first production capacity for silicon carbide devices, including, including it to the list of markets such as silicon photonics, two d and three d sensors, automotive lasers used in photonics devices, and have shown the value and feasibility of using our FOX solutions to address these market needs. The initial system order was for a FOX multi wafer system with proprietary wafer packs configured to test 18 wafers in parallel at up to a thousand watts of power per wafer.

And the customer is using it for 100% production burn in and infant mortality screening of silicon carbide devices at wafer level. This new silicon carbide application with a Fortune 500 market leader in silicon carbide and power modules adds a significant new tier one customer of our FOX XT system and WaferPaks for whole wafer burn in and infant mortality screening of silicon carbide devices. Since our initial installation in January, we've received multiple follow on orders for additional WaferPaks from this customer, including multiple new designs and now have a significant number of different devices that have been released into production. This customer is forecasting additional capacity needs for our FOX XP systems during this fiscal year and two years into the future. The silicon carbide market semiconductor device market is growing at a tremendous rate with a unit growth of high power devices of over 50% CAGR per year of research from 2019 to 2025.

Silicon carbide is a very impressive material for high power and particularly high voltage devices for applications such as the needs of electric and hybrid electric vehicle powertrains, electric vehicle charging infrastructure, IT data center power supplies, and renewable energy power conversions such as wind, solar, as well as power storage. These devices have shown reduction in power losses as much as 78%, and many articles have been written about the first mainstream use of silicon carbide power devices that were in the Tesla Model three, which enabled much longer driving range per charge. This has basically changed the market with most, if not every, electric vehicle, hybrid electric vehicle automotive company moving to silicon carbide based powertrain and charging system. The challenge is the reliability of silicon carbide is known to have high infant mortality rates. But after a reliability burn in screening, these defects 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 on an entire wafer of devices all at one time while testing and monitoring every device for failures during the burn in process to provide critical information on devices so they're not later packaged into multi die modules where the yield impact is 10 x or a 100 times as costly. The old research is forecasted over 600,000,000 yielded power MOSFET 20 amp equivalent devices shipping per year by 2025 equates to over a half a million wafer starts per year, which creates an enormous opportunity for our wafer level and simulated die systems, given the long durations required to burn in the devices and to remove the defective parts. Burn in times can be as long as days per wafer. So even at our industry leading 18 wafer per system capacity, FOX XP, that's a significant number of systems. The high the next highlight is pretty important.

In fiscal twenty, we saw the industry adopt production wafer level burning. We made significant progress with our new FOX products for wafer and sequelae digest and burning during the fiscal year with two tier one tier one customers added and five customers transitioning to production with a 100% stabilization or infant mortality screening with our FOX systems. We saw our silicon photonics customers move to production for the first time in just this last fiscal twenty twenty. During the fiscal year, we saw our lead customers for silicon photonics move to full volume production. We expect them to purchase additional systems this fiscal year and into the future as they continue to maintain or grow their market share and add additional silicon photonics devices to the mix.

We also moved three additional silicon photonics customers to production with our FOX systems in fiscal All three of these customers are expected to ramp production during this fiscal twenty one as well, adding capacity in both systems and consumables. And near the fiscal year end, we announced yet another new silicon photonics customer that is deploying our FOX NP system for initial production burn in and stabilization of the high performance silicon photonics devices and is forecasted to then transition to our FOX XP multirafer systems during the fiscal twenty twenty one to meet the volume production forecast. Silicon photonics devices are highly integrated silicon based semiconductors that have embedded or integrated the nonsilicon based laser transmitters and receivers to enable a smaller, lower cost, higher reliable alternative to traditional fiber optic transceivers. Historically, fiber optic transceivers are made up of many different logic ICs, multiplexers, DEMUXs, external discrete lasers, and receivers into a mechanical package that is used in data center and telecommunication infrastructure. Basically, this has been the high speed transmission lines for long haul and data center to data center backplane of the Internet.

However, these fiber optic transceivers have been extremely difficult and extensive to build. This has been seen as a limiter to the adoption of fiber optic transmission of data and to the maximum data rates and transmission in the data centers that store the world's data. The old research has stated that market leaders like Intel, Cisco, Luxtera, BroadX, Inphi, and Acacia are setting the standards for 100, 200, 400, and even 800 gigabyte transceiver standards based on transceivers with fully integrated silicon photonics devices, while many other companies are also jumping into this exploding market. One of the key claims of these transceivers are their lower manufacturing cost and the ability to scale manufacturing due to the full wafer level integration of these devices, which brings the scale of semiconductor manufacturing to fiber optic communication for the first time in history. Where Ehr fits in is that these devices all need to have their photonics transmitter stabilized under high power and temperature.

And also customers use our systems to screen for infant mortality of these devices to ensure high initial quality and long term reliability. This is a manufacturing step down on 100% of the die. And in the case of silicon photonics, we provide a much more cost effective and scalable solution for this step than doing this equivalent stabilization and screening after the die are put into the final PCB substrate package. The silicon photonics market is growing at a CAGR of 42% between 2019 and '25 to a $3,600,000,000 annual market, and we believe that the entire industry will transition to wafer level of simulated die for this critical manufacturing step, which is where our FOX P products stand alone as the most cost effective solution for this and a portfolio of patents and IP in this area. We estimate that the market opportunity for wafer stabilization and reliability screening equipment and contact ors for silicon photonics is approximately a $150,000,000 by 2025, with well over 300 wafers of test capacity required by that time.

Our FOX XP production system is the only multi wafer system available to test and burn in these high power silicon photonics wafers in a single insertion, and we can test up to nine two thousand watt wafers in parallel on a single system. So the total capacity needed by 2025 is about 35 of our nine wafer FOX XP systems to put this into perspective. Today, air has shipped about 50 wafers of capacity into this application. Interestingly, while fifth fiscal twenty was the first year to see volume production so in Photonics with wafer level burn in, FY twenty also saw second half push outs in silicon photonics ramps. We experienced push outs in customer forecasted orders in our '20 for our FOX systems and consumables in data center and some five g end use application for silicon photonics transceivers.

These customers, as I said before, have indicated the push outs are temporary and they require the additional system capacity and consumables in the current fiscal twenty twenty one year. Our next highlight is shipments of consumables were a significant percentage of revenue this year. Shipments of our proprietary WaferPak contactors and DiePak carrier consumables for our FOX systems accounted for 48% of total revenue in fiscal twenty. In fiscal q four, which we just ended, our consumable revenue was 79% of revenue as anticipated customer orders for systems did not materialize, but customer demand for the consumables for the installed base systems held steady. As we stated in the past, historically, consumables can often soften any weakness in systems as customers contemplate new capacity but maintain, in some cases, actually increase the need for new WaferPak contactors and DiePak carriers to get new designs or devices out to market.

In the semiconductor test industry, which is just over $9,000,000,000 total last year in 2019, It is made up of $3,700,000,000 in test systems, another $3,700,000,000 in consumables, such as probe cards for contacting wafers and sockets and tech boards for contacting packaged parts, And then another $1,700,000,000 is semiconductor device handling equipment in wafer and package form. With Air's FOX product line, we play actually in all three segments. Our FOX systems serve the test systems market. Our WaferPaks and DiePaks serve the contactor consumables market. And our aligners and the FOX systems themselves that have the integrated thermal capabilities of a WaferProver are turnkey solution for handling devices.

So the consumable business as a whole is approximately the same size and often higher than the systems business in down years in the overall semiconductor test business. Again, both about $3,700,000,000. But for reliability and burn in space, which we primarily play in, the consumables can be two to four times the annual sale of systems as the systems typically are used for longer periods of time with annual needs for new contractors and consumables. This is why we're confident that our consumer business is likely to exceed our overall systems business over time even though both will grow in absolute dollars. Okay.

Our next highlight is that ARRIS currently engaged with over a dozen new potential customers. We're currently working with well over a dozen additional tier one and tier two customers that are considering using our products for high market growth applications, including silicon photonics, silicon carbide, automotive, and memory devices production burning. While tier one customers are seeing as those with the opportunity to drive 6 to $10,000,000 or more in systems and consumables per year, our tier two customers are considered to have the market share and application to drive 1 to 3,000,000 per year or more. Several of these companies are expected to place their orders this year with ramps into production later in the fiscal year and or the following fiscal year. We see an increasing awareness and adoption rate that we believe could drive the majority of the market for silicon carbide as well as silicon photonics to move to wafer level or singulated die burn in within the next few years.

Our final highlight is we in fiscal twenty twenty, we completed our our planned restructuring and shift to higher margin products. Aire completed our previously announced restructuring and also moved to next higher margin box systems and consumables during the fiscal year. We started this before the pandemic outbreak and completed it during the last few months. As part of the previously announced and plans restructuring, we completed the close of our Japan subsidiary and also transitioned our European sales to third party sales representatives late in the fiscal year. We also added key marketing directors and made some additional structural changes to our sales force.

We believe these enhancements have already and will continue to both improve our efficiency and materially increase our sales activity and bookings going forward and increase our penetration of key customers in our target markets. We believe these changes position us for success with sales of our current products as well as additional new products planned for introduction this year. We also have shifted to higher margin, higher highly differentiated systems and consumables. As I noted in the last call, we've started to see some forecasts for renewed market demand for packaged part burn in systems, particularly from customers who are asking us about our high voltage capability and adding this capability to our packaged part systems. These changes in long term forecasts reflect the move toward higher voltages and other requirements for devices in automotive automobile automobiles, particularly with electric and hybrid automobiles and the time autonomous vehicle sensors.

We expect to see a resurgence of packaged part burn in systems orders from some specific AVTS system customers and to generate additional new opportunities with our planned introduction this fiscal year of a new packaged part burn in system product that adds very high voltage test capability. We see the need for high voltage capabilities in both wafer level and packaged part as a new high growth opportunity for Aehr Test and expect to see sales from current customers resume and also add several new customers that include both tier one and tier two level customers for packaged part learning. At the same time, and as discussed last last year, we had seen a significant drop off in our packaged part product business as several of our customers have shifted their businesses or entirely closed product lines that were driving the need for testing burn in using the high power and high pin count capabilities of our ABTS family of products. In one specific case, a customer that had been buying multiple systems per year has all but shuttered a line of products, and we feel they are unlikely to take additional capacity of that particular configuration of system that we had several systems of inventory left on hand when they dropped their forecast to zero.

Interestingly, this and several other customers have, at the same time, shifted their focus to other product lines, particularly for automotive and other new applications that are expected to drive new needs in the future. I've mentioned this specifically last quarter and noted that as a result, we were going to do a deep dive in our inventory for older products and configurations. We decided it was prudent and appropriate to write down the inventory that we simply do not see a likelihood of selling in the foreseeable future, which resulted in a onetime charge this quarter of $1,600,000 of inventory. This leaves us with significant inventory of systems and material that is in our near term forecast, particularly in our FOX products, which also allows us to make short lead time shipments as well as meeting significant revenue forecast without taking on additional inventory expenditures. Last year, we reported on the shipment of our new FOX CP test and burn in system to a major new Tier one customer for a very high volume application for the enterprise and data center market with a planned build out of this production ramp over the next several years.

The FOX CP is our low cost single way compact test and reliability verification solution for logic, memory, and photonic devices. And their solution is comprised of a test system integrated with a wafer prover configured with a high power thermal trap that allows up to two kilowatts of testing and burning in a full wafers. This customer has indicated they plan to begin their production ramp within our current fiscal year, and so we expect to begin additional shipments of test cells to them in the second half of this fiscal year. We're very excited about this application, expected to drive very high volumes of devices that we believe will drive test system sales for several years. Let me try and wrap this up.

We added two key tier one customers this past year. We now have five significantly large tier one customers. Again, applications and market sizes that can drive 6 to $10,000,000 or more a year on our FOX wafer level articulated die test systems and consumables. We also have another seven tier two customers that are each capable of FOX product sales typically between 1 to 3,000,000 and sometimes more. In addition, five of our customers moved to production during the year using our FOX products for 100 stabilization and burn in and infant mortality.

And we will be growing the list of both tier one and tier two customers this year in both wafer levels, singulated die, but also some package part part markets. We feel we can significantly grow these and new customers in the markets we're already serving. Additionally, we will be adding new markets and enhancements to address some significantly large new markets later this fiscal year. We're also seeing renewed activity and interest of our FOX systems and consumables for several new applications in the two d and three d sensor markets, particularly for mobile devices. These sensors are becoming ubiquitous in smartphones, tablets, and are forecasted to be adopted adopted in laptops and computers as well.

The level of security associated with facial recognition far exceeds fingerprint based biometrics and certainly greater than traditional keyboard entry passwords. These opportunities in two d and three d sensing are opportunities that could add significant upside to our currently forecasted revenue for this year and next, but are not built into our current guidance. Although COVID nineteen has created challenges such as international travel, some small impacts on our supply chain, and created caution and or delays with some customer production ramps, we believe that there is no long term negative impact to air, the demand for our products, or for the attractiveness of the key markets that we serve. We absolutely believe that we'll come out of this stronger than we went into this worldwide pandemic with more production customers, more applications, and higher margins with higher value products. Our key customers' products are being used to build out new data centers, improve data rates, increase storage in data centers, build out the five g in infrastructure, enable the newest sensors and technology in smartphones and tablets, enable the widespread adoption of electric and hybrid electric vehicles and charging stations, and address the unstoppable demand for memory and data storage and computing data centers, mobile devices, and hundreds of applications that are keeping the world connected.

As we move into fiscal twenty twenty one, we remain optimistic about both growth in systems and consumables within our installed base of customers as well as expanding the number of customers with our family of FOX P solutions. We expect significant growth in both our top and bottom lines moving forward with much lower fixed operating expenses and significantly higher margin products and services. With that, let me turn it over to Ken before we open up the line for questions.

Speaker 3

Thank you, Gayn, and good afternoon, everyone. As Gayn mentioned, our fourth quarter results reflected the impact of the current challenging global business environment around the COVID pandemic and customers who pushed out forecasted orders during the 2020. In our prior year call, we announced our two new FOX NP customers and our new FOX CP customers were expected to ramp to volume production during fiscal twenty twenty and add capacity, resulting in orders for FOX XP systems and CP systems. While these orders did not happen in the fiscal twenty twenty year just reported as their timing was pushed out by the customer, we are confident that these orders will occur in our current 2021 fiscal year. It is important to note that through the 2020, the company recognized revenues of 18,500,000.0 or a little over $6,000,000 per quarter and was profitable.

This reflects the impact of the cost reduction initiatives announced in the prior year effective fiscal twenty twenty and a change in product mix, which allows the company to be profitable at lower revenue levels. In the 2020, revenues decreased significantly as there were no system revenues recognized during the quarter. Now let me take you through our results. Net sales in the fourth quarter were $3,800,000 compared to $6,100,000 in the preceding third quarter and $7,200,000 in the fourth quarter of the previous year. The decrease from Q3 includes a decrease in wafer level burn in revenues of $2,200,000 primarily due to a decrease in wafer level burn in system revenues of $2,100,000 The decrease from Q4 last year includes a decrease in wafer level burn in revenues of $3,300,000 primarily due to a decrease of $3,600,000 in wafer level burn in system revenues and a decrease in customer service revenues of $206,000 Non GAAP net loss for the fourth quarter was $720,000 or $03 per diluted share compared to non GAAP net income of $452,000 or $02 per diluted share in the preceding quarter and a non GAAP net income of $428,000 or $02 per diluted share in the fourth quarter of the previous year.

The non GAAP results exclude the impact of stock based compensation expense, restructuring charges and write down of excess and obsolete inventory. On a GAAP basis, net loss for the fourth quarter was 2,900,000.0 or $0.13 per diluted share, which includes the impact of approximately $1,900,000 or $08 per share in inventory write down and restructuring charges taken in the quarter. This compares to GAAP net income of $245,000 or $01 per diluted share in the preceding quarter and GAAP net income of $110,000 or $00 per diluted share, which includes the impact of $118,000 or $01 per share in restructuring charges in the fourth quarter of the prior year. Excess and obsolete inventory reserves of $1,600,000 were taken in Q4 twenty twenty related to slow moving and obsolete packaged part burn in product inventory, legacy FOX inventory and downrev FOX P products and subsystems. The $220,000 restructuring charge consisted of severance payments and associated legal fees for individuals impacted by the closure of our subsidiary in Japan and a reduction in headcount in our German subsidiary.

As noted in our last call, we will be moving to a sales rep distributorship model for sales in these regions. Gross loss in the fourth quarter was $93,000 or 2% of sales compared to a gross profit of $3,000,000 or 49% of sales in the preceding third quarter and gross profit of $3,400,000 or 47% of sales in the fourth quarter of the previous year. The sequential and year over year decrease in gross margin is primarily due to the impact of the $1,600,000 excess and obsolete inventory provision in Q4, accounting for a 44 margin impact during the quarter. In addition, gross margin was unfavorably impacted due to higher unabsorbed overhead costs to the cost of sales due to lower revenue levels in the fourth quarter. As we've noted on prior calls, our WaferPak and DiePak revenues are accounting for a more significant portion of our overall revenues, favorably impacting our gross margins as they maintain higher margins in our system or pass through products.

In the fourth quarter, our WaferPak and DiePak consumable business accounted for 79% of total revenues, up from 51% in the preceding Q3 and 36% in Q4 of last year, providing a favorable direct material margin impact for the company. Operating expenses in the fourth quarter were $2,700,000 flat compared to the preceding third quarter and down $508,000 from $3,300,000 in the fourth quarter last year. While Q4 twenty twenty was flat to the preceding quarter, a decrease in SG and A of $217,000 was partially offset by the restructuring charges of $220,000 taken in the quarter. The decrease in operating expenses from prior year fourth quarter is primarily due to restructuring actions taken during taken in the prior year related to reduced costs. SG and A was $1,700,000 for the fourth quarter compared to $1,900,000 in the preceding third quarter and $2,000,000 in the prior year fourth quarter.

The decrease from Q3 is due primarily to lower labor related costs, including lower salary expense and lower commissions from lower bookings and sales incentives in the fourth quarter. Savings resulted to closure of our Japan subsidiary and lower travel due to travel restrictions related to COVID-nineteen. The decrease from prior year fourth quarter is primarily due to the impact of cost reduction initiatives in fiscal twenty nineteen. R and D expenses were $854,000 in the fourth quarter, flat compared to $845,000 in the preceding third quarter and down $266,000 from $1,000,000 $1,100,000 in the prior year fourth quarter. The decrease in R and D expenses from Q4 last year is primarily due to cost reduction initiatives in fiscal twenty nineteen and lower R and D project materials.

Now turning to results for the full fiscal year. Net sales for fiscal twenty twenty were $22,300,000 up 6% from net sales of $21,100,000 in fiscal twenty nineteen. The increase includes an increase in wafer level burn in revenues of $5,300,000 partially offset by a decrease in packaged parts revenues of $2,200,000 and customer service revenues of 1,900,000.0 The decrease in packaged parts revenues is due to no ABTS system revenue in FY 2020 compared to three ABTS systems sold in FY twenty nineteen. Fiscal twenty twenty net sales were comprised of $18,900,000

Speaker 0

in wafer level burn in revenue and $3,400,000 in customer service revenue.

Speaker 3

For the full fiscal twenty twenty, system revenues accounted for 36 Fiscal of revenues compared to 45% in fiscal twenty nineteen. WaferPak and DiePak consumable revenues accounted for 48% of total revenue in FY twenty twenty compared to 29% of revenues in FY 2019. Customer service revenues accounted for 15% of revenues in FY 2020 compared to 25% of revenues in FY 'nineteen. Non GAAP net loss for fiscal twenty twenty was $27,000 or $0.00 per diluted share compared to a non GAAP net loss of 2,800,000.0 or 13% per diluted share in fiscal twenty nineteen. While revenues increased by $1,200,000 FY 2020 compared to FY 2019, the non GAAP bottom line improved by $2,800,000 As noted earlier, this reflects the impact of cost reductions initiatives effective in fiscal twenty twenty and the change in product mix, which allowed the company to be profitable at lower revenue levels.

On a GAAP basis, net loss for the fiscal year was $2,800,000 or $0.12 per diluted share, which includes the impact of approximately 1,900,000 or $08 per share in inventory write down and restructuring charges taken in Q4. This compares to a GAAP net loss of $5,200,000 or $0.23 per diluted share, which includes the impact of $1,500,000 or $07 per share inventory write down and restructuring charges taken in fiscal twenty nineteen. Gross profit for fiscal twenty twenty was $8,400,000 or 38% of net sales compared to a gross profit of $7,600,000 or 36% of net sales in fiscal twenty nineteen. The increase in gross margin percentage in FY 2020 compared to the prior year is primarily due to lower direct material costs due to a change in product mix, partially offset by the impact of excess and obsolete charges in FY 2020 compared to FY 2019. Operating expenses for fiscal twenty twenty were $11,100,000 a decrease of $1,500,000 or 12% from $12,600,000 in fiscal twenty nineteen.

The decrease included a decrease in SG and A of 194,000 a decrease in R and D of $767,000 and a decrease in restructuring charges of $505,000 SG and A was $7,500,000 in fiscal twenty twenty, down from $7,700,000 reported in fiscal twenty nineteen, primarily due to cost reduction initiatives in fiscal twenty nineteen. R and D expenses were $3,400,000 in fiscal twenty twenty, down from $4,200,000 in fiscal twenty nineteen. The decrease is primarily due to a cost reduction initiatives in fiscal twenty nineteen and lower R and D material expenses. Overall, the decrease in SG and A and R and D of 961,000 included $922,000 decrease in labor related costs as a result of cost reduction initiatives implemented. Turning to the balance sheet for the fourth quarter.

Our cash and cash equivalents were $5,400,000 up $375,000 compared to $5,100,000 at the end of the preceding quarter. Accounts receivable at quarter end was $3,700,000 an increase of $206,000 compared to $3,500,000 at the preceding quarter end due to the impact of customer deposits and deferred revenue on current quarter revenues. Inventories at May 31 were $8,000,000 compared to $9,300,000 at the preceding quarter end. The $1,300,000 decrease is primarily due to the $1,600,000 E and O inventory provision taken in Q4 twenty twenty. Property and equipment was $663,000 compared to $783,000 preceding quarter end.

Customer deposits and deferred revenue, short term and long term, were $192,000 a decrease of $227,000 compared to $419,000 at the preceding quarter end, primarily due to the decrease in backlog from the prior quarter. Our current and long term debt of $1,700,000 is related to funds we received during the fourth quarter under the Paycheck Protection Program, or PPP, which we announced in an eight ks filing in late April. We expect over $1,400,000 up to the full loan balance to be forgiven under the provisions of the CARES Act. Bookings in the fourth quarter totaled 2,600,000.0 Backlog at May 31 was $2,500,000 compared to $3,600,000 at the end of the preceding quarter and $7,500,000 at the end of the fourth quarter of the prior year. Now turning to our outlook for fiscal twenty twenty one.

For our fiscal twenty twenty one year ended 05/31/2021, we expect full year total revenue of between $25,000,000 and $28,000,000 which will represent growth between 1226% year over year and to be profitable for the year. As a requirement to receive funding under the CARES Act, the company is required to use the funds from the PPP loan to retain employees and maintain payroll. While our revenues and backlog have decreased from the impact of the current challenging global business environment around the COVID pandemic, the company has made no headcount reductions. However, the company has taken actions to control spending through mandatory vacations, shutdown days and travel restrictions. This concludes our prepared remarks.

We're now ready to take your questions. Operator, please go ahead.

Speaker 0

Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We'll take our first question from Christian Schwab with Craig Hallum.

Speaker 4

Hi. This is Tyler on for Christian. Thanks for letting us ask a couple of questions. First, as we look at fiscal twenty twenty one hi, guys. So looking at fiscal twenty twenty one, could you help with any expectations for linearity quarter to quarter?

You know, within that, are you expecting maybe some softness and some customer push offs to continue in the first half? Or, you know, any customer orders or conversations with them that would give you any indication that the first half or second half would be stronger or weaker would be helpful?

Speaker 2

Couple things. One is I think it's it's it's a fair, a number of the customers, and we specifically stated in the call, notes were are are forecasting second half. So I think we do think our second half will be stronger than our first half, and I think that's a a reasonable conservative stance to take. Know, we we have not provided quarterly guidance before, and, you know, basically, we do start the quarter with a small backlog. We've got several customers with Forecast for Systems that that we have on hand and an inventory and can turn in weeks.

In some cases, they had planned to take them last quarter. So we have that in the inventory that we have. Whether they come in in time to ship by the end of this quarter or next, is the over under. And, honestly, we're focused on new wins and customers and markets of meter systems. I can tell you waking up every day and checking for expected POs doesn't help.

I will also tell you I do that more often than I want to admit to. I mean, our customers are telling their customers and their shareholders that they're ramping. I mean, in many cases, that's you know, I don't even hear what the customers message is telling me. I'm not checking and making sure that I believe them by what are they telling the street. Most of these customers are, you know, public and large.

K? They need our tools. We're the plan of record. That was a critical thing for us this year if we looked at our business plan is to make sure that those wins move to production, that they actually are counting on us and get those qualified due to their end customers. And particularly things where their automotive qualification, that's a big deal.

And, basically, we think we, you know, plan to do our guidance or more without winning another customer. We have the customers. We have the applications, the products, the inventory, and we actually we completely have the manufacturing capacity. We didn't talk much about that, but have the ability to build far in excess of even our guidance to meet customer needs, and we're adding more customers and applications. And and, basically, that's what we're focusing on.

Speaker 4

Thanks. That was that was very helpful. Second question then is you you outlined you have six tier one customers that are capable of doing 6 to $10,000,000 a year, and you seven tier two customers that capable of doing 1 to 3,000,000 a year. So, obviously, just math that, you know, if if those customers majority of those customers ramped into those, revenue levels, you know, your total revenue would be, you know, significantly higher than it is today. You know, and also understanding and, you know, you have thousands more customers you're you're engaging with.

So I was just wondering, you know, how we should think about or how you guys think about, you know, those customers ramping to those types of levels. You know? Is this a three to five year kind of time range where we we we would expect most of those to be in that kind of revenue level, or how how should we think about that?

Speaker 2

Well, I and, again, I so, realistically, when we put this in a in this tier one, tier two, this is the first time we've introduced that term, and we had some feedback on just how do we get our arms around These when we look at the total available market that these customers serve, the the the, you know, unit volumes, the test times, the you know, is it a 100% burn in or a sampling? We can estimate what their buying power is for any given year. Right? And so the intent of that was that is a range of the kind of customer. I mean, you know, I don't wanna get into all the detail, but, you know, we've our 10% customers that we have are forced to talk about, and, you know, we're adding one or two more this year.

You know, yeah, you know, our 10% in our 10 k customers are the likes of Intel and ST and Apple TI. So, you know, these are large multinational, companies with large scale applications. And for them to be able to do, you know, 10 or $12,000,000 in a year, they've all proven that they can do that. K? So that's the kind of class we're trying to describe that as.

We have other customers, including ones that we've announced, and I wanna be careful not to not mention them, but, you know, I don't want any any of my customers to think I don't love them as much. But, you know, they're just not the likelihood of them doing $10,000,000 is nowhere near the same. But we would expect them to do $1.02, or $3,000,000 a year or so. As always is the case, at least early on, we can see even customers being lumpy. Like, maybe they have a good year and then a soft year the next year.

But if you start to look at the these new devices, silicon photonics and silicon carbide and some of these others, they're actually growing so fast. It's it's reasonable for them to be sustainable year after year. And, you know, kind of ignoring some of the craziness going on in the world right now, we would have expected this to be an up year even over last year's guidance. So, you know, again, I don't think you should just linearly add them all up, but, you know, it's not crazy that they all, you know, have good years in the same year. I think it's really gonna be, you know, maybe two thirds of them at any given time are having good years, and then they they kind of alternate over time.

And the goal for us would be to get, you know, fifteen, twenty customers, which we think is reasonable, so that we don't have to wake up at the beginning of the year and think we're all we're totally dependent upon one customer to do a significant amount of our sales.

Speaker 4

That's great. Very helpful. That's all for me. Thanks, guys.

Speaker 2

Thank you.

Speaker 0

We'll take our next question from Jeff Bernstein with Cowen.

Speaker 5

Yes. Hi, I'm sorry. I think you cut out for a minute. At one point, you were talking about some business that is not in the guidance. Is that correct?

And can you go back over that?

Speaker 2

Sure. Okay. So then did you hear me cut out or did I stumble maybe talking? Alright. Okay.

So anyhow, yes. So what I I did, and I'm not gonna go back and actually read it. I'll just pull it back up again to make sure. So this was specifically we've seen in the last, you know, several months maybe and even picking up steam, some renewed activity in, in our two d three d customer base that have wafer and singulated die systems installed. They actually continually have been buying die packs from us and WaferPaks, the consumable, with new product releases, and that, you know, has been material business for us.

But interestingly, they had not added any system capacity last year. We've been, brought into, several new programs that, we are aware of now that appear to be a good fit for our products. And, we're just getting our arms around it right now, but it's very interesting that there's some renewed activity there. If you followed us several years ago, you know, one of the tough years we had was we started the year with a customer saying how great it's gonna be. And, you know, we forecasted that thinking that that was a gimme.

And, ultimately, they pushed out that program and ultimately canceled that specific program. And so I'll tell you, I'm a little gun shy about, you know, beating my chest about these particular applications until they're a little bit more direct, you know, my out of their eyes. So I I didn't mean bold enough to say that, you know, we we can meet with our guidance without any of these, but, some of these deals could be some, you know, material upside to to that or certainly offsetting the other possible issues. But, that's what I meant to say by that.

Speaker 5

Gotcha. And is and is there a change going on, with regard to, a 100, burn in kind of thing versus some sort of statistical, sampling and and that kind of thing, or is this really just about brand new programs?

Speaker 2

Well, let me let me do this. The programs that we're in, which include both 100% and sampling programs, are continuing along those. These are new programs. I we actually don't have all the details. I think we believe that one of them is one hundred percent and one of them is a sampling.

But I we don't have all the details.

Speaker 5

Gotcha. That's great. Thanks so much.

Speaker 0

Thank you. We'll take our next question from John with Dielectric Capital.

Speaker 2

Hey, John.

Speaker 6

Yes, thanks for taking my question. How are you? I apologize because I've been on multiple calls. I just want to apologize in advance in case you've addressed this. I I guess I guess I'm partially confused at the progress you keep making.

You introduce new products. You get new customers. And yet I don't see it in top line guidance expectations, top line performance, granted you've got COVID for this quarter, I understand. But where's the disconnect? I mean, you've signed up a ton of new customers in the past.

You continue to sign up new customers. You've got existing products. You've got new products. You talked at length about them. Everything seems to be going the right way, and it doesn't seem to be flowing through.

So I'd just love some help with with that basic question.

Speaker 2

Well, I think to you know, if if we if we step back or as the board and and I do sit and trying to look at the overall business to try and get our arms around it. We've been putting together three year plans, looking at what those forecasts are. You know, one of the things I think is fair, just at the minimum, was, you know, customer we like, first our lead silicon photonics customers was buying FOX XP systems, but they didn't go to production yet. And we talked about that several times, maybe almost every single quarter. And they, for whatever reasons, had not actually introduced the new products that were moving to the wafer level burn in and then finally have and, you know, qualified it, got it to PLR.

But, actually, that was you know, if if you look at linear time, that was over a couple of years. That was not what we expected. And, ultimately, it was okay. You know, when's this gonna happen? And we finally saw that shift to production this year, and they started to buy all the contractors.

So we knew they couldn't go to production because they didn't have the contractors with us. So they have these beautiful systems sitting there that were not being used yet. The reason was is they were bringing up the systems, and they wanted to ramp quickly. We were able to ship a lot of WaferPaks all the next you know, within a month or two, and that's part of the business model to get them to production. Now other customers were kind of a mix.

Some that had bought, you know, after our lead customer, but also didn't get to production till this year. And then we had another customer that went, you know, with with, like, a six month period. The customer that we just shipped to, with the order that we announced in q four, is gonna be in production here shortly. And then interestingly, on our silicon carbide customer, they went from zero to a 100% within two months. So, you know, what we, actually, Vernon, my VP of sales, was presenting in our board discussion the collapse in amount of time it's taking for the customers to go from, say, when we first ship it to get to production.

But the lead time on the sales cycle is still a little bit spotty. Some of those have been shorter, and some of them have you know, we've been talking to some customers for a year now, maybe a year and a half. And then we've had other customers that, you know, were okay. The first innovation, you know, one to two maybe two quarters later, they already are purchasing. So I think this is balance of either our own opt overoptimistic or or, you know, how fast customers are actually ramping or the deployment.

I think, to some extent, the deployment of silicon photonics devices in the main end customers. So remember the date or if you know this or not, we have a couple of folks that follow our stock that, really track this market, but it's really interesting to talk to them. But the big buyers of this market are Facebook, Amazon, Google. It's the large data centers. K?

And so they have enormous buying power, and there's been one of the things was it appears they now finally are buying silicon photonics devices. But but before they were buying the traditional kinda much more expensive fibrotic transceivers. So this is a this is a this is a major inflection point for us because the end customers are now buying in volume. Right? And shifting to the higher performance, you know, higher speed devices as well, all of which is good for us.

And so I believe at this point, it feels more believable that there's more data, behind that. You know, everybody's saying it's gonna be great, and now we actually have customers that are ramping and that the end users are pulling. What I will tell you is one of the big things we were surprised by is the seeing pushouts of capacity. Well, maybe we weren't surprised, but, we saw push outs of capacity for those end use customers,

Speaker 0

you know,

Speaker 2

you know, starting in the beginning of this calendar year. And so, you know, if it is you know, some absolutely customers point specifically at the COVID implications of it, and others are, you know, what happened? Why did the data center slow down? Was there a push out? So it's something that we're trying to understand, but there's no doubt in my mind.

Data centers aren't going away. The move to more fiber optic, They move to the fiber optic down at the lower levels of the data center because of the bandwidth. All the data is there to support it, and I I think that's the trend that's happening. So, I mean, that's kinda wanna try and All those

Speaker 6

all those trends make sense, and everything you said just makes sense, except for the fact that it doesn't necessarily line up with guidance that is necessarily lower than the guidance you gave last year at the same point in time. I mean, I just don't understand why twenty five to twenty eight relative to twenty eight to thirty one or wherever you were a year ago makes sense, given you have more customers, you're faster to production, like you have newer you have more new products. Help, help me. Why is there why are we not at the inflection point I thought we were at in terms of revenues really inflecting higher. What am I missing?

Is it slower lead Is

Speaker 2

it push outs? Well, we certainly have stated on the the push outs that we have directly seen from customers that they themselves are explaining that and saying that that is turning around, and they're planning to move forward. We have some customers that have, you know, for the first time, actually given us heads up of capacity and forecast. I think related to guidance and and that, I mean, certainly, in the board discussions, it's there's a sense of, you know, how aggressive or conservative should we be in this environment. We wanna make sure that we can do what we think we're gonna do.

And, you know, there's obviously certain things that are out of our control, but we believe that this is a comfortable number.

Speaker 3

Gayn. I'd like to add a comment related comparative to prior year. So if you take a look just at wafer level burn in, even though our overall total revenues only went up 6%, wafer level burn in went up 39% or $5,300,000 compared to last year. So even though we didn't get any system revenues in Q4, and there were the push outs fully we talked about, we did recognize a 39% increase. One of the items built into the numbers was we had a a decrease of $4,100,000 if you take a look at our package part revenue and our customer service business that included the upgrades of the ABTS systems from prior year.

So keep in mind, building into our model in FY 2020 were additional revenues in those areas as well.

Speaker 6

My last comment is just that, you know, I really think you guys should take a serious look at your board ahead of this year's proxy season. It looks like it could use a refresh under ISS standards, and I think that's something that could maybe help you guys progress more rapidly or bring a set of fresh eyes to the entire situation. So I would recommend that as shareholder. And otherwise, thank you.

Speaker 2

Hi, Don. Appreciate it. And just a comment, just in general, I know there was a specific question there. Actually very happy with, we've added a couple of there's been a transition in our board over the last couple of years of adding some additional board members. Laura Oliphant, who had been a, capital director at Intel, very influential, has been has been wonderful.

John came on our board a couple years ago as well. And we did actually have a lead board member, independent board member pass away during the year. And there's been some discussions about, you know, when's the appropriate time to add a board member, but for any, you know, kind of government related things, and then just honestly with some reasonable balance and expenses and others. So I appreciate it, John.

Speaker 0

Thank you. We'll take our next question from Jeff Scott with Scott Asset Management.

Speaker 7

Hi, Hi,

Speaker 8

Dane. How are you?

Speaker 2

Okay. First question.

Speaker 8

Alright. You added a new sales rep in, I guess, German based to cover the European account. How long do you think it will take to get some sense as to whether or not that is working out? And and precisely what kind of metrics will you be looking at determine whether or not it was a good move? Is that number of new customers?

Is it dollar volume that they're able to generate? Please help me out.

Speaker 2

Okay. Well, a couple of things there. I mean, certainly, early on and I when you did and so did Vernon made several trips and and had customer calls with them, and I was really pleased with the level of, I guess, the number of quality customers they were able to get to. You know? And I I and and, you know, the last time we were there was, I think, February or March.

You know, one the things that definitely has impacted us has been, some of the international travel. I I think, Ken kind of alluded to it, the expense controls. It's not very hard to have expense controls right now. So we've been doing some pretty creative things with our reps and with remember, we have employees around the world to ensure that it's not limiting our capabilities for installations and support of customers. But HCT, who's out of Germany and covers our on Northern Europe, has actually been a good start.

I do expect them to move from, you know, great customer calls to orders, both in terms of volume, quality, and eventually dollars as well. And those are expectations that we would have, starting this year. As well as, you know, reps in Southern Europe. And we are work working to close on, a rep or two in Japan right now. We've already been in discussions, but we didn't formalize anything with them and looking at some other things.

Speaker 2

Thanks, Deane. Thank

Speaker 0

you. We'll take our next question from Tom Diffely with D. A. Davidson.

Speaker 7

Hello. Yes, quick question on the balance sheet. Assuming that you do get a couple of customers that happen to come at the same time, what can you say in terms of working capital or inventory builds and the balance sheet?

Speaker 3

All right. So in terms of the balance sheet and inventory builds and capitalization, we have $8,000,000 in inventory as of the May '31. $6,500,000 of that is in our FOX P product. And included in that is about 1,700,000.0, what we call our demo lab, that is turnkey. So it allows for quick turns on that.

And the benefit of that is we can't turn quickly, and we do not need to add inventory. We're in a position where we don't expect a tremendous increase in inventory to meet our goals during the period and don't expect a whole lot of additional capitalization to be able to fund that.

Speaker 2

And, Tom, also, just to put it in perspective, we had and I it's interesting. I think I talked about it the last quarter and didn't do it this. I certainly had enough content already. But this last year, one of the other big things that we did, we just did our end of year plan, is we significantly lowered our lead times for our WaferPaks and increased capacity. So we're able to do short term quick turns on fully custom WaferPaks and DiePaks.

And what what's important about that is we don't need any material around for So, you know, and given that half of our business is DieHex and WaferPaks, you could say, oh, wow. That's it. But we really, in most cases, we're being paid by our customers by the time we pay our vendors on those things. So and then lastly, actually, we didn't talk about it because we also didn't use it. We did put in place a line of credit this last quarter.

I don't know you wanna cover that a little bit, Ken.

Speaker 3

Sure. It actually was it was prior to last quarter. But with our bankers, Silicon Valley Bank, we have a $4,000,000 line of credit that's available to borrow for domestic AR. And we have not borrowed any of those funds that are available to us through the bank. So we have that ability.

See so you're saying that, the throughput on the wafer level is something like 12 times what the part burn in system is. But I think you said in your comments that because you're not you're catching those failures, the infant mortality failures in the in the die level, on the wafer level, you you haven't put any more money into it or they haven't put in packaging and so on. You did you say it was up to five times more expensive once it's packaged when they find that failure and send it away? Or

Speaker 2

So I the the numbers I said is, like, four to 10 x or so. But the the specific things, if you go look at it, if you physically actually, I have one in my hand right now. K? Which so that you guys can't see it. So I'm I'm physically holding one of these high power modules that goes into a car.

And it's this large metal frame with a large heat sink on it. It's encapsulated. This thing, they put, you know, eight or 10 of these MOSFETs in it in parallel, and then they'll sell it. And if you go out on DigiKey or anything else, you can find it from the folks. You know, there's several people that are out there.

I don't wanna go into which one is my customer, although they will show up as a 10% with our 10 k. Right? But they specifically you know, these things are doing, you know, hundreds of amps. But they're put into this thing, integrated in, encapsulated, and then they burn this module in. And then one of the devices fails, and it's pretty high failure rate.

So they're throwing away 10 or more percent. I won't I don't need to give you the numbers, but that's an easy number of this entire module. Well, the module the package itself might cost a $102,100 dollars to build. And then the dyed inside them might be in the fives of dollars apiece or tens of dollars apiece because that's the price of them when they're discreet. So that's a reasonable thing.

When they throw that away, they throw the whole module away. It's big deal. And so that's why everyone's scrambling. They they they all have EDIX get to wake up.

Speaker 9

So so the throughput's, like, 12 times higher, give or take. You're catching those failures at the lowest cost before they any more money's put into them, which because it sounds like a huge savings. And then Yep. Know, the road map down the road is the the go to eight inch wafers, and your system's capable of 12 inch, so it's future proof. And then, of course, the economics getting even better in that scenario.

So I guess I go back. Why isn't everybody going to this? Is is everyone currently burning in their their components, in the part system? And so why isn't it such a So to go to your wafer level?

Speaker 2

So we have a large punch list customer list of the ones that we are targeting. A a a reasonable majority of them, we have not been in contact with. That's just the truth. Others, we have been, and we started to make engagements, and we're gonna talk starting at the top of the list, if you will. And now that we have proven the feasibility and the capabilities, we are engaged with multiple other customers on this.

There are testing that we can there are certain tests that we can do, and there are certain tests right now that we do not yet have proven on our POX systems that we are also working on. And, we're working with, you know, one or more of the largest silicon carbide customers on, working through that application. So, you know, I think that, you know, it's it this is an area that I that maybe how do we get in front of customers? How do we make phone calls? How do we get it?

That that's one of the reasons we're trying to beef up and make the changes in our sales so we can get in front of more customers.

Speaker 9

Right. I mean, it seems like it seems like this approach is a no brainer. But if assuming the industry would go this route, is there an idea how many systems could potentially be involved for the silicon carbide application? How many XPs?

Speaker 2

Well, that I think I specifically walked through some of the math there. You know, I talked about a half a million wafer starts a year.

Speaker 9

Alright.

Speaker 2

And then I have one more. So we we I think we might actually already be testing a gallium nitride wafer. Apologize. I know that that is the plan, but it is a power device. So from our tester, it looks pretty similar to if it was that's interesting.

I hey, operator. I got one of our people that was just on the call calling myself. So I did we have a problem? Is everybody still on? Okay.

Anyhow, so, they absolutely are doing both sales and carbs out in gallium nitride. And to be blunt, they look the same to us. They both have similar, reliability issues. It it's sort of it's sort of you gotta have a certain, I don't know if I'd say sense of humor. But if you're a tester guy and you're testing semiconductors, you love devices that fail.

Okay? I mean, that's a good thing for us. And it turns out and and fail in an application where it matters. And then the other thing is you want devices that fail and are never gonna stop failing. Silicon carbide is actually a very mature process in many ways.

It's just that substrate is inherently not going to give you the crystalline structure and ever get to the defects of silicon wall. Yeah. People know that. Compound semiconductor or silicon, But you can't get semiconductors up to 1,700 volts with the efficiency. Right.

So okay. You got you do a burn in step, and all you do is, you know, one or two days later, you weed it out. These aren't actually very expensive steps even on our tool. And so from a cost effectiveness, it's cheap. People were just surprised we could do it.

So folks that weren't on the call last year, when we first engaged with this initial customer, they were like, what do you mean you can do this? Like, it was like and we said, yeah. We'll we'll show you. And we just simply offered them to buy a wafer pack, and then we tested one of their wafers. So they didn't even know that it was it seemed feasible.

They didn't think it was at all possible. We tested their wafer. We send it I think it was tested two or three of them. Sent it back. It went through their entire qualification process.

We've not only told them which devices failed, but what time they failed. And they went through the whole qual process. It caught 100% of the failures. They then turned around and said, can we ship you more wafers? And here's a PO.

And we actually, while we were building our system, continue to ship wafers for them. So they said, can we please borrow more time? So we actually shipped out of our apps lab. We were shipping them wafers. I believe they were shipping to customers because they were like, this is fantastic.

So and that's why they immediately wrapped. And so, that's been a very positive, experience for for all of us.

Speaker 5

And and GAN RF, is that a a different test, structure?

Speaker 8

Do what? To do that? Or

Speaker 2

So far so far, I have not heard about people driving the RF part of it, these tiny little transceivers for the same level of reliability, but our ears are open. It I think it's just that maybe the criticalness of the the first one the first application was these power modules going into automotive where they were staffed. But I believe that that people will be doing this for discrete, and it will not surprise me if we go to the RF The k the system capability is there.

Speaker 4

Yep. Gotcha. Okay.

Speaker 5

Great. So so then, just, you know, back on the question on the the relative guidance, which which kind of, you know, jumped out as to me as well. But I think what I'm hearing is, in each one of these markets, we've had a Gartner hype cycle. Gallium nitride, silicon carbide, five gs, silicon photonics, three d sensing, AR, autonomous driving, you know, every one of these things. We all know they are all coming.

So so it it feels like we're just in that early phase where you just don't have enough, you know, that that's all going to production and and getting out there in the world to really get a trend going for you guys. And hopefully, that means that this year's guidance has sort of been shaken down to take all that into account and say, we're gonna stop hoping this stuff hits the inflection point, and and we're gonna let it hit the inflection point when it when it does. Is is that a a proper characterization?

Speaker 2

I I think majority so. And that part about, you know, there's only so much we can do. When we have a customer that says we're POR, they have our products. They say I mean, we had specific quotes we were giving to the to ourselves and the board. It's like, nobody else has anything like this period at any price.

Of course, then it's like, then why are we like, why don't we charge more for them? But that's a different discussion. And so, we know that they're planning to and, you know, I again, I my intention was not to spend a lot of time talking about COVID. There are some businesses that I think we all can just wonder what the heck is gonna happen. This isn't this shouldn't be one of them.

I mean, our our semiconductor companies are all engaged. They're all all their fabs are open. They're the end use applications for us are not being impacted, we believe. There's nothing materially impacted related to anything related to COVID or pandemics or international travel or hotels or something that should have any impact. But, you know, certainly, more communication, more data, all of that stuff is in play.

But, you know, I think that, I I I you know, I'm I'm comfortable with where we're at. You know, though one of the discussions was, you know, should we go out with guidance? It's like, absolutely. We should. And, you know, we hope to, you you know, we hope to have a good year this year.

Speaker 5

Great. Thanks very much for the time.

Speaker 2

Thank you, Jeff. Operator?

Speaker 0

And we have no further questions in queue.

Speaker 2

Okay. Okay. I appreciate it. Folks, we appreciate your your time with us. And, we, as always, if you have any questions or follow-up, follow-up questions, I mean, get get a a mail about to us or through MKR, and we can set something up in there.

Okay? Thank you all very much and have a good one. Everyone stay safe.

Speaker 0

This concludes today's call. Thank you for your participation. You may now disconnect.

Aehr Test Systems - Earnings Call - Q4 2020

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