Aehr Test Systems (AEHR) Q1 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Aehr Test Systems’ First Quarter Fiscal 2018 Financial Results Conference Call. Today’s conference is being recorded. [Operator Instructions] At this time, I’d like to turn the conference over to Mr. Jim Byers of MKR Group. Please go ahead, sir.

Thank you, operator. Good afternoon, and thank you for joining us today to discuss Aehr Test Systems’ first quarter fiscal 2018 financial results. By now, you should have received or seen a copy of today’s press release. If not, you may call the office of MKR Group Investor Relations for Aehr Test at 323-468-2300 and we will get a copy out to you right away. With us today from Aehr Test Systems are Gayn Erickson, President and Chief Executive Officer; and Ken Spink, Chief Financial Officer. Management will review the company’s operating performance for the fiscal first quarter before opening the call to your questions. Before turning the call over to management, I would like to make a few quick comments about forward-looking statements. The company 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. 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 Aehr Test Systems undertakes no obligation to update the forward-looking statements. And now, I would like to introduce Gayn Erickson, Chief Executive Officer.

Thanks, Jim, and good afternoon to those joining on the conference call and also listening in online. Ken will go over our first quarter financial results and guidance later in the call, but first I’ll spend a few minutes discussing our business and product highlights, including our continued progress with our new FOX-XP platform for our next-generation of wafer level and Singulated Die and Module Test and Burn-in products. We’ll then open up the lines for your questions. We’re off to a great start for fiscal 2018. We finished the quarter with revenue of $7.0 million, a GAAP net income of a little over break-even, non-GAAP net income of $226,000, and a backlog of $15.2 million. Our non-GAAP net income of $226,000 excludes our non-cash related stock-based compensation expenses. Today, we announced orders totaling $2.7 million for our FOX-XP Test and Burn-in Solution products. In addition to this, we received another order for over $1 million in WaferPaks for our FOX installed base of wafer level burn-in systems just in the last day. With these orders plus the fiscal Q1 ending backlog of $15.2 million, our total backlog adds up to over $19 million already early in our second quarter. We’re very pleased with the installations of our new FOX-XP Multi-Wafer and Singulated Die and Module Test and Burn-in systems at our two lead customers, and both have purchased follow-on capability and capacity. This afternoon, we announced that we received follow-on orders from a subcontractor of our initial FOX-XP Test and Burn-in System customer. The orders include a partially populated FOX-XP system, multiple DiePak carriers for their next generation devices, and multiple DiePak loader/unloaders to increase their current production capacity. We’re excited to receive these additional follow-on orders from this large multi-national customer and these new orders follow an earlier customer device test and burn-in implementation now moving into volume production. It also provides us additional insight and confidence into their commitment to us on the devices already on their FOX-XP systems, as well as the new devices going into production next year. Earlier this month, we also announced an initial $900,000 upgrade order from our other lead customer for our FOX-XP Multi-Wafer system. This provides additional test capability and power handling capacity to their existing FOX-XP system in order to meet the requirements of their new silicon photonics devices that will go into production next year. These latest orders continue to expand our production presence with these customers for multiple generations of devices. In addition, we have ongoing discussions with several additional new companies about our FOX-XP platform and we are optimistic about the prospects with these prospective new customers. During the quarter, we announced several new orders for our installed base of ABTS package part burn-in and test systems, our FOX-1 systems and our new ABTS chamber OEM customer that contributed to our solid bookings for the quarter. In July, we received follow-on order exceeding $3.8 million for multiple ABTS test and burn-in systems. This latest follow-on order comes from a customer who’s leading multi-national manufacturer of advanced logic ICs for automotive applications. Early last month, we announced follow-on orders exceeding $1.3 million for multiple WaferPak contactors for an existing customers FOX-1 wafer level test systems. These orders reflect additional capacity needs and it’s gratifying to see renewed demand for our proprietary WaferPak contactors from our installed base of FOX-1 systems. We’ve been seeing utilization rates increase on our FOX-1 single wafer and our FOX-15 multi-wafer systems, which now join the high utilization rates we’ve previously reported on our package level and burn-in systems installed base. And in late August, we announced a follow-on production order exceeding $3 million for multiple ABTS thermal chambers from our OEM customer. This was the first high volume production order from this customer and as part of our partnership agreement under which we will deliver the critical thermal chamber subsystem for use with their own electronics and software for custom application. Their application has the potential to be very high volume and our ability to supply these ABTS chambers in high volume was a key factor in our selection. This new opportunity is an interesting and new business model for us, and we believe this project will drive significant revenue over our next two fiscal years. We remain very focused on the opportunities we see in key emerging and rapidly growing markets that significantly increased our total available market. One of these markets is the rapid growth in automotive sensor technologies. This includes Advanced Driver Assistance Systems such as collision avoidance systems using LIDAR, radar or other sensing technologies. Autonomous vehicles use collision avoidance systems to detect obstacles and to navigate safely through dangerous environment. Reliability of the devices in these systems is especially critical for autonomous driving applications. And the need for reliability increases exponentially as these sensors become an integral part of a vehicle’s autonomous or Driver Assistance Systems. It goes well beyond safety. If the consumer or the world loses confidence in these systems, where does this leaves this industry? Another emerging market where reliability is critical is biometrics, where sensors are essential to enabling identification based on physical and behavioral traits. This technology is increasingly being used in airports, hospitals, hotels and numerous other entities for security and safety and not just security of access, but security and safety of the data being protected. Clearly, we’re seeing this technology being deployed in the latest mobile devices and applications, where we believe this will become universal over time. Certainly, a technology that scans your retina should be safe under any circumstances, but any undermining in confidence in the reliability of the security method would put into question the viability of the entire technology itself. We believe, Aehr Test could be at the very beginning of a critical reliability testing wave of biometric devices for all kinds of applications. This is the front-end of a wave of opportunity for the need for highly reliable and proven semiconductors, modules and systems that must maintain the reliability over long periods of time and for very critical use cases, where either critical security, mission critical safety or customer and consumer confidence and assurance reliability is absolutely necessary. Looking ahead, these are extremely exciting fields that we believe are going to drive an entirely new level of quality and reliability expectation of hardware systems and pose a very significant long-term opportunity for Aehr Test. We continue to remain our confidence in our stated growth forecast for the fiscal year ahead, which is revenue growth of, at least, 50% year-over-year and profitability for the year. We believe we’re well-positioned to capitalize on the market opportunities ahead with our new products that address the need of our customers to ensure reliability of their semiconductors, integrated modules and systems, where safety, security, and assurance of user confidence are absolutely critical. Lastly, our shareholder meeting will be held on October 26, here at our headquarters in Fremont, California. In addition to our shareholder meeting and company presentation, we’ll be doing a facility tour, where shareholders can see our new FOX-P products. We just had a successful trade show and conference at SEMICON Taiwan, plus I personally spent the last two weeks seeing many customers in five countries in Asia, where we saw a significant number of current and new potential customers. This conference plus the customer meetings were very encouraging and they’ve given us a chance to really start spreading the news about our new products. The response was very promising. In addition, later in October, we’ll be showcasing our wafer level test and burn-in products at the International Test Conference, taking place October 31, through November 2, in Fort Worth, Texas. I’m planning to be at our booth for some of that time and we’d certainly welcome any investors to visit us in addition to the customers that plan on attending to see us. I’ll now turn the call over to Ken. Ken?

Thank you, Gayn. The company recognized strong bookings in the first quarter of fiscal 2018. Bookings totaled $9.4 million compared to $7.6 million in the preceding fourth quarter and $10.4 million in the first quarter of the previous year. Bookings in the quarter included our previously announced ABTS system orders, ABTS OEM chamber order, FOX-1 WaferPak order and FOX-XP upgrade order. Backlog at August 31, 2017 was $15.2 million, up from $12.7 million at the end of the preceding quarter and $10.4 million at the end of the first quarter of the previous year. Total revenue in the first quarter was $7 million, a 4% increase from $6.7 million in the preceding quarter and a 31% increase from $5.3 million in Q1 of the previous year. Included in Q1 2018 net sales were $3.8 million in wafer level burn-in revenues; $2.4 million in package part system sales, including our ABTS OEM chamber sales; and $817,000 in customer service-related revenues. Non-GAAP net income for the first quarter was $226,000, or $0.01 per diluted share, compared to a non-GAAP net loss of $587,000, or $0.03 per diluted share in the preceding quarter and a non-GAAP net loss of $436,000, or $0.03 per diluted share in the first quarter of the previous year. The non-GAAP results exclude the impact of stock-based compensation expense. On a GAAP basis, net income for the first quarter was $10,000, or $0.00 per diluted share. This compares to a GAAP net loss of $795,000, or $0.04 per diluted share in the preceding quarter, and a GAAP net loss of $755,000, or $0.06 per diluted share in the first quarter of the previous year. Gross profit in the first quarter was $2.9 million, or 42% of sales. This compares to a gross profit of $2.6 million, or 39% of sales in the preceding quarter, and a gross profit of $2.2 million, or 41% of sales in the first quarter of the prior year. Operating expenses in the first quarter were $2.7 million, down $468,000, or 15% from $3.2 million in the preceding quarter and essentially flat compared to $2.8 million in the prior year first quarter. The decrease from the prior quarter reflects the impact of several one-time expenses in Q4 2017 related to the completion of development and accelerated shipping and installation of the FOX-XP. R&D expenses were $955,000 for the first quarter compared to $1.3 million in the preceding quarter and $1.1 million in the previous year quarter. As stated previously, R&D spending can fluctuate from quarter-to-quarter depending upon the development of our new products. SG&A was $1.8 million compared to $1.9 million in the preceding quarter and $1.7 million in the prior year first quarter. Turning to the balance sheet and changes in the first quarter, our cash and cash equivalents were $14 million at August 31, 2017, compared to $17.8 million at the end of the preceding quarter. The sequential decrease is primarily due to an increase in inventories of $2.4 million and an increase in vendor deposits of $1 million, included in prepaid expense and other to support the increased backlog. Accounts receivable at quarter-end was $6 million compared to $4 million at the preceding quarter-end. The increase is due to timing and the collection of outstanding receivables. Inventories at August 31 were $9 million, an increase from $6.6 million at the preceding quarter-end. Property and equipment was $1.1 million compared to $1.4 million in the preceding quarter. This reduction reflects the transfer of capital equipment to inventory for future sale. Customer deposits and deferred revenue were $3.8 million compared to $3.5 million at the preceding quarter-end. Turning to our outlook for fiscal 2018 that we discussed in prior earnings calls with the improved momentum in our business. We are seeking to provide greater visibility into our business outlook going forward. For our fiscal year 2018 ending May 31, 2018, we are reiterating [Technical Difficulty] previously provided guidance of full-year total revenue growth to exceed 50% over fiscal 2017 and to be profitable for the year. On the investor relations front, as Gayn mentioned, we will have a booth at the upcoming ITC Conference taking place in Fort Worth, Texas, October 31 through November 2. We welcome any attending investors to stop by. In addition, we are scheduled to present at the Craig Hallum Alpha Select Conference on November 16 at New York City and also at this year’s Midtown CAP Summit taking place December 6 in New York City. We look forward to seeing many of you there. This concludes our prepared remarks. Now, we’re ready to take your questions. Operator, please go ahead.

Thank you. [Operator Instructions] And we’ll go first to Christian Schwab with Craig-Hallum.

Hi, this is Tyler on behalf of Christian. Congrats on a great quarter guys and thanks for letting me ask a couple of questions.

Okay, Tyler.

So with the follow-on orders you guys announced today for your initial FOX-P customer for additional capacity, can you help give us an idea of how far along the customer is, or how much further capacity adds you might be expecting from this customer?

Great question, and probably not directly. There’s certain elements of a lack of 100% clarity with our customer. But we know a lot more than we can really talk about. So at this point, what I will share is, the customer is very happy with our solution. They’re adding more capacity as implied in there that includes some additional devices they’re on the horizon. And I think, I just got to leave it at that. Probably one of the most secure customers we could choose to not talk about that, how’s that. Sorry, Tyler.

No, understood. All right. Well, then how about the second FOX-XP customer? During the quarter you announced an order, upgraded order for $900,000. Could you give us any clarity on future orders from this customer?

Sure.

Do you expect any future [indiscernible] this year?

Maybe a little more clarity, how’s that. So, again, what we try to do is keep kind of focused on clarity of what we’re doing as opposed to all the forward-looking stuff. But that customer one thing we did share a couple of quarters ago, it was pretty obvious even as we were completing the shipment of that that they were starting to ask us about further capability and capacity, and I did share that in previous calls. What I will say is that initial order for $900,000 is not all of it. We are still expecting more, both capability and capacity. So, we’re very much on the leading-edge of what that customer is doing. And we believe that there’s – I mean, it’s a great account and a great application space to be in right now. I think, there’s a lot of [Technical Difficulty] trying to get their arms around how big this is going to be and how this impact of these types of devices like silicon photonics will have on the more discreet application – the discrete type of devices in that application space. But we’re super happy. They’re happy with us. There’s ongoing conversations. We think that they’ll be continuing to buy from us well into the future.

Okay, thanks. And then last question maybe for Ken then, your OpEx was down about $500,000 quarter-over-quarter, you commented on your prepared remarks due to some one-time costs in Q4. So just looking forward then, could you help us what – this quarter, the $2.7 million, $2.8 million, is that kind of a reasonable run rate going forward, or how should we think about that going forward?

So I would tend to say, that’s a good baseline to use on a going-forward basis. Keep in mind, as we ramp up, we’ll incur additional shipping cost to the customers, as well as some tooling and other related costs. So that’s a baseline, I would think as the revenue increases, or if revenue increases, I would expect that to go up just marginally though not significantly.

All right. Sounds great. That’s all for me. Thanks, guys.

Thanks, Tyler.

Thank you. [Operator Instructions] We’ll now hear from Geoffrey Scott with Scott Asset Management.

Good afternoon, guys.

Hi, Geoff.

Well done.

Thank you.

The partially populated description of the order today…

Yes.

I don’t understand about the nomenclature. What is a partially populated system?

Well, at the same time as we’re trying to not give a ton of visibility, there’s certain expectations with respect to ASPs and things that are out there. So one thing that is actually very nice about the architecture of our FOX-1P and XP systems is what we referred to as blades. And you can take a system, for example, with a FOX-XP and you can configure it with up to 18 blades to use for wafers, or nine blades to – for the Singulated Die and Module and what we call DiePaks. And you can, in fact, partially populate those systems with less than a full complement of blades. The nice thing about them is it’s very simple to upgrade them. You can – we can simply ship a blade and install it within a day, or a few hours. And so, they make for very nice homes that are begging to be populated later. So if you recall, we had talked, I think, back in January that one of the initial shipments of the FOX-XP was actually like a single or dual blade system, I can’t remember, and then later it was upgraded. So that’s what a partially populated system means.

Okay. Going back to the last conference call, we were talking about dollars for R&D. And you said, the run rate is likely to come down unless there’s a major opportunity. And you said, you will be willing to commit large amounts of R&D dollars if that opportunity were to fly by. Can we assume that that opportunity has not risen yet?

We certainly haven’t started to see the expenses of it. I would still say that’s fair, yes. I mean, what we’re seeing, which I’m actually pleased with is that the customers – the FOX-P platform and I choose that word specific allows a degree of flexibility in addition to how it’s configured with blades, as we just described. But within a blade, it can be configured with a complement of now four different flavors of channel modules that can be configured to order and basically make a system be slightly different for a different application or customer. But the building blocks and the tools and a lot of the material are similar, which allows us to basically put product and inventory or long lead items to shorten inventory or our lead times for customers. So one thing that’s happening is even as we’ve been going out and I personally spent some miles. You may hear it in my voices, I have a little bit of a cough here. So the miles I was talking to customers, it was actually very positive feedback on the XP, in particular. And within the configurations of the boards that we’re already building and just using custom WaferPaks and DiePaks, we found several opportunities to expand that market for us without having to go off and go build a whole new platform. So I really like to not embark on a big R&D program. But as we, I think, I specifically alluded to is, there are some opportunities out there like high volume SSD Flash applications that might require some additional investment. And if the right opportunity came along, our intent would be to make the investments if there’s an ROI there.

Okay. The OEM order, last conference call, there was a lot of a kind of wiggle room on when an order come – might come in and the size of it?

Yes.

It came in a bit earlier than you expected and it’s very substantially larger than you expected. What was it at the OEM’s customer, not the OEM, but the OEM’s customer that was so attractive that the OEM came back to you and said, okay, you just go?

That’s a very good question that I, again, no more than I’m willing to share a lot about. Well, I’ll tell you what. So if you remember what we did is, we had, in fact, delivered the very first unit of that OEM program actually a year ago.

Yes.

And we know that with this partner, it was being evaluated for a couple of different, at least, potential kind of applications. Our visibility to some extent is pretty limited intentionally. Although we’re given some ranges and things like that to ensure that we have the infrastructure and capacity in place. We’ve known for even a year several different outcome scenarios that include an order of that size. But it’s always tough to predict it, because if I tell you it’s come in and it doesn’t, then you’ll be more disappointed in me, than if I don’t tell you it’s coming in and it does, so.

Yes.

I will tell you, we’re going to take a conservative stance on these OEM chambers first for awhile, because there’s real upside to these chambers. And we – to be blunt, I don’t want to have to count on them, and so we kind of look at as incremental. We’ve already said, it’s the lowest margin business we do, but it’s actually very good business. And so far so good and not only the first unit, but the additional units that were ordered last in, I think, February and March, have gone in well. And I think, the data that was taken off those systems was either a pleasant surprise, or they were very happy with it for certain. And then I know the customer chose to pull in some things, which resulted in this initial order to us for a few million bucks.

Was the original evaluation for one application and now it’s going to be used for more than one application? [Multiple Speakers]

We don’t have 100% visibility, but it’s – I believe that it’s – has been evaluated for more than one.

Okay. Last question, you talked about the sales pipeline for a customer three and more. What are we talking about in a timeframe of any likely action?

I think, I’ve been pretty consistent on the calls in saying that they all have pretty long lead times in terms of the conversations that start with the customers, their understanding of it, building of a process change and evaluation procedure often times, we might get a small order for a WaferPak or a DiePak to prove it out and then. So it’s not surprising that it’s in the three, four quarter kind of run rate even with the product out. It was longer certainly before we had our new products out. The kind of up the bar a little bit not be – not give you anything. Some of the tone from the customers was shorter than that. So we’ll see, but there’s some really hot things going on with sensors right now, and there’s just nothing else out there like what we’re doing. And so there’s a little bit of – if we get the right markets, we’ve talked about this before, you find those right waves, you get out in front of them. We’re getting in front of some, I mean, these are not small companies we’re talking to, and they’re engaged there. So we’ll see, but I’m encouraged. And you’ll see, Ken, somebody’s better and ask Ken about our inventory, but you’ll see we’ve actually upped our inventory, which includes taking some of the money we did in the race and putting it in the FOX and very specifically FOX-XP inventory and infrastructure, well, I mean and products related to not infrastructure, but like a liners and things like that. So we’re still trying to get our arms around how aggressive we want to be with putting inventory in place, but I’m encouraged.

I too, I’m encouraged. I’ll let you go. Thanks very much.

Thanks, Geoff.

Thank you. [Operator Instructions] We’ll hear from Larry Chlebina with Chlebina Capital.

Hi Gayn. Just a quick question. That wasn’t clear to me any of these prospective new XP customers. Are they for or any of them for stack dies?

Okay. So you didn’t say that right? You meant Flash stack die right?

Yes, okay.

Yes, that’s okay, no. At this point, no.

Is that considered the primary target stack dies just flash?

You know, right now…

HPM or anything else like that HPM?

Yes, I mean that when we talked about the idea that simply and for those on the call that aren’t familiar with us, there’s a – there are devices that today are taken multiple of the identical devices like flash memory, or DRAM memories, for example. They’re put into a single package and then they’re put on a burn-in system like ours, or our competitors, which we call package part burn-in systems. And they are tested for, say, a day or a half a day or something. During that time, one of the devices inside that package will fail. And a circumstance like a solid-state – enterprise solid-state disk drive using flash memory, that’s a problem, and the entire device can be thrown away. So if you happen to have eight or 10 devices inside of that and you throw one away and you throw the entire one away, because one of the die inside failed, that’s problem. So one of the early applications that we talked about with the FOX-XP is its ability to actually test entire Flash wafers and be able to test them at the wafer level in a more cost-effective way than could ever be done with ATE systems. So that you could weed out those bad die before they get stuck in the packages. So specifically relative to that type of application, Larry, that’s still the one that comes to mind. But I can tell you, the world is very resourceful and I’ve been hearing some things about other applications, where people put memories or other devices on to other pieces of silicon. So where you would stack gallium arsenide or nitride lasers or something on to a piece of silicon substrate, or when we talk about modules, where there are multi-chip modules, where there’s three, four die inside of a module or something, and you might want to test one of those die before it hits the module stage. So that need is still there. And with the, quite frankly, with the introduction of a volume – a real volume production solution that’s been thought through in the entire test cell from hand – automatic handling, contacting and testing of these wafers like the FOX-XP. It gives customers the first time in many cases ever to even consider moving package or module test back to wafer. And so, that is still just starting to play out. And as I’ve said before, it is so much easier to go out and talk to customers and show them a beautiful picture of a system that we’ve shipped to customers, or that they can come into our facility and actually see it. So in that case, maybe we shouldn’t be surprised at the enthusiasm, but I’m certainly encouraged by it.

So I would think the Singulated DiePak approach might be more applicable, especially considering the yields that they’re initially getting on a 3D NAND wafer. I would think that, I don’t know you capture the single-aided…

Right.

…failure rate as well?

So, Larry, you can come and join our product marketing team. So a lot of times there’s details even in my vocabulary would seems. So we were proofreading through my call today and somewhere two or three times, you’ll see me say the statement. We introduced our new FOX-XP Multi-Wafer and Singulated Die/Module Test, which is a mouthful.

Right.

Well, the reality is multiple wafers singulated die and module are very different capabilities each of which we can do on our system. And in fact, you can take a wafer singulated, and before you package it, we have proposals using our DiePaks to be able to actually test that singulated die. And the beauty of it right now is, it sort of like we don’t care where you do it, because we’ve got to cover with a FOX-XP, and rather than trying to preach that religion, it’s like you tell me where. And so, well, that’s one of the great things about that platform. I believe that we will have customers within even a year that will be doing it at both wafer level and module level, because it still makes sense in both places for slightly different reasons.

So why – I was kind of pushing you to make a commitment on that is, that’s where the volume applications are, and that particularly when you start looking at these 3D NAND structures and they get to 128 levels, they can’t go any farther most people’s thinking. And so the next step will have to be in the stacked – stack die area.

You got it.

So it seems like you’re sitting right in the roadmap of where the stuff is headed. So that’s why I’m hoping to see an announcement soon that you’re working on one of those applications. So that’s why I was wondering in this prospective new XP customers if any or more potentially [Multiple Speakers] die?

Yes, because I do agree with you and the importance, and that I actually – I’m going on record. None of them right now are any of the NAND guys. But I – there’s – we’ve had some conversations, but I don’t want to go so far as to start setting expectations yet. But I’m still a big believer in that space. Okay?

All right. That’s all I had. Thank you.

Thanks, Larry.

Thank you. We have a follow-up from Geoffrey Scott.

Going back to San Francisco in July, and I ask a question about the FOX-1P customer. And then it was – it sounded like there wasn’t a dynamite introduction of that product. Could I gather from today’s discussion that that activity has actually not picked up?

Well, let’s see here. So, no, okay? So, what we’ve stated is the FOX-1P, I would say, it did not do as much as we were originally thinking it was going to do. One of the things that we definitely ran into is, we would go out and we would tell people about the FOX-1P. And in the presentation, the next page it talks about our FOX-XP. And so my customers were, oh, oh, oh, tell me about the FOX-XP? So we clearly unhook some of the things with respect to 1P, as people want to go all the way to multi-wafer. What I – I kind of actually alluded to sort of couple of things. We’ve had in the last month we announced an order for multiple WaferPak for our FOX-1P, that’s our traditional installed base. The customer is, in fact, at higher and higher utilization rates and came back to us and bought some additional WaferPak, which they haven’t done in a couple-and-a-half years or so.

[Multiple Speakers] customers yet for the 1P?

Did we – that was the lead customer for the FOX-1 – to the FOX-1.

Okay.

Okay? So it’s really not related and we’ve never tied anything together with who exactly the 1P lead customer was.

Okay.

The other thing we said and I brief through it, it was almost adlibbed in here. We’ve actually just got an order literally within the last day-and-a-half for another greater than $1 million worth of WaferPak for our FOX-15 installed base. And so that that’s why we – I think in the press release, it says $18 million effective backlog and then add $1 to it, and I stated it today at $19 million. So were definitely seen, I mean, it’s just a good business. Everybody is using their tools. They’re still using their systems. I mean, literally, all of our FOX-1s, 15s, XPs are maxed out, and that’s encouraging. And so people are buying more things, and that – we’re at a good spot right now.

That FOX-15 order, is that Europe, or Far East?

I don’t think we stated, because you’re almost – Tyler was the worst so far that one wasn’t so bad job. All right.

Okay, thank you.

Okay, you’re welcome.

Thank you. [Operator Instructions]

So folks, I know we actually have maybe even a record attendance here, because we got the rundown. So I would encourage folks to jump on if they can.

[Operator Instructions]

All right then.

And we do have [Charlie Dell], [ph] private investor.

All right.

Good afternoon. So one of the questions I’ve had in terms of the FOX-XP is, what kind of expectation should we have in terms of the annual level of consumables for one of these units?

.: Those DiePaks and WaferPaks are proprietary and patented concept that we had implemented literally over the last decade. That allows us to make extremely fine pitch contact with all of the die on a wafer, or the small contacts on a singulated die or a module. These modules, these tiny devices and we carry more on trade shows, I mean, they’re really small, a couple of few millimeters or so on a side. So they’re extremely hard to handle and we do that with automated equipment that we also supply. So when you go to buy a test cell from us, you’re actually buying an entire solution that’s made up of the tester and burn-in system with all of the electronics. I said WaferPaks or DiePaks, which contacts the devices under test and a liner or an autoloader that does automated handling of all this, so you’re not doing any of this by hand. Those – the test system is configured for a typical application. But it’s still general purpose, in that it can be reconfigured depending on the device just through software with generic resources and all. The physical contact of the device through the contractors that we call WaferPaks and DiePaks is a physical routing to get to the X, Y, Z locations specific to the type of the device. So for every new device, you actually need a new contactor. So there’s two reasons people buy a new DiePaks or WaferPaks from us. They’re buying more or they have more capacity, so they buy additional capacity from us. And in that case, they would be buying both the test system and the DiePaks or WaferPaks. And the other scenario is, a year later or two years later, their devices change from flavor A to flavor B. And if the pin out or anything changes about them, then they actually throw away their WaferPaks and DiePaks that were used before unless that product is still in production, and then buy new WaferPaks and DiePaks from us. So the question is how many turns is that, or how often will that be? And at least, in a lot of the semiconductor space that I’m familiar with, there’s kind of a few categories. There was always the typical consumer devices that might have a, two to three-year lifespan or something along those lines, and then there was automotive, which lasted eight or ten years. And so, theoretically, on the consumer guys, every couple of years or so, they might replace those devices with new probe cards or in our case WaferPaks or burn-in boards, or in this case DiePaks for our test systems, okay? Now the piece of it that’s really changed is, I think, it was just maybe six months ago just going through this discussion with someone when they pointed out that, if you think an automotive application is eight years old, go sit in a car right now. And if you look at the dashboard, there’s nothing that looks eight years old about it. In fact, I’m not sure what’s moving about as fast as the dashboard and the electronics that are going in automotive devices. What I know about cars that are going out next year with respect to these ADAS systems, forward-looking radar, even the biometric sensors. I drove an automobile in Europe a while ago and they’re available in U.S. as well, but there’s – the Mercedes now has it, where it’s continuously monitoring your face. And if you blink for too long, it shakes the wheel to ensure that you’re not dozing off to sleep, and I actually did that, so I remember it specifically. So there’s all kinds of things that are going in the automotive that maybe that turns even faster. The other piece is, on the whole mobile side of things, gosh, I don’t know, my kid’s phones don’t last very long. And if they do, we were replacing them before they die anyhow. And I don’t know the last time somebody did a breakdown, or tear down and saw the same part in anybody’s phone. So does that mean those devices have one-year life cycles, or two-year life cycles. So, the good news is the shorter the life cycle the better for us. And as we have an installed base out there of 10, 20 whatever systems at some point not only are people buying new systems, but they’re also going to be replacing those consumables. And we’ve specifically put in place capability and capacity to supply a very large number of them. So we’ve told customers that we have the capability that with lead time, et cetera, and the infrastructure of our supply chain that if we need to build 100 WaferPaks a month, we can do it. Now if you contrast that to the largest probe card suppliers, it’s in the same order of magnitude as the high-end probe card suppliers. So we’re optimistic about that. So one thing – another thing to think about is in – this isn’t something new if you look at the package part burn-in market. For example, the estimates that are out there for just standard package part burn-in systems, while the testers themselves might only have a couple of hundred million dollar market like a total available market, the actual consumable on the burn-in boards is closer to $1 billion –$800 million to $1 billion depending on the year. So the consumable has grown to be four or five times, several times larger than the annual spend, because people keep those darn burn-in systems around for decades. And that’s our experience with our installed base. But today, we do not supply consumables on our package part burn-in systems. But not only do we supply them on our wafer level and Singulated Die and Module, but actually we’re the only ones who supply it. It’s a captive supply relationship at this point. So I hope that gave you plenty of answer there.

That sounds good. You mentioned the – asking Ken the impact of the – should really the ramp up in supplies on hand at $2.4 million, I think, it was. How does that impact on earnings?

Oh, inventory?

Yes, inventory?

What was the question?

How does that impact on earnings?

What is the impact on earnings?

Yes, is there any impact on earnings?

No, there is no impact.

There is no impact on earnings. Basically, this is an inventory for future sales. We took, as Gayn indicated, proceeds from our recent public offering, did exactly what we said, we’re going to do built this up corresponds directly to the backlog that we have right now so.

I mean, technically, if you didn’t put that in inventory, we could put it in the bank and make egads [ph] amounts of money. Unfortunately, we are by large, et cetera, we’re getting 1% or 2% on it or something like that. So theoretically, the $2 million in inventory is costing us the interest it would have, I’d say, because of the interest. But I’m a way more interested and being able to tell my customers, I can do quick turns, and if they need something, I can ship it to them.

Thank you very much.

Thank you.

Ladies and gentlemen, we still have a few minutes for any additional questions or comments. [Operator Instructions] And with nothing else in the queue, I’ll go ahead and turn the floor back over to management for any additional or closing remarks.

All right. Well, thank you very much. Well, folks, as I said, actually it’s been great – we continue to have a larger and larger attendee base. As always, we will make ourselves available. If you want to get in touch with us through the IR department or Ken and we can set something up. We’re always available here in Sunny Silicon Valley, if you would like to come or try and make some time for you as well, or perhaps see you at one of the trade shows, or at one of the conferences in New York coming up in a couple of months. And until next time, we appreciate your time. I’d like to standby.

Thank you. Ladies and gentlemen, once again that does conclude today’s conference. Thank you all again for your participation. You may now disconnect.