Good day and welcome to the Aehr Test Systems’ Fiscal 2018 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 MKR Group. Please go ahead, sir.

Thank you, operator, good afternoon and thank you for joining us today to discuss Aehr Test Systems’ fiscal 2018 fourth quarter and full-year financial results. By now, you should have received 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 2018 fourth quarter and full year before opening the call to your questions. Before turning the call over to management, I would like to make a few 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. Now with that said, I would like to introduce Gayn Erickson, Chief Executive Officer.

Thanks, Jim, and good afternoon to those joining us today on the conference call and also listening in online. Ken will go over our fourth quarter and full year financial results later in the call including details on our guidance for the fiscal 2019. First I’ll spend a few minutes though discussing our financial business and product highlights including our continued progress with our new FOX-P platform, to our next generation of wafer level and Singulated Die and Module Test and Burn-in products. Then we’ll open up the line to your questions. I have actually gotten a lot of questions over the last couple of months here. People are asking about how our progress has been with each of our lead customers, how has that gone and of course when are they placing more orders and how does that look like. So I'm going to try and do my best to cover a lot of ground and give people some insight with the positive progress that we've had as well as – as much as I can to break out our expectations with those as well as the other business opportunities. We're really pleased to report our financial results for our full fiscal year 2018 with revenue for the full-year of $29.6 million, that's up 56% growth over the prior year and we're profitable for the year for each quarter and also for the full year on both the GAAP and non-GAAP basis. The GAAP net income for the year was $528,000, a significant improvement from the GAAP net loss of $5.7 million for the prior year. Our non-GAAP net income for the year, which excludes our non-cash related stock-based compensation expenses were $1.5 million, up $6.2 million from last year's non-GAAP loss of $4.7 million. Let me start off…

Thank you, Gayn. As we reported in today's press release, we finished the 2018 fiscal year with total revenue of $29.6 million, a revenue growth year-over-year of 56%. And recognize a GAAP profit of $528,000. Net sales in the fourth quarter were $7.3 million, compared to $7.4 million in the preceding quarter. On a year-over-year basis, Q4 revenue is up 9% from $6.7 million in the prior year Q4. Non-GAAP net income for the fourth quarter was $365,000 or $0.02 per diluted share, compared to a non-GAAP net income of $509,000 or $0.02 per diluted share in the preceding quarter. And non-GAAP net loss of $587,000 or $0.03 per diluted share in the fourth 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 fourth quarter was $191,000, or $0.01 per diluted share. This compares to GAAP net income of $267,000 or $0.01 per diluted share in the preceding quarter and a GAAP net loss of $975,000 or $0.04 per diluted share in the fourth quarter of the previous year. Our bottom line for the fourth quarter of the prior fiscal year reflects the impact of several time expenses related to the development and accelerated shipping and installation of the FOX-XP. Gross profit in the fourth quarter was $3.2 million or 43% of sales, compared to gross profit of $3.2 million, or 43% of sales in the preceding quarter and a gross profit of $2.6 million, or 39% of sales in the fourth quarter of the prior year. The increase in gross margin from the prior year fourth quarter is primarily due to several onetime expenses in Q4 2017 related to the FOX-XP new product introduction, including NRE for tooling and design layout, scrap, rework and other…

Thank you. [Operator Instructions] Our first question comes from Christian Schwab with Craig-Hallum Capital.

Hey Christian.

A great quarter guys. Just a few quick questions, gross margins were kind of over stronger than they've been in quite a while. How should we be thinking about that going forward into 2019? Should we stay up with this 43.5% type of level? Is there a little bit more room? Any help there would be appreciated.

So yes in terms of FY’18 we finished the year about 42% gross margin for the year. In terms of forecast for FY’19, I would expect it to be very, very close to that number, maybe up just a little bit. I know we've finished out a little bit stronger at the 43%. But as I mentioned our increase in operating spending that we've recognized during FY’18 carried over into FY’19. I think planning on a margin of about 42% would be appropriate.

Fabulous, thank you. Gayn can you kind of rank your three lead FOX-XP customers? And how you see the opportunity this year and potentially how you may see the opportunity over a multi-year timeframe?

Alright Christian, let me start by I love all three of my children and none more than any of the others, okay. But because many of them are listening in, I – let’s see here. You know what I actually – I'm excited about each of those three. And as we've talked about one in particular which was our original lead customer probably has the most opportunity to fan out into multiple different applications. Our second lead customer also has that. Well I think in the third customer it has more to do with expanding and being released into their production in all of their products. So right now what we've just focused on this year was to absolutely make sure that the products were successful, they got the data that they were ready to go for their production ramps and then start focusing on the ramp side of things for them. All of them are forecast to be up year-over-year. And at different times they possess different opportunities, but probably in total dollars spend opportunity my first lead, second lead, third lead, they probably rank in that order. The first being the mobile application, the second being silicon photonics wafer level and the third being silicon photonics singulated die, if that helps.

That's very helpful. Thank you. And then your last comments of your prepared comments Gayn talking about how you feel confident in the Company's ability to continue to grow for many years to come, is that – can you get a little bit more clarity on what gives you confidence in that I guess?

Well I mean part of that stems if you look back in the last couple of years we embarked on these new products that we saw a lot of opportunity that if you will a rising tide coming from automotive. And at that time we were talking about the touch screens in your car and possibly back up sensors. We weren’t even bold enough to start really getting ahead of our skis and talking about autonomous vehicles and then necessity of the safety of those devices. We also had talked about the mobile side of things which just continues to grow and the complexity of the sensors and other applications that are going in the mobile phones has created more and more focus on the quality side, as well as the security aspects of the mobile phone side. And over the next year you'll start hearing me talk more about even on the health side, in the biometric sensor based health monitoring that's going on. These are kind of rising tides that we see as just decade long trends. For us the key was to get our new products out, prove them to these lead customers because in the case of our wafer-level burn-in system, there is nothing else out there like that. Nobody was able to prove the technical feasibility much less the cost effectiveness to be able to move from a package part to a wafer level burn-in system. When I tell people, we test 18 wafers at a time, they look at me with sort of a cockeyed head tilt like what are you talking about. And so actually implementing that is a big, big deal. Now that we bring customers through, we can actually show them that. We can benchmark it within a couple of few…

Thank you. That's very helpful. Congratulations, guys.

Thanks, Christian.

Thank you. [Operator Instructions] We'll take our next question from Geoff Scott with Scott Asset Management.

Good afternoon, guys.

Hi, Geoff.

Hi, Geoff.

My phone cut out when Gayn was talking about the largest customer for ABTS and then the OEM customer. Can you repeat those?

Maybe we could get someone else, if it was their phone too because I really apologize if that was the case. Let’s see here. So last year our – actually our largest customer for our ABTS product had a very strong year and they actually buy two different flavors of our ABTS for very high power applications as well as from lower power. Their two configurations actually are the highest parallel burn-in systems that were ever built in the world and we shipped them to those guys for their volume production as well as all their qualification of all their devices. They had a very good year. We know that there have been some – they've basically communicated. We have great visibility of what the utilization is. Their utilization rates have – they believe it's going to take them at least to the end of calendar year to start absorbing the capacity that we were still installing during the quarter, which creates a bit of a hole because last year was a good one. The interesting thing is as we note and have publicly described, our ABTS business is traditionally lower margin business than our wafer level both systems and contactors. So in that sense if there is any business that can be soft that would be the one you'd preferred to be. We're more than making up for that, but really through our FOX products. And so that would also bode well for our gross margins as we go forward. , : Now Geoff, I’ve also said one of the thing, we actually are engaging with some several other customers for our ABTS systems, and there's a customer in particular driving need for a better class of testing in the automotive space and another one in the medical space that we are very optimistic that will drive new business for us this year.

Okay, the OEM customer is…

OEM customer, things are going really well. They're happy with us along with the end customer application for it and we tried to just give a communication that we did ship the rest of the backlog during the last quarter. They are forecasting additional, and I'll call it material capacity to in both our next – this and the following fiscal year at least. And so, it's a great little business for us. We have the capability to ship a very high volume number of chambers and with shorter lead times than we had in the past. And so on one hand it's great, allows us to quickly react. On the other hand, they don't have to order in quite as far in advance to give us the heads up as they used to. But we believe that that business will also be material and solid for us this year and the next.

Okay. In one of the bullet points you said you received an initial order for a new DiePak Carrier design from Aehr’s FOX-XP less lead customer for next-generation device.

Yes.

Can you expand on that point why that’s important? Of course it's an initial order so we're expecting more and the new DiePak Carrier design, why is that important?

Okay, so one of the nice things about our FOX line of products is that actually part of its value and part of its technical capability is to be able to put a really high number of resources on to something like a wafer or individual die. And that is very novel in the burn space, in the test space. We have extremely high parallelism with individual resources and that matters, because then I can tell if one device is failing or passing. And so that gets us the discernibility of the 100% confidence that you burn to the end. Okay. Our test system is impressive as it stands. And then you need to buy these consumable contractors wafer packs, when you're contacting the whole wafer, DiePaks when you're contacting individual die or individual complex models. Those latter pieces are consumable in that each time a customer makes a new design of a component, they would need a new set of those DiePaks. So in addition to a system that they purchase, and that system is expected to have a life of 10 years or more, every time they change their device they would need to buy new sets of DiePaks. And so this is really the first example where our installed base of FOX-XP that was shipped with sets of DiePaks, the customer is coming back and saying I have a new device, we design new DiePaks for them. And then those would then be used in their existing systems to be able to be used in production test of their next generation devices. We would expect that to be a continuous ongoing scenario. And the real debate is how often is it every 12 months, every 18 months, every 24 months that you start getting this repeat business. But a key leading indicator is we in fact are getting repeat business off of that tool which is a great endorsement that they are not only committed to us, but they're – it's integrated into their systems. We believe that by the way that between wafer packs and DiePaks all of our customers over time will not only buy more systems, but they would buy DiePaks for all of the systems that are already installed.

Okay, I guess I misread it. You are saying it was their new DiePak carrier design, I thought it was your new DiePak carrier design.

No, no, it’s our design, but what happens is, the customer comes up with a new type of device and it has physical pinned locations in different places. We design a contactor that is unique to make the electrical connection between our tester their unique device, it's our DiePak design.

So it’s their new device, not your new device?

Correct.

Yes, I've misread it, okay. 10% customers, how many did have in fiscal 2018?

So Geoff, we had three 10% customers in fiscal 2018. So I want to kind of expand on our customers also. So the nice thing is if you take a look at the top five customers, it will also be reporting in our 10-K. Actually we’re said to be at 86% of the total revenues, that compares to 93% in the prior year. And we also – something that we haven't talked we have 29 customers which is a pretty good customer base and so it's good to see that our concentration is going down a bit, taking a look at our top customers.

Included in those three would be your lead ABTS customer, your second FOX-XP customer and your OEM customer. Is that correct?

We can't name names until the 10-K comes out Geoff.

I'm not naming name, I was just trying to…

I think that's pretty close Geoff.

That’s pretty close. Okay I’ll leave it somebody else. Thank you.

Thanks Geoff.

Thank you. [Operator Instructions]