Operator: Good afternoon. Thank you for holding. Your conference will begin very shortly. Please remain on the line. Your conference will begin in just a couple of minutes. Thanks for watching! Good day. Welcome to the HEIR Test Systems Fiscal 2026 Fourth Quarter and Full Year Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Jim Byers at Ponda Wilkinson Investor Relations. Jim, you may begin.
Jim Byers: Thank you, operator. Good afternoon and welcome to Air Test Systems' fiscal 2026 fourth quarter and full year financial results conference call. With me on today's call are Air Test Systems President and Chief Executive Officer Gayn Erickson and Chief Financial Officer Chris Siu. Before I turn the call over to Chris and Gayn, I'd like to cover a few quick items. This afternoon, right after market closed, Air Test issued a press release announcing its fiscal 2026 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 will be archived on the investor relations page of the company's website. And I'd like to remind everyone that on today's call, management will be making forward-looking statements 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 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 Air Test Systems undertakes no obligation to update the forward-looking statements. Now, with that said, I'd like to turn the call over to Gayn Erickson, President and CEO.
Gayn Erickson: Gayn Erickson Thanks, Jim, and good afternoon, everyone, and welcome to our fiscal 26 fourth quarter and full year earnings conference call. I'll start with an update on the key markets driving our business, including the strong demand we're seeing in the AI and data center infrastructure markets, as well as the significant progress we've made this year in diversifying and expanding our end markets. Chris will then go over and review our financial results and open up the call for questions. We're very pleased with our fiscal fourth quarter, which exceeded consensus street expectations and capped a year of significant bookings and revenue diversification for AIR. Record quarterly bookings, a very strong and record backlog, and growing demand across AI processors, silicon photonics, and power semiconductors for both our wafer-level and package-level burn-in solutions positions us well for significant growth in 27 and moving forward, fiscal 27, that is. With strong momentum and a record backlog heading into fiscal 27, we're expecting revenue of between $130 million and $150 million. representing 2.6 times to three times the just completed fiscal 26 revenue. Non-GAAP pre-tax profitability at these levels is expected to come in between 18 and 22%. With current customer forecasts that we're seeing across our wafer level and package level burn-in platforms, we see the opportunity to increase our revenue guidance even higher as additional orders materialize. We believe we're not capacity limited even at the $150 million revenue levels. To illustrate the progress we've made in diversifying its additional high growth markets, just two years ago, over 95% of our business was tied to silicon carbide for electric vehicles. Whereas today, almost 95% of our fiscal year 26 revenue came from markets not electric vehicles, silicon carbide. Reliability and production wafer level burn and screening for AI accelerators, CPUs, and network processors were our fastest growing markets this year. representing approximately 71% of our total annual revenue. Optical device test and burn-in for data center infrastructure transceivers, chip-to-chip I.O., and hard disk drives accounted for another 20%. We expect both of these markets to grow significantly in fiscal 2027, and we're seeing encouraging signs of recovery in the silicon carbide market as well as new growth opportunities for power semiconductors such as in gallium nitride and even silicon based power MOSFETs used in both automotive and AI data center applications. So let me provide an update in several of the key markets in customer initiatives. And I'll start with wafer level burn-in. Demand from AI related applications continues to accelerate. Our lead AI processor wafer level burn-in customer is significantly ramping their products driving an increase in forecasted capacity needs for our FOX systems and proprietary wafer pack full wafer contactors this year and over the next few years. This past year, they've ordered our fully automated wafer pack aligners to integrate with their installed base, doubled their systems from us, and are forecasting significant increases in wafer allocation from their foundry this year and into the future. This had been a challenge to their growth over the last year. We're happy to see them move all production burn-in screening to wafer level burn-in on our systems this past year. They no longer need to perform any system level screening of their products. This customer sees AIR as a critical supplier and we're working to ensure we can meet all their capacity needs as they forecast significant growth in system purchases and wafer packs this year and over the next few years. In addition, we're engaged with additional AI processor customers who are evaluating wafer-level burn-in to improve their product reliability and reduce yield loss from production burn-in of their devices later in the manufacturing process. This includes one of our largest package-level burn-in customers who's now asking us about a wafer-level burn-in evaluation for future production of one of their AI accelerators and CPUs. This is in parallel with ensuring we can meet their package-level burn-in needs with our Sonoma systems. A key advantage of our proprietary wafer pack contact or technology is its ability to manage individual dye temperatures, enabling significantly better thermal management than conventional package level approaches. Our systems can process up to a quarter of a wafer at a time with as many as nine wafers tested in parallel, delivering a compelling combination of throughput and cost efficiency. So let me provide an update on our wafer level We're excited to report that we successfully completed the benchmark testing of our wafer-level burn-in solution on one of their processors, achieving results that exceeded their expectations and, in their words, produced results better than they can get at package level. This top-tier AI processor supplier has now expressed interest in moving to pilot production test validation at their semiconductor contract manufacturer in Taiwan for their current high-volume device, which we just completed the benchmark on. Originally, this benchmark was to evaluate wafer-level burn-in for their next-generation device. Instead, they indicated that based on the results, they're interested to pull this device in and to consider wafer-level burn-in on the current device as well. They told us this current device is expected to continue ramping and achieve significant volumes over the next year or more. In addition, they also requested that we evaluate a second device in parallel. The potential revenue opportunity from one of these devices is significant to AIR in terms of near and long-term revenue streams related to the wafer-level burn-in systems and proprietary AIR wafer pack contactors. Turning to wafer-level burn-in for silicon photonics devices, As we have anticipated for the last year, silicon photonics devices and the need for production burn-in are now seeing strong momentum as AI data center architectures increasingly rely on optical IO and high-speed optical interconnects. Our lead silicon photonics customer is ramping with follow-on orders over the past year and more already in this fiscal year for fully automated wafer-level burn-in systems powering AI optical IO and data center interconnects. These systems are fully integrated with their automated wafer handling equipment, enabling fully automated high-volume production burn-in with hands-free operation using automatic guided vehicles, marking another important milestone with this long-term customer. In addition, our newest major Silicon Protonis customer, a global leader in networking products and solutions, has provided us with a forecast for additional systems this calendar year as it ramps capacity support next generation hyperscale data center deployments. This customer first engaged with us just last November and has since ordered two of our nine wafer FOX test cells and two of our FOX NPs. This engagement progressed quickly from initial contact to their first order and our first delivery of fully integrated test cell. We believe our sales process is shortening over time as our wafer-level burn-in solutions are becoming more pervasive across multiple industries, customers and countries. We believe the silicon photonics and optical test and burn-in market has substantial growth potential and can be a meaningful long-term growth driver for air. So now let me share some highlights of our progress in power semiconductors and wafer-level burn-in in the past year. We completed more than a dozen designs for gallium nitride wafer packs, which are now being sampled by potential customers. Many, if not all, are expected to move to volume production on our wafer-level burning systems, driving the need for systems and wafer packs this year and going forward. We also just completed the world's first 300-millimeter GaN wafer-level burning solution, using our high-voltage wafer packs to stress and test the critical high-temperature reverse bias test needed to screen for GaN MOSFET defects in production. Just recently, we closed the sale of our first Fox system for a silicon MOSFET wafer-level burn-in application. Prior to this, customers had purchased our Fox wafer-level burn-in systems only for non-silicon MOSFETs, such as silicon carbide and gallium nitride. We're working with this customer to determine test times and quality screening modes that we hope will lead to production burning capacity needs, as the customer has indicated. We also captured our first silicon carbide customer in Taiwan. This customer works closely with several automotive manufacturers in Taiwan and China, as well as other international companies. Securing this win was especially important to us because they chose Air over Semite, a Chinese company that recently reincorporated in Malaysia as Nexus Test for their silicon carbide wafer-level burning products. As some of you know, Airtest is currently suing Semi Nexus Test for patent infringement of their silicon carbide focused wafer level burn-in system. We believe they're violating our IP and patents that we hold in many countries around the world, including China, Taiwan, Japan, Korea, Singapore, the EU, and the United States. We were chosen over SEMI due to technical superiority, cost, and our reputation in the automotive industry for production wafer-level burn-in of silicon carbide devices for EVs. We are seeing encouraging signs of recovery in the silicon carbide power semiconductors and actively engaged to meet the wafer-level burn-in needs of several of the world's largest automotive OEM manufacturers, the car and EV suppliers, and several of their silicon carbide suppliers for their new electric vehicles. We also announced today that we received approximately $8 million in new orders in just the last month for silicon carbide wafer level burn and wafer packs as global electric vehicle programs accelerate. These include expanded production orders from our lead silicon carbide customer for wafer pack full wafer contactors and a key order directly from one of the largest automotive companies in the world for multiple wafer packs to be used in the qualification of silicon carbide devices from suppliers for the new generation of electric vehicles using AIRS FOX wafer-level burn-in systems. This year, we expect renewed demand for both silicon carbide and GaN power semiconductor test and burn-in, driven by automotive electrification and AI data center power infrastructure. Let me talk a little bit about wafer-level burn-in for memory. We also continue to pursue opportunities in memory, including NAND flash and potential high bandwidth memory DRAM applications as part of our wafer-level burn-in solutions roadmap. The growth of these two memory markets may be stronger than ever with massive capacity increases planned for this decade. With our wafer-level burn-in benchmark with a global leader in NAND flash completed, we're in discussions on how to move forward. As we said last quarter, we hope to close on discussions about test system specifications needed for their next-generation flash memories, and in particular, their high-bandwidth flash devices, which would lead to a development agreement to supply systems and wafer packs to them over a 12- to 18-month deployment development of our new memory-optimized blades for our Fox XP and MP multi-wafer test and burn-in platform. We're also in ongoing discussions with other key memory suppliers that produce high-bandwidth memory, the new DRAM standard used in the AIGPUs, as well as standard DRAM and flash memories to align our solutions with the production needs of these companies' new capacity coming online. As we've noted before, this is a key focus for AIR this year with the goal of reaching an agreement with these customers to develop the enhancements needed to extend our Fox system into these markets. We believe this market could drive orders in fiscal 2027 with ramps in fiscal 2028. Now turning to package level burden. Our package-level burn-in business for AI processors also gained momentum over the year, highlighted by record follow-on production orders from our lead hyperscale customer for Sonoma Systems supporting high-volume AI processor production burn-in. This customer is a premier large-scale data center provider and is forecasting substantial expansion of Sonoma System purchases for a second device, which is twice the power per package as the first device that they're using Sonoma Systems for today. As their current and next generation devices ramp, we believe Sonoma systems and consumables can become an increasingly important contributor to AIRS revenue. This past year, we secured key new device wins on the Sonoma platform for high temp operating life qualification. We're also engaged with multiple current and prospective customers for package level reliability qualification and production burden of AI accelerators, ASICs, network processors, and also for Edge AI processors for automotive and robotics, which represent significant opportunities for AIR over the next few years. Recently, we introduced an enhanced Sonoma high-power configuration designed for next-generation CPUs, GPUs and high-performance network processors used in AI data center and communications applications. This enhanced system expands the Sonoma product family's capabilities with per-device power up to 2,000 watts or more increasing total system power capacity and improved device count scalability. It also includes an optional fully integrated auto aligner and a high throughput automated loader unloader that enable completely hands-free operation in a production environment. Unlike traditional batch flow burn-in, the Sonoma high power configuration with its ALU is designed for continuous flow operation, enabling devices to begin testing immediately upon insertion. The automation and thermal systems run continuously, maximizing equipment utilization, throughput, and return on investment for both engineering qualification and high volume manufacturing environments. Our Sonoma systems deliver what we believe is the industry's lowest cost solution, enabling customers to transition seamlessly from early reliability characterization to full production burn-in and early life failure screening. This approach helps reduce costs, improve quality, and Accelerate Time to Market. To meet anticipated demand, we've been expanding manufacturing capacity for both our systems and consumables. That's both on the wafer level and on the package level. This additional capacity positions us to support expected customer ramp-ups and provides flexibility if demand exceeds our current outlook. Looking ahead, we're very excited about our position entry in fiscal 2027. We have multiple customers who began production over the past 12 months and are now ramping up, creating the potential for meaningful follow-on demand for systems and consumables. With multiple customers entering or expanding production, a record backlog, and additional opportunities under discussion for both wafer-level and package-level burn-in, we believe AIR is well positioned for multiple years of strong revenue growth. With that, I'll turn it over to Chris.
Chris Siu: Thank you, Gayn. Before I review our financial results, I would like to provide a brief update on the steps we're taking to expand our manufacturing capacity and consumer support infrastructure to support our growing backlog and future growth opportunities. As Gayn mentioned in the last conference call, we continue to scale our manufacturing capacity to support growing demand. In addition to our Fremont expansion, we've begun shipping Sonoma Systems from one of our existing contract manufacturers in Southeast Asia. This adds capacity for more than 20 additional Sonoma Systems per month and gives us greater flexibility as we scale to meet customer demand. With the recent record 41 million purchase order we received from our hyperscale customer in April, we are very active operationally as we build Sonoma Systems to meet the customer's delivery schedule. This system is expected to be delivered this year to the OSET of our hyperscale customer, which is based in Taiwan. Gayn also reported today that we successfully completed benchmark testing of a wafer-level burning solution with a major supplier of AI accelerators, CPUs, and network processors. The testing was completed on one of their processors and achieved results that exceeded their expectations. This top-tier AI processor supplier has now expressed interest in moving to pilot production test validation for its current high-volume device. In anticipation of the next stage of this project, we have recently signed a new lease to expand our office in Hsinchu, Taiwan. This expansion will allow us to increase our local sales and customer support personnel, deepen our engagement with customers and ecosystem partners in the region, and strengthen our ability to support future production ramps. With recent manufacturing capacity enhancements and an increased presence in Taiwan, we believe we are well positioned to support significant growth in both waiver level and package level burning systems as customers ramp production. Now to our financial results. Bookings in the fourth quarter of fiscal 2026 were 60.7 million. up more than 500% from 11.1 million in the prior year quarter. The increase was primarily driven by purchase orders for Sonoma package level and Fox wafer level burning systems, wafer packs, and burning modules boards for AI and silicon photonics processor burning, partially offset by lower customer orders for silicon carbide wafer packs. Backlog at the end was a record 80.6 million, up from 15.2 million at the end of fiscal 2025. Subsequent to year end, we received an additional 20 million in bookings during the four-week transition period and the first two weeks of fiscal 2027. As a result, our effective backlog increased to approximately 100.6 million before taking into account minimal shipments during the transition period and the June 26, 2026, which is not part of fiscal year 2027. Turning to our Q4 performance, we're excited about our continued momentum in the artificial intelligence and data center markets. AI processors and silicon photonics burning accounted for more than 80% of our fourth quarter revenue, compared with 56% in the prior year period. For the fourth quarter, we had three customers representing more than 10% of total revenue. Two of these customers target the AI market, and the third focuses on the data center. Optical Transceiver Market. Revenue for the fourth quarter totaled $18.8 million, up 34% from $14.1 million in the prior year quarter. The increase was primarily driven by strong demand from AI and data center customers for our Fox systems, Sierra Auto aligners, and wafer packs. Contacted revenue was $5.8 million, representing 31% of our total fourth quarter revenue, compared with 30% in the prior year quarter. period. This remains a sizable revenue stream for AIR, driven by demand for new wafer pack designs as existing and new customers deploy FOX systems for additional device applications. Non-GAAP growth margin for the fourth quarter was 45%, up 1,000 basis points compared with 35% in the same period last year. The increase was primarily due to high revenue levels, improved manufacturing capacity utilization, and more favorable product mix. In the fourth quarter of fiscal 2025, our revenue was driven primarily by the sale of package-level burning systems, which had lower product margins. Non-GAAP operating expenses in the fourth quarter were $7.5 million, compared with $5.4 million in the prior year quarter. The year-over-year increase was primarily attributable to higher employment costs as we added headcount to support our R&D projects, as well as higher commissions related to record bookings, from customers in the AI and data center markets. As an update on our patent litigation against Semite in China, we continue to incur legal fees during the fourth quarter to support our claims. We are encouraged that the patent office in the Beijing district of the People's Republic of China has upheld two of our Chinese patents, which is critical to our litigation against Semite. The case is still ongoing and we anticipate incurring additional legal expenses in upcoming quarters. as we continue to protect our intellectual property rights in China. Non-GAAP net income for the fourth quarter, excluding the impact of stock-based compensation and amortization of intangible assets, was 3.6 million or 11 cents per diluted share, well above street consensus. This compares with a non-GAAP net loss of 0.2 million or negative one cents per diluted share in the fourth quarter fiscal 2025. Turning to the full-year results, we reported revenue of $50 million, down 15% year-over-year. Full-year non-GAAP gross margin was 38.5% compared with 44% in the prior year. Full-year non-GAAP net income was $0.9 million, or $0.03 per diluted share, compared with non-GAAP net income of $4.6 million, or $0.15 per diluted share in fiscal 2025. At the end of the fourth quarter, cash, cash equivalents, and restricted cash totaled $116.5 million compared with $26.5 million at the end of fiscal 2020. During fiscal 2026, we raised approximately $100 million primarily through our ATM program, significantly strengthening our balance sheet. Although AIR remains a capital-like company with only $2.1 million in capital expenditures in fiscal 2026, This enhanced financial position provides the working capital and flexibility to pursue larger customer opportunities and scale production to meet customer demand. Now I will share our guidance. For the fiscal year ending June 25, 2027, we expect total company revenue to be between $130 million and $150 million, representing expected year-over-year growth of approximately 160% to 200%. This outlook is based on the information available to us today, including our current backlog and anticipated customer demand. We continue to pursue additional orders from existing and prospective customers. We also expect pre-tax non-GAAP net income to be 18% to 22% of total revenue. Lastly, look at our investor relations calendar. Airtest will be participating in three upcoming investor conferences over the next couple of months. We'll meet with investors virtually at the Needham Sixth Annual Semiconductor and Semicab one-on-ones conference on Wednesday, August 20th. The following week, we'll meet with investors in person on Tuesday, August 26th at the Jefferies Technology Summit Conference in Chicago. On September 10th, we'll meet with investors in person at the Lake Street Capital Annual Big Ideas Growth Conference in New York City. We hope to see some of you at these conferences. This concludes our prepared remarks. Later, we're now ready to take questions.
Operator: Thank you. At this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your aliveness in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, please press Star 1 on your phone at this time if you wish to ask a question and please hold both questions. And the first question today is coming from Christian Schwab from Craig Hallam Capital Group. Christian, your line is live.
Christian Schwab: Thank you. Congratulations on the fantastic outlook. Gayn, I know you gave some description of revenue by application for the last fiscal year, but as we're thinking about the $130 to $150 billion, you know, not obviously asking by wafer level burn-in, or the Sonoma Systems. But can you just give a rough idea of the assumption as far as product mix, you know, between AI chips, silicon photonics, power, and if there'll be any memory revenue? Sounds like that's fiscal 28.
Gayn Erickson: Yeah, so we will. And the only challenge, of course, is, you know, we've never done that before. And so In reality, our ability to always predict, but in our current kind of roll up right now, it's pretty similar to last year in terms of AI, 70-ish percent, the silicon photonics, maybe 15, 20 percent, maybe in that same range. And then the power semiconductor and miscellaneous is kind of the rest. But there's some pretty good, and by the way, and I will state, we currently do not anticipate any memory revenue in even the 150 number. So upside any potential revenue from memory would be in addition to that, but right now we're not assuming any of that. And the bulk of that, if not the majority of all of that range of 30 to 150 is coming from current customers. So not really even including, I want to give myself a little leeway of this new benchmark customer that we just completed with amazing results. That would be upside to that as well. So I think last year I talked about the silicon carbide customers a year ago were all talking about how great it's going to be and it's going to be a turnaround year. They didn't really give us really detailed forecasts. So I think I shared a year ago, I'm kind of in a wait-and-see mode. I'll just believe it when I see the orders. This year seems a little bit more specific. We have some people with real numbers, some real forecasts, some real targets. We're seeing the population of our installed base be at pretty well full capacity. So it does feel more real this year, and so I'm more optimistic. But we still have a pretty small number. Yeah. Yeah. A pretty small number. Actually, I think we might have just exceeded it. So that's probably what we want to do. Chris is looking at me like I'm sharing too much. So that order we just got, those orders we just got in, I think exceed what we were already planning. So we'll see how this goes. There's just a lot of opportunity. But AI is going to be a big chunk of our business this year, both in dollars and percentage.
Christian Schwab: fantastic thanks for that clarity and then just on the memory it sounds like you feel more confident in the development program last quarter you did mention kind of roughly the same words that you know you that it could you know lead to orders in 27 and revenue and in 28 but it sounded like You were more confident that you will get orders at some point in fiscal 27 for revenue in 28. Did I hear that right?
Gayn Erickson: I don't know if I'm more confident than last. I'm not sure I'm more confident than last quarter. I mean, I was moderately confident last quarter as well. We have more detail. We've actually started to spend money on it. So we've hired some people and redirected some people and we're doing architectural schematics and assessment. There's some software that started, you know, physical board layouts as part of the proposals to the customers. And, you know, but we really believe you need a committed customer to a project. You know, there's a sort of, whether it be a PO or a sponsorship, but you need to make sure you're aligned with what they want and what they're going to buy at the price point you're willing to sell them at. And that's the piece that we still need to get ourselves resolved to. There's been some dynamics during the last year, if you look in the last 12 months, what's kind of changed. The introduction of high bandwidth flash is a doozy, right? That has really put at least a couple of them, it's publicly known, on their heels in terms of what they were going to do, how they could test it, and it broke a lot of things. The other piece is the new HBM, which is a DRAM. High Bandwidth Memory is DRAM. High Bandwidth Flash is, of course, Flash. But HBM, new standards that are coming out, and I don't want to get too carried away here, some of which driven by specific end users, have embedded BIST capabilities in it, which means that the testability changes dramatically. and we think could be in our favor. So it's given me some additional optimism with respect to our ability to maybe do HBM sooner than we were thinking, you know, certainly six months ago. But I'm going to just keep a optimistic attitude that we're going after this business. But I, you know, I would be hesitant for you to build models with a lot of revenue in that yet. Certainly not next year.
Christian Schwab: Great, and then I'll just slip in one more if I could. There was a lot of different discussions regarding capacity, and I guess I couldn't write all the answers down quick enough to kind of do the math. But as you sit here today, you know, as far as top-line revenue capacity, what do you believe it is?
Gayn Erickson: Yeah, so we've talked about some different pinch points, okay? So people that have visited us know that we have done the, until recently, all of our systems and our consumable wafer packs came out of our Fremont facility. but the supply chain of our chambers, our blades, and all the subsystems and printed circuit boards are of course built by contract manufacturers. For the 150 employees or thereabouts that AIR has, we have probably another 250 people in direct contract manufacturers building stuff for us in low cost regions around the world. We have increased our capability in our facility you know maybe tenfold with the remodel and the other things that we've done but we still are only running one shift from an operational perspective we don't have the people to chip tenfold but the capacity is here to be able to do that people go well that's crazy why would you do that well as some of the deals we're talking about if a customer comes to us and said I want a hundred systems you have to be able to say I can do that and it won't take me three years to build it for you okay In parallel, we talked about this in more detail last quarter. We pulled the trigger last September with one of the contract manufacturers in Asia that does assemblies of one of our chamber suppliers. And they upgraded their facility to near clean room space in anticipation of some of the projects that we wanted to outsource to them. We then initiated and gave them orders and worked with them to build our Sonoma systems. and then the last quarter we shipped our first Sonoma systems directly to a customer out of that facility. Our team was there working with them, bringing them up, qualifying everything, demonstrating, then observing, then qualifying the tools. But those systems are actually being installed I think last week or this week at our large hyperscaler customer. and their entire backlog is expected to ship directly out of there. We think the capacity out of that is probably upwards of 20 Sonoma systems a month. And that would basically not impact any of our capacity here. So our capacity is significant. I mean, measured in hundreds of millions of dollars for sure. and we're doing some things to even potentially increase that. Not that we would then ship a billion dollars a year, but what happens if we have to ship a couple hundred million and a quarter? Think of it that way. So one of the challenges in our business is that it's always going to be lumpy and we do not want to put money in place and infrastructure that's permanent because the business is cyclical and You know, five, eight years from now, what's this thing look like? We don't want to have, you know, built up into a, you know, an enormous business. And if there's a softer year that we start losing money or not making as much profit. So I know that's a negative tone on this thing. But the discipline is how do you build up massive amounts of capacity without building up massive amounts of just fixed infrastructure?
Christian Schwab: Got it. That's fantastically clear. Thanks. No other questions. Thanks, Christian. Thank you.
Operator: Thank you. The next question is coming from Jed Dorsheimer from William Blair. Jed, your line is live.
Jed Dorsheimer: Hey, thanks. Thanks for taking my question. And big congratulations to you, Gayn and Chris. I know how long it's been coming in terms of this inflection. So a few questions for you. I guess first one, maybe just piggyback off your last response, Gayn, to Christian there. Did I hear you correctly, 20 Sonoma systems per month? And if that is the case, that's about 100 million of Sonoma. Is that the right way to think about that in terms of the 140 midpoint of guide?
Gayn Erickson: So let me make sure I understand. So at our 140 midpoint, that's nowhere near 20 Sonoma systems a month. The production Sonoma systems that we have in backlog, we've shared this with different people, including the consumable elements are somewhere in the $600,000, $700,000 a piece. They're actually smaller configurations than times quantity. And I think that we've done a pretty good job of announcing orders along the way. So our package level burden Sonoma revenues are, let me make sure I do this. Thank you for having me. That's going to be one of the challenges. We're actually building them right now. We're going to start shipping them here during this quarter, and then the bulk of them actually get delivered in the second quarter.
Jed Dorsheimer: That is helpful. And then on the wafer level, you know, if we took that midpoint, what are the, are you mixing in, I'm trying to separate consumables from, you know, package and wafer level. Can you give some framework in terms of that breakdown?
Chris Siu: Well, let me answer that question, Jet. So, if you heard me, I mentioned about, you know, we're roughly in the 30% kind of distribution. Yeah, in revenue. And that's wafer packs and BIMs? Yeah. Oh, I think that's a good assumption. It's about 30%. That sounds right to me as well.
Jed Dorsheimer: Okay. That's super helpful. And then two more from me. Just along the lines, or maybe three more, sorry, but your largest processor, GPU, TPU, CPU customer, your AI customer I think is how you describe it, do you, in addition to the benchmark testing, I'm just curious, they're going with package level, but could you update on the activity or discussions around wafer level. I'm assuming that they're also engaged in kind of, you know, that opened the door, if you will. So just an update.
Gayn Erickson: It's a bit of a lookup table. So I think what you're talking about is our lead AI production package level burning customer who we've identified as one of the big hyperscalers. Okay. All right. They use Sonoma for all their qualifications. They had never done production burn-in before and they moved to production burn-in as we acquired NCAL. And that's been a great win for everybody because of our capabilities to support them and obviously to meet their capacity needs. That customer, the first device that ever went to production was on Sonoma. The second device is also are going to be on Sonoma. They already bought some of the systems for it. That particular device has been a little bit delayed in terms of its timing, but is still expected to ramp, you know, or at least start the ramp during our fiscal year at this point. That's the one I described that has twice the power, and they're expecting higher volumes off of it. and then that same customer talked to us maybe six months ago the first time the third device they really want to consider wafer level burden and one way you might want to think about it is if there's a progression of number of compute chips in a single package as they get higher wafer level burden has a huge advantage because the devices fail during burden and if you fail one of the compute chips you throw away the other compute chips and all of the memory And so at that point, it gets extremely expensive from a yield loss to continue to do package level burden. So that would be where you'd want to cut in at wafer level burden. So they've actually recently, again, this quarter, you know, again, they're just bringing up their second device, but the third one, they've been talking to us about, okay, what DFT do we need to do? What do we need to put in? How do we optimize it around the Fox system? So it's pretty encouraging.
Jed Dorsheimer: Got it. That's helpful. And, uh, Just shifting gears, silicon photonics and co-packaged optics, I know you mentioned activities. The gallium nitride really struggled with reliability in the auto. Auto requirements are far lower than in data center by about 5x in terms of mean time failure. So I think that would be a good thing for you guys, but I'm just curious how you're thinking about market adoption, timing, and then role in GAN specifically. I know what you've got for silicon carbide. Just curious in terms of activity around GAN and the higher failure rates there.
Gayn Erickson: Okay. You actually mentioned silicon photonics. You mentioned silicon carbide and GAN. Let me just think through that window. Gayn has been interesting. If you remember a year and a half ago or so when we were engaged with the first Gayn customer, we didn't know if they were going to go to production, Vernon, or not. Since then, we've been able to verify they are, and they're going through a major qualification with a bunch of industrial, automotive, and infrastructure and data center applications. It's unlike some carbide that's like two or three big applications. Gayn, we've done like 12 different types of devices. So they're different voltages and power requirements that they go through all from solar to data center to electric switches in infrastructure and homes to automotive. They're all over the place. So they all have different kind of requirements, but so far as we can tell, every one of them needs a production burn-in screening to meet the reliability requirements. and it's been a learning process for us. So again, it's extremely difficult to actually test and burn in at wafer level. We've learned, but it's now been debugged and fully working through and things are going really well for us right now. So we think that that will grow. Now the GAN market by the market forecasters is just dollar wise is measured in single to tens of billions of dollars in this decade. Whereas AI or Memory is 10x that. So they simply could never spend as much money as some of the other markets. But from a reliability perspective, it's very clear the value of burn-in. And we've been proving and validating the value of wafer-level burn-in of GaN similar to silicon carbide. And then silicon photonics, similarly, that's been the big debate is as the data centers really need to go to burn-in or to... Silicon Photonics, optical transceivers for fiber optic communication basically. The burn-in requirements are kind of very clear in front and center. So the hyperscalers, the big data center guys are all talking about this and it's sort of Cool to be in Vernon, if you will, right now. That sounds kind of funny, a plan words. I've actually, Chris is laughing. I've never said that before, but it is. It's just, right now, it's a lot of people are talking about Vernon as kind of the place. I believe that Vernon is by far the fastest growing segment in all the semiconductor tests right now, and wafer-level Vernon in particular.
Jed Dorsheimer: Awesome. Last question for me, I promise. Chris, can you just help with cadence in terms as you look at the year? How are you thinking? I mean, Gayn mentioned second quarter in terms of some concentration on the package level burn-in systems. Is there some way to think about, you know, this is a pretty big shift So if you know historically, we kind of said, hey, our first half is softer than the second half, but I would say this year is hard to say that because
Chris Siu: You know, as Gay mentioned, we're going to ship a lot of the package level, you know, Sonoma systems in the second quarter. So second quarter is going to be a big quarter.
Gayn Erickson: So you could... First quarter is going to be pretty good. Yeah, pretty good. Maybe third quarter is flat, fourth quarter is up from there.
Chris Siu: So there's a high likelihood that the first half might be the same or even better than second half, but, you know, it... Second quarter is going to be a very strong quarter for us.
Jed Dorsheimer: Got it. I'll jump back in queue. Thanks, guys. All right. Thank you. Thanks, Jack.
Operator: Thank you. And once again, as a reminder, if you have any questions, please press star 1 on your phone at any time. The next question is coming from Max Michaelis from Lake Street Capital Markets. Max, your line is live.
Max Michaelis: Hey, guys. A few questions for me. One is a clarification question. So that April order you put out, I think it was a $41 million production follow-on order with a lead hyperscaler. I think that was a production order for the Sonoma Systems. Just to be clear, they aren't transferring over to wafer-level burden. This is a completely different customer, correct?
Gayn Erickson: No, that's the one we're talking about that is currently on package. Then the second part is package, and the third part is wafer-level or potentially being evaluated for wafer-level. It gets kind of interesting because they want to make sure we can also do the package for the third one. So we have to, you know, we kind of, I guess, we have two dogs in that race, and it's a two-dog race. So, yeah.
Jed Dorsheimer: Okay.
Gayn Erickson: But by the way, that third device we think is not even this fiscal year.
Max Michaelis: Okay. And I guess my follow-up to that would be expect sort of a similar – Order size, I mean, on the wafer level side for them?
Gayn Erickson: Good question. If they do the same capacity, it would be higher. Our wafer level systems do in fact cost more per dot than the package level today. Margins are better too. but the value proposition is different because you get the yield advantage which more than makes up for the price of the machine. So just from a product positioning and a pricing, I mean we have a lot more IP in it, there's a lot more R&D people, we have enormous investments that we recover through the wafer level and we have all this IP that is worth it. So customers come to us Not just to, you know, cost-effectively do burn-in, but at wafer level, it's because the device doesn't even exist in another form, or they put the device in with something else, and then if they burn it in and it fails, then the something else gets thrown away. And so the wafer-level burn-in value proposition has more to do with the yield improvement, which can be measured in, you know, 1% of all products if they have eight devices in a package, it's equivalent of 8% yield advantage. The cost of test might be 0.1% or 0.101%. So the price doesn't really come into effect.
Max Michaelis: Okay. And then last one for me, and I don't know, you might have mentioned it, but that second major AI processor that just completed the benchmark testing, I mean, what's sort of the ramp up there? I mean, I mean, I know you kind of left it open-ended with the guidance range of being $130 to $150 million. Could you take it higher? I mean, could you see a major order come in in fiscal year 27 to be able to complete that? Yes.
Gayn Erickson: Pretty brief. Yeah, we can. We can. I mean we've as we've been adding capacity and you know we have multiple AI customers that are engaged with to some extent we can build to forecast you know we are having discussions about what if you throw a party and everybody comes right what does that look like and we're trying to meet at very high levels with the customers and potential customers and make sure We get an idea of what kind of capacity they look like. These systems have a lot of capacity, though. I mean, when you think about a tester that in the footprint of a competitive ATE machine, like a 93K from Advantest, I'm testing nine AI wafers in parallel with, say, a quarter of the 60 devices that are running. This is a lot of capacity that you put in place. So if we say, oh, I'm going to go ship 20 machines It's 180 blades, 180 wafers of capacity. 180 wafer test floor is a big test floor. And we could put 18, we put 20 of these and it's in the size of 20 parking stalls in the garage and out in your parking lot. Think of 20 cars out there that's more than enough to support 20 of our machines. Now think of 180 of our competitors. in the same garage. And these are state of the art clean rooms space. These are bunny suited test floors. And I always have to remember that when someone says, oh, you can ship, you know, five XPs a month, you know, if they're 18 blade machines, they're 100 testers a month of capacity. and like in silicon carbide, testing all 3,000 die in parallel in one insertion per wafer. These are very high volume, very capable machines. It's, you know, why we get several million dollars a piece for them, upwards of six, including wafer packs.
Christian Schwab: Okay. Oh, we lost you, Max.
Gayn Erickson: Okay. Thank you, Max.
Operator: Thank you. The next question is coming from Larry Chlebina from Chlebina Capital. Larry, your line is live.
Larry Chlebina: Hi, Gayn. I just want to quantify the capacity in Fremont. You mentioned one shift, two shifts. So on the Sonoma side, what I call Sonoma Max, I guess those are fully automated systems. What is the throughput capacity expected in Fremont? Is it still 20 Sonoma Maxes per month?
Gayn Erickson: So if you were to come and look at our facility, as many shareholders have, what we did in our big modification upgrade a couple years ago was add enormous amount of additional cooling and power capacity. That gives us drop locations for upwards of potentially 16 locations, physical locations for the equipment to be plugged in, another four mechanically, plus the test labs. What does that mean? That means that theoretically you could have 16 of these machines plugged in and powered up and going through different levels of test. Now, depending on the tool, they could take from several days to several weeks to be on that floor. What we've been doing in parallel is bringing up the CMs to be doing most of that work so that when it comes into the facility, maybe they only sit there for one week. So if you do that math, you're like, well, wait a minute, you could do 16 a week and four per week. Wow, that's a lot. What I've shared with people is, you know, we can reasonably see the ability to do, say, 20. and a combination of package or wafer level systems a month out of this facility within the supply chain infrastructure that we have. But we have not initiated all of that. But in certain cases we have, like chambers, we've been talking to the CMs about auto aligners for both the package and also the wafer level. And so, you know, if those were If those were, say, million dollar Sonoma Maxes, as you call them, we actually call them Ultras, it's $20 million a month of Sonomas. If you are 20 wafer-level burning systems a month, they have an ASP closer, with the wafer packs, of $5 million. They're $100 million a month. So people are like, oh my gosh, you have $1 billion worth of capacity. Conceptually, yes. For my employees that are listening, we need to hire more people and there's a lot more work that needs to be done. But with a running head start and a customer forecast, we could do enormous amounts relative to our current size just out of this facility.
Larry Chlebina: So actually the number would be 20 Sonoma Ultras per month or 20 XPs per month, not both, not 20 each.
Gayn Erickson: Yeah, okay, so you're right. You caught me on something. Except for we just initiated the 20 Sonomas outside of our facility.
Larry Chlebina: No, I know about that.
Gayn Erickson: What it means, Larry, is we could run the 20 Ultras shipping directly from Southeast Asia and then still do 20 XPs here a month. Okay. And by the way, I need to put some disclaimers for all the attorneys listening. Some of these challenges would be particular material or getting access to. Some of the challenges that we've seen on the power supplies, for example, on Sonomas, is some of the power supply manufacturers that we use in Sonoma are supplying to NVIDIA and others. And they've come back and they've raised their prices 40%. if you want to get them. And so we've been buying components with long lead time items and things like that. So, you know, if we make it sound easy that we're overstating, it's actually quite difficult to do what we're doing right now, but so far we're able to keep ahead. And then I think almost everything in my backlog, we could ship before the customer has requested it. I'm thinking like all the Sonomas, Chris, you know, all my Silicon Photonics customers, So, so far, we've been on top of that. And our goal is to stay ahead of that. So, customers, if they want it, we could ship it as soon as they'd like it.
Larry Chlebina: Okay. Then on the paid evaluator, did you say that in your guide for the full year, you don't really have any revenues in there from this particular potential customer? Did you say that?
Gayn Erickson: Let's call it little to none, you know, at this point. You know, it's in the noise level.
Larry Chlebina: So that's a potential big upside, assuming that gets kicked off. And then lastly, in your written release, you mentioned on a memory side that you're working with multiple memory suppliers. Does that mean more than one HBM? I mean, how far are you engaged with the HBM potential customers?
Gayn Erickson: We've had specific conversations with Suppliers... Okay, let me make sure I do this right. Two to three on flash and two on DRAM.
Larry Chlebina: Okay.
Gayn Erickson: And the primary flash... For those that are listening that aren't aware, there's literally like four memory manufacturers in the whole world that matter, so I apologize. And if you're not... For those that are in the fifth and sixth, they might be offended by that, but of the top ones, I'm listening from those.
Larry Chlebina: Okay, and then the... The Primary Flash, you engaged them over two years ago and yet they have any revenue or orders from them. Is that nothing going to happen there unless HBF gets kicked off or as far as you can see?
Gayn Erickson: I don't know. That was a huge change amongst some other organizational things that happened to them pretty dramatically about a year, a few months ago. So at this point, feedback recently has been, you know, they really need something for the HBF, but they really want something for their standard flash. HBF architecturally is way more power, more power supplies. It's technically a more expensive tester, but they really like the price point of the current test, you know, capability. And so we're kind of working through that. We got to find the math for that. And, you know, We need their help to sort of get the ball going because we obviously have a lot of opportunities ahead in all kinds of markets, and we just need them to sort of help us help them.
Larry Chlebina: But on a memory side, that would still be the first potential sale revenue for any of the four memory products.
Gayn Erickson: I think so, Larry. I would put some bet on a wild card. Because this new HBM has a logic interface for its testability, it's breaking the memory testers. And technically, when I describe a new memory tester, I am talking about Well, most people don't know or care on this call what a memory tester is, but a memory tester is built with algorithm pattern generations. It's sort of a different architecture and a different beast than a logic machine. So if you have an APG-based memory tester, it would be really good for flash or DRAM. But if you had a logic BIST engine in the device, then it may not even be very good at doing BIST. and so you would need something that looks like a logic tester, which candidly is more like what we build today with flash. The Fox XP was originally designed for the best engine of a couple of the big flash memory manufacturers. Flash has built in self-test, DRAM until recently never has.
Larry Chlebina: You mentioned that they were coming to you, these HBM potential customers. Would that be a function of potentially this paid evaluator telling them, hey, get over the air test and get your reliability better before you take out our accelerators? Is there any angle on that?
Gayn Erickson: That would be a little too bold for me right now. I don't think that's the case. I do think there is a general tone amongst and growing amongst the Data Center buyers, all the hyperscalers, you know, from Google and Meta, all the papers that you see, you know, Apple, certainly Tesla, of an increasing expectation of testing reliability to screen out defects so that doesn't show up on my data center floor. So that's more of a go get your act together in general than necessarily go to error. I will say that by contrast to the automotive guys, we specifically have automotive EV suppliers telling their suppliers go get air. I mean, that's true. So that's a different, we love that. But imagine one of the biggest, one of two biggest automotive suppliers in the world, buys our wafer packs, tells their suppliers, we'd like to qualify you for your silicon carbide reliability, and we're going to use the air chest box system with our wafer packs to validate your devices, and good luck to you. Pretty impactful, right? So I don't have that with the AI customers today. That would be nice, but we don't have that. Kristen, not yet.
Larry Chlebina: Good job. Hey, I'll let you go. Thank you. Thanks, Larry. Thank you, Larry.
Operator: Thank you. I'm not seeing any other questions in queue at this time. I'll now turn the call back to management for closing remarks.
Gayn Erickson: All right. Well, thank you, everybody, for listening in and joining us. We're really excited to work hard for you guys this year. This is going to be a great year for Aira and hopefully for our customers and our shareholders as well. And we'll look forward to getting you guys an update as we go along. Take care.
Operator: Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.
