Gayn Erickson - President and CEO Gary Larson - VP of Finance and CFO Jim Byers - MKR Group, Inc..

Tom Diffely - D.A. Davidson Nehal Chokshi - Maxim Group Marty Cawthon - ChipChat Technology Group Jeffrey Scott - Scott Asset Management William Smart - Cardinal Value *.

Good day, and welcome to the Aehr Test Systems' Second Quarter Fiscal 2015 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jim Byers of the MKR Group. Please go ahead sir..

Thank you, operator. Good afternoon and thank you for joining us today to discuss Aehr Test Systems' fiscal 2015 second quarter financial results. By now you should have received a copy of today's press release. If not, you may call the MKR Group Investor Relations for Aehr Test at 323-468-2300 and we'll get you a copy right away.

With us today from Aehr Test Systems are Gayn Erickson, President and Chief Executive Officer and Gary Larson, Vice President of Finance and Chief Financial Officer. Management will review the Company's operating performance for the quarter 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.

We 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 our 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, I'd like to introduce Gayn Erickson, Chief Executive Officer. Go ahead Gayn..

Thank you, Jim and good afternoon to those joining us on the conference call and also listening in online. Gary is going to go over our second quarter financial results in a few minutes, but first I’d like to start by discussing our base business and then covering our continued progress with the development and introduction of our new FOX products.

As we discussed on our last earnings call, we forecasted a soft quarter to which is exactly what we’ve seen. Our ABTS packaged part burn-in business dropped off as several customers pushed out forecasted purchases and we’re seeing some impact on our FOX business with the delays in our new FOX-1P product release.

As we look to our ABTS packaged part just in burn-in business, we see a mix of reasons for this softness, but essentially a few customers are pushed out forecasted systems for various reasons. This has resulted in delays in orders and revenue for our ABTS products in both the fiscal second quarter and current third quarter.

We believe this low is temporary and that orders for our ABTS systems will pick up again over the next few months. As a result of these push outs we’ve inventory for ABTS systems that allow us to ship on short lead times as customer orders pick up again.

And with the high utilization rate these customers are running at, we expect them to come in with short lead time expectations when they do order. We continue to see positive macro trends of driving growth in our base packaged part test and burn-in business.

This includes the increasing semiconductor content in automobiles for safety, infotainment, mission-critical components that’s driving the need for reliability testing to weed out early like failures. We believe the significant wave of additional testing capacity that will be needed for this emerging market has not yet begun.

And that volume orders for this new wave will begin this calendar year. We estimate that the addition of automotive device test systems to our base test and burn-in market will add more than $50 million annually to our $200 million annual total available market beginning this year.

We continue to see our installed base of our current ABTS packaged part and FOX wafer level test systems at or near maximum utilization. As we’ve noted before, this is a positive sign, as incremental test capacity needs will drive upgrades in new system orders and revenue.

We believe having material and systems available with short lead times allows us to meet short-term demand from our customers. And we built a number of systems against our forecast and backlog that positions us to provide quick shipments of many configurations of our ABTS products to meet customer needs.

While this buildup has produced a higher inventory level than we want in a steady order environment, we see inventory correcting to more normal levels as we ship systems over the next two or three quarters. Now, I’d like to move to our FOX products, which serve the wafer level test and burn-in space.

As I noted earlier, our current customer installed base of these products is also running at full or near full capacity. During the quarter, we successfully completed the installation of additional capacity of our FOX-15 multi wafer test system with the customers that we shift to in the previous quarter.

This additional capacity has come online and our customers have indicated they’re happy with both the additional system capacity and additional air test wafer pack for wafer contractors also brought online.

We expect that these customers will buy additional FOX-15 system capacity wafer packs as the capacity needs increased further, which we expect will happen incrementally within the current calendar year. Our installed base of FOX-1 single wafer test systems is also running at maximum capacity, as it has been for the last quarter or two.

While we’d normally expect to see incremental system purchases and revenue at these levels, we see customers waiting for the FOX-1P, our next generation single wafer system that we formally introduced last quarter at the International Test Conference.

This is certainly not surprising, particular with customers who have already placed orders for the new FOX-1P and are waiting delivery of these new production systems.

While completion of the FOX-1P has taken longer than we expected, we believe we’re aligned with our lead customer as we work closely with them on the changes in definition of the system to make a cover of larger applications base, particularly, for microcontrollers and to support larger, parallel configurations.

During this first calendar quarter of 2015, we expect to complete final system integration and make the first shipments of the production configuration in a fully integrated wafer level test cell. We are building several systems in parallel with production systems expected to ship within a few months after the first system.

With standard revenue recognition policies and standards, we expect to see revenue for the FOX-1P in our fiscal fourth quarter 2015 ending this May 31st. As we’ve noted before, we see the FOX-1P system as a key revenue opportunity for Aehr Test.

It features a massively parallel test interface, which we believe will provide more test resources than any other automated test system on the market. We see this system is highly differentiated from competitive alternatives for flash wafer test and also for embedded memories and microcontroller test, particularly, in automotive applications.

The FOX-1P system can test a full wafer at one-time versus other competitive products that need as many as 10 or more touch downs to complete the test. A single touch down solution versus a 10 touch down solution makes for simple math. It reduces the test time per wafer by 90%.

The number of resources we’re able to provide with our system is critical to cost effectively moving the long test times associated with burn-in and cycling from packaged part to wafer level.

We estimate the market for test systems with this capability will add $50 million annually to our served available market beginning in the second half of calendar 2015 and beyond.

In addition to the FOX-1P, we’re extremely excited about the prospects for our next generation FOX-XP test cell, our unique wafer level test and burn-in system that adds the functional test capabilities and high system electronics integration of our new FOX-1P into a multi wafer test platform.

The FOX-XP system is capable of functional test and burn-in/cycling of flash memories in wafer form before they’re assembled into multi-die stacked packages.

This new system will deliver a fully integrated solution for testing up to 25 wafers per system at a time, opening up an entirely new market segment for flash wafer level test and cycling applications. We see this solution as a key enabler to the long-term growth of the flash-based solid state drive market for higher capacity drives.

Customers are currently testing the flash devices and packaged part form, but they’re experiencing higher yield losses associated with individual die failures in a multi-die stacked package. Moving the cycling tests they’re doing today from packaged part to the wafer level eliminates the multi-die package yield issue.

As we’ve noted before, the market for test equipment and consumables for this emerging flash market is estimated to be $200 million to $300 million annually starting in calendar year 2015. And this is just for high-density SSD testing. We're targeting our new FOX-XP with our proprietary wafer pack contractors directly at this market.

During the last couple of months, we’ve received requests from multiple flash memory manufacturers to engage in on-site evaluations of the FOX-XP and we’re currently working with these customers on acceptable terms and commitments for their request.

I'm personally very excited about the significant level of customer interest and commitment as it really is a major deal for customers of this size to commit both financial and engineering resources to evaluate a solution like this for volume production.

The feedback we’ve received from these customers is validating that the FOX-XP is a very valuable tool for wafer level testing and burn-in/cycling and memory such as NAND flash, particularly, for devices aimed at high quality and reliability needs such as high-density solid state drives.

We're working with these customers on the product definition and configuration and we’re negotiating the schedules with these schedule -- with these customers. We are expecting the first shipments of the FOX-XP system in the latter part of calendar 2015.

Gary is going to go over our financials and also talk about the private placement ground we completed in November, which we really feel good about. Then we will open-up the lines for questions. But let me conclude my prepared remarks with a summary.

While we have experienced softness in our base business with a few unrelated customer push outs for ABTS products. And as we rollout our new FOX products, we’re encouraged by the outlook ahead.

We believe that orders for our ABTS platform will pick up over the next several months and we expect capacity needs will drive additional orders and revenue for both our ABTS and FOX products and wafer packs over the course of the calendar year.

In addition, we expect to begin seeing revenue for our new FOX-1P test system beginning in the fiscal Q4 ending May 31. And we’re very excited about the continued positive traction we’re seeing with customer evaluations and acceptance of our new FOX-XP product.

With the addition of these new emerging markets and use cases, we’re adding more than $300 million annually to our existing $200 million total available market.

We believe that the significant competitive advantages we’ve with our new product offerings give us the ability to gain a substantial share of this increased market and will allow us to grow our revenue substantially in the future. With that, I’ll now turn the call over to Gary..

Thank you, Gayn. As we reported in today’s press release, our net sales in the second quarter of fiscal 2015 were approximately $2.6 million, compared to $3.6 million in the preceding quarter and $5.0 million in the second quarter of the previous year.

Non-GAAP net loss for the second quarter of fiscal 2015 was $1.8 million or $0.16 per diluted share, compared to a non-GAAP net loss of $710,000 or $0.06 per diluted share in the preceding quarter, a non-GAAP net income of $384,000 or $0.03 per diluted share in the second quarter of the previous year.

On a GAAP basis, net loss for the second quarter was $2.1 million or $0.18 per diluted share. This compares to a GAAP net loss of $907,000 or $0.08 per diluted share in the prior quarter and GAAP net income of $137,000 or $0.01 per diluted share in the second quarter of the previous year.

Gross profit in the second quarter was $694,000 or 27% of sales. This compares to gross profit of $1.6 million or 45% of net sales in the preceding quarter and gross profit of $2.5 million or 50% of net sales in the second quarter of the previous year.

There were higher levels of previously written down material and shipments during the preceding quarter and also the year-ago quarter. In the current quarter additional inventory reserves were taken. Operating expenses were $2.8 million compared to $2.6 million in the preceding quarter and $2.3 million in the second quarter of the previous year.

SG&A was $1.7 million compared to $1.6 million in the preceding quarter and $1.5 million in the prior year second quarter. The increases were primarily due to employment related expenses.

R&D expenses were approximately $1.1 million for the quarter, compared to approximately $1.0 million in the preceding quarter and up from approximately $0.8 million in the prior year quarter.

This year-over-year increase reflects a $0.3 million transfer of costs out of R&D spending and into COGS or prepaid expenses in the second quarter of fiscal 2014. As stated previously, R&D spending influctuate from quarter-to-quarter depending on the development of our new products.

Turning to the balance sheet and changes during the second quarter, our cash and cash equivalents were $3.6 million at November 30, 2014, up from $2.1 million at the end of the preceding quarter, and reflecting the successful completion during the quarter of our private placement of common stock to directors, officers and existing and new shareholders.

At quarter end, our net cash or cash less the line of credit was $3.0 million up from $1.1 million at the preceding quarter end. A recent stock sale resulted in gross proceeds to the Company of $2.6 million before expenses. We didn't use any investment bankers in the deal, which kept expenses very low.

I'm very pleased that we had such broad participation in the stock sale by our directors and officers, including Gayn and me, we believe that this demonstrates we’ve strong confidence in the future of Aehr Test. Account receivable at quarter end was $1.4 million, down from $2.1 million at the preceding quarter end.

Our inventories were approximately $6.0 million compared to $6.3 million at the prior quarter end. Accounts payable was $1.8 million compared to $1.6 million from the prior quarter end. This concludes our prepared remarks. We’re now ready to take your questions. Operator, please go ahead..

Yes, good afternoon.

Maybe quick question on just the cash position today and what you think the cash burn will be over the next couple of quarters as we ramp up these new products?.

This is Gary. And we don’t generally give guidance on the forward looking cash burn, but as I said the cash in the quarter was $3.6 million and net cash was $3.0 million. We do expect that there will be cash burn and as you talked about the new products, we do expect that there will be spending involved with those.

As we’ve discussed in the past we’ve been asking our customers, fairly routinely for a 30% down payment. We do have an existing line of credit with the Silicon Valley bank. And we believe we’ve an opportunity to extend that line to higher levels if any large orders come in.

So we believe that we will be able to finance any large orders that we do to receive..

Okay.

And what is your current capacity from a number of systems point of view or how you want to couch it for the FOX-1P there, at this point for next few quarters?.

Let me try and answer.

You mean in terms of manufacturing capacity and outlook?.

Correct. Yes..

Well, the correct answer is well in excess of even our correct forecast certainly as those that have come and joined us here one of the challenges and opportunities would being in this business is that particularly as we enter into the high volume production applications, customers have the ability to take large numbers of systems.

I mean, we’ve multiple customers with that have taken more than 100 or even 200 systems for manufacturing capacity. And so -- and certainly my experience in the ATE side is there are times when you run into these where someone needs to take 10 or more systems, it’s about how fast can you shift.

So we actually have a supply chain that I think is very robust making use of sub cons and kind of the best of the world’s manufacturers for sub assemblies that to the extend have very open-ended capacity capability.

For example, chambers one of the critical aspects which is a very critical have have not situation, meaning those of us -- like us who had designed our own chambers, its one of the key technological advantages we have with our ABTS and that we’re leveraging over to the FOX-XP for example.

We have two key suppliers that are therefore assurances [ph] supply, we love them both. But both of these have capacity capabilities that they communicate to us in excess of with little bit of headway, 10 systems a month or something like that. We are not sitting here forecasting a 20 system a month run rate.

If you look at our manufacturing part here which is really a final assembly and test, we have stations to be able to run as many as 15 systems in parallel. So capacity -- manufacturing capacity, manufacturing supply chain, I think its one of our real strengths and that’s not one of our limitations at all going forward..

Okay. I was just wondering if there is a certain long lead time item that you needed to build an inventory ahead of this potential ramp..

Gayn Erickson:.

, :.

Okay.

And then, in the press release you talked a bit about how you anticipate the demand to come back over the next month or two? So I assume that -- in that is the expectations for another soft quarter before, the May quarter may see an excellent pick up in the core business as well as the start of the XP or the 1P business?.

Which is exactly what we said last time and it appears to be playing out the same way. And we want to be careful of guidance always because we -- we’re about half way a little less than -- half way through the quarter and we’ve systems that we can ship on almost immediate lead times.

Its been interesting, we try to craft the wording around what’s going on with the ABTS, but as you just looked out in the list of customers there -- for very different reasons that are not related to any macro levels or competitiveness with some customers that have pushed out in anticipation of a new facility where they will take more systems or we actually had a [indiscernible] thing that caught us on one customer who pushed something out.

And as these -- as they’ve rescheduled their shipments we have confidence that they’ll happen. And this business does include turns business; often times we’ll get heads up of customer need and be willing to ship it within a month.

So, I don’t want to throw in the towel on the quarter here, but I also don’t want to change the tone we said last time of a quarter or possibly to a softness..

Okay.

And on the FOX system, so the traditional FOX customer is looking to at some point convert over to the FOX-1P as well or is that a different customer base that the 1P is going after?.

I would say we’ve seen the FOX-1 customers in particular would switch over to the 1P.

The single wafer which we denote by a 1 or a 1P, may or may not impact our multi wafer often times they’re kind of different applications sometimes the same customer, and interestingly our FOX-15 customers are going strong and its not intuitively obvious that they will all or any switch over to the XP anytime soon when its out.

The XP it notably has much greater test capability and functional test capability which opens up markets for a functional test of say a flash memory or a microcontroller.

Whereas our install base of FOX-15 some of its greatest strengths are in sensors in very low pin count devices in automotive where the XP may not necessarily be substantially better and they might be more or want to just tap more of the same systems.

And we’ve talked to new customers that we might be engaging with on selling FOX-15 before or at the same time as an XP would be introduced..

Okay, great. Well, I look forward to the FOX-1P ramp next quarter..

Okay..

Our next question comes from Nehal Chokshi with the Maxim Group..

Thanks for taking my question.

The traction [ph] that you’re seeing with the FOX-XP, is that new flash manufacturers beyond what you’ve with the FOX and FOX-1P or SSD existing customer base already?.

Our discussions with respect to the XP with new flash manufacturers, did I get that right?.

Yes, that’s the question..

Yes. I would say that is primarily the case. The customers, we talked to a number of different markets of different customers related to a multi-wafer test system with more test to resources.

As we’ve emphasized and we’ve publicly talked about really only one of those markets in detail and that is the NAND space where customers are -- would be displacing either functional test at wafer sort or more, we’ve been more detailed about the package part burn-in moving to wafer level.

We today, we do have flash test capability with our flash machines. We shipped memory test systems into package part burn-in, but then the customers we’re talking to about the FOX-XP or wafer level burn-in are not current customers today..

Okay. That’s great. Thank you..

You are welcome..

[Operator Instructions] Our next question comes from Marty Cawthon with ChipChat..

Hello, Gayn. Hello, Gary..

How are you Marty?.

Good. In the comments which Gayn made a few moments ago, he talked about the -- Gayn talked about the FOX-1P being primarily targeted at the automotive microcontroller market, where as the FOX-XP was a good fit for multiple wafers burn-in and test for high density solid state drives.

And Gayn, could you elaborate on that a little bit? How is that automotive market better suited for single wafer testing? Why wouldn’t the automotive market want to do multiple wafer testing the way the SSDs also are tested?.

Okay, yes that’s actually a really good question, and I think there some of that is time. So we in fact have and continue to talk to automotive manufactures about a multi-wafer system. And as we defined the capabilities of the new FOX-P line we built in test capabilities whether they use it in a single-wafer or a multi-wafer environment.

On the subtleties or maybe its not so subtle, the difference is between the two systems, is that a FOX-1P comprises of more resources per wafer than the FOX-XP, but the FOX-XP has more wafers per system. And so that’s a subtlety in the architecture, but it’s also in the target market.

The memory manufactures DRAM, Flash and also devices that have a high degree of DFT or Design for Test capabilities tend to have very low pin counts and have larger device or fewer number of devices per wafer for example. So, an ideal optimized tester may have fewer resources to be able to test an entire wafer than maybe other devices..

Okay..

Micro controllers today, the bulk of them are really on a path evolutionary wise towards more design for test. Many of our conversations with our customers in fact is teaching them a roadmap of how they can get to higher degrees of design for test so that they can use our tools and can be more cost effective.

But today in order to test their devices they need many more tester resources per wafer, so we offer them the solution with our FOX-1P.

As their resources go down, so for example maybe they have a device that has 64 pins on it, we’ve been able to teach them how to test that device with as few as four pins which will allow them to shift from a FOX-1P near-term to a FOX-XP over time.

So, I do believe that long-term we will see more, but currently the bulk of the traction of the XP in particular is in these larger memory market opportunities that we’re talking to customers about.

Did that make sense?.

Yes. Very good. Thank you..

Thanks, Marty..

Thanks, Marty..

Our next question comes from Jeffrey Scott with Scott Asset Management..

Good afternoon..

Hi, Jeff..

Hi, Jeff..

The first FOX-1P was supposed to go out in the fourth quarter.

Can you run through the reasons for the delay?.

I can talk to many of them, and I would -- well, let me just share what I think is comfortable to share with. As we have talked about over the last -- and to beat myself up a little bit further Jeff, that’s not the only slip. There was a time certainly a year ago, we were anticipating it being out even in the summer timeframe or early fall timeframe.

So I don’t want to go easy on me here and you know that..

Yes..

We have been working very closely as we have talked about with several customers both on the FOX-1 and the FOX-1P and the FOX-XP. And something that our customers know about is we have been trying to incorporate all of the market needs within that platform for reasons that are not exclusive to one customer.

Many of these customers as I said before may want to support both. The engineering machine is the same between the two. The software shared those hardware capabilities. That has both been a blessing and a struggle as we have incorporated more feedback from customers and incorporated that into the machine, we experienced some delays.

Specifically about a year ago, I talked to a customer requirement that it changed in with our lead customer specifically related to increasing the target parallelism of the FOX-1P as well as incorporating some capabilities to extend the application space of it which was also consistent with some other customers which in a kind of ironic way our lead customers surprisingly talk to each other.

So they are all into hoots if you will in making sure or helping us to build a better product. That was a lot of the key challenges for us in incorporating that.

During the last quarter specifically, as we were bringing up the system, we have been aligned I believe with our lead customers on the test sell aspects of it, but some of the test sell pieces have taken longer than we’d like. These are kind of joint development projects with our customers.

So as you talk to my R&D folks and all, they all feel we’re very aligned with the customer. I personally I’m a little frustrated to try and get that product out the door because its all about time to market and time to money. But the product has come up a little slower.

I built a lot of testers in my life, not just here at Aehr Test, but the HP, Agilent and Verigy. This doesn’t feel a whole lot different than that and some of the challenges in this last phases of bringing up a machine or as you run into something, a software test [ph] or a firmware that can take a little bit of time to work its way out.

The good news is as we’ve got the keyboards here in-house with respect to our pin electronics and patent generation boards. We’re doing calibration and timing of the boards, and it looks very good. The thermals are working, the test heads are working, the test cell is all coming together. And so in that sense I’m pleased.

I also want to make sure that we don’t get the product out before its ready. But my experience is similar at this stage. There are very many pieces of this that we have high confidence there’s no changes to. Many of the things that we’re tweaking now are going to be firmware and software which is good.

So we are committed and we started to ramp the boards and the test heads. We have multiple systems in parallel that are being built. So when the first system works we’ll be ready to ship several other ones right on its heels. But I would have preferred that it shipped a couple of months ago as well.

But right now I’m feeling better and better that we -- the hard parts are behind us, and that we’ll be on track to get this thing out the door.

I want to fold one over and that is, I had some feedback from one of our investors around okay, well how is it that you take this long to get a 1P out and then you say it all that you could ship even an engineering system or anything on an XP by the end of the year, and it really comes to the leverage of those two products.

In fact the EWS or Engineering Work Station of the two are the same product. That’s what we showed. We actually showed the chamber and the interface up at the international test conference, its here in the lab and we don’t call it a 1P EWS or an XP EWS, its called a FOX-P EWS.

So there is a lot of leverage and technology that will go into the new product as well which will provide us with more certainty and confidence in our schedule. But I don’t want to take away from the fact that I was clear in my expectation and certainly our target of trying to get the product out sooner than this..

Okay. Staying with the FOX-1P for a second, I’m hearing that you’ve made a lot of progress with getting a second customer.

Is that a fair statement?.

We are -- we’ve actually been talking to several different customer and I try not to give too much visibility either on 1Ps, XPs or what, but and in fact I don’t think we’ve specifically even talked about how many customers we have for that product yet. But I continue to get positive feedback on both the 1P and the XP from multiple customers..

But you still only have orders from one customer for the 1P?.

I think technically we have never talked about how many customers we have the orders from, Jeff..

Okay. Anyway there has been no change from what existed three or six months ago..

I will tell you we have not received additional orders for the FOX-1P that we didn’t announce..

Okay. Let’s go to the XP for a second.

Can you run me through a timeline of how long it will take to negotiate the terms of the Luxi [ph], and then how long it will take them to do an evaluation? When you would expect to be able to announce an order with that XP?.

I’m going to pick an choose which of those I will share, and again trying to balance our forward looking forecast and that’s nothing new here. And not to get queued either, but I have lots of customers listening as well, and so we’re also speaking to them.

So, what I would tell you is that we have as we have already stated multiple customers that are very interested in the FOX-XP, some of which are direct competitors or each other and have, each have their own opinions as to the best process for going through an evaluation and we’re working with them.

And there is I will -- there is some level of software customization we believe for these customers and there is always wafer packs -- the conductors are always proprietary to them, there is application software that needs to be done for them.

But as we define the FOX-XP today with the standard boards that we have and/or that are planned we can configure systems for these customers with a high degree of clarity about what our costs and our schedule are, and we’ve been giving them to them and trying to negotiate through that.

And an interesting piece of this is customers are looking at different ways of using it and we’ve seen some evidence where they’re trying to make it easier on us, which is a good thing as they would like to get the product out sooner.

So, I have been pretty consistent relative to the timing of an XP relative to 1P which I think you will -- obviously you can go look it up again. We’re expecting within two to three quarters after the 1P ramps that we could ahead of a scenario with the XP, and I maintain that..

Will they be evaluating it in the first -- by the end of the first calendar quarter, by March 31 will it be under evaluation?.

So, there is an aspect that there, it’s under evaluation already. So now we’re talking about what does it mean? Is it -- what levels of commitments or financial or NRE or what are being paid. And I actually don’t want to either forecast that. To you I apologize or to those customers because that’s something that we need to work through with each other.

But we have things to show customers right now, and that’s a part of the sales process. And we talked a little bit about what an evaluation of sales process -- sorry about that Jeff, go ahead..

I guess, I’m looking for some sort of timeline by which we can know whether or not you are on schedule, so that you say you’re going to be able to ship a production by the end of calendar 2015. That would require an order to be received by you by presumably about June 30.

Would that be right? If you do not announce an order by June 30, can we assume that you are behind schedule?.

I would think that is -- I’ll certainly hold myself to that, that’s fair. But I think we’re looking for levels of customer commitment and engagement prior to that to be fair..

Okay..

The order piece for this is always interesting. And I just -- I don’t want to go up in the weeds here, but I have spent really the bulk of my life in the semiconductor ATE space, and these evaluations feel very familiar to me.

I say that as I’ve talked with other folks here, our business Aehr Test has been traditionally in a package part burn-in or a more traditional burn-in business. We have for years been talking about the opportunities that are coming out with respect to a wafer level burn-in.

These markets that we’re talking about as we even use the term burn-in or cycling or test, they are different. And that is for example, the FOX-XP application is inline with a major product, I mean NAND I believe is currently the fastest growing market segment or thereabouts in the semiconductor space.

SSD is growing that large market at about a 25 plus percent CAGR. This is a very large lucrative important business in the semiconductor space and we’re talking about putting systems in line with the mainstream production in very high volume applications. High volume with multi wafer and with multiple systems.

So these customers do not take this lightly. They do not staff it lightly. They put significant amount of resources to evaluate these systems and dept amount. And we will have -- we can talk about when orders are placed, but they will have fully vented out a system in production before they ramp.

And that’s part of the process and we knew that getting into it..

Okay. But you are not going to put out a press release saying that you’re engaged with company A, you’re engaged with company B.

So the next piece of news we get on the XP will actually be an order that you receive correct?.

I will certainly say that as -- if we get orders that are de-material, we will be making press releases for them, because we won't sit on that..

Okay..

I want to be balanced here, Jeff. I have customers that are looking me in the eye at a management level and asking us to get engaged in evaluations that are very real. That is no small commitment. I know that’s not the same as them putting money down et cetera, but that’s a big deal, and that is new. We did not have that one quarter ago.

And by the way, they need permission to do this. So, I’m very excited about that. I mean, I really am. This is a really good place to be at..

Okay. I’ll drop for somebody else. Thank you..

Thanks, Jeff..

[Operator Instructions] Our next question comes from William Smart with Cardinal Value..

Hi, Gayn. Hi, Gary..

Hello, Bill..

Your estimate of the market size it seems to be in line with what you’ve been saying for the last several months. I was wondering, have you seen any developments as far as your competition goes, I mean your players there or anything like that..

So let me talk maybe just to a couple of markets, well two or three of them. We have talked about kind of three different markets. I think we spent a lot of time on this a couple of conference calls ago. One of them is what we call the emerging automotive.

Just the testing burn-in space for devices that are going in automobiles like in the infotainment, that’s our kind of traditional package by burn-in, its our strength. This is arguably a rising tide, its good for all ships, but we happen to think we’ve got the best ship.

And NAND I talked about before, where we see significant opportunities and customers rumbling and talking about that shift, but it’s our belief that those orders have not really started yet and we’re expecting those to start showing up throughout this calendar year, and it’s a trend, that is a good trend, I mean it’s a good trend for us.

If you are in the test and burn-in space anything that drives test and burn-in up is good for you. I would say that there’s no market -- new market competitors or anything going on. There’s just more awareness of this as those customers go out and talk about these big capacity deals.

We’re all heating up and putting our gloves on and fighting for that kind of space. Second market and I hope I can go quickly on this, is we’ve talked about the automotive space where we have customers that have microcontrollers particularly that do some level of reliability testing and burn-in which have been doing this for a long time.

That is not the emerging market, but they are talking about moving it to wafer level. And the reality is, there is no tool out there that can give you a cost effective solution for doing that. This is something I knew from my days in the ATE space. And the FOX-1P is targeted at providing a solution like that.

We also estimate that, that not just conveniently but it turned out about $50 million annually. The dollars that people would spend or the capacity that would be needed incrementally at backend, but if it were moved to wafer level what would be spent. And so this is an area that we’re excited about the FOX-1P.

We have been talking to multiple microcontroller customers about that, and I’d say that primarily what's changed, or is going on is there is awareness of the ATE market players of the threat, if you will, of a new solution coming in that can really be a much more cost effective solution.

Other than that I don’t see any other real threats in terms of someone who can do the 1,000 or more devices in parallel. We have seen some folks talk about may be increasing their parallelism and there are some debate as to how high they can go.

And then the third one we talked about, I spend the most amount of time here is really the flash SSD or the flash packaged part burn-in going to wafer level.

And that’s still all in place, but we see us as really the only commercially viable machine that is there to be able to take a customer with a DFT or a standard flash device and test it at wafer level and match the parallel like this. And so, we’re in a big hurry to get product out, we’re excited about it.

I can tell you we’ve had customers it’s -- that have told us. No one else is doing anything like that. And we continued to be encouraged to get that product out..

Okay, great. Well, good luck and look forward to your call next quarter..

Thanks, Bill..

Thank you, Bill..

It appears there are no further questions in the queue. At this time, I’d like to turn the conference back to management..

Well, thank you operator. And everyone thank you very much for all your questions. We really appreciate everyone joining the call today. And I will tell you, we look forward to updating you on our progress.

And as always, I tend to conclude, if you happen to be in the Silicon Valley, Bay Area, and would like to come by, we’d be happy to show you -- show your around and show you some of the exciting products that we’re working on. Thank you..

This concludes today's conference. Thank you for your participation..