Aehr Test Systems (AEHR) 2021 Q1 法說會逐字稿

Good day, and welcome to the Aehr Test Systems First Quarter Fiscal 2021 Financial Results Call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Jim Byers of MKR Investor Relations. Please go ahead, sir.

Thank you, operator. Good afternoon, and welcome to Aehr Test Systems First Quarter Fiscal 2021 Financial Results Conference Call. With me on today's call are Aehr Test Systems' President and Chief Executive Officer, Gayn Erickson; and Chief Financial Officer, Ken Spink.

Before I turn the call over to Gayn and Ken, I'd like to cover a few quick items. This afternoon, Aehr Test issued a press release announcing its first quarter fiscal 2021 results. That release will be available on the company's website at aehr.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.

I'd like to remind everyone that on today's call management will be making forward-looking statements today that are based on current information and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These factors that may cause results to differ materially from those in the forward-looking statements are discussed in the company's most recent periodic and current reports filed with the SEC. These forward-looking statements, including guidance provided during today's call, are only valid as of this date, and Aehr Test Systems undertakes no obligation to update the forward-looking statements.

And now with that said, I'd like to turn the conference call over to Gayn Erickson, President and Chief Executive Officer. Gayn?

Thanks, Jim. Good afternoon to those joining us on today's conference call and also listening in online. Ken will go over our first quarter financial results later in the call. But first, I'll spend a few minutes providing some details around the challenges we experienced during the quarter and how we responded. Then I'll turn to what we're seeing now and why we think things are moving in the right direction. And then following our remarks, we'll open up the lines for your questions.

As we anticipated on our last earnings call, our first quarter financial results were impacted by the challenging global business environment created by the COVID-19 pandemic and push-outs of forecasted customer orders during the past 6 months for our FOX-P systems and consumables. We saw this from customers serving data centers and some 5G end-use applications with silicon photonics transceivers, but we also saw pushouts of forecasted orders for devices used in automotive applications and also sensors used in mobile devices. These customers have indicated that they believe the pushouts are temporary and that they will require the additional system capacity and consumables later in the current fiscal 2021 year.

The majority of our revenue forecast for this fiscal year comes from current customers that have already qualified our systems and consumables for production applications. This includes follow-on orders from our silicon photonics customers, forecasted production ramp of current devices as well as adding new devices with our initial silicon carbide customer that we won last year, and follow-on orders from our growing installed base of FOX wafer-level and singulated die and module test systems consumables.

Consumable sales of our FOX WaferPaks and DiePaks accounted for almost 50% of our revenue last year and we anticipate that it will be a significant part of our revenue again this year. We are maintaining our full year revenue expectations and expect the majority of our orders and that revenues to be back-end loaded this fiscal year. It's also important to note that the vast majority of this expected revenue is based on commitments from our current customers who have already planned their production and told us what they're going to buy from us.

I want to ensure that our shareholders know that we're not confused that fiscal Q1 was financially a bad quarter. However, we did have some events and achievements in the quarter that set us up and provide us optimism about our business for the rest of the year and moving forward.

In Q1, we shipped and successfully installed the FOX-NP for wafer test and burn-in system for initial production burn-in and stabilization for a new customer, who is a global leader of communication transceivers for data centers, telecom and 5G infrastructure. This customer is forecasting to transition to our FOX-XP wafer-level test and burn-in systems during this fiscal year to meet their volume production forecast, and we expect them to continue to grow for the next several years. We categorize this customer as a Tier 1 customer, which we define as a customer with the resources and the market size to be able to purchase $6 million to $10 million or more per year of our systems and consumables.

On our last call, we announced that we closed an initial order with the world's largest outsourced semiconductor assembly and test supplier. During the first quarter, we began an initial marketing and sales campaign with this customer for the FOX-P family of products, including their WaferPaks and DiePaks for production test, burn-in and reliability screening the devices at full wafer, singulated die and module level.

The initial marketing and sales campaign has already resulted in multiple new customer engagement. They have asked that we not name them publicly yet because they see their move into the silicon photonics assembly packaging and test space as a strategic initiative. They want to gain market share from some critical target customers before going public with what they see as a competitive advantage of being able to buy a total solution, including full wafer-level test and burn-in before assembly of the silicon photonics engines into the transceiver modules. We expect to make this partnership public in due course.

We also broadened deployment of the FOX-XP for silicon carbide devices during the quarter. We added multiple new device design wins and completed the initial production release of several new silicon carbide devices on our FOX-XP system with our lead customer that is using the FOX-XP system for high-volume production burn-in and infant mortality screening of silicon carbide devices at wafer-level for electric vehicle power modules. They are forecasting additional capacity needs for our FOX-XP systems as well as consumables during this fiscal year and for years into the future.

A critical capability that only our solution can provide in the market today is the ability to test 100% of the die on a wafer in a single insertion while providing 100% traceability of past failed results of each device including exactly what time during the test and burn-in cycle the device has failed. This is a critical feature for them to provide confidence to their customers that they're removing all early life failures prior to shipment. They have made public presentations in industry conferences touting the cost and quality assurance advantages of using our solution compared to traditional package for module level test.

Our systems are not only able to test 100% of their devices on 4, 6, 8 and 12-inch wafers, but we can test and burn-in 18 wafers at a time in a single FOX-XP system. We continue to see the total available opportunity for silicon carbide and silicon photonics wafer-level and singulated die test markets to be approximately $250 million of needed capacity, including consumables. The silicon carbide semiconductor device market is growing at a tremendous rate, with unit growth of high-power devices expected to grow at over 50% CAGR from 2019 through 2025 per Yole research.

We remain engaged with well over a dozen potential customers. And in Q1, our list of Tier 1 and Tier 2 customers that are considering using Aehr's products for high market growth applications, including silicon photonics and silicon carbide production burn-in, continue to grow. In addition, we have seen incremental applications and devices in the mobile sensors segment that provide potential upside in this segment late in fiscal 2021 and into 2022.

Also, as I've talked about before, we started to see forecasts for renewed demand for packaged part burn-in applications, particularly from customers seeking high-voltage capability, reflecting a move toward higher voltages and other requirements for devices and automobiles. We expect to see bookings resume from certain current Aehr customers this fiscal year and also expect to generate additional new opportunities with our planned introduction of a new package part burn-in product that adds very high-voltage test capability.

However, we're relatively conservative with our forecasted packaged part burn-in as this segment seems to be heavily impacted with COVID-19 delays in customer evaluations. We have recently seen 2 customers push out their expected need for additional systems into our next fiscal year, which as it turns out, actually helps us with the timing of our new system availability. Still, we do see the need for high-voltage capabilities in both wafer-level and package part as a new high-growth opportunity for Aehr and expect to add several new customers that include both Tier 1 and Tier 2 level customers for packaged part burn-in this fiscal year and next.

While COVID has created real challenges with travel restrictions and overall caution with our customers, which has resulted in delays of some production -- customer production ramps, we believe there is no long-term negative impact to Aehr, the demand for our products or the attractiveness of the key markets that we serve. We maintain our belief that we will come out of this worldwide pandemic stronger than we went in with more production customers, more applications and higher-value products.

Our key customers are serving some of the highest growth markets including data centers, 5G infrastructure, sensors and technology for smartphones and tablets, electric and hybrid electric vehicles and memory and data storage and computing, data centers, mobile devices and hundreds of applications that are keeping the world connected. As a result, we believe our products will be in high demand this year and for years to come.

As we continue into fiscal 2021, we remain optimistic about the growth opportunities for our systems and consumables within our installed base of customers as well as our ability to expand the number of customers using the FOX family of products. We expect significant growth in both our top and bottom lines moving forward, with lower fixed operating expenses and significantly higher-margin products and services.

Before I turn the call over to Ken to discuss the financial results in more detail, I do want to take a moment to thank John Schneider for his many contributions as a Board Member since 2015. Earlier this month, we announced that John was retiring and not seeking another year with the Board and also the appointment of Geoffrey Scott to our Board of Directors to replace John.

As some of you know, Geoff has been a significant investor with Aehr for quite some time and is very active and engaged with the management of the company. He brings significant insight into investor relationships and also corporate banking and capital markets. Geoff will be placed in the Audit Committee, Corporate Governance and Nominating Committee positions vacated by John. So we welcome him onboard.

And then with that, I'll turn it over to you, Ken, and then we'll open up the line for questions.

Thank you, Gayn, and good afternoon, everyone. As Gayn noted, our first quarter financial results reflect the impact of the challenging global business environment around the COVID pandemic and customers who pushed out forecasted orders for our FOX systems and consumables during the past 6 months. These customers have indicated the pushouts are temporary and that they will require the additional system capability -- capacity and consumables later in our current fiscal year. As such, we expect our fiscal year orders and revenues to be back-end loaded.

At the same time, we discussed on our last earnings call, we have taken actions to control spending. In our fourth quarter, we completed the restructuring to strengthen our sales capabilities and reduce our costs. And these actions, including closing our Aehr Test Systems Japan subsidiary and moving to a sales rep/distributorship model in Japan and Germany, resulted in permanent savings of approximately $120,000 per quarter. We believe these enhancements will improve our efficiency and materially increase our sales activity and bookings going forward and increase our penetration of key customers in our targeted markets.

As we have shifted to higher-margin, highly differentiated systems and consumables, these changes also position us for success with sales of our current products, as well as additional new products planned for introduction this year.

We have also implemented temporary cost reduction initiatives. These actions reflect prudent, short-term cost reductions in response to the decrease in order and shipment activities in Q4 '20 and Q4 '21, and our commitment to managing cash and expenses as we weather through these challenging times. These temporary cost-saving measures resulted in savings of over $200,000 in operating expenses in Q4 and over $350,000 in savings in Q1 '21.

As we announced in our 8-K filing earlier this month, starting in the current second quarter, we expanded our cost reduction initiatives to include a 30% pay reduction in officer salaries, an increase in mandatory shutdown days and reduction in employees. These cost reduction measures are expected to result in savings of over $550,000 per quarter.

Including the permanent and temporary cost reduction measures, Aehr's revenue breakeven decreased by approximately $4.5 million per year. It is important to note that even with these cost controls in place, our operational capacity and bandwidth have not been negatively impacted, and our main focus continues to be growing our revenue base within the large market opportunities that Gayn mentioned earlier.

Now turning to the financial results. Net sales in the first quarter were $2 million, down from $3.8 million in the preceding fourth quarter and $5.5 million in the first quarter of the previous year. The sequential decrease from the preceding Q4 reflects a decrease of $1.6 million in wafer-level burn-in revenues and $195,000 in customer service revenues. This was primarily due to a decrease in WaferPak DiePak revenues of $2.4 million, which was partially offset by an increase in wafer-level burn-in system revenues of $801,000. The decrease from Q1 last year reflects a decrease of $3.1 million in wafer-level burn-in revenues and $365,000 in customer service revenues. This was primarily due to a decrease in wafer-level burn-in system revenues of $2.1 million and a decrease in WaferPak DiePak revenues of $1 million. There were no packaged parts system revenues in Q1 '21, Q4 '20 or Q1 '20.

Non-GAAP net loss for the first quarter was $2 million, or $0.09 per diluted share, compared to non-GAAP net loss of $720,000 or $0.03 per diluted share in the preceding quarter and a non-GAAP net loss of $214,000 or $0.01 per diluted share in the first quarter of the previous year. The non-GAAP results for Q1 '21 include the impact of stock-based compensation expense and a $2.4 million adjustment related to the closure of our Japan subsidiary. This adjustment includes a $2.2 million cumulative translation adjustment, a noncash item, representing the cumulative impact of exchange rate fluctuations held on our subsidiaries books, which was released to income due to the dissolution and liquidation of our Japan subsidiary in Q1 and a tax benefit of $215,000 related to the closure.

On a GAAP basis, net income for the first quarter was $107,000 or $0.00 per diluted share compared to a GAAP net loss of $2.9 million or $0.13 per diluted share in the preceding quarter and a GAAP net loss of $213,000 or $0.02 per diluted share in the first quarter of the previous year. Gross profit in the first quarter was $227,000 or 11% of sales compared to a gross loss of $93,000 or 2% of sales in the preceding fourth quarter and gross profit of $2.3 million or 41% of sales in the first quarter of the previous year. The increase in gross margin from the preceding quarter is due to the impact of the $1.6 million excess and obsolescence inventory provision during Q4 '20, accounting for a 44 percentage point impact in gross margin in the quarter.

Gross margin was unfavorably impacted in Q1 '21 due to higher unabsorbed overhead costs due to low revenue levels in Q1 '21 compared to Q4 '20 and Q1 last year; and an increase in direct material costs as a percentage of sales due to a change in mix from wafer-level -- excuse me, WaferPak DiePak revenues to system revenues in Q1 '21.

Operating expenses in the first quarter were $2.4 million, down $334,000 from $2.7 million in the preceding fourth quarter, and down $286,000 from the first quarter last year. The decrease in operating expenses from the preceding Q4 quarter is primarily due to restructuring charges of $220,000 in Q4 '20 and a decrease in employment-related expenses from cost reduction initiatives implemented during the middle of Q4 '20. The decrease from Q1 last year is primarily due to a decrease in employment-related expenses from cost reduction initiatives implemented starting in the middle of Q4 20.

SG&A was $1.5 million for the first quarter, and a decrease of $160,000 from $1.7 million in the preceding fourth quarter and down $294,000 from $1.8 million in the prior year first quarter. The decrease from Q4 and Q1 of last year is due primarily to a decrease in employment-related expenses from the cost reduction initiatives previously mentioned.

R&D expenses were $900,000 in the first quarter, up slightly compared to $854,000 in the preceding fourth quarter and flat compared to $892,000 in the prior year first quarter.

Turning to the balance sheet for the first quarter. Our cash and cash equivalents were $6.3 million at August 31, up $880,000 compared to $5.4 million at the end of the preceding quarter. Accounts receivable at quarter end was $1.1 million, down from $3.7 million at the preceding quarter end due to the impact of lower revenue levels in the quarter. Inventories at August 31 were $8.1 million, up slightly compared to $8 million at the preceding quarter end.

Property and equipment was $622,000 compared to $663,000 at the preceding quarter end. Customer deposits and deferred revenue, short-term and long term, were $406,000, an increase of $214,000 compared to $192,000 at the preceding quarter end. Our current and long-term debt of $1.7 million is related to funds received during the fourth quarter under the Paycheck Protection Program, or PPP, which we announced in an 8-K filing in late April. The PPP loan is intended to be forgiven, subject to any provisions of the CARES Act. And we've just been notified that our bank is now accepting applications for loan forgiveness under the PPP program. We expect to complete the application process shortly.

Bookings in the first quarter totaled $672,000. Backlog at August 31 was $1.2 million compared to $2.5 million at the end of the preceding fourth quarter and $3.6 million at the end of the first quarter of the previous year.

Now turning to outlook for fiscal 2021. For the fiscal 2021 year ended May 31, 2021, we are reiterating our guidance for full year total revenue of between $25 million and $28 million, which would represent growth between 12% and 26% year-over-year and to be profitable for the year.

Lastly, a couple of updates on the Investor Relations front. Our Annual Shareholders' Meeting will be held on Tuesday, October 20, and we will -- and will be available to join via webcast for all interested parties. Then in November, we will be participating in the Craig-Hallum Alpha Select virtual investor conference on November 17. We hope to see some of you virtually at the conference.

This concludes our prepared remarks. We are now ready to take your questions. Operator, please go ahead.

(Operator Instructions) We'll take our first question in queue. This comes from Christian Schwab, Craig-Hallum Capital Group.

Gayn, can you help us understand the applications or the specifics, I guess, I kind of missed it in the prepared comments about the customer commitments for the meaningful revenue over the next 2 to 3 quarters to get to our target revenue range for the year? Can you walk us through some of the commitments that you feel very confident about?

Sure. I want to be -- I haven't thought through exactly being able to say it because in some cases, the customers are unique and people have a pretty good idea what they are. So I'll try and water it down a little only and intend to try to protect the nondisclosures with the specific customers. But let me just -- so let me just talk first about a few of the market.

So in silicon photonics, we -- I would say most of those customers all have clearly indicated that they will be increasing their production capacity. As I think through this, all of them, are saying they're increasing their production capacity throughout the year. And that would be consistent with the market growing. The silicon photonics market, like, 40% or something CAGR. In terms of revenue, maybe a little higher than in unit growth for the silicon photonics transceivers.

And just as a reminder, as I've gone into it in detail before, these are basically fiber optic transceivers that are heavily used in data centers and in long-haul telecommunications applications and are a big part of the 5G infrastructure. So in reality, all of those are growing. And candidly, everyone has said, boy, with this downturn or with this COVID and everyone being home, everyone's using data centers and on Zoom and everything else, isn't data exploding? The answer, I think, across the board is, yes. But if you go and you look at companies, there have been companies in the space like Ciena and some others that actually specifically talked about slowdowns in the data centers. And we know specifically, there's been slowdowns in 5G infrastructure build and -- as a result of people not having vendors on their floors or doing the upgrades. So we've had our customers, and pretty specifically, described their end customers, having delays in orders and therefore, say, "Gayn, I know you prebuilt the system or we were anticipating taking it. We're not going to give you the order until we have that order in hand from our customers."

And just for clarity because there's a high concentration of the data center guys, and it feels like you're name dropping, but a good chunk of the dollars are spent by Amazon, Google, Facebook, Apple and the likes -- and Microsoft. And so within those names, I specifically am aware of some delays in those data centers and upgrades and stuff that are impacting my customers. But they are restating, yes, they expect to renew that or reengage it. And it's a short-term delay, and it's not a long-term delay. And it's not until COVID clears. It's like, "Hey, we -- just right now, we have to get our act together to figure out how we're going to get vendors in here and do something like that." That's how it's been communicated.

On the silicon carbide side of things, I would say it's less about that. It doesn't feel the same way. It feels like people are going forward pretty aggressively with those. Certainly, on the customer evaluation side of things, we've seen some slowing or difficulty of travel restrictions. But candidly, and we shared with it before, the bulk of our revenue forecast that we guided at the beginning and we reinstated now is actually not with new customer wins. And so while those are impacted, that's not what would be impacting our revenue for this year. So we do anticipate current customers ramping, and they're being pretty specific about what their expectations are. And we see facility upgrades going on and cooking up water and electrical for where the tools are going to go. So there's reasonable visibility.

And then I'll share one more market, and that is people know that we're in the mobile side of things. And our end customers and their customers, there have been some pretty publicly visible delays. Things that would normally be introduced this time of the year have been pushed out. And of course, they didn't give us much heads up with that. That's obviously their secret. And so as soon as the orders don't come, then we know there's a push out.

So we've seen some of that. And we see some of that kind of flowing into the year. But they, too, are forecasting and capacity requirements plus some upside new opportunities that could -- so forecasted specific requirements for this fiscal year, plus some upside opportunities that could happen for revenues early at the end of this year or into next fiscal year 2022.

I hope that gives you some clarity.

Yes, just a little bit potential further clarity. So you would expect the majority of the revenue, they come from silicon photonics? Is that correct? Or am I thinking about that wrong?

No. I mean, I would say the majority of it is silicon photonics, silicon carbide, mobile sensors. And actually, we do anticipate the -- we haven't talked about them. I think, in fact, I didn't put it in the conference call, the bullets, as I think about it. We had won a big customer a couple of years ago that we referred to kind of very generically and hazy as a significant data center, high-volume application or data storage, I think we described it. There's reasons why we're being elusive, it will eventually come out.

But that program was delayed for reasons that we know include specific things related to COVID in terms of when they were going to roll this thing out. But we currently have forecast that Aehr at the end of this fiscal year for systems to be taken. So it's a balance of all of those. And in fact, it's probably in that order of dollars, but all of those are material. I'd say each of those could be 10% or more of our -- even the smallest market segment would be over 10% of our forecast.

Okay. Fabulous. And then lastly, what happens if COVID-related travel restrictions remain in place through a few more quarters? Any way for us to figure out how that would impact your business? Or do you believe that most of those negative impacts are behind you, and that's why you're confident in reiterating previous guidance for the year?

Thanks, Christian. And actually, we had a couple of other folks pain us on this question. So I just -- I actually just quickly, right before the call, jotted down some notes so I just -- so people don't accuse me of anything. I'm going to actually read a little bit from my notes here on this one. But -- because as I wrote it down, I just want to be thorough, I guess, and as clear as I can on it. And I might repeat some things.

But anyhow, first of all, not all customers are impacted by the travel restrictions. Because we have resources locally, so we put people on it or we've worked around them. Meaning, for example, we've had a couple of specific examples where we sent ahead our applications and service people to those locations, and they had 14-day quarantines locally. One of those was international, and one of those was in the states, okay? And it wasn't flying from California into the state, which is kind of interesting. But the customers themselves have a quarantine put in place.

So we planted the guys in hotels and waited it out. It turns out working remotely doesn't always make that much difference when you're supporting customers over the phone and over computers, which is how we normally are doing it. So it doesn't make that much difference whether you're in your home or a hotel, setting aside the burden on the employees, right? So we have these very committed employees.

As such the impact of the 14-day quarantine has been basically manageable or effective, right? So the guys go, they're working every single day, kind of like what they would be doing from home and then they're released and they can get on the customer site and do some things.

And then in many cases, we've actually just physically have local support resources. And so the customers have figured it out. We're important, we need you on the floor, we get on the floor. So we've been able to shift and install systems without any impact.

And then in general, we've always supported customer systems over the phone and remotely, so this doesn't change. We have the ability to log in to customers. I mean we jump on a plane to go to South Korea for something that's urgent, if it's something that needs to be responded to by the factory, we just do that immediately, right?

The customers have told us that they've delayed their ramps. Specifically tell us now that they expect the ramp to happen later this year, okay? Obviously, it's fair to say this, too, could change. I do see customers adopting to kind of a new normal, if you want to call it that, or planning for ramps and equipment installations given the restrictions. And they seem to be getting used to it or put in place processes to deal with it. I mean, by contrast, in the first few months of this, it was totally different, and it was just complete lockdown. Nobody had any idea. They didn't know -- can they ask people to come on? What would that be? What are the protocols? And so we have protocols for customers to come on site and have done that. We have ability for vendors to come on site and have done that. And we now have protocols and a good handshake with customers that people seem to be getting business done. But that's very different than it was even 2 months ago.

I'm more concerned about new customer evaluations. This feels more impacted. However, like our current fiscal year, as we said, is majority made up of current customers. So we're less dependent upon our new customers. And so that also gives us a little bit of a cushion from this impact.

Having said that, we're actually doing some novel things. And maybe I shouldn't use the phrase novel these days, but we're doing some novel things in presales, okay? Last year, before COVID-19, we began putting in place a new demo center that we had talked about in our headquarters here in Fremont that was able to demonstrate all of our tools in real applications, right?

We did this because we were getting, quite frankly, swamped with customer requests. And we were like, how do we optimize this thing because, honestly, traveling around and trying to do them on customer sites is going to be very efficient, okay? And it basically allows us to do actual customer benchmarks of our wafer-level burn-in, singulated die and module stuff for them and evaluate the systems and see the results, okay? So they can come to our site or they can send their wafers or devices, and we will do it for them, okay?

So we actually specifically experienced this with our initial silicon carbide customer last year. So we've demonstrated to them the effectiveness of wafer-level burn-in on their wafers. They were totally unclear whether this was going to work. After the benchmark and at the completion of it, they actually turned around and asked us, would you be okay if we sent you wafers that you could test for us for production use for our customers until we deliver a system that they immediately ordered from us?

We actually said, yes. And we -- while we were building the system over the next couple of few months, we were shipping wafers. They were shipping those wafers, we were testing, we were shipping them back, and they went to customers, okay? In this example, they never set foot on our test floor.

So we were able to actually do that. And so we were like, well, that seems like a good example. So now we're actually doing the same thing, and we're offering to do this with other customers. And in fact, we added 3 more stations since the COVID outbreak that we can do more benchmarks in parallel. These are all in clean rooms and they're manned by Aehr personnel.

And we're actually pushing out a new program. We haven't named it exactly, but to entice customers to make this leap of faith and do the benchmark entirely remotely. Of course, we can do video conferencing and, like, demos and things like that. But this is -- it is actually interesting. This is probably an example of how things are going to change permanently in the world as, honestly, this is more cost-effective and efficient, not only for us but our customers. It's probably a best-in-class example of what we'll do even after the pandemic is behind us.

So it's really our expectation that now as companies are realizing restrictions are expected in place until next year. We're not confused. I don't think anybody in the company, like our shareholders, no one's assuming that COVID's completely released, we're back to normal. Quite frankly, in our fiscal year, the customer is looking at ways to continue with their business plans as well. And they're not just going to delay all their plans and growth until after the pandemic.

So we've specifically heard this from certain customers. And I personally expect that most will be able -- will be taken on this plan. So again, we're not assuming that COVID dries up and goes away November 3. You have to be -- you have to pull that into this to -- for things to get better. We're kind of assuming it's going to stay the same for a while.

Our next question in queue comes from Larry Chlebina with Chlebina Capital.

Gayn, you mentioned that there's 2 process methods for testing silicon carbide wafers. The first one is apparently was the easiest, and that was the lead customer for that application that you have in production currently. Are you trialing anyone with the other method to debug it and prove your system will work for the second method of testing silicon carbide wafers?

Okay. So Larry, let me just sort of repeat back for everyone else that didn't follow that as much. And just as a reminder, silicon carbide is a new complex semiconductor device that's claim to fame is you can run it to thousands of volts, and it operates very efficiently, whereas normal semiconductors can only run to tens of volts. And the big aha and kind of most notable one is when Tesla integrated a silicon carbide discrete FETs into their Model 3 and end up getting, like, I know, 20%, 30% longer-range on the car. It's turned the electric vehicle, hybrid electric vehicle industry completely on edge. And every single one of them is shifting towards this as fast as they can.

And so they're all going to the silicon carbide, and there's just not that many people and not much capacity that's out there. The beauty of it, and it's a little odd, but as a tester guy, the beauty of it for us is, while silicon carbide is extremely reliable, long term, it actually has a very high infant mortality rate, which means that a higher percentage of the devices fail early in the first so many hours of use. But after that, they don't fail anymore, and they're much lower or much higher reliability and lower failure rates than other components. And they're much more efficient.

That's the perfect dream for us because that means you need our equipment to go in and weed out the infant mortalities by testing them for hours, days at a time to remove the infant mortality and then they're more reliable. That's first of all.

Now these devices, the hot ones, field-effect transistors, or FET, they're actually a very simple device. And there's 2 known methods that are published out there for achieving reliability. One of them is done with what we would call a medium high-voltage, on-the-gate source, which applies a voltage and grounds the other 2 channels and can achieve a very high reliability and read out all of the failures.

There's another type where you actually bring it to a very high voltage, measured in, say, over 1,000 volts, and you isolate it so that it doesn't conduct and ensure that it doesn't fail over so many hours. And what we understand within the customer base is there's literally 2 camps. Customers do one or the other and in production, not both. And so we've actually -- our first customers, and we've talked to people about it, are out heralding the one with the gate bias. And there are more than one. There's multiple out there that have talked about that, and they have white papers and talk about why that's the greatest. And that's actually our first customer applications.

We are engaged with other customers on the reverse biases referred to, which is a high-voltage in both wafer, singulated die -- or I should say, wafer singulated die and standard package part applications. And interestingly, there's a discussion with them -- like most people are doing some sort of package part today and really struggling with it or have lower voltage and home brewed, and they're looking for new solutions. But they mentally walk up and say, we need a packaged part burn-in system, which is a different kind of machine with air cool resources and things like that. But it actually has real trade-offs to it, even though we sell them.

By contrast, most customers are saying, but if I can, I need to get to wafer-level or singulated die because the devices are put into modules in die form. They're never packaged up until they're packaged with 8 or 10 devices. So we have customers that are saying, give me a quote for a high power, high-voltage packaged part burn-in system. And another group in the same company saying, but try and solve this at wafer level. There are some challenges at wafer-level that we have some unique ideas and concepts in both hardware methodologies as well as design for test that we have been communicating to customers. And I would encourage any customer, who possibly listens to this, to give us a call, we would be happy to, under nondisclosure, talk about those test methods on how you can actually achieve high-voltage testing at wafer level, which most customers understand the real technical trade-offs or what is needed to be done. And we'd like to talk to you about our solutions for doing it. It's our expectations that we will have those solutions available for production customers in time, as soon as this year. Right?

So right now, we're not counting on that for our forecast either by the way, Larry. But we're working on that.

So Gayn, did I hear you say that another approach, a possible approach for that higher voltage application could be the single A -- the dies first and one of them in a DiePak configuration? Is that all the options?

Yes. And a really cool option at high-voltage up to 2,000 volts, yes, on a FOX system. That's right.

So why don't you make a deal with one of these guys and build a DiePak for them and prove it to them?

We're working on it. Remember that little thing I had earlier, just like we've got a program we're working on, that's part of it. We are specifically approaching certain customers about engaging that in a -- in a sort of a partnership way. So we're...

Sorry, of the nonsilicon carbide targeted customers, how many do the reverse bias, high-voltage approach? And how many do the low voltage?

So far, candidly, I would say there are 10 obvious top guys. There's even smaller ones than that. And we are aware of about half of them, what they do. We actually -- there are certain ones, particularly down the list in terms of size, that have not yet shared with us what their preference is. I'm not totally sure why. And by the way, again, some of this is normally, I would jump on a plane and go visit them and meet with them, we're able to do that. We're definitely -- it's definitely something I feel. But we are getting to some of the big guys.

So you didn't answer the question, though. Of the known approaches...

Of the ones I know -- of the ones I know, I know 3 that are gate and 2 that are reverse, so far.

So possibly, it could be -- it could be half and half or maybe even more of the low voltage and less of the high-voltage, am I right?

Correct. And I know specifically, one of the big guys that does reverse, which is the high-voltage one, they have specifically asked us about gate and have discussed implementing that or benchmarking it because it has some other advantages, by the way. But they had qualified with their automotive customers reverse, and it's actually kind of hard to change your qualification process.

So one thing we're also trying to do is, I mean, the reality is, what, 5 big automotive guys, right? So our lead customer is engaged in several of them. And so just getting qualified with this at wafer-level burn-in, which has already been done, I think, will help. And one of the thoughts is how do we get the industry message out there that this is a viable qualification process.

So, I mean, you proved that one, with your current customer, it just seems like it's such an incredible benefit in terms of not only efficiency and throughput, but also savings from having to throw away modules that have a defect in them. And you're screening the module before [you put another dime into them].

I totally agree. I completely agree.

So I mean, I -- I'm really, really struck. You landed your current customer a year ago. And here we are a year later, and you still don't have any additional customers in that area, which is -- I don't know, I just find that hard to understand, when there's such a clear benefit.

I think some of that is very fair, Larry, and we've been in discussions with -- some of the things we've done, for example, as we -- say, the by-product of it. If you look at silicon carbide, there's really 3 main areas that it's being built, okay? First, it was in the U.S. customers, Cree being the most notable one. And it's up and down the East Coast. Then it's in Europe, between Italy and Germany. That's a very big hotspots for silicon carbide, we know specifically, and Japan. And what you'll note is that we made the decision to shut down those sales offices entirely in Japan, and we -- the sales management team in there have all retired, and we have replaced them with reps. It's actually one of the specific things we're trying to do as well as -- and we have a really great rep also running in Germany that takes Northern Europe. And we've had some recent traction with our rep in Italy and France in this area as well.

So in your LD conference -- in your LD presentation, you indicated I thought that you were running trials with other silicon carbide customers. Is that...

I think it would be more -- I want to be a little careful on all the competitive stuff, but I think it would be more fair that we have discussions with those customers related to trials and not on wafer.

Ken, on your balance sheet, you show a split of short-term and long-term debt. That's the PPP loan. Why does some show up on short-term and other -- and the rest of it are long term?

Well, the PPP loan actually has the 2 components. It's not due for 2 years with the actual first payment not being due within 6 months from the loan origination. So that's the requirement why it's broken out from a GAAP standpoint into short-term and long term.

However, as I mentioned, we -- the plan is we expect to have loan forgiveness of the entire $1.7 million. The portal at our bank that will allow us to apply for the forgiveness actually just opened up to us yesterday. So the plan is, is we expect to have that forgiven. And hopefully, that will be removed from our balance sheet somewhere near our next reporting.

That was my next question. Lastly, has the -- the CP status gain, has that slipped appreciably? I think you said last quarter, that would be in the second half. It hasn't slipped anymore since then, has it? Or...

It has not. We have done some things from that customer. We actually had some -- that would be an example where we had, what I would call, a fairly simple upgrade that we were planning to do. We shipped all the equipment ahead. And at the last second, the customer called and said, "Listen, we've got to shut down. Vendors can't get in the building right now."

It's not critical, like it's not keeping them from production or anything like that. So I don't know if it were critical, they would have let us in. But there's an example where we haven't flown in and done it. But we -- based on what we know right now from them, they're going to need additional tools in [light] in our year into -- and then the ramp sort of starts for about a 2-year ramp.

Okay. One last real quick question on silicon carbide. Everybody that's involved in it is really excited about the potential. But where does it really stand right now in terms of wafer starts? Do you have a sense of where it is today versus -- I know the projections are something like 0.5 million wafer starts in 4 years per year, which would imply that if you could get all of that business, it would require something like 160 XPs to handle it all, if it's a 48-hour burn-in. But where does it stand today? Relatively smaller.

So I want to be careful of exactly your numbers because I don't have that in front of me, but your math, generically, is correct. The forecasted wafers over the next few years is significant, and it requires a lot of XPs. So related to right now, I don't have in front of me, and I would -- I think the Yole Development is probably one of the people that have their finger on the best estimates of it.

For certain, there are released products. We know for a fact that products off our system are going and they're going into, I don't want to name the big customer, but well-known EV and electric vehicles, okay? We know that we're engaged with customers on other applications that are also released. And then we have a number of applications for new cars.

There's so many electric vehicle and -- electric and hybrid electric vehicles that are in place. So there's tons and tons of evaluations going on and qualifications going on. So I don't know. I have a really good feel. Our -- certainly, our customer and the customer we're talking to have capacity and will be ramping this year. And some of those are -- many of them are bigger than ours to begin with.

The one thing that is subtle about this market, that's interesting. So if you look at silicon carbide and you look at the players, and you say, by their revenue, they stock up just publicly, top to bottom, ST, Cree, and if you go down, a few roam and down a little ways to like an ON Semiconductor or something. However, the application, the application, which is power modules, silicon carbide is displacing other power modules, okay? And they're more efficient. In fact, they're so much more efficient that nobody can even imagine selling an IGBT into that application in 2 or 3 years.

So the real opportunity is when you look at the power module companies and then you realize that companies on the list that are pretty far down the line on silicon carbide have $1 billion or $2 billion businesses in that space. So those companies that are rushing into silicon carbide are -- have the ability to swap customers from $1 billion worth of power silicon or the IGBT modules over to silicon carbide.

So I think that the folks like -- the market guys are trying to figure out how fast does that transition. And obviously, the customers -- or our customers, but those vendors have an ability to negotiate with their suppliers. Do you want an IGBT for this price, or do you want a silicon carbide for that? And they are supplying the market today on all those electric vehicles. So I think the [real work] gets interesting.

The real driver, though, for your equipment, for your process is the module. Discretes isn't a big driver. But if they go wafer-level burn-in with your system, they'll use it for the discrete parts also, right?

I believe that's fair. And I think that's the right way of looking at it. The module is so overwhelmingly advantageous to do at wafer level. But we've heard from other customers that there's advantages to doing it anyhow once you get there, right? So like our customer, we believe, are products that are going into discrete components having done wafer-level burn-in.

Right. The application for silicon carbide in modules is fairly new, isn't it, in terms of certainly the automotive. In other words, the first application that you cited with Tesla on a Model 3, that was with discrete products, right?

It was. That's a position. They put, I think, 8 of them in the module.

It isn't -- it wasn't as obvious or is it advantageous to go wafer-level burn-in until you start ramping on modules. And that's a fairly recent event, is that correct?

It is. I think you're in the early stages of an overwhelming ramp.

Yes, exactly. And that's what I'm getting at. So how you go at this and you knock these down, you have to knock them down, start knocking them down now. It isn't -- the Model 3 has been out for years. But it's the modules that's the driver, and that's a recent event. And that's why you should -- burn should be knocking these down left and right, I would think. All -- anyway, that's all, I think.

I will -- several of our investors, and Larry, I acknowledge you're one of the folks that has a deep understanding of silicon carbide and we have customers that have portfolios in that space that we're a part of. I've done this personally, and this is an odd thing to do publicly. If you bring me a silicon carbide customer, we will make it very cost-effective, if not free, to do a benchmark. And one of the challenges is to get some of those attention.

We had planned -- I think we were in 4 or 5 shows this year that have all been canceled. They're not even virtual. Actually caught us at an odd time. So -- and I'll buy you a dinner when we're able to do it.

But I'm wondering if they start losing business that somebody that is taking an approach like this that finds it and can offer a much more economic price, because they're not throwing away, maybe half or 20% of their modules or something because they have a...

Exactly. And as the news gets out there. By the way, I've mentioned this, if you go back to the notes from last quarter or maybe some of the other ones. So I always allude to silicon carbide customer, and I don't go into a lot of the detail. But I don't know, I think the Yahoo! message boards, they were pointing to it. That paper has been removed. So it's not publicly available. But if you give us the -- a number of our shareholders actually have their fingers on it, Larry. I think you're one of them.

So folks, just -- it's interesting because they were out touting how great it was and now they kind of pulled back. It is an odd scenario because customers see the value of it, and they're out selling it as a differentiation to their customers. Well, obviously, if everybody goes to it, then it kind of normalizes. And we're the only game in town.

Our next question in queue comes from John Fichthorn, Dialectic Capital.

Yes. So a few questions. I'll try and be quick. First of all, it sounded like you reduced your breakeven quarterly to around $4.5 million. Is that right? And if so, is there some kind of EBITDA guidance for -- if you guys hit your targets for the year?

So I'll let Ken -- I mean, the first one is easy, which is yes, but I don't know we've given that guidance.

Gayn, I'd like to jump in here. We've reduced our breakeven by $4.5 million. Our breakeven is not $4.5 million. And just kind of walk through where...

I meant your breakeven is around $4.5 million a quarter is what I said not -- yes, you reduced it $4.5 million annually. But however you want to break that.

Absolutely. So kind of talk about it quarterly. I think I've said before that our breakeven historically, based upon our fixed run rate structure and our average margin, is a little over $6.5 million a quarter. Or a little bit over $26 million a year. And that's what we said in the past. With these cost reduction initiatives, reducing that $26.5 million or $6.5 million a quarter down, or $700,000 a quarter in spending, that gets our breakeven per quarter down about $5.5 million a quarter or about $22 million a year.

And that's a GAAP number?

That is a GAAP number, correct.

Fine. I was thinking more of an adjusted EBITDA number, but that's fine. So if you guys come in at $28 million, then that should all -- the excess should drop to the bottom. Right?

Yes. And again, so you talked about EBITDA. We actually did a cash breakeven. If you take a look at what our stock comp is, you can pull out our depreciation expenses, which are right off of our SEC filings and our reporting. You can see that if you look at cash breakeven, that brings us significantly under $19 million a year or right about $4.9 million per quarter revenue for a cash breakeven.

Perfect. So I thought somewhere you guys had said you had 2 dozen new kind of customers in the pipeline before. And this press release said 1 dozen. I'm just wondering if, I don't know, if I'm just misremembering or whether you lost a dozen people in your pipeline.

We haven't lost a dozen people, and I realize that we -- I don't know if we've ever actually stitched together the words 2 dozen before. But you'll see there's some conflicting. We talked about well over a dozen, and then we specifically say well over a dozen into silicon photonics and silicon carbide.

The number -- I'll just go out there. I mean, I was doing a review with our sales team last week, and it is over 2 dozen. It's a long list. And some of those are -- but there's a significant funnel of activities. And one thing, in particular, when -- in preparation for it, some of those customers are just -- have told us that they're just on hold. And so we tried not to get into because then you have to start qualifying all of it. But we're clearly directly engaged continuously, kind of regular cadence with well over a dozen of those, but there's more.

And I think had the COVID stuff, like, kicked in, we would be struggling right now with just all of the activities. We would be -- we'd be adding some apps engineers and some other things. And I want to give [Bernie] credit because he was kind of out in front. Not anticipating COVID, but putting this apps center in place and a number of other processes to allow us to do a lot more benchmarks in parallel. And we are. We are working with customers right now on benchmarks despite all the COVID stuff. But it does feel like it's [not down].

Well, I can't wait to complain about you being too swamped with business and not being able to keep...

Yes. That would be nice.

So you announced a couple of new wins, commitments, the OSAT business, some other things. Were those already in your AOP for this year? Or is that additional pipe? Or should I assume that your year kind of has a further upside, how does that -- how do I think about that?

So certainly the OSAT and that win that we installed was already in our plan. I mean, that was anticipated. It's just it was more positiveness about it. There are some new customers in the list already just from last quarter that I'm not counting on.

I want to be careful of saying they're not in our plan because if one drops out and it comes in, I don't want to feel like I -- we failed at it. Obviously, we...

We don't know what your plan is anyway. We just have your guidance. So I'm just -- I'm curious.

The only thing I have specifically called out is that on the mobile side of things, we still get consumables every single year on that. It's been a couple of years since we actually added a lot of any significant capacity. But we always get new consumables every year with different design turns and things like that, and we're still planning on that.

We do have some new opportunities that have come up that have an opportunity to add capacity. There's some new applications and all that would be upside that aren't in the plan. Again, they could also offset any other risk. But that's the only one I've specifically talked about. And for those that have followed, I'm really hesitant to get too ahead of myself on this on my SKUs there because we've had some scenarios in the past where we got all excited about how big it was, and then it didn't play out.

And so I'd rather just shock you guys when an order comes in and say we knew it was going to happen all along. But for now, I'm just going to say, there are some opportunities. It looks like it's delayed in our fiscal year and into next year, but still. It looks -- I'm pretty excited about it.

Great. And consumables this year, I don't know if you guys broke it out, but roughly, I don't care how wide range you give me, consumables will be roughly what of revenues?

I don't think we have -- I'm going to have Ken correct me, but my guess is it's closer to like 1/3 or something like that this year. Although that could shift. Last year was higher than what we thought our run rate was going to be when it hit 50%. And that's actually because the systems dropped out in the last. So systems that we are anticipating will be shipping in Q4, we didn't ship any systems at all. And so that's part of the reason it was a higher percentage.

We also had a scenario where our -- one of our lead customers have been buying systems without WaferPaks, and we've been talking about that, and then they finally caught up. So normally, the -- if you just look at the hardware to consumable mix, they're going to be closer to, like, 1/3 of the business. But over time, as the installed base buys just uniquely, like we've seen in some of our FOX -- some of our older FOX products, they haven't bought a system in a while, but they keep buying consumables. That will grow. And we do believe that there's a point where even in a normalized steady state year that consumables would be over 50% of our business.

Great. So this is my last question, and it's not a question. It's a comment. Actually, no, I have a question then a comment. When does the window open for insider buying after you guys have released earnings? Is it kind of the standard 48 or 72 hours?

We have not announced when our windows open for insiders, and we're not going to do it at this point in time.

Okay. So my comment after the non-answer to the first question is, I appreciate John's service to your Board, and I wish Geoff the best of luck at representing shareholders. I know he represents a substantial amount of shares. It's listed in your proxy at 660,000. Whether that's him or his clients, I don't know. But I appreciate having a shareholder on your Board.

And I would like to say that Rhea and Mario, who's been on the Board for 40 years and have overseen a $30 million consumption in cash and a 90% drop in the stock price since the IPO or greater, I don't see them buying stock in the open market. And I've lost money and every one of your shareholders has lost money because your shareholder price had ebb and flows. And it's very frustrating. We lose money that we put at risk for ourselves, for our clients, they don't. They get money, they get rigged at $100,000 a year. He gets his health insurance paid. He gets 30,000 options, struck at the market. And if I -- when I'm on a Board, and I've been on 3 public boards over the last year, and I'm on 2 currently. I believe that every public company board member should be risking their own capital by buying stock in the public market of the boards that they're on. And if they don't believe in the story enough to put their own money on the line, then get off the board.

You're telling me the story that's amazing. I love it. I've put my friends, my family, my investors capital at risk, because I think it's a great story. I love the future and the upside. And yet your Board doesn't seem like it's worth their time to reach into their pocket and buy the stock too with us. And I am offended as a shareholder. And if I don't see them start buying stock and you don't deliver, I promise you, I will become a different type of filing shareholder.

So that's my comment, not my question. And thank you very much for your efforts, and I hope you guys succeed going forward.

We'll take our last question from [Marty Koton, Chip Chat].

Yes. My question is -- I've got 3 questions. One of them is regarding the closure of the Japan office. And there's some savings associated with that, which we see -- pretty easy to see, pretty clear on that. It's replaced by a sales representative, and there are costs to sales representatives. My question is do we see the cost of the sales representatives somewhere? Or is that something that gets rediscovered later on?

So in other words, are we only seeing the growth cost of closing the Japan office, but not the net cost because you do have to pay money, I think typically commissions, for sales reps?

Yes. And that's true. That is true, and that is true of other regions that we have sales reps today. And that's true in the European region as well as in Japan going forward. So we do have arrangements with those sales representatives. I don't think we have any distribution networks where they buy and resell. So it is paid as a commission, it will show up in SG&A cost or cost of sales.

And so yes, it's not free, but at least it is tied directly to revenue shipments as opposed to the opposite. And we think that within a normal revenue range and including some significant growth, we're going to be thrilled to death to pay them those commissions.

Yes. Yes, I'm all for paying commissions. I'm just -- it's more curiosity that as we see the savings on the one action. And the question was, is it possible or do we see the savings -- or the cost of the representative, which you've got to pay them and they do earn their money. But it sounds...

We do not have any fixed cost relationships with them. So they are only paid upon success. The other thing I just want to be clear on, although we do save money, and as I said at some point, obviously, if things go wildly successful, there is a real scenario, we would pay them more than we would have done direct. I'll be thrilled with that.

But #2, that's not why we did it. The reality is, is that the customers that are in silicon carbide, the wafer-level customers, the front end, there's more test, is a different type of customer. And we think that we needed to do some things to be able to get at those customers by doing something differently. So it's less about saving money. It's actually putting a better strategy and higher expectations for actually getting sales, because we -- in reality, we've had little to no sales in those regions. And we have been working on this to take action.

By the way, it is not very easy at all to shut down things in Germany and Japan. This has been a -- this has taken us well over a year to do.

Yes. Okay. Second question is, Gayn, earlier in your presentation, you iterated a list of applications or like data centers, mobile communications, automobile. And then you also talked about new prospects, companies that they're not regular customers yet, but they are considering the FOX system. Could you make a comment that's, say, separating the prospects, what percentage might represent 100% production test, which you're going to sell a lot of machines? And what percentage might represent sampling tests or engineering applications? And the reason for this was...

Actually easy. So it's actually easy compared to historically.

If you just have one customer that does 100% production test, he might be worth many times, many customers that use it for sampling and many more that use it for engineering development.

So [Marty], I would say -- I believe, of that entire list of customers, the 2 dozen, let's say, all of them are production. I'm not sure I know one that's engineering for -- in the wafer-level side of things.

On the package part, I know that a couple of them are absolutely qualifications and they're just quals, which means they do it early on in the life of the product and then they do monitors. So you could have one product and sit on it for a while.

In production, if they grow, we grow, okay? Or if they grow, they buy from us. And if they grow exponentially, then we grow. It's technically, if you want to be specific. So the production makes really more sense.

It's actually reasonably rare to have a sampling done at wafer. And there's not a lot of applications where that makes sense or qualifications. We do have customers that do monitoring. One of our big customers has an installed base of systems that are used to monitor and sample with our singulated die flash module systems. So it does exist. But today, I think everyone we're talking to is production.

And on other devices and will be going to their customers -- after they test them, they ship it to their customers.

And they're testing 100% of their die on 100% of their wafers?

Yes. That's right.

And then the final question is, are you -- how much of your business is with the People's Republic of China?

So it's interesting. We had, I think, 10 package part burn-in customers on our ABTS in China since I've been here. We, today, have no wafer-level systems in China. And I believe we only have one customer who is not Chinese who plans to install systems in China.

But I thought you had sold a FOX machine to a Chinese entity 4 or 5 years ago?

No.

No. Okay. I [understand clearer] ...

Yes, [Ken has] just talked about that. Because one of the discussions was with all the trade stuff going on, how would it impact us? And people, I think I shared in the past, we used to buy chambers out of China. We also buy them out of Singapore. Those are 2 vendors today. And today, we're not taking chambers out of China. So we don't actually have any supply chain. I think we've built some printed circuit boards from a U.S. manufacturer that builds them in China. But almost nothing is exposed to China right now.

There are no more questions at this time. I will now turn it back over to management for any closing remarks.

All right. Thank you. A lot of questions this time. We appreciate all of them. And as always, we do invite you to set up a call if we can have a follow-on with you. I often say, I invite you to come over and see what we're doing, but we're not doing that right now, unless it's really urgent, unless you happen to be a buying customer. But other than that, we'll be happy to just set that up and talk to you. And we do hope everyone stays safe and healthy, and we'll talk to you next quarter.

Thank you. Ladies and gentlemen, this concludes today's presentation. You may now disconnect.