Earnings Call Transcript
AEHR TEST SYSTEMS (AEHR)
Earnings Call Transcript - AEHR Q4 2020
Operator, Operator
Good day and welcome to the Aehr Test Systems' Fiscal 2020 Fourth Quarter and Full Year Financial Results Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Jim Byers of the MKR Group. Please go ahead, sir.
Jim Byers, MKR Group
Thank you, operator. Good afternoon and welcome to Aehr Test Systems' fiscal 2020 fourth quarter and full year financial results conference call. With me on today's call are Aehr Test Systems' President and CEO, 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 fiscal 2020 fourth quarter and full year results. That release is 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 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 may cause results to differ materially and 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 valid only as of this date and Aehr Test Systems undertakes no obligation to update them. Now with that said, I'd like to turn the call over to Gayn Erickson, President and Chief Executive Officer. Gayn?
Gayn Erickson, CEO
Thanks Jim, and good afternoon to those joining us on today's conference call and also listening online. Ken will go over our fourth quarter and full year financial results later in the call, but first, I'll spend a few minutes discussing our business and product highlights, including our continued progress with our wafer-level and singulated die testing burning solutions. And then we'll open it up for your questions. This past fiscal year we made substantial progress with our FOX products that strengthened our customer base, expanded our markets, and enhanced our operations and sales capabilities to capitalize on the significant market opportunities we see ahead. While we were on track to meet our expected guidance for fiscal 2020 due to the challenging global environment and uncertainty around the COVID pandemic, we experienced pushouts of customer forecasted orders in the second half of fiscal 2020 for FOX-P systems and consumables in data center and some 5G end-user applications for silicon photonics transceivers. These customers have indicated the pushouts are temporary and they'll require the additional system capacity and consumables in the current fiscal 2021 year. We will cover the detail supporting our optimism but want to quickly state that we are reinstating guidance and expect FY ‘21 full year revenue to be between $25 million and $28 million, up 12% to 26% and to be profitable for the year. With the increase in number of customers in production using our systems, the new market opportunities we added with new customers this year have moved to our higher margin FOX systems and consumables. And the completion of our previously announced restructuring and sales enhancements this past year have positioned us well to address our new market opportunities and we are now profitable at a much lower revenue level. Let me walk you through some of the key business highlights for this last quarter and for the last fiscal year as we outlined in our earnings release. First highlight, we closed a new order with a major new customer in silicon photonics. During the quarter, we closed an initial order with a new customer that is a major global leader in communication transceivers for data centers, telecom, and 5G infrastructure for our FOX full wafer-level test and burning system for production stabilization and test of other silicon photonics devices. This new customer is deploying our FOX-NP system for initial production burning and stabilization of their high-performance silicon photonics devices and is forecasted to transition to our FOX-XP wafer-level testing burning systems during this fiscal year 2021 to meet their volume production forecast. We categorize this customer as a tier one customer which we define as a customer with the resources and market size to be able to purchase $6 million to $10 million per year or more of our systems and consumables. The next highlight is we closed an initial order with the world's largest OSAT. During the quarter we closed an initial order with the world's largest outsourced semiconductor assembly and test supplier to use the FOX-P family products including Aehr WaferPaks™ and DiePaks® for production test, burning, and reliability screening of devices at full wafer singulated die module. They have already added our system to their list of tools and capabilities in their marketing and sales material to their customers and we have begun some cross-marketing and sales activities with them. Stay tuned for more updates and announcements. Next, Aehr added a key new market with the addition of wafer-level burning of silicon carbide devices. This year we successfully took the initial order and installed our first production capacity for silicon carbide devices, including it in a list of markets such as silicon photonics, 2D and 3D sensors, automotive, and lasers used in photonics devices and have shown the value and feasibility of using our FOX solutions to address these market needs. The initial system order was for a FOX multi-wafer system with proprietary wafer packs configured to test 18 lasers in parallel at up to a thousand watts of power per wafer, and the customer is using it for 100% production burning and infant mortality screening of silicon carbide devices. This new silicon carbide application with a Fortune 500 market leader in silicon carbide and power modules is a significant new tier one customer of our FOX-XP system and WaferPak to whole wafer burn-in and infant mortality screening of silicon carbide devices. Since our initial installation in January, we've received multiple follow-on orders for additional WaferPaks from this customer, including multiple new designs and now have a significant number of different devices that have been released into production. This customer is forecasting additional capacity needs for our FOX-XP systems during this fiscal year and for years into the future. The silicon carbide semiconductor device market is growing at a tremendous rate with a unique growth of high power devices of over 50% CAGR as per our research from 2019 to 2025. Silicon carbide is an impressive material for high power and particularly high voltage devices for applications such as the needs of electric and hybrid electric vehicle powertrains, electric vehicle charging infrastructure, IT data centers, power supplies, and renewable energy power conversions such as wind and solar as well as for power storage. These devices have shown reductions in power losses of as much as 78%, and many articles have been written about the first mainstream use of silicon carbide power devices that were in the Tesla Model 3 which enabled much longer driving range per charge. This has changed the market with most of our electric vehicle and hybrid electric vehicle automotive companies moving to silicon carbide-based powertrain and charging systems. The challenge is that the reliability of silicon carbide is known to have high infant mortality rates, but after reliability burn-in screening, these defects can be completely removed to provide extremely reliable devices for these mission-critical applications. Aehr is able to provide a complete solution for one of the key reliability screening tests on an entire wafer of devices all at one time while testing and monitoring every device for failures during the burn-in process to provide critical information so they are not later packaged into multi-die modules where the yield impact is significant. The old research forecasts over 600 million yielded power MOSFET 20 amp equivalent devices shipping per year by 2025 which equates to over a half a million wafer starts per year, creating an enormous opportunity for our wafer level and singulated die systems given the long durations required to burn-in the devices and to remove the detected parts. Burning times can be as long as days per wafer, so even at our industry-leading 18 wafer per system capacity FOX-XP, that's a significant number of systems. The next highlight is pretty important. In fiscal 2020, we saw the industry adopt production wafer level burn-in. We made significant progress with our new FOX products for wafer and singulated die test burn-in during the fiscal year with two tier one customers added and five customers transitioning to production with a 100% stabilization on infant mortality screening with our FOX systems. We saw our silicon photonics customers move to production for the first time in just this last fiscal 2020. During the fiscal year we saw our lead customers support silicon photonics move to full volume production. We expect them to purchase additional systems this fiscal year and into the future as they continue to maintain or grow their market share and add additional silicon photonics devices to the mix. We also made three additional silicon photonics customers to production with our FOX systems in fiscal 2020. All three of these customers are expected to ramp production during fiscal 2021 as well, adding capacity in both systems and consumables. And near the fiscal year end, we announced yet another new silicon photonics customer that is deploying our FOX-NP system for initial production burn-in and stabilization of high-performance silicon photonics devices and is forecasted to then transition to our FOX-XP multi-wafer systems during fiscal 2021 to meet their volume production forecast. Silicon photonics devices are highly integrated silicon-based semiconductors that have embedded or integrated the non-silicon-based laser transmitters and receivers to enable a smaller, lower cost, higher reliable alternative to traditional fiber optic transceivers. Historically, fiber optic transceivers are made up of many different logic ICs, external discrete lasers, and receivers into a mechanical package that is used in data center and telecommunication infrastructure. Basically, this is the high-speed transmission lines for long-haul and data center to data center back point of the internet. However, these fiber-optic transceivers have been extremely difficult and expensive to build. This has been seen as limited to the adoption of fiber optic transmission of data and to the maximum data rates and transmission in the data centers that store the world's data. The old research has stated that market leaders like Intel, Cisco, Luxtera, Inphi, and Acacia are setting the standards for 100, 200, 400, and even 800 gigabyte transceiver standards based on transceivers with fully integrated silicon photonics devices while many other companies are also jumping into this exploding market. One of the key claims of these transceivers are their lower manufacturing costs and the ability to scale manufacturing each of the whole wafer level integration of these devices which brings the sale of semiconductor manufacturing to fiber-optic communication to the first time in history. Where Aehr fits in is that these devices all need to have their photonics transmitters stabilized under high power and temperature and customers also need our systems to screen for infant mortality of these devices to ensure high emission quality and long-term reliability. This is a manufacturing step down on 100% of the value, and in the case of silicon photonics, we provide a much more cost-effective and scalable solution for this step and doing this equivalent stabilization and screening after the dies are put into the final PCB substrate package. The silicon photonics market is growing at a CAGR of 42% between 2019 and 2025 to a $3.6 billion annual market and we believe that the entire industry will transition to wafer level singulated die for this critical manufacturing step which is where our FOX-XP products stand alone as the most cost-effective solution to this and a portfolio of patents and IP in this area. We estimate that the market opportunity for wafer stabilization reliability screening equipment and contactors for silicon photonics is approximately $150 million by 2025 with well over 300 wafers of test capacity required by that time. While our FOX-XP production system is the only multi-wafer system available to test and burn-in these high poly silicon photonics wafers in a single insertion and we can test up to nine wafers in parallel on a single system. So the total capacity needed by 2025 is about 35 of our nine-wafer FOX-XP systems to put this into perspective. Today, Aehr has shipped about 50 wafers of capacity in this application. Interestingly while fiscal 2020 was the first year to see volume production silicon photonics with wafer level burn-in, fiscal 2020 also saw a second half pushouts in silicon photonics ramps. We experienced push-outs from customer forecasted orders in our second fiscal half for our FOX systems and consumables in data center and some 5G end-use applications for silicon photonics transceivers. These customers, as I said before, have indicated the push-outs as temporary and they require the additional system capacity and consumables in the current fiscal 2021 year. Our next highlight is shipments of consumables were a significant percentage of revenue this year. Shipments of our proprietary WaferPak contactors and Diepak carrier consumables for our FOX systems accounted for 48% of total revenue in fiscal 2020. In fiscal Q4 which just ended our consumable revenue was 79% of revenue as anticipated customer orders for systems did not materialize, but customer demand for the consumables for the installed base systems held steady. As we stated in the past historically, consumables can often soften any weakness in systems as customers contemplate new capacity but maintain in some cases actually increase the need for WaferPak contactors and DiePak carriers to get new design devices out to market. In the semiconductor test industry which is just over $9 billion totaled last year in 2019, it is made up of $3.7 billion in test systems; another $3.7 billion in consumables such as probe cards for contacting wafers and sockets and pathworks for contacting package parts and then another $1.7 billion is semiconductor device handling equipment in wafer and package form. With Aehr's FOX product line, we play actually in all three segments. Our FOX systems serve the test systems market. Our WaferPaks and Diepaks serve the contactor consumables market, and our aligners and the FOX systems themselves that have the integrated thermal capabilities of a wafer cover our turnkey solution for handling devices. So the consumable business as a whole is approximately the same size and often higher than the systems business in down years in the overall semiconductor test business. Again both are about $3.7 billion, but for reliability in burn-in space which we primarily play in, the consumables can be two to four times the annual sale of systems as the systems typically are used for longer periods of time with annual needs for new contactors and consumables. This is why we're confident that our consumable business is likely to exceed our overall systems business over time even though both will grow in absolute dollars. Our next highlight is that Aehr is currently engaged with over a dozen new potential customers. We're currently working with well over a dozen additional tier 1 and tier 2 customers that are considering using our products for high market growth applications including silicon photonics, silicon carbide, automotive, and memory devices production burn-in. While tier 1 customers are seen as those with the opportunity to drive $6 million to $10 million or more in systems and consumables per year, our tier 2 customers are considered to have the market share and application to drive $1 million to $3 million per year or more. Several of these companies are expected to place their orders this year with ramps in the production later in the fiscal year and/or the following fiscal year. We see an increase in awareness and adoption rate that we believe could drive the majority of the market for silicon carbide, as well as silicon photonics to move to wafer level singulated die burn-in within the next few years. Our final highlight is we in fiscal 2020 completed our planned restructuring and shift to higher-margin products. Aehr completed our previously announced restructuring and also moved to much higher margin FOX systems and consumables during the fiscal year. We started this before the pandemic outbreak and completed it during the last few months. As part of the previously announced plans, we completed the closure of our Japan subsidiary and also transitioned our European sales to third-party sales representing late in the fiscal year. We also added key marketing directors and made some additional structural changes to our sales force. We believe these enhancements have already and will continue to improve our efficiency and materially increase our sales activity and bookings going forward and increase our penetration of key customers in our target markets. We believe these changes position us for successful sales of our current products as well as additional new products planned for introduction this year. We also have shifted to higher margin, highly differentiated systems and consumables. As I noted in the last call, we've started to see some forecasts for renewed market demand for package burn-in systems, particularly from customers who are asking us about our high voltage capability, adding this capability to our package part systems. These changes in long-term forecasts reflect the need for higher voltages and other requirements for devices and automobiles, particularly with electric and hybrid automobiles and autonomous vehicle sensors. We expect to see a resurgence of package burn-in systems orders from some customers specifically the ABTX system customers and to generate additional new opportunities with our planned introduction this fiscal year of a new package part burn-in system product that has very high voltage test capability. We see the need for high voltage capabilities in both wafer level and package part as a new high-growth opportunity for Aehr test and expect to see sales from current customers resume and also add several new customers including both tier 1 and tier 2 level customers for package part burn-in. At the same time, and as discussed last year, we had seen a significant drop-off in our package part product business that several of our customers have shifted their businesses for entirely closed product lines that were driving the need for testing burn-in using the high power and high pin count capabilities of our ABTX family products. In one specific case, a customer that had been buying multiple systems per year has all but shuttered a line of products and we feel they are unlikely to take additional capacity of that particular configuration of the system that we had several systems of inventory left on hand when they dropped their forecast to zero. Interestingly, this, and several other customers have at the same time shifted their focus to other product lines particularly for automotive and other new applications that are expected to drive new needs in the future. As I mentioned this specifically last quarter and noted that as a result, we were going to do a deep dive in their inventory for older products and configurations. We decided it was prudent and appropriate to write down the inventory that we simply do not see a likelihood of selling in the foreseeable future which resulted in a one-time charge this quarter of $1.6 million in inventory. This leaves us with significant inventory of systems and material that yields in our near-term forecast particularly in our FOX products which also allows us to make short lead time shipments as well as meeting significant revenue forecasts without taking on additional inventory expenditures. Last year we reported on the shipment of our new FOX-CP testing burn-in system to a major new tier 1 customer for a very high volume application for the enterprise and data center market with a planned build-out of this production ramp over the next several years. The FOX-CP is our low-cost single wafer compact testing reliability verification solution for logic membrane photonic devices and their solution is comprised of a test system integrated with a wafer probe configured with a high-powered thermal chuck that allows up to two kilowatts of testing when burning in of full wafers. This customer has indicated they plan to begin their production ramp within our current fiscal year and we expect to begin additional shipments of test sells to them in the second half of this fiscal year. We're very excited about this application which is expected to drive very high volumes of devices and we believe will drive test system sales for several years. Let me try to wrap this up. We added two key tier 1 customers this past year. We now have five significantly large tier 1 customers again applications and market sizes that can drive $6 million to $10 million or more a year on our FOX wafer level articulated die systems and consumables. We also have another seven tier 2 customers that are each capable of FOX product sales typically between $1 million to $3 million and sometimes more. In addition, five of our customers moved to production during the year using our FOX products for 100% stabilization and burn-in and infant mortality and we will be growing the list of both tier 1 and tier 2 customers this year in wafer level, singulated die but also some packaged part markets and feel we can significantly grow these and new customers in the markets we're already serving. Additionally, we will be adding new markets and enhancements to address some significantly large new markets later this fiscal year. We'll also see renewed activity and interest in our FOX systems and consumables for seven new applications in the 2D and 3D sensor markets, particularly for mobile devices. These sensors are becoming ubiquitous in smartphones, tablets, and are forecasted to be adopted in laptops and computers as well. The level of security associated with facial recognition far exceeds fingerprint-based biometrics and certainly greater than traditional keyboard entry passwords. These new opportunities in 2D and 3D sensing are offering opportunities that could add significant upside to our currently forecasted revenue for this year and next but are not built into our current guidance. Although COVID-19 has created challenges such as international travel, some small impacts on our supply chain, and created caution and/or delays with some customer production ramps, we believe that there is no long-term negative impact to Aehr, the demand for our products, or for the attractiveness of the key markets that we serve. We absolutely believe that we will come out of this stronger than we went into this worldwide pandemic with more production customers, more applications, and higher margins with higher-valued products. Our key customers' products are being used to build new data centers, improve data rates, increase storage in data centers, enhance the 5G infrastructure, enable the newest sensors and technology in smartphones and tablets, and support the widespread adoption of electric and hybrid electric vehicles and charging stations and just the unstoppable demand for memory and data storage and computing in data centers, mobile devices, and hundreds of applications that are keeping the world connected. As we move into fiscal 2021, we remain optimistic about growth in systems and consumables within our installed base of customers as well as expanding the number of customers with our family of FOX new solutions. We expect significant growth in both top and bottom lines moving towards much lower fixed operating expenses and significantly higher margin products and services. With that, let me turn it over to Ken before we open up the line for questions.
Ken Spink, CFO
Thank you, Gayn, and good afternoon everyone. As Gayn mentioned, our fourth quarter results reflected the impact of the current challenging global business environment around the COVID pandemic and customers have pushed out forecasted orders during the second half of fiscal 2020. In our prior year call, we announced that our two new FOX-NP customers and our new FOX-CP customers were expected to ramp to volume production during fiscal 2020 and add capacity resulting in orders for FOX-XP systems and CP systems. While these orders did not happen in the fiscal 2020 year just reported due to timing pushed out by the customer, we are confident that these orders will occur in our current 2021 fiscal year. It is important to note that through the third quarter of fiscal 2020, the company recognized revenues of $18.5 million or a little over $6 million per quarter and was profitable. This reflects the impact of the cost reduction initiatives announced in the prior year effective fiscal 2020 and a change in product mix which allows the company to be profitable at lower revenue levels. In the fourth quarter of fiscal 2020, revenues decreased significantly as there were no system revenues recognized during the quarter. Now let me take you through our results. Net sales in the fourth quarter were $3.8 million compared to $6.1 million in the preceding third quarter and $7.2 million in the fourth quarter of the previous year. The decrease from Q3 includes the decrease in wafer level burn-in revenues of $2.2 million primarily due to a decrease in wafer level burn-in system revenues of $2.1 million. The decrease from Q4 last year includes a decrease in wafer level burn-in revenues of $3.3 million primarily due to a decrease of $3.6 million in wafer level burn-in system revenues and a decrease in customer service revenues of $206,000. Non-GAAP net loss for the fourth quarter was $720,000 or $0.03 per diluted share compared to non-GAAP net income of $452,000 or $0.02 per diluted share in the preceding quarter and a non-GAAP net income of $428,000 or $0.02 per diluted share in the fourth quarter of the previous year. The non-GAAP results exclude the impact of stock-based compensation expense, restructuring charges, and write-down of excess and obsolete inventory. On a GAAP basis, net loss for the fourth quarter was $2.9 million or $0.13 per diluted share which includes the impact of approximately $1.9 million or $0.08 per share in inventory write-down and restructuring charges taken in the quarter. This compares to GAAP net income of $245,000 or $0.01 per diluted share in the preceding quarter and GAAP net income of $110,000 or $0.00 per diluted share which includes the impact of $118,000 or $0.01 per share in restructuring charges in the fourth quarter for the prior year. Excess and off-site inventory reserves of $1.6 million were taken in Q4 ‘20 related to slow-moving and obsolete packaged part burn-in product inventory, legacy FOX inventory, and down-maintenance FOX-P products and subsystems. The $220,000 restructuring charge consisted of severance payments and associated legal fees for individuals impacted by the closure of our subsidiary in Japan and a reduction in headcount in our German subsidiary. As noted in our last call, we will be moving to a sales rep distributorship model for sales in these regions. Gross loss in the fourth quarter was $93,000 or 2% of sales compared to a gross profit of $3 million or 49% of sales in the preceding third quarter and gross profit of $3.4 million or 47% of sales in the fourth quarter of the previous year. The sequential and year-over-year decrease in gross margin is primarily due to the impact of the $1.6 million excess and obsolete inventory provision in Q4 accounting for a 44% point margin impact during the quarter. In addition, gross margin was unfavorably impacted due to higher unabsorbed overhead costs to the cost of sales due to lower revenue levels in the fourth quarter. As we've noted on prior calls, our WaferPak and Diepak revenues are accounting for a more significant portion of our overall revenues, favorably impacting our gross margins as they maintain higher margins in our system or pass-through products. In the fourth quarter, our WaferPak and Diepak consumable business accounted for 79% of total revenues, up from 51% in the preceding Q3 and 36% in Q4 of last year providing a favorable direct material margin impact for the company. Operating expenses in the fourth quarter were $2.7 million flat compared to the preceding third quarter and down $508,000 from $3.3 million in the fourth quarter last year. While Q4 ‘20 was flat to the preceding quarter, a decrease in SG&A of $217,000 was partially offset by the restructuring charges of $220,000 taken in the quarter. The decrease in operating expenses from prior year fourth quarter is primarily due to restructuring actions taken in the prior year related to reduced costs. SG&A was $1.7 million for the fourth quarter compared to $1.9 million the preceding third quarter and $2 million in the prior year fourth quarter. The decrease from Q3 is due primarily to lower labor-related costs including lower salary expense and lower commissions from lower bookings and sales incentives in the fourth quarter. Savings resulted from the closure of our Japan subsidiary and lower travel due to travel restrictions related to COVID-19. The decrease from prior year fourth quarter is primarily due to the impact of cost reduction initiatives in fiscal 2019. R&D expenses were $854,000 in the fourth quarter flat compared to $845,000 the preceding third quarter and down $266,000 from $1.1 million the prior year fourth quarter. The decrease in R&D expenses from Q4 last year is primarily due to cost reduction initiatives in fiscal 2019 and lower R&D project materials. Now turning to the results for the full fiscal year. Net sales for fiscal 2020 were $22.3 million, up 6% from net sales of $21.1 million in fiscal 2019. The increase includes an increase in wafer level burn-in revenues of $5.3 million partially offset by a decrease in package parts revenues of $2.2 million and customer service revenues of $1.9 million. The decrease in package parts revenues is due to no ABTS system revenue in FY 2020 compared to three ABTS systems sold in FY 2019. Fiscal 2020 net sales were comprised of $18.9 million in wafer level burn-in revenue and $3.4 million at customer service revenue. For the full fiscal 2020, system revenues accounted for 36% of revenues compared to 45% in fiscal 2019. WaferPak and Diepak consumable revenues accounted for 48% of total revenue in FY 2020 compared to 29% of revenues in FY 2019. Customer service revenues accounted for 15% of revenues in FY 2020 compared to 25% of revenues in FY 2019. Non-GAAP net loss for fiscal 2020 was $27,000 or $0.00 per diluted share compared to a non-GAAP net loss of $2.8 million or 13% per diluted share in fiscal 2019. While revenues increased by $1.2 million in FY 2020 compared to FY 2019, the non-GAAP bottom line improved by $2.8 million. As noted earlier, this reflects the impact of cost reduction initiatives effective in fiscal 2020 and the change in product mix which allowed the company to be profitable at lower revenue levels. On a GAAP basis, net loss for the fiscal year was $2.8 million or $0.12 per diluted share, which includes the impact of approximately $1.9 million or $0.08 per share in inventory write-down and restructuring charges taken in Q4. This compares to a GAAP net loss of $5.2 million or $0.23 per diluted share, which includes the impact of $1.5 million or $0.07 per share in inventory write-down and restructuring charges taken in fiscal 2019. Gross profit for fiscal 2020 was $8.4 million or 38% of net sales compared to a gross profit of $7.6 million or 36% of net sales in fiscal 2019. The increase in gross margin percentage in FY 2020 compared to the prior year is primarily due to lower direct material costs due to a change in product mix, partially offset by the impact of excess and obsolete charges in FY 2020 compared to FY 2019. Operating expenses for fiscal 2020 were $11.1 million, a decrease of $1.5 million or 12% from $12.6 million in fiscal 2019. The decrease included a decrease in SG&A of $194,000, a decrease in R&D of $767,000, and a decrease in restructuring charges of $505,000. SG&A was $7.5 million in fiscal 2020, down from $7.7 million reported in fiscal 2019 primarily due to cost reduction initiatives in fiscal 2019. R&D expenses were $3.4 million in fiscal 2020, down from $4.2 million in fiscal 2019. The decrease is primarily due to cost reduction initiatives in fiscal 2019 and lower R&D material expenses. Overall the decrease in SG&A and R&D of $961,000 included $922,000 decrease in labor-related costs as a result of cost reduction initiatives implemented. Turning to the balance sheet for the fourth quarter our cash and cash equivalents were $5.4 million, up $375,000 compared to $5.1 million at the end of the preceding quarter. Accounts receivable at quarter end was $3.7 million an increase of $206,000 compared to $3.5 million at the preceding quarter's end due to the impact of customer deposits and deferred revenue on current quarter revenues. Inventories at May 31 were $8 million compared to $9.3 million at the preceding quarter end; the $1.3 million decrease is primarily due to the $1.6 million E&O inventory provision taken in Q4 2020. Property and equipment was $663,000 compared to $783,000 preceding quarter end. Customer deposits and deferred revenue short term and long term were $192,000, a decrease of $227,000 compared to $419,000 at the preceding quarter end primarily due to the decrease in backlog from the prior quarter. Our current and long-term debt of $1.7 million is related to funds we’ve received during the fourth quarter under the paycheck protection program or PPP which we announced in an 8-K filing in late April. We expect over $1.4 million up to the full loan balance to be forgiven under the provisions of the CARES Act. Bookings in the fourth quarter total $2.6 million. Backlog at May 31 was $2.5 million compared to $3.6 million at the end of the preceding quarter and $7.5 million at the end of the fourth quarter of the prior year. Now turning to our outlook for fiscal 2021. For our fiscal 2021 year ended May 31, 2021, we expect full-year total revenue of between $25 million and $28 million which will represent growth between 12% and 26% year-over-year and to be profitable for the year. As a requirement to receive funding under the CARES Act, the company is required to use the funds from the PPP loan to retain employees and maintain payroll. While our revenues and backlogs have decreased from the impact of the current challenging global business environment around the COVID pandemic, the company has made no headcount reductions. However, the company has taken actions to control spending through mandatory vacations, shutdown days, and travel restrictions. This concludes our prepared remarks. We are now ready to take your questions. Operator, please go ahead.
Operator, Operator
Thank you sir. [Operator Instructions] We will take our first question from Christian Schwab with Craig-Hallum.
Unidentified Analyst, Analyst
Hi, this is Tyler on for Christian. Thanks for letting us ask a couple questions. First as we look at fiscal '21, could you help with any expectations for linearity quarter-to-quarter within that? Are you expecting maybe some softness and some customer push-outs to continue in the first half or any customer orders or conversations with them that would give you any indication that the first half or second half would be stronger or weaker could be helpful?
Gayn Erickson, CEO
A couple of things. One is I think it's a fair number of the customers and we specifically stated in the call notes are forecasting checking out, so I think we do think our second half will be stronger than our first half and I think that's a reasonable conservative stance to take. We have not provided quarterly guidance before and basically we do start the quarter with a small backlog. We've got several customers with forecasted systems that we have on hand and in inventory that can turn in weeks in some cases they had planned to take them last quarter. So we have that in the inventory and whether they come in and try to shift by the end of this quarter or next is the over under and honestly we're focused on new wins and customers and markets to meet our systems. I can tell you waking up every day and checking for expected orders doesn't help. I will also tell you I do that more often than I want to admit to. I mean our customers are telling their customers and their shareholders that they're ramping. I mean in many cases that's -- I don't even hear what the customers necessarily just tell me. I'm not checking and making sure that I believe them by what they’re telling their shareholders.
Unidentified Analyst, Analyst
Thanks. That was very helpful. The second question then is you outlined you have six tier 1 customers that are capable of doing $6 million to $10 million a year and you have seven tier 2 customers that are capable of doing $1 million to $3 million a year so obviously just math that if those customers ramped into those revenue levels your total revenue would be significantly higher than it is today and also understanding and you have thousands more customers you're engaging with, so I'm just wondering how we should think about how you guys think about those customers ramping to those types of levels? Is this a three to five year kind of time range where we would expect most of those to be in that kind of revenue level or how should we think about that?
Gayn Erickson, CEO
Well, and again I -- so realistically when we put this tier 1, tier 2 this is the first time we've introduced that term and we had some feedback and just how do we get our arms around it. These when we look at the total available market that these customers serve, the unit volumes, the test times, is it a 100% burn-in or sampling. We can estimate what their buying power is for any given year and so the intent of that was that is a range of the kind of customer, I mean -- I don't want to get into all the detail but we’ve had our 10% customers that we have been forced to talk about and we're adding one or two more this year. Our 10% in our 10K customers are the likes of Intel and Apple, TI. So these are large multinational companies with large scale applications and for them to be able to do $10 million or $12 million in a year they've all proven that they can do that. Okay. So that's the kind of class we're trying to describe that as. We have other customers including ones that we've announced and I want to be careful not to -- not mention them but I don't want to invite customers to think I don't love them as much but they're just not the likelihood of them doing $10 million is nowhere near the same but we would expect them to do $1 million, $2 million or $3 million a year or so. As always is the case at least early on we can see even customers being lumpy like maybe they have a good year and then a softer year the next year but if you start to look at the these new devices and silicon photonics and silicon carbide and some of these others they're actually growing so fast. It's reasonable for them to be sustainable year after year.
Unidentified Analyst, Analyst
That's great and very helpful. That's all from me. Thanks guys.
Operator, Operator
Thank you. We'll take our next question from Jeff Bernstein with Cowen.
Jeff Bernstein, Analyst
Yes, I am sorry. I think you cut out for a minute at one point you were talking about some business that is not in the guidance is that correct and can you just go back over that?
Gayn Erickson, CEO
Sure. I would -- okay. So did you hear me cut out or did I stumble maybe talking? All right, okay. So anyhow, yes, so what I did and I'm not going to go back to read and I just go back up again to make sure, so this was specifically we've seen in the last several months maybe and even picking up stream some renewed activity in our 2D, 3D customer base that has wafer and singulated die systems installed. They actually have been buying Diepaks from us and Waferpaks, the consumable with new product releases and that it's been material in business for us. But interestingly they had not added any system capacity last year. We've been brought into several new programs that we are aware of now that appear to be a good fit for our products and we're just getting our arms around it right now but it's very interesting that there's some renewed activity there.
Jeff Bernstein, Analyst
Got you. And is there a change going on with regard to a 100% burn-in kind of thing versus some sort of statistical sampling and that kind of thing or is this really just about brand new programs?
Gayn Erickson, CEO
Well let me do this. The programs that they're in which include both 100% and sampling programs are continuing along those. These are new programs. We actually don't have all the details. I think we believe that one of them is 100% and one of them is a sampling but we don't have all the details.
Unidentified Analyst, Analyst
Got you. That's great. Thanks so much.
Operator, Operator
Thank you. We will take our next question from John [indiscernible] Capital.
Unidentified Analyst, Analyst
Hey guys. Thanks for taking my question. How are you? I apologize because I have been on multiple calls. So I just want to apologize in advance in case you've addressed this but I guess I'm partially confused at the progress you keep making. You introduce new products, you get new customers, and yet I don't see it in top-line guidance expectations, top-line performance granted you've got COVID for this quarter I understand but where's the disconnect -- I mean you've signed up a ton of new customers in the past, you continue to sign up new customers you've got existing products, you've got new products you talked at length about them. Everything seems to be going the right way, and it doesn't seem to be flowing through. So I'd just love some help with that basic question.
Gayn Erickson, CEO
Well I think to if we step back as the board and I do sit and try to look at the overall business to try to get our arms around it. We've been putting together three year plans, looking at what those forecasts are -- one of the things I think is fair it just the minimum was a customer we were like well our first our lead silicon photonics customers were buying FOX-P systems but they didn't go to production yet and we talked about that several times maybe almost every single quarter and they, for whatever reasons, had not actually introduced the new products that were moving to the wafer level burn-in and then finally have and qualified it guided to PLR but actually that was if it makes it look a linear time that was over a couple of years that was not what we expected and ultimately it was okay, we’re just going to happen and we finally saw that shipped to production this year and they started to buy all the contactors. So they have these beautiful systems sitting there that were not being used yet. The reason was is they were bringing up the systems and they wanted to ramp quickly, we were able to ship a lot of Waferpaks all well within a month or two and that's part of the business model to get them to production. Now, other customers were kind of a mix; some that had bought after our lead customer that also didn't get to production this year and then we had another customer that was like a six month period. The customer that we just shipped to on with the order that we announced in Q4, it's going to be in production here shortly and then interestingly on our silicon carbide customer they went from zero to a 100% within two months. So what we actually one of my VP of sales was presented in our board discussion the collapsing amount of time it's taking for the customers to go from say when we first ship it to get to production but the lead time on the sales cycle is still a little bit spotty. Some of those have been shorter and some of them have -- we've been talking to some customers for a year now maybe year and a half and then we've had other customers that okay the first innovation one to two quarters later they already are purchasing. So I think this is balance of either our own over-optimism or how fast customers are actually ramping or the deployment I think to some extent the deployment of silicon photonics devices ended customers to remember the -- if you know this or not we have a couple of folks that follow our stock that really track this market it's really interesting to talk to them but the big buyers of this market are Facebook, Amazon, Google it's the large data centers okay and so then enormous buying power and there's then one of the things was it appears they now finally are buying silicon photonics devices were before they were buying the traditional kind of much more expensive didactic transceivers.
Unidentified Analyst, Analyst
All those trends make sense and everything you said just makes sense except for the fact that it doesn't necessarily line up with guidance that is necessarily lower than the guidance you gave last year at the same point in time. I mean I just don't understand why $25 to $28 relative to $20 to $31 or wherever you were a year ago makes sense given you have more customers, you're faster to production like you have new or prior, you have more new products. Help me why is there, why are we not at the inflection point I thought we were at in terms of revenues really inflecting higher? What am I missing? Is it slow early time? Is it pushouts?
Gayn Erickson, CEO
Well, we certainly have stated on the pushouts that we have been facing some customers that they themselves are explaining that in saying that that is turning around and they're planning to move forward. We have some customers that have for the first time actually given us heads up of capacity and forecasts. I think related to guidance and that I mean certainly in the board discussions there's a sense of how aggressive or conservative should we be in this environment. We want to make sure that we can do what we say we're going to do, and there's obviously certain things that are out of our control but we believe that this is a comfortable number.
Ken Spink, CFO
Hey Gayn, I'd like to add a comment related comparative to prior year. So if you take a look just at wafer level burn-in even though our overall total revenues only went up 6%, wafer level burn-in went up 39% or $5.3 million compared to last year. So even though we didn't get any system revenues in Q4 and there were the pushouts really we talked about, we did recognize a 39% increase. One of the items built into the numbers was we had a decrease of $4.1 million if you take a look at our package part revenue and our customer service business that included the upgrades of ABTS systems from the prior year.
Unidentified Analyst, Analyst
My last comment is just that, I really think you guys should take a serious look at your board out of this year's proxy season and it looks like it could use a refresh under ISS standards and I think that's something that could maybe help you guys progress more rapidly or bring a set of fresh eyes to the entire situation. So I would recommend that as a shareholder. Otherwise, thank you.
Gayn Erickson, CEO
Hi John, I appreciate it and just a comment just in general I know that it was a specific question there makes us very happy that we've added a couple of there's been a transition in our board over the last couple years of adding some additional board members or all upon who had been a capital director at Intel, very influential, has been wonderful John came on a board a couple years ago as well and we did actually have a lead board member, an independent board member passed away during the year. And there’s some discussions about is it appropriate time to add a board member both for any kind of government-related things and just honestly with some reasonable balance and expenses and others. So I appreciate it John.
Operator, Operator
Thank you. We'll take our next question from Geoffrey Scott with Scott Asset Management.
Geoffrey Scott, Analyst
Hi Gayn. How are you?
Gayn Erickson, CEO
Okay.
Geoffrey Scott, Analyst
First question. You added a new sales rep in, I guess German base to cover the European accounts. How long do you think it will take to get some sense as to whether or not that is working out and precisely what kind of metrics will you be looking at to determine whether or not it was a good move? Is that number of new customers, is it dollar volume that they were able to generate? Please help me out.
Gayn Erickson, CEO
Okay. Well a couple things there. I mean certainly early on and I – made so they burn-in made several trips and had customer calls with them and I was really pleased with the level, I guess the number of quality customers and the levels within those customers they were able to get to and last time we were there was I think February or March. One thing that it definitely has impacted us has been some of the international travel. I think Ken kind of alluded to it, expense controls it's not very hard to have expense controls right now. So we've been doing some pretty creative things with our reps and with remember we have employees around the world to ensure that it's not limiting our capabilities or installations and support our customers but HTT who is out of Germany and covers our northern Europe has actually been a good start. I do expect them to move from great customer calls to orders both in terms of volume, quality and eventually dollars as well and those are expectations that we would have starting this year as well as reps in southern Europe and we are working to close on a rep or two in Japan right now. We've already been in discussions but we didn't formalize anything with them and looking at some other things. There's absolutely people that are really good at some of these non-silicon application customers around silicon carbide in particular but also silicon photonics that we're trying to bring on. So I am hoping and expecting and burn on has metrics around getting more sales through those reps as well.
Geoffrey Scott, Analyst
Okay. Next question you have been working on engineering for a more fully automated FOX system. Where are you on that engineering progress?
Gayn Erickson, CEO
That is a system that is still in development. We haven't talked and given customers exactly what the integration and lead time is due to some specific competitive and other reasons but that is in the process. I'm just going to leave it at that for now.
Geoffrey Scott, Analyst
Okay. Last question I will have to go back and kind of parse the statements made about the tier 1 customers, tier 2 customers things like that but my gut instinct is that if you add the revenue guidance for fiscal '21 that firstly all of that is coming from further penetration of existing customers and no need for any real new customers. Is that fair?
Gayn Erickson, CEO
That is fair but I also want to just point out that's not because we think we are going to win new customers. So you want to take that from how conservative we are. It's like guys I'm not starting off this year thinking that if we can just win that one big guy I can make my numbers, that is not the case. We can build up that guidance entirely with current customers and applications.
Geoffrey Scott, Analyst
What my sense was any new customer would represent an upside from that guidance that you gave us. Is that good?
Gayn Erickson, CEO
Yes. That is true and to be balanced it obviously creates some potential for de-risking but yes.
Geoffrey Scott, Analyst
Okay. That's all I have. Again thanks.
Gayn Erickson, CEO
Thank you.
Operator, Operator
Thank you. We'll take our final question. It comes from Jeff Bernstein of Cowen.
Jeff Bernstein, Analyst
Yes, hi. Just two quick ones. So you just touched on gallium nitride and my question was what's going on in terms of opportunity for you in gallium nitride RF and gallium nitride power and what are engagements kind of look like so far and I have one more.
Gayn Erickson, CEO
So we actually we might actually already be testing a gallium nitride wafer; I apologize I know that that is the plan, but it is a power device. So from our tester it looks pretty similar to if it was, that's interesting hey operator I got one of our people is just on the call calling myself. So I didn't have a problem. Is everybody’s still on? Okay, anyhow, so they absolutely are doing both silicon carbide and gallium nitride and to be blunt they look the same to us. They both have similar reliability issues. It sort of you got to have a certain -- I don't know if I take sense of humor but if you're a tester guy and you're testing semiconductors you love devices that fails. Okay. I mean that has been correct for us. It turns out and fail in an application where it matters and then the other thing is you want devices that fail and are never going to stop failing. Silicon carbide is actually a very mature process in many ways. It's just that substrate is inherently not going to give you the crystalline structure and ever get to the defects of silicon wall. People know compounds, but you can't get semiconductors up to 1700 volts with the efficiency. So okay you got, you do a burn-in stuff and all you do is one or two days later you read it out. These aren't actually very expensive steps even on our tool. And so from a cost-effectiveness it's cheap. People were just surprised we could do it. So folks that weren't on the call last year when we first engaged with this initial customer they were like what do you mean you can do this like it was but and we said no will show you and we just simply offered them to buy a WaferPak and then we tested one of their wafers. So they didn't even know that it was feasible, I think it was at all possible. We tested their wafer, we send it I think we've tested two or three of them sent it back they went through their entire qualification process we not only told them which devices failed but what time they fail and they went through the whole core process. It got 100% yield. They then turned around and said can we shipping more wafers and here’s our issues, we actually while we were building our system continue to ship wafers for them. So if you can please borrow more time so we actually shift out of our side. We were shipping the wafers I believe they were shipping to customers because they were like this is fantastic. So and that's why they immediately ramped and so that's been a very positive experience for all of us.
Jeff Bernstein, Analyst
And again is that a different test structure you do that or?
Gayn Erickson, CEO
So far I have not heard about people driving the RF part of it, these tiny little transceivers for the same level reliability. But our ears are open. I think it's just that maybe the criticalness of the first one the first application was these power modules going into automotive where they were stacked but I believe that people will be doing this for discrete. It will not surprise me if we go to the RF side, the system capability is there. Yes. Got you. Okay. Great. So then just back on the question on the relative guidance which kind of jumped out to me as well but I think what I'm hearing is you know in each one of these markets we've had a gartner or hype cycle. Gallium nitride, silicon carbide, 5G, silicon photonics, 3D sensing, AR, autonomous driving every one of these things. We all know they are all coming. So it feels like we're just in that early phase where you just don't have enough that's all going to production and getting out there in the world to really get a trend going for you guys and hopefully that means that this year's guidance has sort of been shaken down to take all that into account and say we're going to stop hoping this stuff hits the inflection point and we're going to let it hit the inflection point when it does, is that a proper characterization? I think majorly so and that part about there's only so much we can do when we have a customer that says for forecast they have the products they say. I mean we had specific quotes who were giving them to ourselves in the board it's like nobody else has anything like this period of any price of course then it's like entirely right entirely charge more for them but that's a different discussion. So we know that they're planning to and I again my intention was not to spend a lot of time talking about COVID, there are some businesses that I think we all can just wonder what the heck is going to happen. This shouldn't be one of them. I mean our semiconductor companies are all engaged. They’re all, all their plants are open. They're the end-user applications for us are not being impacted we believe there's nothing that really impacted related to anything related to COVID or pandemics or international travel or hotels or something that should have any impact but certainly more communication, more data all of stuff is in play. But I think that I'm comfortable with where we're at -- one of the discussions were should we go out with guidance it's like absolutely we should and we hope to have a good this year.
Jeff Bernstein, Analyst
Great. Thanks very much for the time.
Gayn Erickson, CEO
Thank you Jeff. Operator?
Operator, Operator
We have no further questions in queue.
Gayn Erickson, CEO
Okay. I appreciate your time with us and we as always if you have any questions or follow-up questions send to us if you could set something up to me in there. Okay. Thank you all very much and have a good one. Everyone stay safe.
Operator, Operator
This concludes today's call. Thank you for your participation. You may now disconnect.