Aehr Test Systems Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
January 9, 2024

There are 9 speakers on the call.

Operator

Greetings, and welcome to Aehr Test Systems Second Quarter Fiscal 20 24 Financial Results Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Jim Byers of MKR Investor Relations.

Operator

Jim, you may begin.

Speaker 1

Thank you, operator. Good afternoon, and welcome to Aehr Test Systems' 2nd quarter fiscal 2024 financial results conference call. With me on today's call are Aehr Test Systems' President and Chief Executive Officer, Gain Erickson and Chief Financial Officer, Chris Siew. Before I turn the call over to Gain and Chris, I'd like to cover a few items this afternoon right after market close. Aehr Test issued a press release announcing its fiscal 2024 Second Quarter results.

Speaker 1

That release is available on the company's website at air.com. This call is being broadcast live over the Internet for all interested parties, and the webcast will be archived on the Investor Relations page of the company's website. I'd 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 that could cause actual 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, I'd like to turn the conference call over to Gayn Erickson, President and Chief Executive Officer.

Speaker 2

Thanks, Jim. Good afternoon, everyone, and welcome to our Q2 fiscal 2024 earnings conference call. Thanks for joining us today. We'll start with a quick summary of the highlights of the quarter and the continued momentum we're experiencing in the semiconductor wafer level test and burn in markets. Then Chris will go over the financials in more detail.

Speaker 2

After that, we'll open up the lines to take your questions. We had another solid quarter with strong year over year growth in revenue and net income, both ahead of consensus estimates. Revenue for the quarter was $21,400,000 an increase of 45% year over year, And we generated non GAAP net income of $6,700,000 slightly over 31% net profit. For the first half of the fiscal year, we grew revenue 65% over the same period last year. We continue to see increased demand for our wafer level And remain confident about the future demand for our unique technology solutions and the multiple market opportunities they address.

Speaker 2

In just the last 60 days, we've seen how the slowing of the growth rate of the electric vehicle market has had a negative impact on the timing of several current and new customer orders and capacity increases for silicon carbide devices used in them. For clarity, we do not see the Silicon carbide market actually decreasing, only a slowing of the growth rate and we've seen delays in both Current customer and new customer purchase orders for production ramps to meet those electric vehicle demand compared to what we are expecting even within the last several weeks and days. I'll discuss more detail on our new customer engagements, But a very large customer that we've been engaged with on a significant automotive benchmark in particular has modified their timing for taking multiple production Systems, which we feel most likely pushes them out of this fiscal year and is reflected in our lowered revenue forecast for this fiscal year. Recent announcements from some automotive semiconductor suppliers of slowing growth due to their customers stockpiling parts suggests that the automotive semiconductor slowdown may be due in part to a temporary excess in inventory. But in addition to slowing sales of Automobiles Worldwide related to overall caution by automotive buyers due to increased interest rates and its impact on new auto sales.

Speaker 2

Multiple companies we're engaged with are large suppliers of automotive semiconductors and they have put in place temporary cost control measures that have trickled down Even silicon carbide plants, which we have heard are the area least impacted due to the expected growth that is forecasted by their customers. As a result, we've seen delays in customer ramps and capacity expansion plans, which has resulted in delays in expected existing and new customer orders for our products. We're also experiencing the impact of shifts in our customers' product mix, which specifically includes an increase in WaferPak Wafer Contactors for our largest customer. As our customers shift from one design to another, they will order additional wafer packs from us to be able to test and burn in those wafers. In the case of a large shift in the customer mix, this can be a very large number of wafer packs.

Speaker 2

Our largest customers' overall forecast for revenue with us has actually remained relatively flat for the year, but the revenue mix has shifted to fewer systems and more wafer packs. Given the latest forecast from our customers and uncertainty on the timing of their orders, We believe it makes sense to take a more conservative approach to our fiscal year forecast and have reduced our growth estimates for fiscal 2024 revenue. We're reducing our revenue expectations of at least $100,000,000 this fiscal year by 15% to 25 To a range of $75,000,000 to $85,000,000 in revenue. This is still a growth rate of 15% to 30% year over year. Despite this uncertainty and timing of orders, we remain confident about the future demand of our unique semiconductor test solutions in the markets they address.

Speaker 2

We have not reduced our growth expectations for the years ahead, where we continue to see tremendous opportunity. We continue to hear from our current customers as well as companies we're engaged in evaluations with that wafer level burn is critical to their product roadmaps to address multiple large and growing markets, including battery and hybrid electric vehicles, industrial and solar power conversion, data and telecommunications infrastructure and the new incoming optical IO and co packaged optic semiconductor markets. Now let me discuss our progress with Silicon Carbide and Gallium Nitride Power Semiconductor customers. As a reminder, Silicon Carbide is a semiconductor, there's thermal conductivity that's 3 times better than that of silicon and the dielectric breakdown strength of SiC is around 10 times better than silicon, making this much better for high voltage high power applications. Silicon carbide has become the semiconductor of choice for use in electric vehicle power conversion and chargers, and in particular, it is a key differentiator in the motor traction inverter due to the longer range and faster charging than electric vehicles using Silicon Carbide C.

Speaker 2

Silicon carbide semiconductor devices have a very high relative early life failure rate compared to pure silicon, But these failures can be weeded out with special electrical and thermal stresses referred to as burn in such as those supplied by ARRIS family of FOX wafer level test and burn in Our proprietary WaferPak full wafer contactors. Our WaferPaks make electrical contact to the tiny electrical pads of the semiconductors while still in wafer form and are unique and specific to each customer device and wafer layout. Customers are moving from package or module form of burn in to save on the yield loss of the carbide devices at a time on a single wafer and also up to 18 wafers at a time so that our customers can remove Extrinsic failures to get the quality and reliability critical to the electric vehicle suppliers in an extremely cost effective way. We can do this testing and burn in while ensuring that every single device is proven to be burned in before they're shipped to the end customer. This cost effectiveness and assurance that 100 percent of the devices are burned in is critical to this market.

Speaker 2

Last month, we announced our first order for our FOX wafer level vehicles and power infrastructure and adds another major customer to the list of companies using Aehr's FOX products for wafer level test and burn in of widebandgapcompoundsemiconductors. We were already able to ship this system within a few weeks to them to meet their needs. We're now working with 2 of the market leaders in Gallium Nitride, which positions us front and center in a market that we believe is another Gallium Nitride is similar to silicon carbide and that both of these compound semiconductors are considered widebandgap semiconductors that are more efficient in higher voltage power conversion applications than pure silicon semiconductors. We believe the Gallium Nitride market is another potential growth driver for our wafer level solutions, particularly for automotive and photovoltaic applications where burn in appears to be critical for meeting the initial quality and reliability needs of those markets. We continue to make great progress with our previously announced benchmarks and engagements With prospective new customers, including the significant automotive qualification of wafer level burn in we've been doing with one of the market leaders in silicon carbide.

Speaker 2

We believe we have a large opportunity with this potential new customer and feel confident they will move forward with our FOX XP multi wafer solution for their high volume needs, but the timing is taking longer than anticipated. We remain confident that we'll receive initial purchase orders from them in fiscal 2024. However, it's not clear whether they will have infrastructure ready to take shipments from us within our fiscal year that ends May 31. We've made significant progress in expanding our customer base for silicon carbide or SiC and Gallium Nitride or GaN wafer level burn in for a wide variety of applications. We currently have a total of 7 customers purchasing our solutions for SiC and GaN devices and are also actively engaged with more than 2 dozen SiC and GaN companies to address their needs for wafer level test and burn in of these devices.

Speaker 2

Importantly, 10 of these additional companies have already engaged with Aehr for on wafer benchmarks. We have never lost a full wafer level burn in evaluation since introducing our FOX NP and XP systems configured with silicon carbide and gallium nitride test resources, And we believe we will have over 12 silicon carbidegallium nitride customers buying our wafer level test and burn in solutions by the end of this calendar year 2024. These companies are projecting revenue growth and the need for burning in their devices We firmly believe that Aehr provides the most competitive solution to burn in devices that will be used in power modules and have shown examples where our cost devices in individual packages, but the yield hit placing multiple devices in a single package or in modules exceeds the cost of tests significantly. For example, at a loss of 1% per die during burn in, a module containing 32 die experienced a 32% yield loss of the entire module and all the dye inside it are thrown away if they're burnt in at that module level. This is a real life example that we have seen across every customer we've talked to.

Speaker 2

In anticipation of both our current and new customers' forecasted needs, Aehr has put in place the inventory, infrastructure and processes to increase our manufacturing and installation capacity as well as significantly lower lead times to meet growth in our customer capacity needs. This allows us to ship a large number of systems and wafer packs within the same quarter that we received purchase orders, which is certainly the case in this current fiscal year. While we've seen delays in orders from our automotive customers, we're actually seeing a pickup in opportunities for silicon carbide wafer level burn in for applications outside of the electric vehicle market, which includes the industrial, solar and commuter electric trains As the efficiency and value of silicon carbide is being recognized for these additional markets. Even though the largest market opportunity Silicon carbide for Aehr's products. William Blair forecast that the total silicon carbide marking is growing at a CAGR of greater than 4% annually to $8,500,000,000 in 2025 and over 25% of that will be in industrial and energy power conversion applications.

Speaker 2

As we noted on last quarter's call, we're also seeing a continued stream of new designs for our wafer packs as more and more electric vehicles are coming online with their own Our proprietary waferPak contactors are needed with our FOX wafer level test and burn systems to contact with the individual die on the wafer and are designed specifically for a given device. As our customers win new designs from their customers, Aehr will eventually secure orders for new wafer packs to fulfill these new wins. With each new design, our customers will need enough new wafer packs to meet the volume production capacity needed for those new devices. Last quarter, we mentioned that our new wafer pack and applications test program design volume has tripled over the past previous 9 months and this quarter will be a new company record for new WaferPak designs for customers. Each design can turn into a high volume production application driving tens or even hundreds of wafer packs needed for production, highlighting the recurring revenue part of our business.

Speaker 2

We believe that for the semiconductor test markets we serve, our customers desire if not require short lead times for test and burn in systems and particularly for the wafer packs used with them. During this fiscal year, we've been able to increase our manufacturing capacity to enable us to ship up to 50 or more FOX test blades per month, representing 50 or more wafers of full wafer test and burning capacity each month. We have the supply chain infrastructure and process in place to increase this another wafer packs for new systems, but also for our installed base of systems so that customers can purchase and ship large quantities of wafer packs within a few months. We believe the added inventory, increasing capacity, shorter lead times are creating an even larger competitive advantage for us, which in turn will result in continued market share expansion and growth in the markets we serve. So let me move on and talk a little bit about silicon photonics.

Speaker 2

We remain very enthusiastic about this market, which includes the current photonics transceiver market used in data and telecommunications and the upcoming application of silicon Photonics Integrated Circuits for use in optical chip to chip communication, which we see as a major market opportunity. These next generation silicon photonics based integrated circuits can require up to 2 to 4 times as much power for full wafer test and burn in and stabilization. And our new high power configuration of our FOX production system, which can be used to test and burn in these new optical IO devices, expands the market opportunity of the FOX XP system even further. We've been making good progress on our new volume production FOX XP system for these very high power The system is configured to enable cost effective production test of up to 3,500 watts of power per wafer and up to 9 full wafers in parallel and also includes our latest chamber configuration, which has a smaller overall footprint. This new system is also auto aligner ready, enabling our customers to easily dock this to our new FOX WaferPak auto aligner for hands free operation of wafers from 6 to 12 inches using industry standard wafer cassettes and FUPS.

Speaker 2

This new FOX XP configuration allows for as many as 8,000 high power optical devices in parallel on each of 9 wafers before they're singulated and placed into a photonic application, such as fiber optic transceiver modules or for placement in co packaged optics for optical chip to chip communication devices, such as those that have been announced on product roadmaps by companies including NVIDIA, Intel, AMD, TSMC and GlobalFoundries. These photonic ICs require an extra step in their manufacturing process referred to as stabilization or aging, where the devices experience a varying degradation and then stabilize of their optical output power as a function of the input power. This is critical to stabilize before integration into a transceiver or optical chip to chip communication package. This process step takes many hours or even more than 24 hours for the stabilization and is critical to do before the die is integrated into the system. Aehr provides a unique solution for doing the stabilization of all devices while still easy and repeatable wafer form.

Speaker 2

One key challenge is doing this in massive parallelism up to and including all the devices in the single wafer Is the power and power density of testing the devices in this form? The stabilization requires very high power and this not only requires a test system to deliver the high power to the wafer, But all the power to the wafer must be removed in the form of heat to keep it from literally destroying the devices. Aehr can not only provide precise regulated and calibrated voltage Concurrent to devices on the wafer up to 3,500 watts per wafer and 9 wafers at a time, but we can also remove this power while we're Maintaining a uniform temperature across all the wafers. At this time, we believe we're the only company providing both providing and removing this much power to silicon photonics wafers and are also doing it up to 9 wafers at a time. This is a key differentiator in what we believe is an enabler for the capacity and scale needed to address the high power photonic integrated circuits used in Very high speed optical transceivers and also the up and coming optical chip to chip communication devices market.

Speaker 2

As I noted on our last call, Aehr currently has 6 customers using our systems to production test the silicon photonics devices. We're watching this market very closely and are working with some of the leaders in silicon photonics to ensure that they have the products and solutions available to meet their needs for this potentially significant market application. Let me conclude. We expect continued strong demand for our wafer level burn in solutions, given the continued growth forecast for the markets they address and the expanded market opportunities we're seeing. While we've reduced our growth estimates for fiscal 2024 revenue given the uncertainty on the timing of customer orders, We believe we remain well positioned to capitalize on the incredible growth of this industry and are poised for continued solid growth for years to come.

Speaker 2

With that, let me turn it over to Chris, and then we'll open up the line for questions.

Speaker 3

Thank you, again. Good afternoon, everyone. We're pleased to announce another solid quarter for Aehr Test Systems with strong year over year growth in revenue and net income both ahead of consensus estimates. Let me summarize our results for the fiscal Q2. 2nd quarter revenue was $21,400,000 up 45 Percent from $14,800,000 in Q2 of last year.

Speaker 3

Strong demand in all revenue categories including systems, contactors and services contributed to the significant year over year increase in revenue in the Q2. WaferPak revenues were $9,200,000 and accounted for 43% of our total revenue in the 2nd quarter, which was consistent with 45% of our revenue in the prior year quarter. Customers typically buy wafer packs from us subsequent to purchasing our FOX systems. We are seeing continued momentum for new wafer pack designs with existing and new customers to meet their customer and market requirements. As Gay noted, we have seen how the slowing of growth in the electric Vehicle market has had a negative impact on the timing of several current and new customer orders and capacity increases.

Speaker 3

As a result, bookings in the 2nd quarter were $2,200,000 and our backlog as of quarter end was 3,000,000 We expect orders for systems, wafer packs, aligners and services in this and next quarter in time to support our latest revenue forecast. GAAP gross margin for the Q2 came in at 51.1 percent down from 53.4% in Q2 last year. The decrease in gross margin is primarily due to high inventory reserve and increased period costs. Operating expenses in the second quarter were $5,500,000 up 24 percent from $4,400,000 in Q2 last year. The year over year increase is primarily due to previously noted increased headcount related expenses to support our worldwide sales and marketing efforts along with our R and D programs.

Speaker 3

Our investments in sales and marketing staff continue to have a positive impact on expanding our customer engagements in the U. S, Asia and Europe and marketing reach to support revenue growth. The increase in R and D in Q2 from the same period last year was primarily due to costs associated with development programs for augmenting features and performance of our automated wafer aligner and higher personnel expenses. The first order for our integrated automated aligner that was shipped in the fiscal Q1 of 2024 was accepted by our customer in the fiscal Q2. We continue to bring in R and D talent and invest in R and D programs to enhance our existing market leading products and to introduce new products to maintain our competitive advantages and expand our applications and addressable markets.

Speaker 3

Non GAAP net income which excludes the impact of stock based compensation was $6,700,000 or $0.23 per diluted share for the Q2. This is up from non GAAP net income of $4,500,000 or $0.16 per diluted share in the Q2 of fiscal 2023. Turning to the balance sheet. We continue to maintain a strong cash position on our balance sheet. Our cash and cash equivalents were $50,500,000 at the end of Q2, Flat from our cash and cash equivalents balance of $51,000,000 at the end of Q1.

Speaker 3

With a strong balance sheet, We can continue to invest in scaling our business. Over the past 6 months, we have invested financial and human resources in improving our own infrastructure To support the continued growth of our business, we recently went live with a new human resources information system in Q4 and are implementing a new enterprise resource planning system that will provide more sophisticated functionalities and capabilities to support decision making and compliance. We expanded our policies and procedures in various functions to provide more internal control and structure. We have made improvements in our supply chain and engaged with contract manufacturers that offer more value added quality components and services to support our growth. We used $500,000 in operating cash flows during the quarter to procure inventory components to support our revenue target in fiscal 2024.

Speaker 3

Even though our book to bill ratio is less than 1, We believe we have the necessary inventory components to build products quickly and ship them to our customers when we receive purchase orders from them. We have 0 debt and continue investing our excess cash in money market funds. Interest income earned during this favorable interest rate environment was $631,000 in the 2nd quarter compared to $263,000 in the Q2 last year. In Q3 of last year, We announced an ATM offering of up to $25,000,000 in shares of the company's common stock on the open market. We received gross proceeds of $7,300,000 on the sale of 209,000 shares in fiscal 2023.

Speaker 3

We did not sell any shares during our last three fiscal quarters. As of the end of the second fiscal of 2024, The remaining amount available under the ATM offering was $17,700,000 It remains our plan to only sell shares against this ATM offering at times and prices that are most advantageous to our shareholders and to the company. Now turning to our outlook for the current fiscal 2024 year that ends on May 31, 2024. As Gay noted, we expect continued strong demand for our wafer level burn in solutions for the markets Given the latest customer forecast and the uncertainty on the timing of their orders, we believe it makes sense to take a more conservative approach to our fiscal year forecast and reduce our growth estimates for fiscal 2024 revenue. For the fiscal year ending May 31, 2024, Airy is revising its expected full year total revenue to be between $75,000,000 $85,000,000 representing growth of 15% to 30% year over year and GAAP net income of between 20% 25% of revenue.

Speaker 3

Even with this more conservative guidance, We expect solid year over year revenue growth and believe we are poised for continued strong growth for years to come. Lastly, looking at the Investor Relations calendar, Airtel will be meeting with investors next week at the Needham Growth Conference taking place in New York. We will be meeting with investors throughout today on Wednesday, January 17 and until noon on Thursday, January 18 and hope to see some of you at this conference. This concludes our prepared remarks. We're now ready to take your questions.

Speaker 3

Operator, please go ahead.

Operator

Thank you. At this time, we will be conducting a question and answer session. First question today is coming from Christian Schwab from Craig Hallum. Christian, your line is live.

Speaker 4

Thank you. Gaye, can you give us some indication of how you would anticipate the revenue Orders to come and support the second half of the year, are you assuming the vast majority of the revenue you're guiding for the fiscal year will come in the May quarter?

Speaker 2

Yes. No, that's a fair question. I mean, we're given where the orders are right now with already a chunk into the 3rd quarter, We think that second half of the half, it sounds right. Q4 will certainly be bigger than Q3. I don't know maybe, But not majorly, maybe a sixty-forty spread or something like that.

Speaker 2

So we're still expecting orders And have things lined up to ship for this quarter.

Speaker 4

Okay. And then You guys talked about Gabe in your prepared comments, you talked about we're seeing a slowdown Given all the reasons that you mentioned, but then you went on to say that does not change your growth expectations for years ahead. Can you let us know what are your growth expectations? What do you think The top line growth rate of the company on a multiyear basis will be.

Speaker 2

Yes, that we probably set ourselves up for that Christian because as you know we haven't given a multiyear growth strategy on here. Let me answer it this way instead and I know that we'll be giving next year's guidance in July. I'm not yet sure we'll commit to a multi year or not. But when we talk to the customers, one of the hardest things about preparing for this call was even Not even 30 days ago, we were still hearing across the board from our customers, bookings and Shipment slot requests that were consistent with us exceeding the $100,000,000 It's only been in the last couple few weeks that we've seen Things including all the way in the last weekend where they've sort of finalized what their plans are and push some things out. These customers have not changed their long term plans, their forecast for their revenue growth, their market share, their silicon carbide, their test times, those kind of things, we think are still consistent with what we have been sharing in the past, which includes, by the way, test time reductions over time, Consistent with the models that we generated a couple of few years ago, where if you look at a 4,000,000 wafer starts To support just the EV market, it would take somewhere on the order of 2,000 wafers of capacity or 2,000 of our blades For the overall market.

Speaker 2

And so we haven't changed that. And in fact, I'll add one more thing here. Those numbers We're based on this 30% penetration of 100,000,000 vehicles or 30,000,000 EVs in 2030. I Keep using that thirty-thirty-thirty number. Last year for the bulk of the year, there were many people saying that EVs were going to be faster than that.

Speaker 2

There will be more than 30% penetration. We actually never repeated that because our feeling was that just seems You're too aggressive. So in some ways, people's growth estimates have kind of modulated back To be consistent, I think with those thirty-thirty-thirty numbers. So in that sense, it hasn't changed our opinion. But if you start looking at a discrete Customer who was going to put in enough start installing tools this spring for having them ready in the fall and they shift things out 2 or 3 or 4 months, all of a sudden it impacts us.

Speaker 2

And that's the downside of the front end of this. And What I hope people hear today and drop the whole Q and A is, we're trying to be as absolutely candid as possible. And what the customers were telling us in previous quarters, we were communicating and now they have Changed their timing of it and we're just trying to communicate that to it. We still have the capacity and the capability to $100,000,000 this year. If customers came in and said, just kidding, I need them after all, we still have the ability to do that.

Speaker 2

But right now that's just doesn't seem like the most likely case. We don't think that is impacting our plans going forward And that we think we still have these pretty solid growth expectations for next year and beyond.

Speaker 4

Just then maybe another way of thinking about as we exit this year and go into fiscal year 2025, would you assume that your lead significant Much greater than 10% customer can grow or sustain itself at a material run rate, dollars 50,000,000 $60,000,000 $80,000,000 How should we be thinking about I understand you don't want to make a proclamation about what their Aggregate demand, yes, but they've made comments about it. So given their public comments, I guess, let's start with that. How would you anticipate that customer materiality in fiscal year 2025?

Speaker 2

I mean, we I believe that they will still be material. I don't know that they will be the dominant Customer size, would they be or they not be? My guess is they will not even be the largest, as some of the other customers are kicking in with their ramps. One thing we've tried to look at is how fast is the market growing itself. I mean silicon carbide is Growing, let's say, 40 percent a year top line revenue.

Speaker 2

Can we grow faster than that? I think there's examples where we can, but I think Yes, it would be more realistic to think that we grow alongside the market itself. But as we displace potential Package part burn in, etcetera, there's opportunities. The wildcard of this would be the mix. So as a customer, If they have purchased wafer packs from us and they're shipping $100,000,000 worth of revenue a year to a customer, The next year if the devices stay the same, they wouldn't buy any more wafer packs and certainly not systems to meet that $100,000,000 If that customer or our customer's customer grows from 100 200, they would buy more systems and more wafer packs.

Speaker 2

But if their customer mix or the product mix changes, They might displace all of those wafer packs, so we would get revenue even though their revenue isn't growing. That's a very important part of obviously our business for our shareholders, but also to our customers that we can continue to generate revenue And have the dollars to spend on R and D and applications and support and new enhancements for their needs even if they're not necessarily buying new systems. But We do think that they will still be a significant customer for us next year. We Believe that they and are consistent with what they have been telling people their growth plans are, but we think that There'll be other customers most likely that will be bigger than them next year.

Speaker 4

Great. And then my last question, I apologize for so many. Is the Chinese market still is a fast adoption Doctor of Silicon Carbide has numerous manufacturers, many manufacturers of silicon carbide. Is that a market And if you plan on eventually targeting or are you currently targeting?

Speaker 2

That's a good one. You're taking all the good questions here. But let me talk about the Chinese market because I think there is a change there from last quarter. And I'll be giving more updates probably at the next one. So the Chinese market, certainly the EV market itself is growing very fast.

Speaker 2

A lot of the things you hear in the U. S. With respect to why people should or shouldn't adopt EVs is just not the case Outside of the U. S. And particularly in Asia and in China.

Speaker 2

Chinese EVs are have Exploding growth with big suppliers like BYD and MEO and others. We're actually shipping where we know we're testing products that are going into the Chinese market today. So they are being tested in China, okay, but they're actually being tested on our systems and shipped to it. A lot of the silicon carbide, if not the majority, is still being supplied outside of China into China. But we see that changing over time as there's a lot of players getting into the Chinese market for silicon carbide.

Speaker 2

A lot of them in the wafering itself, but also in devices. In the last quarter, we've had some Pretty active conversations with some of the big Chinese suppliers, who candidly are asking us to participate and to engage with them more directly. And we've been having some conversations related to how can We protect our IP there, what would that look like, etcetera. And we are working on some strategies that I'm not trying to keep them from our shareholders. I'm just trying to keep them from our competitors.

Speaker 2

So we're keeping those close to our chest. But Expect some movement there over the next quarter. And I will give you guys some movement in what we're doing. Next quarter, I'll try and give you guys some more update. But there are some key activities going on in China that I think Eric is going to be participating in.

Speaker 2

Okay?

Speaker 4

That's great. Thanks, Gaye. No other questions.

Speaker 2

Thanks, Christian.

Operator

Thank you. The next question is coming from Jed Dorsheimer from William Blair. Jed, your line is live. Hey,

Speaker 5

thanks for taking my question. Sorry for the background noise. I'm in Las Vegas meeting with your customers actually. So just, Dane, trying to reconcile, it sounds like there was a material change in the last 30 days in terms of demand and visibility Your business, is that correct? And I just ask that because your largest customer did flag some Last quarter, but I want to separate what happened in the cash versus what's occurred in the last 30 days.

Speaker 5

Thanks.

Speaker 2

All right. Well, one thing I'm going to start giving people heads up on is I'm trying to be more thoughtful about Giving insight into our customers to be fair, but I'm going to specifically answer what I think you're implying. Our latest Right after our largest customer talked about their change in their forecast, we not only did not hear A negative impact to us. Candidly, it flipped around and for a period of time, it was actually an uptick, Okay. Which was a little hard to imagine and explain, but it had to do with the wafer pack and the shift to new customers and some other things.

Speaker 2

Literally in the last 7 days, they have reconciled their plans, etcetera, and we've tried to thoughtfully reflect that in the latest one. But again, I actually said in my prepared remarks, their revenue to us is pretty close to what we were expecting When this all came out. So if you want to say the bulk of the $15,000,000 to $25,000,000 decrease Was not from them. That was actually from other customer forecasts that have changed over the last like 3 to 4 weeks candidly. Our lead customers forecast settled in only in the last week or so.

Speaker 2

Now having said that, Folks, it may not be the right answer. There is still a range. We took a very conservative stance in hopes there's No way we'll miss it on the low end. But I can see scenarios where we could be higher than the range I gave you. But Yes, we're going out and saying we have a range of $75,000,000 to $100,000,000 just seemed silly.

Speaker 2

And We're taking this stance. I think we really think that this is appropriately communicating what the customers are telling us, And we could defend that and we're doing our best to just be open with people, okay?

Speaker 5

That's helpful. I guess, getting to that point, though, If I look at what you've done this year versus the guide of 75% to 85% and subtract out The delta there, that would imply, if it was equal between each of the next two quarters, Somewhere between $16,000,000 $19,000,000 each quarter. And I know to Christian's earlier question, you said it would be 6040, but I guess it does beg the question with the current bookings, what gives you the confidence towards the low end There, because you seem pretty confident in that it's been conservative and there would only be upside. But I guess what giving you that? Is that the sort of verbal commitments that you that's happened in the last few weeks with the customers?

Speaker 2

Yes, I mean, I would warn what a verbal commitment really is. We are in constant communication with All of these customers and our lead customer is daily, candidly. I'd say that the numbers and the forecast they've given us have been Constant for the last 30 to 60 days, but on the low end. And so that's why we have more clarity. I think they have direct Visibility of orders that they have from their customers and what that drives in terms of wafer packs and capacity, etcetera.

Speaker 2

But I will My personal belief is I don't think they have perfect visibility. And I think there's a little bit of reaction to the seeming slowdown, but Now with interest rates recovering and perhaps people getting to their inventory, maybe they'll be pleasantly surprised on their side. But yes, I mean, we're down to knowing when we have these forecasts, we know what wafer pack Mix it is, etcetera. So we have pretty good visibility. I'd say very good visibility.

Speaker 5

So two more questions for me. The first is with the inventory that you've built, which is good if you get to move to a turns business and a book and ship. But I'm just wondering whether or not that presents a challenge of Holding pricing, whether or not if pricing was to erode at all, Would that how should we be thinking about a margin impact and then also with the WaferPak versus system?

Speaker 2

Okay. There's a couple of things. So first of all, on the inventory, the inventory that we built, we believe is allows us to address the needs across all of the markets we've talked about, plus the 2 d, 3 d sensing, Including memory that we didn't spend much time spending, that we built this platform with a mix that basically we can ship to multiple different customers. That gives us the confidence that we bought this material. We're not going to be writing it down or anything along those lines.

Speaker 2

So That one is really important. We've had a lot of conversation about that. The turns business has the advantage of you can get an order today and ship a lot in the next month. It has a disadvantage of customers can wait and kind of try and hold you up. We're not and have not been in conversations with people and don't really entertain conversations of people I'll hold this over a barrel.

Speaker 2

If you decrease your price, then I'll place the order or I'll take a shipment. Candidly, We've tried not to do that. I think that's the wrong answer. Would pricing come down over time? We have not been experiencing that.

Speaker 2

What we have been doing And we've expressed this to customers. Our costs, like everybody else's costs, increased During COVID, but we did not pass those on to our customers even in extreme cases when shipping costs were out of control. So we've been able to hold our pricing, which as a vendor, I appreciate a lot. And so candidly, our customers raise their prices on us because we buy their components. But we've been able to hold our pricing even in a time when we're extra competitive And we've not been gouging our customers, and I think that's really important.

Speaker 2

By the way, I wasn't sure if I was going to do this. I'm going to throw this out publicly out here. We are aware of a scenario where an investor approached 1 of our customers And had some conversation related to, we believe it was a hedge fund that had our we short our stock. We had like a 20% short position, Approach one of our customers and was complaining to them about how much money we're making. They clearly had a vested interest To try and get the customer to try and negotiate our prices down.

Speaker 2

And I think that's garbage, but it's not against the law. But I'm publicly pointing that out there. We did not, as a result, raise lower our prices or something else. But people have all kinds of reasons to want to communicate with our customers. And By the way, Jed, you just said you're talking to customers.

Speaker 2

I'm not accusing you of that, please. That is not the case. But somebody did, and it really upset our customer. And one of the challenges we need to do in being so forthright with all the information is that people use that information against us in sort of the weirdest of ways. But At this point, we are able to maintain our pricing to our customers, maintain good margins, and that includes on our systems And on our consumables and the wafer packs, which is critically important for us to maintain healthy growth so we can meet our customers' needs as well.

Speaker 2

Thanks.

Speaker 5

Thanks for all the color, Dane. I appreciate it. Look forward to seeing you tomorrow night.

Speaker 2

Okay. Thank you, Chad. Thank

Operator

if you wish to ask your question today. The next question is coming from Tom Diffely from D. A. Davidson. Tom, your line is

Speaker 6

open. Yes, good afternoon. Thanks for the question. Quite a few have been asked already, so I'll stick to a couple of just industry questions for you, Yi, if you don't mind.

Speaker 2

No problem.

Speaker 6

I'm curious where we are as an industry, when we talk about power conversion devices, in the move from silicon to silicon carbide And then inside that, where we are from discrete looking carbide to kind of multi die systems.

Speaker 2

Okay. So it's interesting. There's the ISS Summit is going on right now and I think people are feeding me slides of what's going on. That's just an industry forum where large players like Infineon and ST, for example, were presenting. And they were showing their roadmaps and talking about the importance of silicon carbide and gallium nitride to the power semiconductor industry And how that fit with silicon.

Speaker 2

Why that's important is they plus on semiconductor as an example are not pure plays. They have both silicon IGBT large businesses, multibillion dollar businesses, As well as silicon carbide businesses and gallium nitride businesses in the cases of ST and Infineon in particular. So they have a, I would call it a good balanced opinion about what's going on because they're doing both. They talk about how Important it is for kind of a greener planet because of the efficiencies associated with both silicon carbide and gallium nitride And how those markets are going to grow significantly and not only displace some of the IGBT, but Create new markets that didn't even exist before. So my feeling is, is Silicon Carbide, We've had a chance to sit in front of customers in Asia and Japan, Europe, There continues to be a ton of excitement around silicon carbide and not just in the EVs.

Speaker 2

And guys, we're not pivoting. EVs are critically important and they're a huge opportunity for Aehr Test. But there's a lot of companies, in fact, the last two customers that placed orders with us, They were not aimed at the EVs. I said that already publicly. They were actually at other applications.

Speaker 2

And so those companies are making their whole strategy related to the investments to put the silicon carbide out there. There are all these other applications that would benefit from it. And to some extent with more suppliers and I don't want to say pricing reducing as much as it is just availability of it, There's a lot more people getting into it. And so silicon carbide is the real deal. It's going to grow.

Speaker 2

I recently heard from one of the biggest suppliers. They think that silicon carbide will still be in short supply to certain applications all the way through the end of the decade, even with all the investment that's going on. Now silicon carbide kind of the over under we've been using is this 1,000 watt thing. At 1,000 watts and above power transfer, Silicon carbide is going to dominate. But for applications 1,000 watts and below, which could be Individual servers, microinverters and solar, certainly all the little chargers for Apple, your devices, etcetera, They're all going to be silicon they're all going to be gallium nitride.

Speaker 2

That's what we think. And they'll completely shift away. The idea that you're going to have a little transformer That plugs into the wall and heats up and it's the size of your fist to power your computer, that's all going to be gone. There won't be any of those things in a few years. They'll all be these gallium nitride, they call solid state Transformers are solid state converters done through high speed switching of Gallium Nitride and to some extent also silicon.

Speaker 2

I think in the low end, less than 1,000 watts, GaN is going to win. And those things are important. Now your next question was discrete versus module. This is where I always have a show and tell and we don't do these things with video feeds. But discrete normally refers to a single device sitting in like a package form with the 2 or 3 leads from it, okay.

Speaker 2

This discrete device, if it fails, it only costs you the packaging. And so the world had been actually testing those devices in the package form before we got here. And when people said they're going to put up to say 32 of these devices, 10 of these devices, 24, 48, we've seen all kinds of different ones, They put in multiple die in the same package. We refer that as a module, although Technically, it's still a package, but a module meaning multiple die inside of it. The yield loss associated with that becomes a real problem.

Speaker 2

And so if you have 30% yield loss because you had 30 DAI in there, I mean that's pure cost. Your manufacturing costs would be increased by 30%. Your output would be decreased by 30%. So that was really what started this wafer level, Why it became such a big deal in silicon carbide was because companies were moving to the module level. We still see that transition.

Speaker 2

The likes that are very public announcements by BorgWarner, that's all the U. S.-based guys and more, FZ out of the European ones, the Danfoss folks Out of Europe, the Volkswagen has publicly talked about this. There's multiple companies, the folks Starting to come out of what's going on in Japan and also out of Korea. We think that the bulk and what we've been told by The bulk of electric vehicles and the big power conversion will all be modules. And so when they go to modules, they have it's So much more cost effective or even a must to do the wafer level burden of those before you put them into the modules.

Speaker 2

And so that has been the leading indicator that was driving our business. And so now the question is, did something happen? Have things slowed down to those Cars, etcetera. I mean, clearly, we've seen some push outs of roadmaps and stuff from the likes of GM and Ford. I don't think anyone's confused.

Speaker 2

But I'll tell you what, you don't see that is that offset by the pull in of Toyota, who last February was still maintaining. They didn't believe in electric vehicles until the CEO was displaced. We're seeing If you get outside of the U. S, you can just sort of you can see the roadmaps for people. I mean, there are companies like Hyundai just announced, They just shut down 2 engine plants.

Speaker 2

It's like the old Viking days of burning the boats. They're not going backwards. They're getting rid of that. In the U. S, you can't do that because of unions and things like that.

Speaker 2

So it's a big contrast and we think that Modules are coming. They're going to be in from the largest to even some of the smallest automobiles that are out there in EVs.

Speaker 6

So even though it's on everyone's roadmap, would you say today it was very, very early in that transition?

Speaker 2

I believe still. I do. I mean, not everybody is doing it. And I don't want to get into Anything other than what is publicly described out there, but even some of the shifts with respect to what's going on in Tesla's business Has had an implication because I think people know and again I'm not saying anything that's not public. Tesla which started this segment, They actually use a form of a discrete device in their current inverters.

Speaker 2

It has 2 die in each device. You would call it a module and depending on the supplier, they can either do it with package form or wafer level. And some of those shifts could have an impact on us in the near term. But although I don't have I'm not providing any insight into what Tesla's plans are long term, but The prevailing thought process is that by the end of the decade and certainly before that, you'll see also some carbide Engines and modules are most of them.

Speaker 6

Great. I appreciate all the extra color.

Speaker 2

Thanks, Tom.

Operator

Thank you. The next question is coming from Matt Smith from Halter Ferguson. Matt, your line is live.

Speaker 7

Yes, thanks. Gaynor, I wanted to kind of piggyback on that last question. I mean hearing everything you've talked about in the longer term kind of prospects around GaN or photonics or even new markets within auto, am I right to presume that your kind of

Speaker 2

Matt, you just broke up on your last sentence. Our level of expectation, what?

Speaker 7

Sorry, apologies. Can you hear me now? Is that any better?

Speaker 5

Yes. Yes.

Speaker 7

Yes. All right. Just your level of expectation around some of these either new markets or new segments seems to be Increasing relative to maybe what you would have thought a couple of years ago or maybe even a couple of quarters ago. So despite the kind of short term noise or The lack of demand we might be seeing on auto, is your expectation on the other segments kind of increasing to the point where you think you might be close to capacity in a couple of years?

Speaker 2

Okay. So yes, let me kind of the historical perspective of the timing of it. I'll pick on What do I do? Memory. Okay, we didn't talk much at all about memory.

Speaker 2

What we've said is if you invest in there, you're investing in memory. Memory has Always been on our plans and we have different level of engagements and we're still talking with memory suppliers about It is not deployed in mass yet. It makes sense at flash. It ultimately makes sense in DRAM. That's the longest term out there.

Speaker 2

We're not planning to get revenue in the next year, but I've even shared we have specific long term Bonus and KBOs for every manager on my staff and myself to get into memory. So that is a real thing. Back up a little bit, It's Gallium Nitride. We just talked about Gallium Nitride just like within the last 9 months. And what we said at the beginning of the year is We're going to work to engage with the leaders, which now I'm very comfortable we are, to understand the requirements And what their needs are and so we can be there to address their needs and to learn and understand if there's a large production opportunity.

Speaker 2

What I'll share with you is that we've learned a lot already together with those customers. There's some things about it, and I'm not going to get into it on this thing, but there's some Real tricks that we've been able to help our customers to solve that are unique to GaN versus silicon carbide. And honestly, I'm super happy about it. I'm a bit of a technical nerd, but the things that we're able to do with the customers are really impressive and that's great And puts us in a very good comfortable position to be able to be there. There is data that is now supporting the need for production burn in.

Speaker 2

We're still getting our arms around how big that is. And so we haven't put out any actual numbers, but I do believe much more confidently now than 2 quarters ago That there will be production business for us versus before it was more of an investigation, okay. And then the one Prior to that would be another one was silicon photonics. The first time I talked about silicon photonics IO was December of 2022. So it's only been a little bit of a year ago.

Speaker 2

And at that time, I mentioned that early indications from the likes of an Intel Had actually started to talk about it in demos. On their website, they were Pat Gelsinger was getting up and talking about this. And it's like, boy, something sure seems like there's brewing around that. And people said, what do you think? And my question was, listen, That would be fantastic and it makes sense because it has all the same needs.

Speaker 2

It needs burn in. It's a compound semiconductor, Both for reliability and stabilization, its application is a multi chip module, meaning you'd want to do it at die level because if you put it in with a graphics processor Or a central processor or something else, you don't want that device being thrown away if this one fails, okay. The early indicators where we were we had And some NP Engineering and then we got a production order last May and people asked what did you think? I said I was surprised that seems sooner than expected. That's the one we're working on to shift this quarter by next month, okay?

Speaker 2

So we're now seeing more visibility of that. And candidly, and I don't want to get too carried away on this AI thing, but the people are out there, NVIDIA and AMD and Intel have been talking about one of the big problems with these AR processors is their chip to chip bandwidth Or they can talk internally to the die that are inside, but even that's at a bandwidth limitation. So each of those We talked about how do I actually integrate an optical interface to be able to overcome the bandwidth limitations of an electrical interface. And TSMC and GlobalFoundries have been making big investments to be able to help them with that or the IBMs of the world like an Intel Would be doing it themselves and A would be somewhere in between. So what we think is that looks like a really interesting opportunity and it's right up our Because what we do there is candidly even more unique than even the silicon carbide because of the power.

Speaker 2

The interesting thing is this, If you walk up and look at it, it looks like the same system that we're shipping to silicon carbide. But instead of high voltage, we're talking about high power, In this case, lower voltage and a lot of current. And so with the mix and match of the platform allows us to do that. So this is actually just a reconfiguration Of the same system that we were shipping to the likes of Silicon Photonics customers and 2 d, 3 d sensors like on the Facial recognition on mobile phones, it's the same one, but even higher power than that. So I'm still not clear.

Speaker 2

I would tell you people's roadmaps are really close to their chest. This is not something you're going to publicly read about how big the market is going to be. One of these days you're just going to see one of those big suppliers show up with a product, and that's where the market is going to come from. So Some of the stuff we're doing, the hardest thing is you can't go out and read about how big the market is going to be because it didn't even exist beforehand. So anyhow, those are Some of the other markets that we're doing, I hope they gave you probably more color than you're even looking.

Speaker 7

Yes. I think what I was Trying to get at is, it seems to me that the growth rate of these, let's call it non core business segments for air today It's probably going to be higher than the growth rate within the kind of core automotive silicon carbide market. Is that kind of how you would think about Just the sheer quantity and the sheer magnitude of those opportunities?

Speaker 2

Okay, 2 things. Okay, so if you're going to take growth rate, be careful Because a small number of growth rate can seem large and it's a small number. So are there are those bigger? The Optical IO market, we've said, we think can be as big or even potentially bigger than even silicon carbide simply because of the potential units And the test time, the dollars, it turns out it's actually much more expensive for us to build even though it's extremely cost effective. So it has the ability to be bigger.

Speaker 2

Memory absolutely is the biggest of all of them, Okay. And GaN is a TBD, I think, but looks promising. So if I try and give you relative sizes, okay?

Speaker 7

All right. Thanks. I appreciate the

Speaker 2

color. Okay.

Operator

Thank you. The next question is coming from Larry Trebnick from Selina Capital. Larry, your line

Speaker 2

is now open.

Speaker 8

Thank you. Hey, Gane, I have several questions and we can get through them fairly quickly, we're getting late. Do you expect follow on orders and shipments this fiscal year to the fully automated silicon carbide customer that you just Booked the revenue last quarter. Do you expect shipments and revenues additional follow on revenues This fiscal year from that customer?

Speaker 2

Yes. We I'm looking down to the whole list here. I think we are expecting some level of revenue from most customers including them.

Speaker 7

Jim?

Speaker 2

Yes.

Speaker 8

That was a significant order and since they ordered 2 of them, I would expect They have a significant ramp that they're going to need some more capacity.

Speaker 6

All

Speaker 2

of these all of the customers need significant more capacity to meet their revenue forecasts.

Speaker 7

That's correct.

Speaker 8

Could it be that maybe the slower uptake of some of these customers, particularly the one you've been working on forever, It is simply the fact that they're building 200 millimeter fabs and they're waiting for the 200 millimeter wafers Before they commit to your full system, so they don't have to buy 2 sets of wafer packs, Why start at 150? If you wait a little bit, you're going to be on 200? Maybe they have a bunch of single wafer probers that they can get by on. It's not efficient, but could it be something along those lines?

Speaker 2

I don't think that it could be, Larry. I mean, I don't I think so. I look at each individual customer. Most of them are all planning to go from 150 to 200. Now it's not So if you if let's say the $200,000,000 is a new line completely, very often people may want to change their strategy And go from discrete to die level on a new line, let's say.

Speaker 2

In that case, maybe you're right. They would time it with the 200 millimeter ramps. But that isn't that hasn't been how it has felt to us. People have I think the 200 millimeter is coming. I mean, we're testing 200 millimeter wafers today from multiple customers, okay?

Speaker 2

We see it. I think it's Kind of consistent with everything that everybody is hearing. We don't have any particular great insight. I just don't it's not I think it will be it's slower than people originally thought. I don't think it's going to be 100% of the It's going to I mean, through the end of the decade, there's still going to be a big chunk of 150 millimeter wafers being built.

Speaker 2

One of the big Discussions that's going on is will a 200 millimeter wafer yield higher than 150 at a lower cost per yielded die. And right now, I think everything I've read is not yet. And so but that's also very true with most of these Transitions, it's sort of chicken and egg, you have to lead with it and then eventually your costs come under control. But One thing with us is that the system is fully compatible between 150200. You can build our auto aligner and it can work with both.

Speaker 2

We have current customers that in the same day are doing both, Okay. And so in the wafer packs, there are some things we can do with wafer packs to actually leverage and help with that too. But Yes, I could I don't think that's the majority of it, but it might be on some customers.

Speaker 8

Okay. On the optical IO customer, it's interesting that they started with NP. If I recall, 4 of them, they scattered around the world. And then now they're pushing you to pull in and complete as soon as possible the Production XP for that application, it would seem that in a fairly short time, maybe sooner than later, they might Be needing quantities of production tools. As fast as that market is growing on the AI front, Possibly it would give them a terrific leg up on their competitors.

Speaker 8

Do you think that could be something that might be at work here?

Speaker 2

Maybe. Yes. I mean, we're Preparing the tool, it will allow us to duplicate and build multiple of the same flavors. One of the nice things that we did with this one is the system is actually in the new chamber configuration. So it bolts right onto the front or the back, if you will, of the aligner.

Speaker 2

So they could do it either with offline or integrated. It was not purchased with the integrated aligner, but could easily upgrade it in the field if they wanted to do that. And we think I think that makes sense for that market. I think the aligner is the right answer. And as high volume that would totally make sense.

Speaker 8

Exactly. So along the high volume, last question on the You mentioned many times that every DRAM is burned in. I'm assuming some kind of exotic package part burn in or whatever. But the large DRAM producer in the U. S.

Speaker 8

Is planning on building Actually several fabs in the U. S. And they're also, they're reducing high bandwidth memory This quarter, I believe, with 12 stacks of DRAM on top of it. It just seems like a layup. I know it's more complicated than that, but an application that would lend itself towards wafer level burn in versus Doing testing on that stack and planning you got a bad die in there somewhere.

Speaker 8

Would it make sense to Try to get an evaluation tool on a fully automated XP over that memory customer before they Set their plans

Speaker 2

on

Speaker 8

clean room space and so on and so forth, particularly before they commit The building goes there.

Speaker 2

Yes. I mean, I don't want to get too much into it, but on DRAM, there's a couple of other things that need to happen with DRAM To be able to cost effectively do a wafer level burn and we've had some conversations related to those DFT modes and what would be needed. Fundamentally, I mean the HBM device can have 1,000 pins on it. Let's say you have 1,000 diodes on a wafer, That'd be a $1,000,000 pin wafer pack. That we couldn't build one of those, okay.

Speaker 2

And if you could, it wouldn't be very cost effective. So the net here is that's not the right answer. The answer has to do more with the DFT modes or something like the flash memory that I'm familiar with. And so there's some other things that need to happen and we're going to help enable that. Flash memory is probably The leading edge of this instead, it's easier to get there.

Speaker 2

But that's pretty specific, Larry. But I mean DRAM would be probably the most impactful to the financials of those companies. And so they would Have the vested interest to make those changes to their devices.

Speaker 8

And

Speaker 2

I'll leave it at that, okay?

Speaker 8

That's all I had. Take care of you guys.

Speaker 2

Thanks Larry. Thank you.

Operator

Thank you. And this does conclude today's call. I will now turn the call back to AirTest management team for closing remarks.

Speaker 2

All right. Thank you. I actually wrote myself a couple of comments here. I just wanted to do just make sure to summarize because I mean candidly this is the first time we've come in and lowered. And so we tried to do our best To ensure that all of our shareholders, our customers, our employees understand that we're at where we're at.

Speaker 2

We're not in DEFCON 5 position here. We lowered our growth expectations, but believe that they're going to recover as we go forward. Aehr Test has Spent a lot of time selecting and focusing on some really incredible markets. Some of those selected us, if you will. And we believe we're going to Give us the opportunity to have more than our fair share of growth in the semiconductor capital equipment market.

Speaker 2

We're actually growing faster than semis and semiconductor capital equipment this year, Okay. So that is a little interesting people don't put in perspective. We're focused on production wafer level test and burn in, silicon carbide, gallium nitride. We've talked about the growth in electrification worldwide infrastructure, electric vehicle traction inverters, infrastructure, data center, solar, numerous industrial application. And we're candidly focused on engaged with multiple companies in the silicon photonics, okay.

Speaker 2

And we talked about the large companies that have roadmaps that are heading in a direction, if you will, where we have gotten To a place where they're coming towards us, okay. We also talked about memories. And I think as memory Goes towards things like heterogeneous integration for graphics, AI processors, etcetera. Long term, that's going to make sense for this as well. There's these large macro trends that are going on.

Speaker 2

Semiconductors are going to double in the next 7, 8 years. More semiconductors are less reliable, compound semiconductors, smaller line widths, etcetera. And more and more semiconductors Going into applications that really matter, like automotive applications and sensors and things like this. And the heterogeneous integration, which is the result of the Endemore's Law, people are having to put more chips together in the same package To be able to continue to meet the technical roadmaps and when they do that, burning them in, in the package or module form doesn't make sense. These are all things that are aiming towards us for our solution.

Speaker 2

And candidly, we think we have a unique integrated A unique technology and solution for providing a one stop shop for the systems, contractors, applications, test programs And have the ability and the capacity and the lead times to meet the customer needs. So we're going to focus on market share And we're going to focus on maintaining and growing profitably, right? If we can maintain a high market share in these new exciting growth markets, We think we can achieve strong growth in a healthy profitable manner and that's going to reward our shareholders, employees and our customers. And so with that, I really thank everyone for attending and we look forward to providing you all with an update in our next quarterly conference call. Take care.

Operator

Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.

Powered by Quartr

Key Takeaways

  • Aehr reported Q2 revenue of $21.4 million, up 45% year-over-year, and non-GAAP net income of $6.7 million (31% net margin), exceeding consensus estimates.
  • Management acknowledged a slowdown in electric vehicle-related silicon carbide orders, leading to a revised fiscal 2024 revenue forecast of $75 million to $85 million (15–30% growth).
  • The company remains confident in long-term demand for its wafer-level test and burn-in solutions across silicon carbide, gallium nitride and other power applications, with seven current customers and over two dozen in evaluations.
  • Aehr is advancing its silicon photonics offering with a high-power FOX XP system capable of testing up to 3,500 watts per wafer across nine wafers, and has six production customers for optical I/O devices.
  • To support growth, Aehr has bolstered its manufacturing capacity and inventory—enabling shipment of 50+ FOX test blades monthly—and maintains a strong balance sheet with $50.5 million in cash.
AI Generated. May Contain Errors.
Earnings Conference Call
Aehr Test Systems Q2 2024
00:00 / 00:00