Aehr Test Systems (AEHR) on Q2 2021 Results - Earnings Call Transcript
Operator: Please standby. Good day and welcome to the Aehr Test Systems Second Quarter Fiscal 2021 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 MKR Investor Relations. Please go ahead, sir. Jim Byers: Thank you, operator. Good afternoon, and welcome to Aehr Test Systems' second quarter fiscal 2021 financial results conference call. With me on today's call are Aehr Test Systems' President and Chief Executive Officer, Gayn Erickson and Chief Financial Officer, Ken Spink. Before I turn the call over to Gayn and Ken, I'd like to cover a few quick items. This afternoon, Aehr Test issued a press release announcing its second quarter fiscal 2021 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 in the Investor Relations section of the company's website. Gayn Erickson: Thanks, Jim. And good afternoon to those joined us on the conference call online and also listening on the -- over the web. Ken will go over the second quarter financial results later in the call, but first, I'll spend a few minutes providing some details around the challenges we experienced during the quarter and how we've responded. Then I'll turn to what we're seeing now and why we think things are moving in the right direction and then following our remarks, we'll open up the lines for your questions. As we anticipated on last quarter's call, our bookings and revenue for the first half of our fiscal year were negatively impacted due to several customer-specific production ramp delays and push outs of forecasted orders due to COVID-19 related impacts, as well as the continued challenging global business environment created by the COVID-19 pandemic. These customers continue to indicate they believe the push-outs are temporary and they will require additional system capacity and consumables in the current fiscal year. We continue to be optimistic about generating significant bookings and revenue increases in the second half of this fiscal year, compared to the first half based on these customer forecasts and the initial order flow we began to see already starting in the second half. As we get into the third quarter, just last month, we announced that we received a design win for high -- new high-volume production test and burn-in application for critical new mobile center application. This engagement with the new customer who is a supplier of sensors to a mobile -- a major mobile device manufacturer began with an initial $4.3 million order for an initial test cell consisting of the FOX-XP production test and burn-in system, a set of DiePak Carriers and FOX Automated DiePak loader/unloader. This initial test cell is expected to ship during this fiscal third quarter and we expect follow-on capacity orders from this customer in this fiscal year for additional test system capacity, DiePak Carriers and our DiePak autoloader solution . We are proud we've been selected for this application, which we were awarded due to our unique technical capabilities and the cost effectiveness of our solution that is critical to this application, which will require 100% test, burn-in, traceability and validation of these devices. Our highly differentiated FOX solution achieved this test requirement and met the customers low cost of test targets due to the significantly higher parallelism that can be obtained on our FOX-XP systems and DiePaks. Ken Spink: Thank you, Gayn, and good afternoon, everyone. As Gayn noted, our revenue and bookings for the first half of the fiscal year were negatively impacted by several customer-specific production ramp delays and push-outs of forecasted orders and the continued challenging global business environment created by the COVID-19 pandemic. However, these customers continue to indicate they believe the push-outs are temporary. Based on these customer forecasts and the initial order flow we have started to see since the beginning of the third quarter, we expect significant bookings and revenue increases in the second half of this fiscal year. At the same time, as we discussed on previous earning calls, we have taken significant actions to control spending and maintain our cash position as a result of customer orders push-outs and delays in production ramps. Operator: Thank you. And we'll take our first question today from Christian Schwab with Craig-Hallum. Tyler Burmeister: Hi, guys. This is Tyler on behalf of Christian. Thanks for letting us ask a few questions. First question... Gayn Erickson: Hi, Tyler. Tyler Burmeister: Hi guys. So first question, so on the multiple, I think you called dozen previously or more than dozen Tier 1 and Tier 2 potential customers, engagements you have, kind of, the silicon photonics and silicon carbide, as well as other customers, in the next couple of quarters, fiscal year and into next year, should we expect a majority of orders from these customers or how many of this customer pipeline would you expect to turn into orders? Gayn Erickson: Okay. That's a good question and kind of tease out how we are looking at our forecast. And I know there is -- we have lots of feedback with respect to people on how we look at our forecast and what we're doing. Primarily what we've discussed is forecast for revenues and less about exactly what the bookings are. And obviously bookings come before revenues because you book, ship, get revenue. Right or wrong, when we started off the year, we tried to be clear in communicating that when we set the expectation for the year, we had basically communicated the majority of the forecast was only with installed base customers, customers that were already won, were already communicating to us that they intended to buy more, arguably, believed to be a conservative stance at that time, because the alternative was just sort of looking into when is COVID -- and what's going to happen etcetera, how do we anticipate. So we quite frankly just listened to what our customers are telling us. Generally speaking, when you look at forecasts, you actually forecast not only what the customers specifically tell you, but we anticipate winning new deals or that the customer will ramp or something, and that tea leaves that was a bit of a challenge to do. In our latest, if you will, guidance, we again took now our current specific customers, including the deal that we just won again and what are they specifically telling us. This is what we and the Board have decided is our best way to communicate our guidance because we have clear line of sight to those deals. It also helps to explain and I in my prepared comments, , it says, oh, and then we have other deals. So again, I just want to make sure people understand that most of what we talk about when we guide is, I have -- customer A has told me they need this configuration for this price by this month. And that's how we built up our forecast. The downside of course to that is, if a customer knew something we can be wrong in specific incremental steps. And this is -- we just try to do our best at building that out. In that range, if you want to interpret because this is -- I guess, we could have been as clear, what they tell us right in the middle of that, okay? So as we said, okay, there is some downside, upside and we are just -- we're trying to be as appropriate as we can in this environment to give people some guidance, while we continue to be -- still, we manage the business to ensure that we are profitable. By the way, in that range, you could also interpret we are profitable at the low end, so we must be pretty profitable at the high-end and that's a fair way of thinking about it. So there's still dynamic range within that forecast. And you specifically asked about customers and the target Tier 1 and Tier 2 and just for folks that have not listened in the last couple of few calls, we were describing Tier 1s as customers that were significantly large enough to do maybe $6 million to $10 million a year on a, call it, average or a good year, whereas maybe a Tier 2 might be $1 million to $3 million. It's not how much we love those customers, but just sort of the buying power, which is a combination of their size, the markets they serve, etcetera, and we have a number of both of those -- both as customers that are already qualified and those new opportunities. So back to your question in terms of, do we anticipate in our forecast for current customers, absolutely include some of our biggest current installed base customers, as well as some of the smaller guys. And in the case of the Tier 1 that we announced that we won late in May, at the end of the last fiscal year, as they shift from buying the first NPI system to production, we see them being a Tier 1 customer. I mean, they are physically a very large company and have a significant forecast with us. And so that's an example where they are small to begin with, we consider them a Tier 1, they were already a customer but they'd only bought a small amount and they're about to buy a, call it, significant test out from us. So we have that in silicon photonics for certain. We have many more customers. We had both -- I think five or six customers that are already qualified for silicon photonics and then we have -- over twice that many companies we are engaged with on the silicon photonics and the photonics space. Again, in our revenue forecast primarily there is no revenue in the range that we shared with you relative to new customers coming in. One of the challenges we have right now is the reality is we're month into our third quarter. And while we do have inventory, there is only so much time until even with large orders, we're not going to be able to necessarily ship at all before the end of May. And so I think as we anticipate this year, we can see that the bookings, for example, would continue to be strong as the ramp is near mostly just shifted, which would afford us to have a believable strong backlog going into next year. Related to just new customers going forward, again, we're not talking -- we try not to forecast all the bookings and things like that, but for certain, we do have, over these next 18 months and certainly in the next year, anticipate that we will win a number of new customers across several segments, including silicon photonics, including silicon carbide, as well as some new application spaces that we haven't spent a lot of time talking about, but we kind of alluded to in the memory and microcontroller space and some other things. There's actually a lot of activity and a lot of discussion in the market around wafer level burn-in right now, but I think one of the themes that -- and I really spend a lot of time answering this, but one of the challenges right now is there is a lot of folks that are -- the semiconductor industry, I want to make sure people understand, is actually doing really well right now, which seems to be a big disconnect with respect to why is Aehr having a couple of the worst quarters in recent memory. This is kind of a straight away, if you will, where everyone going as fast as they can, the Microns of the world, many semiconductor companies, they're basically buying exactly what they're doing and they are just going fast. There is actually not a lot of kind of new development. There is not a lot of new process turns. People are kind of just sticking to the knitting and doing exactly what they're doing. And so in a scenario like us where we're just winning into these new silicon photonics, silicon carbide applications, some of those customers have, kind of, pulled back, slowed down those ramps to their customers. And as a result, the bulk of our business was involved in this NPI or this new product introduction space. I'll just say one more thing here. Last quarter, I mentioned it. It was absolutely dead on that prior to then, everybody was just completely holding their breath. They -- it was -- we couldn't fly in and see them, they were just sort of -- things were just sort of moving laterally, but over the last, let's say, three months, customers have realized they're not going to wait for the pandemic to be over and the conversations -- here is the order, it's coming, how we going to install it. We could -- maybe later in the call I'll go into the actual tactical logistics of -- us flying in people and they're sitting in quarantine then they do the installations in the -- how to manage through all that, but we need to do that, because we're going to be installing a bunch of systems in the second half. And back to you, Tyler. Tyler Burmeister: That was great. Appreciate all the color, Gayn. Second question here, I want to follow-up on your new customer order, this $4.3 million order for customers serving a large mobile manufacturer. So I know we've, kind of, been surprised or maybe disappointed in the lack of follow through previously here. So I'm just wondering if you could add some color, some comments on your conviction that this customer will turn into more meaningful revenue in the future? Just kind of your best expectations of that customer today. Thanks. Gayn Erickson: Sure. And I -- let me add to your comment about, I'll use the word disappointing follow-through, I'm not sure you used that word, but I'll use it. For those folks that are kind of new to us or not familiar with the story, we had a very large mobile manufacturer, who turned out they will be initial lead customer on our new FOX family of wafer level and singulated die and module products. And when they were first buying from us, there was -- it was unclear yet how they would deploy the tool in terms of which high volume applications, how long the test time was, and then as it turned out, what percentage of the devices were actually testing. What we have made clear is that, we've seen that market space in this case turn to what is called sampling, which means they do not test 100% of every single device using their tool. Instead, do it for a quality, reliability sample, which I won't go into a lot of detail, but the way to interpret this is, if you're only doing a 5% or a 1% sampling, you only buy 5% or 1% of what you could. So there is a huge dynamic range there. And in the initial orders from these customers and these applications we did not know whether they were going to do the sampling or higher volume production. And in fact, the sampling rate was lower-than-expected and therefore while they buy $10 million, $15 million worth , they didn't buy $50 million worth. Now, specifically in this application and we had to be really careful about what things we say, so I know we are going to try and say the same things I've said before and specifically in the release. We have been told and are clear that this is actually a production burn-in, meaning it is a 100% test, right? So the good news is, it doesn't have the 1% or 5% multiplier times. The test time in the volume percentages, I don't want to get into, I never will. Technically, there is some even -- uncertainty exactly what applications it will go into, although there are some of us that are read into the programs and more and more than we will ever talk about. All I would say at this point is that we have been told, there is volume behind it. We absolutely believe it and they are -- this happens to be one of the customers that's asking us to secure allocation of capital and etcetera for additional capacity this year. So I -- my voice may not sound it. I'm actually really excited about this one. I will maintain an extra amount of conservativeness and believe it as I see it, but so far so good. And it doesn't take a lot of 4.3 million test cells to add up when you're doing this level of revenue. So this is actually really encouraging. The other specific thing I want to say on that, because it may come up somewhere else on this new customer and I really mean it to come out through my pores. I am actually really excited about this not just because of the potential dollars, which are significant, but that the customer specifically understood and selected this -- our system based upon its capability for 100% validation of the device. This part could have been tested with what is known in the industry as a packaged part burn-in system. We sell them. Suddenly, one of the differences between a packaged part burn-in system with a traditional convection oven is that you've traditionally -- you have to use lots of shared resources. I wouldn't go into it. All it means is you just do not have the traceability and the validation of every single device. The FOX products have as much as 100 times the resources per -- available to the devices, which allows us to 100% know that, that part got tested, as well as thermally conductive cooling and heating gives us the ability to certainly know it was actually burnt in properly, right? That is more expensive than packaged parts. But in certain applications, we're able to -- through wafer level or singulated die, test so many more in parallel that we can actually do it more cost-effective, while at the same time, giving them much better data. They specifically spent more money to ensure that this device was 100% burn-in and clarity, and we have reason to understand why that was important to them. And that is super encouraging to me, because honestly, that's what we've been out touting for years and they get it. And so that was just really encouraging and I think this is going to lead towards more business and other opportunities that are similar to it because of the level of clarity of the value of this type of burn-in and test, okay? Tyler Burmeister: That's great. Appreciate that. And then last quick one, and I'll turn the call or the question over. A little bit of a modeling question, I guess, as well as fundamental. Your implied second half guidance with the visibility you have today, any color on Q3 versus Q4? Would you expect Q3 and Q4 to be kind of similar in size or more of a progressive improvement through the end of the year and Q4 sequentially better? Any color there would be great. Thanks. Gayn Erickson: I mean, I would -- so I guess we talked about it, but let me put it out there. I think it's pretty fair to say that Q4 would still be bigger than Q3, given the -- just the current situation of our backlog, albeit when we put the press release out for that order for about $4.3 million, and we've had orders since then, by the way. We just haven't put out press releases on them. I'm not sure if I even said it originally. I think we got it at, like, 9 o'clock in the morning on the 1st. It's like it missed our quarter by less than 12 -- certainly less than 24 hours or something. That was pretty sad. So it would have been nice to sit there in backlog, but it's certainly in backlog from day one. So you do need a little bit of a running head start to make sure you can ship things. So we haven't announced any significant orders as we are expecting yet this quarter, but I wouldn't say it's fair that the second -- that Q4 would be, revenue-wise, larger than Q3. Bookings, I'm not sure, it might actually be spread out or even, but I think revenues there should be larger in the fourth quarter. Tyler Burmeister: That sounds great. I appreciate. That's all from me. Thanks, Gayn. Gayn Erickson: Thanks, Tyler. Operator: We'll now hear from John Fichthorn with Dialectic Capital. John Fichthorn: Thanks for taking my question. I appreciate it. So a little bit of a follow-on from the questions you just got asked in a slightly different way since he asked some of my questions. Hey, are the bullet customer one with a $4.3 million order and then the bullet customer two, are those different customers or same customer different... Gayn Erickson: You know what, I actually do -- all right. I'm actually getting some feedback, John, I'm not sure if that's you. Okay, it seems to be better now. Okay. We had not made that clear, although I think most people had interpreted and you probably got -- you're wrong and close. So I do want to make it clear here. The end customer is the same, okay? But the subcon is different, the application and the device is different. That's a good thing for us. And just because the end customer is the same, I can tell you, you don't just win one application and then you get another one. Internally, the groups can be different, the applications are different etc. So this feels like a new win to us, not certainly with the subcon, but even within the application in the group that it was won in. And one of the reasons in particular I'm excited about is because there is cross-pollinization going on in that customer to recognize and they found us in this application. They came looking for us and said, can you do this? So that's the answer, John. John Fichthorn: Great, that sounds exciting. And so without having to give any timeline around it, what do you think the total revenue potential is in these two products, either one of them alone or two of them together, like over whatever period of time. I don't... Gayn Erickson: Well, I'll tell you what, the one I -- I'm going to ease my way out of this one a little bit, but one thing is just looking historically, sometimes it's good to just point to people that it's historically happened, so you can say it publicly out there. We have been having a couple of million dollars with the DiePaks in Q4, I think, each of the last three, four years or so, right? And normally, what we get is we get a set of DiePaks somewhere around fall and then that turns into production around May. I've, kind of, made it pretty specific back as we would have expected again this time, but then you got pushed into the summer, so that's one example. So that type of device has generally been maybe a few million dollars a year of just the consumables. This new application, I am going to just simply say there will be more and a test cell is $4.3 million or $4 million or so. So they come in pretty good-sized chunks. We have ranges of what it is and we also know that all of the deep data is not in. And our visibility of this is actually still relatively limited. Meaning, we can see the capacity needs maybe over the next six or nine months or so, but we will see as the device finally gets out in its deployment, in all the different devices, what the growth rate is. I'll tell you, I'll share one thing, and I can -- I think this is okay to say. I have been told by the customers, you could think of even this one in the past, this is how big it is and how great it's going to be, and then they have not bought that much. And this is a customer that has certainly done that before. This time, they told us less about how great it's going to be, but it's more obvious from their actions how big it's going to be. So I don't know if that's a good thing, but it seems like when they tell us how great it is, it isn't as big as it is. And maybe the fact that they haven't said as much this time, maybe that's a good sign or not, but we know it's going to -- it's a good-sized deal and building more revenue and bookings. John Fichthorn: But I have to believe that they need to plan their business. And so they have to give you some level of visibility. I mean, what are your lead times today? And you would say had a scope of those lead times, like, I mean, either lead time shifts or can you help us with an idea as opposed to revenue guidance through year-end like where do you think your backlog is at year-end? Maybe that will help us understand what you think the scope is as we move forward. Gayn Erickson: I think what I will share with is, given that the majority of what we have done with our forecast is basically shifted in time. I think, it's fair to say that we believe -- and I think if things play out as we expect, we should have a pretty strong backlog going into next year. I know that's, kind of, the weak way of describing it, but I think it would be a fairly substantial backlog going into the year, which is very different than it was this year when we went into this year and certainly last quarter. So, I -- you actually asked a different question, and I want to answer that, and that is, well given your lead times and stuff, how much visibility does it give you, there is pros and cons of our having a manufacturing capacity and infrastructure and supply chain to be able to ship significantly more than any of the revenue numbers we talked about, and I mean 10 times at least. So the downside is that as the customers come in and particularly this customer and other large Tier 1 customers, they kind of do a deep dive and make sure you have the capabilities to serve them, okay? So they know darn well that if they give us a multisystem order that we can ship that in five to six months, okay? So they don't have to get us too much visibility. They're not forecasting 40 systems with us and think that we're going to ship those inside of six months. But even at $4 million test cells, keep in mind, that's only one system to us. And we have no challenge shipping multiple of those per month with reasonable lead times. And our typical lead times on the Street are in the 16 to maybe 24 weeks or so kind of configuration of the backlog and stuff. So they don't have to give us that much visibility. John Fichthorn: Okay. And so -- that was great by the way, great weaseling out of answering the question. I applaud you. That was black belt CEO dodge. I'm very impressed. So the -- on the transceiver customer, that sounds kind of like a new thing. What is the size of that opportunity? Maybe you could answer that one. Gayn Erickson: Okay. So let me -- it's interesting. So first of all, it feels like all of these silicon photonics guys have, kind of, a similar pattern, and that is they start with one or two, what we call blades, which is, say, one or two wafers of capacity to begin with. We now can do that with our new FOX-NP systems. And then when they go to production, they buy XP systems of either nine or 18 blades or something more. And so I think a general rule is to think about it that way. In fact, each of our initial silicon carbide -- I'm sorry, silicon photonics customers have all seemingly started off that way. I think except their initial lead customer, because we didn't have the NP systems to begin with, but the first XPs they purchased, they were doing all the calls and everything else, two, three, four wafers at a time, even though we shipped them a nine or an 18-blade system. So what it feels like is, oh, you buy $0.75 million or $1 million full test cell or something, which is an NP system with a couple of wafers and then you transition and you're buying a $3 million or $4 million test cell as you move to production, and then you duplicate that over time. And the capacity of that just gets into what do you think is the market size. So there's -- if you look at silicon photonics, and John, I think you've have listened in on this before, not everybody understands, but you throw these numbers out with the silicon photonics. So silicon photonics is an industry description of integrated device used for electrical to fiber optic or optical transmission. So historically, fiber optic transceivers to and from, okay, are a very complex module made up of lots of different IPs and mechanical and electrical structures and lasers and things all integrated into this little package that is being used in the data centers. It is used in telecommunication for cross town. It's even used for underwire, undersea fiber optic transceivers. They all -- the cost of a transceiver can be from $300, $400, $500 or more up to $10,000 per one. So the industry had been working for maybe a couple of decades, companies like Intel, who said, listen, the world hasn't gone to fiber optics, because the cost of those transceivers is just so expensive. We're not going to have a fiber optic communications hub in our house, if the transceiver is $900 per channel, okay? And this is actually one of the big misses in the 1999, 2000 hubbub around why JDSU and the world is going to go fiber optic, and then it went nowhere. The reason is it's just too expensive. And so the world went in other directions and other kind of communications protocols and all. But the need for fiber optic or the end, if you will, of RF and microwave transmission through regular coaxes etcetera was running out of steam. And so folks like Intel were saying, I have an idea, I'm going to integrate all that stuff into one silicon and take the cost of -- the manufacturing advantages that you see with silicon manufacturing and I'm going to make a wafer with 500 to 1,000 devices on it, and I'm going to take the cost from hundreds if not thousands of dollars down to tens of dollars, and that's what they did, right? And there have been several other big companies, Cisco's of the world, that have been making these investments. And the big deal is, it allows the world to go much higher bandwidth at much lower cost. I mean, like a tenth of the cost. And when Intel introduced their first product in there, it was devastating to the industry because there were companies out there that were selling these products for $3,000 a piece or $1,000 a piece, and Intel was selling them for $400 and making huge margins on it. And so there are companies that went away and so the industry analysts have said, wow, it's an enormously elastic market. And as the world puts out as much silicon photonics devices as they can, they're going to shift from copper-based communication protocols to fiber optic communications-based protocol. So there is this elasticity where the cheaper they make it, the more they'll come. So up until recently, the whole story is there is not even close to enough manufacturing capacity out there to meet the market needs. The big players include Intel, right? And people know that they happen to be just because they are a 10% customer of ours, okay, a favorite of ours. But there are other players, some of which we have mentioned and some we haven't that are in that space and it's sort of the Wild West, everybody is getting into it. The one thing that's interesting about the customer -- I'm going back now to the customer that we won in May, okay? They are a large player in the transceiver business, right? And they're getting into silicon photonics. So unlike a lot of the players in the space that aren't actually making transceivers and are just getting into silicon photonics, okay? These guys are one of the biggest players in transceivers and they're going to shift their business to silicon photonics. So there is -- the ramp is different for them. As soon as it works, the instead of selling CA to a customer that can sell CB and all the differences of manufacturing costs and the reliability and the footprint is so much smaller, that it's a better product for them. One of the things -- one more thing -- background on the whole silicon photonics space is that fiber optic communications is measured in -- is noted in both protocols and speed. And the speed of fiber optic communications were like 50 gigabit or something, which is very fast, by the way. But they're going to 100 and 200 and 400 and 800. Well, it turns out copper is completely running out of steam. It can't -- the fastest fiber optic communication or non-fiber optic communication is like 112 gigabit. And as they go above that, they're going to have to go to photonics. So there is other reasons in silicon for people to go to photonics as a communication protocol. And the good news is those photonics devices need not just a burn-in, but an aging and stabilization that Aehr Test provides with our wafer-level solutions. So people that are going to whole wafer silicon photonics are all looking at how do I do wafer-level stabilization of these photonics devices, and that's what we offer with this FOX-XP. And so that's why right now, almost all of the players in the market are talking to us, but they -- I mean, it's unbelievable how they have, I'll call it, stalled in the last six months. We were trying to figure out how we were even going to be dealing with all of the different benchmarks in all last summer, when we put the new marketing and the clean engine in place in our facility last February. And right now, it's just sort of a lot of Zoom calls and stuff, but it's nowhere near the activity that we think will come back as soon as we get through this pandemic. So that specific customer has the ability to ramp significantly, and in fact, be bigger than our biggest customer in this space. And we do believe that in times like this. John Fichthorn: Great. So you almost answered it in the last sense, and I appreciated the warm up, bigger than your biggest is -- would be great. So I'll give it to somebody else. My last comment is, once again, I would like to reiterate that I think your Board should continue to see some turnover. I appreciated that there was some last year, but Board should be refreshed. You did miss for six months. And I think you guys should either add or -- or I'd like to see some board members buy some stock or management. Like we're all out here risking our capital. You're on this Board for 12 to 44 years, reach in your pocket, buy a share. It shows that you believe in the story also. It shouldn't all just be Christmas presents of gifts and pay to be a Board member and have your four nice dinners a year. Shareholders would like to see you risking some capital alongside of us. And that is a message from me directly to them. So thank you and good luck... Gayn Erickson: Thank you, John. John Fichthorn: And... Gayn Erickson: Appreciate it. John Fichthorn: Yes. Good luck in the back half. Gayn Erickson: Thank you. Operator: Next, we'll hear from Tom Diffely with D.A. Davidson. Tom Diffely: Yes. Hi, thanks. Just a couple of quick ones. First is when you look at the recent cost-cutting you've done, has that impacted your ability to do trials with new customers? Or has it limited your engagement with new customers at all? Gayn Erickson: I would say no. I mean, we -- in no way have we slowed down anything, but my pause is things have slowed down that gives us some bandwidth that has allowed us to do cost-cutting, if you will, is candidly the case. And Vernon or myself or anyone of my staff was working seven days a week anyhow, even though we all stepped up and said we're going to take direct cash pay cuts till we get to profitability, because it's the right thing to do. But I don't believe that is the case. I don't think we're actually cutting anything that slowed down sales. That is -- we are absolutely engaged in some R&D programs, some point where I can give more color on that, but the clear focus right now with everyone in the company, including every single day of the call, is the pending purchase orders and the ones that we have, ensuring that we can install them and ship them as quickly as we can get paid etc. Tom Diffely: Okay, great. And then maybe just a quick question on the competitive front. I mean, the fact that things have stalled a little bit here for a few quarters, has that enabled the new competitors to catch up with you? Or have you seen any competitors try to do what you're doing in this situation? Gayn Erickson: So at this point, I would say we have not at all. We have not seen any new competitors there. We have not heard as anybody working on something that could be considered a multi-wafer system for doing the, kind of, things that we're doing. There's no conduction-based multi or singulated die or module systems like we do with our mobile customers. There just isn't -- when we're competing, it's like we're competing with a packaged part burn-in system. It's just interesting to see we also sell those, albeit arguably not much or none this year. There still is a -- there is some markets where packaged part is cheaper and people are willing to make those tradeoffs. It's very interesting that we have examples like in silicon carbide, there's either some automotive companies that are moving from packaged to wafer level, so we see both sides. So we do these cost of ownership models and convince ourselves why the wafer-level makes more sense. So what I'm trying to point out is when we're competing, we're competing like against packaged part. And that is arguably an alternative, but very differentiated in terms of its value proposition. Not only talking it more parallel, but we get the yield advantage by somebody doing it at wafer level before it goes into a packaged or a multichip module or something like that. And so that's the primary still alternative to us, no real competitors. Tom Diffely: That's good to hear. So you know that you're not actually losing any business. It's just purely being delayed? Gayn Erickson: Yes. And Tom, let me make that very specific. We have not lost a deal, right? We have not actually said, oh, we lost here so and so and said, hey, what happened in the entire last year. I mean, nothing about this slowdown or pushout is a result of us losing a deal. Tom Diffely: Okay, great. And then finally, just a clarification. Starting this quarter, very little backlog and you say going into next year with a fairly significant backlog or meaningful backlog. That means that new orders have to be quite a bit higher than the revenue. And the revenue in the second half year is projected to grow quite nicely. So I just want to make sure that I understood you correctly when you said you'd have a fairly significant backlog going into 2021? Gayn Erickson: That's the math, Tom. And again, that's correct. And the only caveat I just said is based upon what we understand and rolling up I believe that to be the case. Sorry. Tom Diffely: Alright. Thanks for your time. Gayn Erickson: I mean, we have specific customer forecast for the summer. And they need to give us the order before then, so -- and the summer, I bring that up because our fiscal year starts June 1st. So we need them in the summer in the next fiscal year. So that's all, yes. Tom Diffely: All right. Thanks, Gayn. Gayn Erickson: Thanks, Tom. Operator: We'll take our last question from Larry Chlebina with Chlebina Capital. Larry Chlebina: Hi, Gayn. I got two quick questions on timing. Your mobile center new customer, when you talk about more systems, you currently talk about this fiscal year, is that plural? In other words, in Q4, is there one more system that you're sure of? Or is there more than one? Just to clarify that. Gayn Erickson: Yes. Let me make sure I understand. Okay, one of the -- Larry is able to understand our business really well . One of the challenges is that our -- in the test business, the typical automated test equipment and the test suppliers like Advantest, Teradyne, Cohu, for example, Verigy that I came from before here, the testers in the wafer level test one wafer at a time; so one tester equals one wafer. Our solutions, we make single wafer solutions with the CP, dual wafer solutions with the NP and up to 18 wafers in an XP. So when we talk about systems and systems capacity, sort of how do I interpret it? So the advanced question Larry is asking is how many XPs are we going to get versus just how many, what we call, blades or testers within it. All we have stated, Larry, is, and tried to clarify, is that there is absolutely no blade or systems or testers with the capacity and no DiePaks and no loader, unloaders. We're not getting clarity yet as to do we think there'll be multiple XPs in this fiscal year or not. I haven't gone there yet, right? Larry Chlebina: So you're saying you're going to have loaders, but if you already got a loader on the system you're shipping this quarter. If you have a loader, you obviously have another XP that you use that loader on... Gayn Erickson: That's at least fair. I'll tell you what, I'll go this far. They need at least another XP DiePak and loader. Larry Chlebina: Okay. So at least there is one more system in Q4, but when I say yes, it implies to mean -- it implies to me that there's more than one, but there is at least one. Is that correct? Gayn Erickson: Yes. Larry Chlebina: Okay. And then on your new NP silicon photonics customer that's going to buy the XP, is that expected in Q3 or Q4 that will be? You said this year? Gayn Erickson: Yes, I'm expecting the order before I ship it and I don't have the order yet. How is that? Larry Chlebina: What would be the cutoff on that system if you got the order... Gayn Erickson: Yes. I mean -- I'll tell you what, we do have the ability to ship things on relatively short lead times, but generally speaking, inside of like eight weeks or 12 weeks, you're pushing it. So that goes to one of the original questions, I think, from Tyler, which is do you think Q3 and Q4 will be the same? No, I don't. I think Q4 will be larger. And so we do have revenue in Q3, which ends at the end of February that we have not booked yet. And we definitely have revenue in Q4 we have not booked yet. Larry Chlebina: Because you haven't identified... Gayn Erickson: So Q3 is not over yet, but not everything that we book in Q3 will ship in Q3 for certain. Larry Chlebina: Right. The CP customer for data center, is that still on track for at least getting off the ground before this fiscal year? On the data center customer with CP? Gayn Erickson: We have -- okay, I mean, we haven't really gotten -- part of this gets into how much forecast. So for folks that are listening for sort of clarity. So we won a new customer about a year and a half ago for a data center-related application that we continue to state is for this extremely high-volume application, right? We do continue to forecast that they will buy multiple systems for production and have every reason to believe that. They are absolutely using the tool today for early production ramp etc. We're trying to figure out when the ramp is. We know for certain the ramp is delayed because of coronavirus, okay -- 100%, okay. So -- and we have not seen the end of it yet. So I don't know exactly when that is. So right now, I actually don't have that in our fiscal year any longer, because I have not specifically been told by them that they're going to take it by May. That's why I pulled it up. It doesn't mean it couldn't still happen and we have the ability to ship, but there is just -- I don't have the visibility with them as I do with some of the other customers. Larry Chlebina: On that application in that system, that smaller system, you could -- if you got an order in a reasonable period of time, you could ship it quicker, and say an XP, in four weeks? Gayn Erickson: Similar, I actually have some CP capacity test cells around. If you, kind of, understand for those that have come and visited, I don't -- pictures of our products help a lot. So the product family on the FOX-P is -- has three different chambers, we call it. There is a single wafer, dual wafer and multi wafer. And then in those chambers go blades. The blades are interchangeable between all the customers. And then in those blades are channel modules specific to applications, but there is only three flavors and everybody is made up of the same three. So we just mix and match and configure the order. So if someone needed a couple of CP systems, I could ship them almost immediately. Larry Chlebina: Okay. So, it's good to know. So, lastly -- and I'll be quick because we're running late. I'm going to shift a little bit to this mounted memory potential that's out there, I don't know, four years ago when you were developing the XP. There were two fabs that got initiated and they were looking for somebody, the burn-in system at the end of the line. I think they won it with Tokyo Electron. You certainly are ready or the XP wasn't even be bothered alone effected. And the only thing I hear about that application was a disaster. I think they had loader system that worked around your IP, but it didn't work too well anyway. Can we get the sense that there is probably another one or two fabs that need to get off the mark shortly? Is -- especially with all the opportunities, you've got a full plate and the resources are limited. Does it really make sense to joint venture? I mean, you need all -- you have a proven machine, though. It's proven, the XP, it's the key technology for that application, but you need automation, which is -- you don't have. Would it make sense to joint venture with somebody like a Brooks Automation, like they got a $5 billion market cap. It would derisk an entire project, so you could get it off the mark. Certainly, you could push XPs through your facility. You now have a good ops manager to help you do that. And so in order to secure that opportunity, it would be a monstrous -- I think it would dramatically reduce the risk for the customer, if you present yourself in that manner. And ultimately, if you could land something like that, you could deliver the rest of your life on the consumables because there will be something like 1,000 DiePaks or so on that. If you could add a little bit ? Gayn Erickson: WaferPaks, the memory -- so we teed up a ton of software, Larry. You've clearly done your homework, okay? I just want to acknowledge several data points and maybe try and answer the one question that was embedded in there. So I want to acknowledge, we do believe that some, but not even close to the majority of the memory companies had implemented wafer level burn-in, and only in flash memory today not doing that. We believe that long-term that it makes sense for all flash memory and potentially DRAM to go to wafer level burn-in. And there is some specific reasons that have taken some time, DRAM longer than flash, and we have a pretty good idea why, okay. The people that implemented wafer level burn-in first with flash did it in a -- what we believe is a compromised way and we've gotten specific feedback that they would like -- that they're going to need more cost-effective, higher parallelism, lower footprint, more automation in the future. And we do believe that long-term that is an opportunity. And as long as I'm in the seat, we at -- Aehr will always be trying to get into that space. We have shared vaguely with people, and I would vaguely repeat it again. Part of the investment in us as a company is actually that horse in the water related to automation and production cells, extending the XP and its capability. So it is more applicable and more effective for massively high-volume applications such as memory, right? And we are spending that money today. So in this downturn, in addition to the investments we're making in WaferPaks, DiePaks, high voltage, packaged part and wafer level burn-in systems, we're also engaged on automation and some other things that we think are particularly appealing to multiple markets, including and specifically the memory dials, okay? We alluded to the risks associated with us as a small company. And certainly, a big part of the risk profile three, four years ago was the XP was a glimmer in my eye -- or our eye and it was a sketch on a piece of paper and that was too far of a fetch for a fab that's going to need up to 100 XPs per fab to go after. I believe that we are on a path to be able to reduce that risk and that gives us opportunities. I will also tell people do not invest in our stock because you think we're going to sell a whole bunch of memory systems in the next six months, but we are engaged in working on some things. And very specifically, the engagement in that area slowed to a halt during COVID, not for us, but everybody. But then the guys are absolutely just focused on doing what they were doing done and not doing -- there's no, I believe and understand any programs and stuff that really didn't do on the wafer level side of things right now. But I do believe they'll reengage. So -- but your comment about should we partner with somebody etcetera, I think that is, I understand it makes sense. I don't want to comment about potential partnerships shifting to the end, but I will acknowledge that could very well make sense to companies before they go off and try and spend hundreds of millions of dollars for their test on wafer level burn-in systems. Larry Chlebina: Yes. Particularly, if you could just get your key technology, your XP system out the door was -- would be a tremendous boon to you, but also, the consumable business would be, like I said, it would be literally set for life. So anyway... Gayn Erickson: I believe that one of the critical weaknesses of the way people have deployed and one of the headwinds of why people have not been able to do wafer level burn-in across a lighter segment of flash, as well as DRAM is the contractor where it has proprietary technology with what we call our WaferPak that can address it. So I think that's one of the differentiated things. I actually think the tester is as well and the test around the automation, but for certain, the probe cards that are out there cannot address the DRAM, the high-density, high-power flash memory coming up. And it's something the WaferPaks can. Larry Chlebina: Yes. This seems like why you take on the automation, that's really not the key technology. Just what you said is the key technology and by partnering with somebody, it would dramatically reduce the risk to the customer and we need to get down the road. Just my thought. But hopefully, you guys are seriously considering something like that. Gayn Erickson: I appreciate the feedback. And stay tuned, Larry. Larry Chlebina: Yes. Thank you. Gayn Erickson: Okay. Operator: That will conclude today's question-and-answer session. I would now like to turn the call over to management for any additional or closing remarks. Gayn Erickson: Okay. Well, thank you very much, operator. And thank you, everybody. We appreciate you listening in and taking some really great questions and giving us some great questions. I absolutely want to acknowledge we understand that the first half was certainly one of the less exciting times of Aehr's history, even in recent memory, but I truly sit here at this edge and I'm so glad that 2020 is behind because it wasn't just last six months, it was really all of 2020, but we were feeling it. And starting up with this initial order and based on what the customers are telling us, it's not just COVID and all the other things going on in the world. We're actually more excited about 2021. So I'll leave it there, and appreciate it. And as always, you know how to reach us. Do talk to us if you want to have follow-up conversations etcetera. And thank you very much, and we'll talk to you next quarter. Bye, bye. Operator: That will conclude today's conference. Thank you for your participation. You may now disconnect.AEHR Ratings Summary
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Aehr Test Systems Reports Q1 Beat, But Outlook Unchanged, Shares Plunge 14%
Aehr Test Systems (NASDAQ:AEHR) saw its stock price drop by over 14% intro-day today following the release of its Q1/24 results, despite beating expectations for the quarter. The company reported Q1 EPS of $0.18, surpassing the Street estimate of $0.16. They also achieved a 93% year-over-year revenue growth, reaching $20.6 million, compared to the Street estimate of $19.23 million.
CEO Gayn Erickson expressed satisfaction with the Q1 performance, calling it the strongest first quarter in the company's history, even though traditionally it has been their weakest season. Erickson stated that they are off to a strong start for the fiscal year and reaffirmed their expectation to achieve at least a 50% year-over-year revenue growth and over 90% profit growth for the full fiscal year.
Despite the beat, the company kept its previous full-year guidance unchanged, aiming for total revenue of at least $100 million (compared to a Street estimate of $102.93 million).
