Aehr Test Systems

and welcome to the Aehr Test Systems Fiscal 2021 Fourth Quarter and Full-Year Financial Results Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jim Byers of NKR Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon and welcome to Aehr Test Systems Fiscal 2021 Fourth Quarter and Full-Year Financial Results Conference Call. With me on today's call are Aehr Test Systems President and Chief Executive Officer, Gane Erickson, and Chief Financial Officer, Ken Spink. Before I turn the call over to Gane and Ken, I'd like to cover a few quick items. This afternoon, right after market close, Aehr Test issued a press release announcing its fiscal 2021 fourth quarter and full year results. That release is available on the company's website at aehr.com. This call is being broadcast live over the Internet for all interested parties, and the webcast will be archived on the investor relations page of Aehr Test's website. I'd like to remind everyone that on today's call, management will be making forward-looking statements today that are based on current information and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These factors that may cause results to differ materially from those in the forward-looking statements are discussed in the company's most recent periodic and current reports filed with the SEC. These forward-looking statements, including guidance provided during today's call, are only valid as of this date, and Aehr Test Systems undertakes no obligation to update the forward-looking statements. Now, with that said, I'd like to turn the conference call over to Gane Erickson, President and CEO.

Thanks, Jim, and good afternoon and welcome to our fiscal 2021 fourth quarter and four years earnings conference call. Thank you for joining us today. Let's start with a quick summary of the highlights of the quarter and the improved business momentum we're experiencing. And then I'll dig deeper into our expectations for increased revenue growth in our new fiscal year, which is already underway. We saw continued signs of recovery and a strong increase in customer demand during the fourth quarter. which is a positive turnaround from the customer production ramp delays and push-outs we experienced this past year related to COVID-19. I'm pleased to report improved revenue and operating profit for the fourth quarter that reflect a return to above pre-pandemic levels. Fourth quarter revenue was up 45% sequentially quarter-on-quarter and up over 100% from Q4 last year, and we're profitable for the quarter on a gap basis. Additionally, we're off to a strong start for fiscal 2022 with $5.4 million in bookings and an effective backlog of $7 million as of today. We're seeing improvement in multiple test and burn-in segments, including silicon carbide, silicon photonics, and mobile sensors, each of which we expect will contribute to our expectations for significant revenue growth year over year in our new fiscal year. Now, let me dig a little deeper into each of these opportunities, starting with silicon carbide. This past fiscal year, we made significant inroads into the emerging silicon carbide device market, which continues to be a very promising key growth driver for air and will be a major focus in the coming fiscal year. Silicon carbide power semiconductors have emerged as the preferred technology for battery electric vehicle power conversion in onboard and offboard electric vehicle battery chargers and the electric power conversion and control of the electric engines. Our FoxP family of products are very cost-effective solutions for ensuring the critical quality and reliability of devices in this market, where performance and reliability can not only mean increased battery life, but also whether you have to walk home from a vehicle whose power semiconductor fails in the powertrain. I once heard from a very wise general manager of automotive semiconductor components supplier that the quality and reliability of devices such as these power semis in the engine drivetrain of vehicles should not be measured by how many failures per million they have, but how many walk homes per million they have. As a failure in this component results in the driver and passengers walking home after it fails in the vehicle. During this past fiscal year, our lead silicon carbide customer qualified AehrS Fox XP system for high volume production burning and infant mortality screening of silicon carbide power devices at wafer level for electric vehicles. This customer is a leading Fortune 500 supplier of semiconductor devices with a significant customer base in the automotive semiconductor market. They have now qualified several devices for automotive applications on our solution, ordered multiple Fox XP systems, and have purchased multiple new wafer pack contactor designs that are expected to be qualified and moved to production during this new fiscal year. During our fiscal fourth quarter, we received and shipped a follow-on order from this customer for an additional Fox XP system for higher volume production testing and burning of those devices. In this past week, we announced another follow-on from them for an additional Fox XP system and multiple wafer packs to meet their increased production capacity needs. These follow-on orders for additional FoxXP systems and wafer packs are the result of our working closely with this lead customer to achieve their test requirements and validation of our FoxXP platform and wafer pack full wafer contactors as their production qualified solution. This customer is forecasting orders for multiple additional FoxXP systems and wafer packs this year and a significant number of systems and wafer packs over the next several years due to the electric vehicle semiconductor test and burn-in demand. Each of these silicon carbide-focused FOX-XB systems are configured to test 18 silicon carbide wafers in parallel in the footprint of a typical single wafer test solution, while contacting and testing 100% of the devices in parallel on each wafer. Our solution can not only test 4-inch and 6-inch silicon carbide wafers, but can test the future 200 millimeter 8-inch wafers planned to be introduced over the next several years. Aehr provides a unique, fully integrated solution that includes the test systems, full wafer, wafer pack contactors, and the wafer pack aligners. In addition to the very large opportunity for silicon carbide with our lead customer, We're currently engaged in detailed and very promising discussions with several other major suppliers of silicon carbide, some of which have also publicly indicated plans for significant capacity increases. We expect to move to on-wafer evaluations with multiple potential new customers this fiscal year. As I mentioned on our last call, we're very excited that a new potential customer that produces silicon carbide power devices has asked us to demonstrate our full wafer level burn and solution on their silicon carbide wafers, including putting the system on their manufacturing floor to demonstrate our capabilities. While this is a new customer for us for silicon carbide, they're actually currently a customer for us in other applications and already have several Fox XP systems in production today for testing and burning in mobile sensors. They are a significant player in silicon carbide right now and we're confident that we can prove to them that our solution will catch their infant mortality failures that otherwise show up in customer devices. As I've discussed many times, silicon carbide is an optimal material for high power and particularly high voltage devices for applications such as electric and hybrid electric vehicle power trains and electric vehicle charging infrastructure. These devices reduce power loss by as much as greater than 75% over power silicon alternatives like IGBT devices, which has essentially changed the entire market dynamic. With this development, we see most, if not every, automotive company that's working on electric vehicles moving to silicon carbide-based powertrain and charging systems in the near future. The challenge with silicon carbide is that it's known to have high infant mortality rates. However, with the reliability, burning, and screening that Aehr is able to offer with our Fox product solutions, these defects can be removed to provide extremely reliable devices for these mission-critical applications. Aehr's Fox XP solution allows for one of the key reliability screening tests to be completed on an entire wafer full of devices, basically testing all of them at one time, while also testing and monitoring every device for failures during the burning process, to provide critical information on those devices. This is an enormously valuable capability as it allows our customers to screen devices that would otherwise fail after they are packaged into multi-die modules where the yield impact is 10 times or even 100 times as costly. Okay. Sorry, we had some background noise going on. Silicon carbide appears to be one of the hottest potential application spaces air test has seen in many years, and we're extremely excited about our ability to service this emerging market. We anticipate that wafer-level test in Vernon will become the industry standard for quality and reliability screening for silicon carbide devices for the automotive market. And with the most cost-effective solution on the market to address this opportunity, we believe that air has a chance to build a dominant market share. Power semiconductor market for electric vehicles is expected to triple between 2020 and 2026, growing at nearly 26% CAGR to $5.6 billion, according to Yole Research. And a report with Deloitte forecast total electric vehicle sales will grow at a CAGR of 29% from 2020 to 2025, before reaching 31.1 million units by 2030 and securing approximately 32% of the total market share for new car sales. These stats highlight the tremendous opportunity Aehr Test has in front of it with its wafer-level test and burning solution for electric vehicle semiconductors. Now, turning to silicon photonics, we're seeing an improvement in the silicon photonics market, which was significantly impacted by the pandemic this past year. During the fourth quarter, fiscal fourth quarter, we shipped a Fox XP system and multiple wafer pack contactors to an existing customer that's transitioning from our FOX NP system for initial production burn-in to our production FOX XP system to begin volume production of their high-performance silicon photonics devices. This customer is a major supplier of fiber optic transceivers in the data center interconnect market today. Silicon photonics fiber optic transceivers, which are used in data storage and 5G infrastructure, require a process step in manufacturing called stabilization. where the devices are subjected to high temperatures and power to stabilize their output power. Our customers are using our Fox wafer-level test and burn-in solution for production test and burn-in of their integrated silicon photonics devices, and we currently have five silicon photonics customers that are shipping products to their end customers using our Fox solution. We see a significant opportunity for growth as we expand within these customers and add additional new silicon photonics customers in this fiscal year. Now, let me touch on the mobile sensor market. This past year, we successfully implemented our Fox systems and DIPAC carriers for production, test, and burn-in of two new applications for 2D, 3D sensors for mobile devices. Aehr has now successfully executed on a number of programs for highly custom and unique sensors and packages and configurations, unlike any other devices on the market. Aehr's engineering team has been able to design and develop custom DIPAC carriers and contactors to address the unique electrical, mechanical, optical, and thermal needs of these devices with our Fox XP systems and proprietary DIPAC carriers. These solutions are turnkey with development of the proprietary carriers and test schematic, custom DIPAC, singulated diode module sockets and carriers, highly proprietary thermal conductivity and transfer solutions, custom application test plans, and automated handling systems to load and unload our DIPACs with 100% traceability of test results and binning. We feel we continue to meet and exceed the customers' expectations and are happy to continue to meet their needs on these extremely challenging test and burn-in applications. We expect to see follow-on orders for system capacity in DIPACs this year and continue to be optimistic about this market space. Let me talk a little bit about our consumables and contact with businesses. As I mentioned on past calls, our five family of test systems include our customized wafer packs and die packs that are proprietary full wafer singulated die and module contactors and are needed not only for new system orders, but also for each new design win or each new device added to production test. During the fourth quarter, we launched our newest die pack solution, which is capable of handling extremely small and complex devices. and are very high power density devices with higher parallelism than ever before. This new class of dye pack can handle devices small enough to rest on the tip of a pen or a pencil. Devices this small are extremely hard to handle, and particularly in any kind of parallelism. Often a discrete device this small is handled with special handling equipment and a tester that can only test one device at a time. This new Fox XP system and dye pack solution is capable of testing very complex dye modules in addition to them being tiny. This solution is a great addition to our product family, and we believe it further sets us apart from any other company in the industry. As we increase our installed base of Fox systems with current and new customers, particularly with our Fox MP and XP multi-wafer and simulated dye module test and burn-in systems, We expect this consumables business will continue to grow in absolute value and also as a percentage of our total sales. Over the long term, we expect these recurring consumable sales to account for up to a half or even more of our total annual revenues. And lastly, touching on our package part business, we continue to see indications of renewed demand for package part learning applications, particularly from customers in automotive applications and those seeking high-voltage capabilities. Our new packaged part burn-in product with very high voltage test capabilities continues under development, and we expect to generate additional new opportunities with our planned shipments to begin later this fiscal year. So let me go ahead and touch on supply chain. I've received many questions from customers and shareholders about our supply chain and ability to meet capacity demands for systems and contactors. Given all the issues with semiconductor shortages and rising costs in raw materials, and lengthening lead times across many industries, I quickly have to acknowledge this is a reasonable concern and understand where the questions are coming from. Aehr has a very robust supply chain with world-class subcontract manufacturers on subsystems of our test systems, contactors, wafer pack aligners, and dye pack handlers. These subcontractors have successfully supplied these subsystems for years to Aehr and are very mature. In all cases, these suppliers have capacity well in excess of air historical shipment and the ability to ramp significantly higher as well. We're very confident in our ability to meet the customer forecasted demand plus considerable upside. The one area that we do want to highlight is the risk associated with semiconductor component lead times that have been very irrational over the last six months. which is causing us to jump through many hoops to ensure we have near and long-term volumes to meet both our forecast and considerable upside to this forecast. I don't want to overstate the risk as we're confident in meeting our projected revenues that we're guiding for this fiscal year, and we believe we can meet a considerable upside to this forecast. However, we know there's a risk in the near term in particular with some semiconductor components, but also have seen logistics issues with shipping lead times that continue to make our team keep on their toes. and may add to the lumpiness of our quarterly shipments and revenues. So let me conclude my remarks. We're now a month and a half into fiscal 2022, and we're confident in our revenue growth projections for this new fiscal year. We're seeing a recovery across our customer base, along with significant demand for wafer-level test and burn-in of silicon carbide devices for electric vehicles, silicon photonics devices for data center and 5G infrastructure, and 2D and 3D sensors for mobile devices. For the fiscal year ending May 31, 2022, ERIC expects full-year total revenue to be greater than $28 million, which would represent growth of approximately 70% year-over-year and to be profitable for the fiscal year. Now, before I turn over the call to Ken to go over our financials, I want to note that during the quarter, we announced the appointment of Fariba Dinesh to our Board of Directors. Fareebra is a technology industry veteran with special emphasis on semiconductor, photonics, telecommunications, and data storage, and she brings incredible knowledge, experience, and contacts in the compound semiconductor and optical semiconductor spaces. We, and certainly I, am really excited to have her on our board. With that, let me turn it over to Ken to review our financial results in more detail before we open up the line for questions.