Aehr Test Systems

Good day and welcome to the Aehr Test Systems Fiscal 2023 Fourth Quarter and Full Year Financial Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Jim Byers, MKR Investor Relations. Please go ahead.

Thank you, operator. Good afternoon and welcome to Aehr Test Systems' fiscal 2023 fourth quarter and full year 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, Chris Swee. Before I turn the call over to Gayn 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 2023 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 in the investor relations page of the Aehr website. I'd like to remind everyone that on today's call, management will be making forward-looking statements today that are based on current information and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These factors that may cause results to differ materially from those in the forward-looking statements are discussed in the company's most recent periodic and current reports filed with the SEC. These forward-looking statements, including guidance provided during today's call, are only valid as of this date, and Aehr Test Systems undertakes no obligation to update the forward-looking statements. And now, with that said, I'd like to turn the call over to Gane Erickson, President and CEO.

Thanks, Jim. Good afternoon, everyone, and welcome to our fiscal 2023 fourth quarter and full-year earnings conference call. Thanks for joining us today. Let's start with a quick summary of the highlights of the quarter and fiscal year we just completed in May and the continued momentum we're experiencing in the semiconductor wafer-level test and burn-in markets. Then our new CFO, Chris Tsu, let me make sure I get that right, Chris Tsu, sorry, that's awful, who is sitting here with myself and Ken Spink, who is retiring soon. We'll go over the financials in more detail. After that, we'll open up the lines to take your questions. We're pleased to report record financial performance for both the quarter as well as the entire fiscal 2023 year ended May 31st. For fiscal 23, our total revenue grew 28% to a record $65 million. Bookings reached a record $78.3 million, and our gap profit of $14.6 million and non-gap profit of $17.3 million were also records, growing 54% and 62% year-over-year, respectively. This record performance was significantly driven by bookings and revenue shipments of our wafer-level test and burn-in systems and contactors for silicon carbide semiconductors used in electric vehicles and electric vehicle charging infrastructure, and silicon photonics devices used in data and telecommunications infrastructure, as well as an up-and-coming new application for chip-to-chip optical I.O. that I'll provide more detail on later in this call. We saw fiscal 2023 as a breakout year for our unique wafer-level test and burn-in products. These products provide complete solutions for semiconductor manufacturers for high-volume test, burn-in, and stabilization of semiconductors, such as those used in electric vehicles, electric vehicle charging infrastructure, photovoltaic or solar power conversion, and data and telecommunications infrastructure. We also see on the horizon a significant new market opportunity for test and burn-in of semiconductors such as silicon photonics devices used in optical input-output, or optical I.O., and co-packaged optics for data farms, computing, and artificial intelligence markets. So let me start with the increasing momentum we're seeing for wafer-level test and burn-in for silicon carbide devices. During the fiscal fourth quarter, we received the first purchase order from another new silicon carbide semiconductor company for our production Fox XP multi-wafer solution that will be used for volume production wafer level test and burn-in of silicon carbide devices for electric vehicles, trucks, and train traction inverter modules. The train traction inverter application represents an exciting new market driver for our Fox production test solutions. Due to the extreme reliability and length of service requirements of this application, leading to prolonged test times. This new customer is a multinational industrial conglomerate and manufactures semiconductors, including power semiconductors. They're forecasting to grow their silicon carbide business significantly to meet the market demand, which we forecast will in turn drive incremental capacity of our Fox systems and our proprietary wafer-packed full wafer contactors. William Blair forecast total demand for silicon carbide wafers just for electric vehicles, which include EV inverters, onboard and off-board chargers, to grow from 220,000 wafers in 2022 to over 4.5 million six-inch equivalent wafers in 2030, a greater than 45% compound and or growth rate, and over 20 times larger in 2030 than in 2022. In addition, William Blair expects demand for industrial applications, trains, energy conversion and RF amplifiers of silicon carbide to drive another 2.8 million wafers in 2030. This expands our silicon carbide test and burn-in market even more. With the addition of this latest new customer, we've significantly expanded our customer base by adding a total of four new silicon carbide customers this year. Each of these new customers is already ramping or plans to ramp our products into high-volume production using our multi-wafer test and burn-in systems. We continue to be excited about the incredible growth and production ramp of our lead silicon carbide customer that's using our wafer-level test and burn-in systems and wafer packs to meet capacity increases from their current customers in addition to many new design wins. In early June, we announced another $13.7 million in follow-on orders for wafer packs from them. That includes both current design capacity increases and several new designs that are expected to ramp to volume production after their customer qualification is completed. During the quarter, we also announced an order for production quantities of wafer-packed full wafer contactors from our second major silicon carbide customer that will be used with previously ordered Fox XP systems for testing and burning of wafers in their production facility. We believe this customer, who serves several significant markets that include the electric vehicle industry as well as other industrial applications, will purchase a large number of our Fox XP systems to meet their publicly announced significant increase in plant capacity and revenue growth over the next several years and through the end of the decade and longer. Now let me move to our benchmarks and engagements with prospective new customers, which continue to make great progress. We continue to work closely with one of the largest silicon carbide players in the world on a large wafer level benchmark and qualification for automotive and other markets. Well, candidly, this has taken much longer than we thought it would. We're excited that this qualification continues to make good progress, and we remain confident that it'll result in them moving to our Fox wafer-level systems and wafer packs for their volume production. They have told us that their plan is to move all new production capacity to wafer-level burn-in and away from package part burn-in. This is because they're not only mostly moving to multi-chip modules and known-good die sales, but also for the lower cost of tests associated with wafer-level burn-in over package burn-in, as well as the significant improvements in yield they achieve with wafer-level burn-in. For those listening in that are new to our story, we provide our customers with a unique low-cost way to do extended burn-in stress testing that removes the early extrinsic failures of devices like silicon carbide semiconductors before they're put into packages. This saves in cost of overall manufacturing as you're not only avoiding throwing away the cost of the package, but in scenarios where multiple of these devices are put into a single package, which is referred to as multi-chip modules, this also saves significant costs as the other devices in the same module are not thrown away when one of the devices failed during burn-in. The savings in yield is much more than the actual cost of wafer-level burn-in. Multiple companies have announced silicon carbide half-grid modules used for EV traction inverters that have up to 48 die in a single module. Imagine the implication of the greater than 1% failure rate experienced in burn-in on a module with 48 die. The extrinsic failure rate of high-power silicon carbide MOSFETs could cause 25% to 50% yield loss of these modules. For all intents and purposes, this is unmanageable without wafer-level burn-in. So wafer-level burn-in actually enables these kinds of high-density multi-chip modules. In addition to our momentum in silicon carbide, we also have multiple potential new customers inquiring about our systems with the new 2,000-volt high-voltage option that we introduced last year to test in burn-in devices such as silicon carbon and gallium nitride semiconductors for power conversion applications. Gallium nitride is another wide bandgap compound semiconductor being applied for efficient high-speed power conversion and amplifier applications. These new potential customer inquiries include several gallium nitride semiconductor devices ranging from RF, or radio frequency, to power conversion. We're currently working with a large multinational semiconductor supplier to move forward with a full wafer level burn-in evaluation of gallium nitride devices. This evaluation includes our new high voltage option for doing the critical high temperature reverse bias stress test needed for gallium nitride MOSFETs and amplifiers. The gallium nitride market appears to be a potentially significant growth driver for our systems and wafer-packed full wafer contactors, particularly for automotive and photovoltaic applications where burn-in appears to be critical for meeting the initial quality and reliability needs of those markets. Now moving to silicon photonic semiconductor burn-in and stabilization and the new significant market opportunity we see on the horizon. As a reminder for those not familiar with silicon photonics, this is what the industry calls the devices where both electrical semiconductor integrated circuits are combined with photonics or light-based transmitters and receivers. We continue to be very enthusiastic about this market especially as it looks to expand beyond just being used for fiber optic transceivers to becoming an embedded market that integrates the optical data transmission technology into other devices like chipsets and processors themselves. We see the potential to integrate the photonics integrated circuit devices into multi-chip modules as another major market opportunity for Aehr. There are several names for this application, ranging from co-package optics, heterogeneous integration, and optical IO that use silicon photonics integrated circuits for use in optical chip-to-chip communication. This market is in addition to the current photonics transceiver market used in data and telecommunications, where we currently have six customers that have adopted our Fox XP and NP systems for production use of their silicon photonics wafer and die slash module level burn-in. Multiple companies such as Intel, NVIDIA, AMD, TSMC, and Global Foundries have made public announcements regarding their product roadmaps for co-packaged photonics integrated circuits with microprocessors, graphics processors, chipsets for computing, and also artificial intelligence applications. Our Fox wafer-level test and burn-in solution with our proprietary wafer-packed full wafer contactors are a great fit for the silicon photonic semiconductor market as we can test and burn in the devices while still in dye or wafer form before they're integrated into the multi-chip modules for the same reason as discussed before due to module yield improvement. Also, because the burning conditions of the photonic integrated circuits are very different than the other chips in the multi-chip module that they're integrated with, Burning in the photonics integrated circuit in the module would also pose real thermal and power challenges to the silicon photonics part and also the devices that are integrated into the same module. During the fourth quarter, we received our first order from a current major silicon photonics customer for a new volume production Fox XP system configuration that enables cost-effective production tests of full wafers of next generation photonic integrated circuits up to 3,500 watts of power per wafer. This system can test new high power density devices that can be used in new optical IO or heterogeneous integrated packages. This customer is one of the world's largest semiconductor manufacturers, and we expect to receive orders for additional production systems as they increase production of these devices. These next-generation silicon photonics-based integrated circuits can require up to two to four times as much power for full wafer test, burn-in, and stabilization of the silicon photonics devices. Our new Fox production system configuration, which can be used to test and burn in these new optical I-O devices up to 3,500 watts per wafer, expands the market opportunities of the Fox XP system even further. Its ability to test, burn, and then stabilize up to nine 300 millimeter wafers in parallel with up to three and a half kilowatts of power per wafer is beyond the wafer parallelism and power capacity of any system on the market. This testability is unprecedented in the industry as there are no other competitors that can even test one wafer at a time at these power levels. And our Fox XP with our proprietary wafer pack contactors enables the test of up to nine of these wafers at a time in a single system. The applications that have been announced by these major semiconductor players for optical chip-to-chip communication include high-performance microprocessors, graphics processors, and processor-to-peripheral device chipsets. These known devices have been predicted to dramatically improve the communication bandwidth between semiconductor devices beyond the bottleneck of traditional electrical interfaces used today. This is an exciting opportunity, and we believe these devices will ramp to high-volume production over the next several years. We believe silicon photonics can become a significant market for wafer-level test and burn-in and could become as large or larger than the silicon carbide market for our products later in this decade. Now, let me spend a minute or two on our R&D initiatives. This past year, we introduced several significant test system enhancements that extend the market leadership of our Fox products for full wafer test and burn-in and open new markets for our products. These include added voltage ranges, increased parallelism per wafer, new burn-in and stress conditions, and a new fully automated Fox wafer pack aligner configured to fully integrate with our Fox XP multi-wafer systems to enable hands-free operations. Our new Bipolar Voltage Channel Module, or BBCM, for the FOXP platform of products, which includes our FOXXP, NP, and CP, extends our test and burning capability to provide a wide range of positive and negative voltage programmability applied to the gate for positive high-temperature gate bias or negative H2GB testing. The BBCM can supply gate bias voltage to more than 3,000 di per wafer. while being able to monitor individual dye performance and detect individual dye failures. Enabling these tests is particularly essential in threshold voltage and gate oxide stabilization and screening. Our new Very High Voltage Channel Module, or VHVCM, which is an option released this fiscal year, enables high temperature reverse bias testing of silicon carbide and gallium nitride devices on wafers of up to 2,000 volts using our proprietary wafer pack contactors. Our wafer packs and the Fox XP and NP systems include patented anti-arking capabilities that are necessary to avoid the high voltage electrical arcing between devices running at these voltages or between the devices in the streets on the wafer that have distances as small as less than 200 microns apart from each other. The amazing part of this is we can manage anti-arking across the entire wafer, whereas semiconductor functional automated test equipment, or ATE testers today, are only able to keep devices from arcing in very small areas, such as only one or a few devices at a time. This allows an unprecedented low cost of test and burn-in for high voltage wafers, such as silicon carbide devices used for electric vehicles, trucks, and trains. with voltage specifications up to 1700 volts and above. We're excited that we received customer final acceptance of this new high voltage solution and wafer packs in our fiscal fourth quarter. During the fiscal year, we completed a multi-year development of our new fully automated Fox wafer pack aligner. Our new wafer pack aligner allows hands-free operation of wafer pack handling and alignment, and it's available either as a standalone configuration with movement between the aligner and portable carts or in a full integration configuration integrated with the Fox XP system. The wafer pack auto aligner automatically takes wafers from cassettes or foops ranging from 100 to 300 millimeter wafers and automatically aligns and loads wafers into our proprietary wafer pack cartridges, which provide contact with 100% of the dye on the wafer. Wafer packs can be brought to and from the auto-aligner in wafer pack carts in what we refer to as the standalone configuration. This allows one auto-aligner to work with multiple Fox XP systems, which each can have up to 18 wafer packs with 18 wafers in them tested at the same time. This is great for very long test and burn-in times, such as 24 to 48 hours or more. Alternatively, the Auto-Aligner can be configured to dock directly to the front of a Fox XP system such that all material handling and wafer pack movement is done 100% hands-free, up to and including fully lights-out operation. As capacity and volume forecasts grow, eliminating all manual interfaces for automated handling can become critical to our customers. The added automation capability of our new aligner gives our wafer-level test and burn-in offering even greater value and opens several significant incremental markets to air, such as high-volume processors and chipsets with integrated photonics transceivers, flash, and ultimately DRAM memories. And higher mix devices require an extremely high reliability and 100% burn-in, such as automotive microcontrollers and sensors. We have received positive feedback on our new aligner from multiple current and prospective customers across several markets and believe it will be an important addition to our product portfolio going forward. We have now installed both the standalone and integrated configurations of our new wafer pack aligner at multiple customers, with the standalone aligner accepted and released into production just this week. And the Fox XP with the integrated aligner is expected to receive production acceptance yet this current fiscal quarter. We see a mix of customers that will purchase our wafer pack auto aligners in standalone and integrated configurations. Most customers feel very passionate that one way is absolutely better than the other way, and basically we just agree with them. We offer both to our customers. Each of these new product enhancements broadens our total available market and extends our cost competitiveness and application space for our Fox products. We continue to invest in R&D to enhance our existing market-leading products and to introduce new products to maintain our competitive advantages and to expand our applications in addressable markets. Our customers use our products to test, burn, and then stabilize semiconductors used for applications where safety, security, quality, and reliability are absolutely critical, including electric vehicles, electric vehicle chargers, photovoltaic solar, power conversion, industrial, and data and telecommunication applications. RFOX multi-wafer test and burn-in systems, proprietary wafer pack full wafer contactors, and newly introduced fully automated wafer pack aligner puts us in an excellent position to continue to gain significant market share of these new market opportunities. Our customers require semiconductors to be tested and burned in and stabilized prior to integration in the customer systems, and in particular, multi-chip modules, heterogeneous integrated packages, or co-packaged optics. And we believe this is the very beginning of a wave of applications using our FOX products. The market forecast for wafer-level burn-in products is significant. William Blair estimates the total global market for wafer-level burn-in products for silicon carbide alone to be over $400 million by 2027. We believe Aehr has the potential to capture a significant portion of that market based on the level of silicon carbide engagements we have with the customers across the globe. To meet this demand, we have begun to significantly ramp up the production capacity of our systems and wafer pack full wafer contactors, increasing our production capacity to 3x or by over 200% during this past fiscal year. And we plan to double this production capacity by the end of this new fiscal year. We also have the supply chain and infrastructure, excuse me, to increase capacity significantly as the market demand warrants. To conclude, we're very encouraged by the continued positive momentum and expanding growth opportunities we see with our current and prospective customers. We start fiscal 2024 with an effective backlog of almost $40 million and a strong forecast from our current and prospective customers. Our engagements with numerous potential new customers gives us confidence in our growth expectations over the next several years including projections for record revenue and profit again for this fiscal year that ends next May, particularly as the positive momentum and demand for silicon carbide and electric vehicle continues to accelerate. We're very pleased to report a significant forecasted growth in our fiscal 2024 financials. For the fiscal year ending May 31st, 2024, Aehr expects total revenue to be at least $100 million, representing a growth of over 50% year over year, and a GAAP net income of at least $28 million, representing earnings growth greater than 90% year over year. Before I turn the call over to Chris, I'd like to take a moment to welcome him to air. Chris is a semiconductor industry veteran who has served in senior financial positions with several much larger public companies in the semiconductor and semiconductor equipment space. including most recently at Ultra Clean Technologies. We're excited to have him join the company and look forward to working together. I also want to thank again Ken Spink for his leadership and many contributions during his 15 years at Aehr. This includes helping us identify and select Chris as our new CFO and also staying on to help complete our fiscal year and annual 10-K filing and work with Chris and I to ensure a smooth transition. On behalf of the board and the entire Aehr team, we wish Ken and his family the best in his retirement. With that, let me turn the call over to Chris before we open up the lines for questions.