Aehr Test Systems

Greetings. Welcome to the Airtel Systems Fiscal 2026 Second Quarter Financial Results Conference Call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Jim Byers of Fondell Wilkinson Investor Relations.

You may begin. Thank you, operator. Good afternoon. Welcome to Airtest Systems' second quarter fiscal 2026 financial results conference call. With me on today's call are Airtest Systems President and Chief Executive Officer, Gane Erickson, and Chief Financial Officer, Chris Ciu. Before I turn the call over to Gane and Chris, I'd like to cover a few quick items. This afternoon, right after market closed, Airtest issued a press release announcing its second quarter fiscal 2026 results. The lease is available on the company's website at air.com. This call is being broadcast live over the internet for all interested parties, and the webcast will be archived on the investor relations page of the company's website. I'd like to remind everyone that on today's call, management will be making forward-looking statements that are based on current information and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These factors 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 Airtest Systems undertakes no obligation to update the forward-looking statements. Now, with that, I'd like to turn the conference call over to Gane Erickson, President and CEO.

Thanks, Jim. Good afternoon, everyone, and welcome to our second quarter fiscal 26 earnings conference call. I'll begin with an update on the key markets we're targeting for semiconductor test and burn-in, with a particular focus on the common growth drivers we're seeing across these markets, which is namely the massive explosion of AI and data center infrastructure. After that, Chris will walk through our financial performance for the quarter, and then we'll open up the call for questions. While second quarter revenue was softer than anticipated, we made significant progress in both wafer-level burn-in and package-part burn-in segments and are very excited about our prospects moving forward. Based on customer forecasts recently provided to AIR, we believe our bookings in the second half of this fiscal year will be between $60 million and $80 million, which would set the stage for a very strong fiscal 27 that begins on May 30th. During the quarter, we made substantial progress with wafer-level burn-in engagements and production installations across AI processors, flash memory, silicon photonics, gallium nitride, and hard disk drives. We're encouraged to see that one of our key growth strategies focused on reliability solutions for the exploding demand for AI and data center infrastructure is beginning to bear fruit. In package part burn-in, We secured key new device wins for our Sonoma system, supporting high-temperature operating life qualifications for AI devices. These wins are expected to drive additional capacity at test houses, including at least one customer that is elected to move into production in late calendar 26, which we believe could result in meaningful volumes of Sonoma production systems. In addition, in the last month, we received a very large forecast from our lead Sonoma production customer for AI ASIC production capacity. This forecast is expected to drive very strong and potentially record bookings for the company this fiscal year and position us well for significant revenue growth next fiscal year, with their requested shipments starting in the first fiscal quarter of our next fiscal year. Taken together, our increased visibility across multiple end markets gives us great confidence in our outlook. As a result, we're reinstating financial guidance in fiscal 26, which we'll touch on later in today's call. Now let's talk about our key segments. Starting with our wafer-level burn-in during the quarter, we expanded engagements and completed additional production installations across several end markets. Our lead AI wafer-level burn-in customer continues development of its next generation processor and is currently discussing additional capacity with us. They're forecasting additional system and wafer pack capacity orders this fiscal year and plan to transition to our fully integrated automated wafer pack aligner for 300 millimeter wafers. We expect this customer to continue scaling and excited to support their growth. We also announced a strategic expansion of our partnership with ISE Labs during the quarter to deliver advanced wafer-level test and burn-in services for next-generation high-performance computing and AI applications. This partnership accelerates time to market, improves performance, and gives customers the option of either package part or wafer-level test and burn-in for their production volumes. ISE, together with its parent company, ASE, represents the world's leading outsourced semiconductor assembly and test, or OSAP, platform, serving a global roster of top-tier semiconductor customers. As part of our benchmark evaluation program with a top-tier AI processor supplier we announced last quarter, we completed development of our new fine-pitch wafer packs for wafer-level burn-in of high-current AI processors. These are currently in test with this potential customer's processors and are designed to validate our Fox XP production systems for wafer-level burn-in and functional test of their high-performance, high-power AI processors. We're currently completing startup procedures such as power-up sequencing, thermal profiling, test vectors, timing, and high-speed differential clocks, and expect to complete data collection this quarter. While we're demonstrating our new fine-pitch high-current wafer packs for this benchmark, Many customers can utilize lower-cost wafer pack designs if certain design-for-test rules are incorporated up front. These approaches reduce cost and lead time and are especially attractive to customers focused on faster time-to-market or wafer-level high-temp operating life qualification. We also have two additional AI processor companies planning wafer-level benchmark evaluations since last quarter's earnings call. These benchmarks typically take about six months, and we expect to make meaningful progress beginning this quarter. Both customers are evaluating wafer-level test and burn-in as an alternative to package part or system-level test for large advanced AI modules that combine multiple AI accelerators and stacked high-bandwidth memory. Moving burn-in upstream to the wafer level significantly reduces cost and yield risk by avoiding scrapping expensive substrates and memory stacks when early failures occur later in the process. We have seen estimates that show the cost of the substrate is more than a single processor and the cost of the high bandwidth memory is even higher. Turning to flash memory, we completed our wafer level benchmark with a global leader in NAND flash just prior to the holidays. The customer has now taken the wafers back for further processing to validate correlation with their internal process. This benchmark demonstrated our ability to test flash memory wafers with significantly higher parallelism and power than is possible using traditional probers and group probers from companies such as TEL or Acratech. We've also proposed the next generation solution enabling test of a new emerging flash memory device called High Bandwidth Flash or HBF designed for AI workloads. This proposed solution leverages our Fox XP platform, wafer packs, and auto-aligner technology, and would support single-touchdown, high-power tests on 300-millimeter wafers. While development of this system would take over a year following customer commitment, we believe this represents a compelling entry point into a large and evolving memory market. We look forward to sharing more details as this progresses. Turning to silicon photonics, we believe that silicon photonics used in data center and also chip-to-chip I.O. is going to be a significant market driving production burning capacity for our Fox wafer-level burning systems and wafer packs. Our lead customer has now firmed up its production ramp, which we expect to begin early next fiscal year. While this timing is later than previously expected, it aligns with recently announced AI processor platforms and positions as well for calendar 2026 orders and deliveries in fiscal 27. We've also finalized a forecast with another major Silicon Photonics customer, initially targeting data center applications with a roadmap toward optical IO. We expect to book their initial turnkey FOX system soon with delivery planned for May of this year. In gallium nitride power semiconductors, We continue to support our lead production customer, though we experienced delays related to unanticipated high-voltage bolt conditions that required wafer packs and protection circuit redesigns. This delayed approximately $2 million in wafer pack shipments from last quarter into this quarter, along with some system enhancements. Shipments have now resumed, and lessons learned have significantly strengthened our GAN power supply burning capabilities. If anyone tells you that testing and burning in full wafers of GaN power semiconductors with up to 600 volts or more is easy, don't listen to them. We also continue to engage with multiple new potential GaN customers and are developing wafer packs for several new device designs that are expected to go to high-volume production for applications like data center infrastructure and power delivery automotive electrical power distribution on both ICE and hybrid electric vehicles, and even power semiconductors used for electrical breakers. AIR has a unique solution that can deliver full turnkey, fully automated wafer handling and probing for test and burn-in of GaN wafers in sizes from 6 to 8 inches and even 12 inches or 300 millimeter wafers. Turning to silicon carbide, as we previously discussed, silicon carbide demand has been weighed toward the end of this fiscal year. Customers continue to be optimistic about this market and their capacity needs. But we've tried to take a very conservative stance that is mostly show us the orders before we believe them. Our lead customer recently transitioned from 150 millimeters to 200 millimeter wafers, nearly doubling output without adding new Fox XP systems and supported by AERA's proprietary wafer packs that we developed to accommodate both 150 and 200 millimeter wafers, contacting 100% of the dye on each in a single touchdown. They're now seeing additional needs for wafer packs this year, but additional capacity for systems appears to be a year out. We pushed out expected orders until next fiscal year from our near-term forecast, but have capacity of systems or wafer packs to continue to support their surge capacity needs as well as our other silicon carbide customers. While electric vehicle-related demand has slowed industry-wide, we remain well-positioned with the most competitive wafer-level burn-in solution available, and we expect to benefit when growth resumes. In semiconductors used in data center hard disk drives, we're installing the additional Fox CP systems for a major supplier of hard disk drives for wafer-level burn-in of their special components in their drives. They've indicated plans for additional purchases later this calendar year. While their device unit volumes are very large, the overall revenue opportunity remains modest due to short stress times and the massive parallelism achieved on our Fox CP system and proprietary high-power wafer-packed wafer contactors. Now, let me talk about package part burn-in. We're seeing continued momentum in package part qualification and production burn-in for AI processors, driving growth in our new Sonoma ultra-high power package part burn-in systems and consumables. As we announced today in a separate press release, during our fiscal third quarter to date, we have received orders from multiple customers, totaling more than $5.5 million for our Sonoma ultra-high power package part burn-in systems, including initial orders from a premier Silicon Valley test lab for our newly introduced higher power configured Sonoma system that can also support full automation. These orders already exceed the total Sonoma orders for the entire second quarter, highlighting the accelerating demand we're seeing for our package-level burden of high-powered AI and compute devices. This quarter, we also secured key new device wins on the Sonoma platform, or high temp operating life qualification. These wins are expected to drive additional capacity at test houses, with at least one customer planning to transition to production later this calendar year, generating significant system demand. Our lead package part burn-in production customer for AI processors continues to ramp and is forecasting substantial growth in 2026 and beyond. Although we have not yet received the purchase order, we have received a substantial forecast from this customer for AI ASIC production capacity, with requested Sonoma production, package part burn-in system, and BIM shipments beginning in the fiscal first quarter of 27. That starts May 30th, which we expect to contribute to very strong bookings in fiscal 26 and generate significant revenue growth in fiscal 27. This customer also plans to introduce much higher power A6 later this year, for which we are already developing the high-temp operating life qualification burden modules and sockets to be used on the Sonoma systems at one of the premier Silicon Valley test services companies that have many systems installed. This AI accelerator ASIC processor is also forecasted to go to production burden and drive even higher volume needs for production burden systems downstream at the OSATs in Asia. We feel we're very well positioned with our Sonoma system for this production capacity need and believe this could drive very substantial volumes of Sonoma systems in our next fiscal year. During the quarter, we completed development of a next generation fully automated higher power Sonoma system supporting up to 2,000 watts per device. This system enables continuous flow operation, improved throughput, and seamless transition from qualification to high volume production using the same fixtures and sockets. These capabilities enable customers who are focused on high-temp operating life reliability testing to have a system that is fully software and hardware compatible with the Sonoma systems they have installed, which simplifies and accelerates time to market that's critical for HTAL testing and new AI processors. This Sonoma burn-in system can also simply bolt on a fully automated handler developed and sold by Airtest as a turnkey solution to allow hands-free operation with less than a couple of minutes of overhead per burn-in cycle, which is amazing for production burn-in needs. We're also seeing increased demand for our lower-power Echo and Tahoe package part burn-in systems, driven by our installed base of more than 100 systems across over 20 semiconductor companies worldwide. But I'll wait for another call to discuss these systems and the markets they serve in more detail. As stated last quarter, the rapid advancement of generative AI and the accelerating electrification of transportation and global infrastructure represent two of the most significant macro trends impacting the semiconductor industry today. These transformative forces are driving enormous growth in semiconductor demand, while fundamentally increasing the performance, reliability, safety, and security requirements of the devices used across computing and data infrastructure, telecommunications networks, hard disk drive and solid state storage solutions, electric vehicles, charging systems, and renewable energy generation. As these applications operate at ever higher power levels and in increasingly mission-critical environments, The need for comprehensive test and burn-in has become more essential than ever. Semiconductor manufacturers are turning to advanced wafer-level and package-level burn-in systems to screen for early life failures, validate long-term reliability, and ensure consistent performance under extreme electrical and thermal stress conditions. This growing emphasis on reliability testing reflects a fundamental shift in the industry. from simply achieving functionality to guaranteeing dependable operation throughout a product's lifetime, a requirement that continues to expand alongside the scale and complexity of next-generation semiconductor devices. This year, we're making significant progress expanding into additional key markets for our semiconductor test and burning solutions, including AI processors, gallium nitride power semiconductors, data storage devices, silicon photonics, integrated circuits, and flash memory. This diversification of our markets and customers is significant, given our revenue concentration in silicon carbide for electric vehicles the last two years. This progress and key initiatives expands our total addressable market, diversifies our customer base, and provides us with new products, capabilities, and capacity, all aimed at driving revenue growth and increasing profitability. The progress we made this quarter with a significant number of customer engagements and production installations provides improved visibility into future demand. As a result, we're reinstating guidance for the second half of fiscal 26. For the second half of fiscal 26, which began November 29th, 25, and ends this May 29th of 26, AIR expects revenue between $25 million and $30 million. As stated earlier, although we're not providing formal bookings guidance, based on customer forecasts recently provided to AIR, we believe our bookings in the second half of this fiscal year will be much higher than revenue, between $60 million and $80 million in bookings, which would set the stage for a very strong fiscal 27 that begins on May 30th of 2026. With that, let me turn it over to Chris, and then we'll open up the lines for questions.