Aehr Test Systems

At this time, all participants are placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to hand the floor over to your host, Todd Curley of Pondell Wilkinson. Sir, the floor is yours.

Thank you, Operator. Good afternoon, everyone, and welcome to Ehr Test Systems' first quarter fiscal 2027 financial results conference call. Joining me on today's call are Gayn Erickson, Air Test President and Chief Executive Officer, and Chris Siu, Chief Financial Officer. This afternoon, following the market close, Air Test issued a press release announcing its first quarter fiscal 2027 results. The release is available on the company's website at air.com. Today's call is being webcast live and a replay will be available on the investor relations page of the company's website. Before we begin, I'd like to remind everyone that management will make forward-looking statements today that are based on current information and estimates. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Factors that could cause such differences are discussed in the company's most recent periodic and current reports filed with the SEC. Forward-looking statements, including guidance provided during today's call, are valid only as of today's date and AIR undertakes no obligation to update them. Now I'd like to turn the conference call over to Gayn Erickson, President and Chief Executive Officer. Gayn?

Thanks, Todd. Good afternoon, everyone, and thank you for joining us. I'll begin with a brief overview of our first quarter highlights and provide an update on the key customer programs and markets driving our business. With a focus on the strong demand we're seeing in the AI and data center infrastructure markets, Chris will then review our financial results and outlook before we open the call for questions. We delivered an outstanding start to fiscal 2027 with record quarterly revenue, strong bookings, and significant progress across several major AI semiconductor customer programs. First quarter revenue was a record $33.0 million, increasing 200% year over year and 75% sequentially. Non-GAAP net income was $9.4 million, up 163% sequentially, reflecting the operating leverage in our business as revenue scales. These results demonstrate expanding AI production demand and our ability to meet customer capacity requirements. Bookings totaled $46.7 million, representing a book-to-bill of 1.4%. Our effective backlog, including bookings received after quarter end, reached $109.3 million as of November 1st. Based on our strong first quarter performance, substantial backlog, and visibility in the customer production requirements, we're raising our fiscal 2027 revenue outlook to $150 million, compared with our previous guidance range of $130 million to $150 million. This represents 200% revenue growth over fiscal 2026 and reflects our growing confidence in the production ramps and customer programs supporting our business. We expect non-GAAP net income of at least 20% of revenue for the full fiscal year. Chris will provide additional details on our financial outlook. Demand continues to accelerate across both wafer level and package level burn-in, driven by increasing semiconductor complexity, power requirements, and deployment and mission critical applications. As devices become more advanced, the need for comprehensive test and burn-in is becoming essential to ensure reliability and performance, which is driving growing adoption of our solutions across multiple markets. For AIR, this is translating into expanding production demand from existing customers and new opportunities to qualify our solutions on additional devices with both those customers and new customers. Starting with our wafer-level burn-in business, demand for our Fox wafer-level burn-in solutions is accelerating. Our lead AI processor production customer continues to expand capacity. In August, we announced a $22 million follow-on order for multiple systems consisting of fully automated Fox XP systems with integrated wafer pack auto liners and full sets of proprietary wafer pack full wafer contactors. We are executing against this customer's capacity expansion plans and are encouraged by its forecast for additional capacity in both the short and long term. We've also made significant progress with a major supplier of AI accelerators, CPUs, and network processors that successfully completed a benchmark evaluation last quarter. This customer has decided to purchase a fully configured XP wafer-level burn-in test cell for installation at one of its key outsourced semiconductor assembly and test, or OSAP, partners in Taiwan, where the system will be evaluated in a high-volume production environment using the same device that was successfully tested in last quarter's benchmark. Installation is planned for early calendar 2027, with a decision regarding high-volume production anticipated within several months following installation and validation. We believe this customer represents one of the largest potential burn-in system opportunities AIR has ever pursued with significant potential across multiple product lines and across multiple manufacturing locations. This engagement represents an important step toward broader adoption of wafer-level burn-in for advanced AI processors, as well as deployment of our wafer-level burn-in solutions across multiple products and product lines for a single customer. As these advanced processes are integrated into expensive multi-type packages that include other processors, high bandwidth memory, and other components such as electrical and optical IO chips, identifying early life failures before final assembly can provide significant cost and reliability benefits. There's also a growing trend that some devices that customers are working on may require production burn-in screening at the wafer level as infant mortality failures of certain devices may simply not be able to be screened effectively at the package level. In silicon photonics, we received additional production orders from multiple customers for fully automated Fox XP systems used to burn in photonic integrated circuits for high-speed optical interconnects and data center applications. We believe broader adoption of optical interconnects, including emerging co-packaged optics architectures will create additional demand for wafer-level reliability screening. In silicon carbide, additional wafer pack orders and increased utilization of installed Fox systems point to improving demand. We have direct evidence from EV automotive suppliers that companies using our wafer-level burn-in systems are being seen as preferred vendors for their quality and reliability screening. Increasingly, we see that companies performing reliability screening through wafer-level burn-in see it as a real differentiator in their markets. We also continue to pursue gallium nitride and other power semiconductor applications where reliability screening has proven to be critical to their end markets as well. GAN has much broader application space than silicon carbide does today and has proven to be much harder to screen for early life failures. We feel we are the market leader in this area and have added two additional production customers in the last six months. In memory, we remain engaged with major manufacturers on next-generation wafer-level burn-in, and flash opportunities are progressing more slowly than expected because of limited incremental manufacturing capacity and also the timing of new high bandwidth flash architecture volumes. Separately, emerging high bandwidth memory architecture for D-REB with more complex logic in the base die may create wafer-level burn-in opportunities before integration into advanced memory packages. These engagements continue and AIR continues to feel these are long-term opportunities for us. Now let me turn to package level. Our Sonoma high-power package level burn-in business is also expanding. We're shipping and installing more than a dozen systems per month to support our lead hyperscale customers production ramp for its first AI processor using Sonoma. Our expanded manufacturing capacities are supporting this delivery pace. The same customer's second AI processor has successfully completed qualification on Sonoma. As announced in October, we received follow-on orders for additional systems, burn-in modules, and software enhancements to support initial production sampling and an anticipated production ramp in calendar 2027. Importantly, the customer forecast that this second processor will ultimately reach higher production volumes than its first processor currently in production on Sonoma. This processor requires greater power and more sophisticated thermal management, including multiple independently controlled thermal zones within a single package. We're also advancing evaluations of our Sonoma high power systems with additional AI processor suppliers and hyperscale customers for both engineering qualification and potential high volume production applications. These engagements include bringing up processors here at AIR as well as at customers facilities here and in the US and in Asia. These processors include data center focused processors for training and inference as well as very high volume edge based processors for mission critical real time inference applications. We continue to see package level applications driving our business in addition to the growth in wafer level. On our consumable business, Complementing our system sales, our proprietary wafer pack contactors and Sonoma burn-in modules support customers' ongoing production requirements and new device introductions. We currently expect these products to represent about 35% of our fiscal 27 revenue. As our installed base expands across AI processors, silicon photonics, silicon carbide, gal nitride applications, We see further opportunities for these engineering qualification and production driven purchases. I also want to highlight an important change in the profile of our business that may not be fully apparent from the individual customer programs we've discussed. Historically, AIR had only a handful of customers with the potential to generate significant production orders. Today, we see that potential across more than a dozen customers. spanning AI processors, silicon photonics, silicon carbide, gallium nitride, and other applications. This represents meaningful diversification, not only across customers and then markets, but also across both our Fox wafer level burn-in and Sonoma package level burn-in platforms. Individual customer orders and production ramps can still vary significantly from quarter to quarter. but we now have a much broader range of customer and production opportunities contributing to our growth outlook. We believe this breadth reduces our dependence on the timing of any single customer program and positions AIR for more diversified, sustainable long-term growth. Importantly, this expanding customer base combined with the increased number of devices being qualified production and growing installed base of our systems is creating multiple opportunities for additional revenue growth beyond our fiscal year. To support expanding demand, we've increased our manufacturing capabilities, including in Southeast Asia. These investments are supporting our current customer production ramps and providing capacity for additional growth. We continue to work closely with suppliers to meet customer delivery requirements. We're also planning further manufacturing expansion and targeted investments in engineering, customer support, and sales to support growth beyond fiscal 2027. Our priorities remain delivering on existing production commitments and advancing additional customer programs through qualification and validation. Before turning the call over to Chris, I'd like to welcome Vijay Rao to our Board of Directors. Vijay brings 30 years of technology industry experience and deep expertise in hyperscale data center infrastructure, including AI accelerators, high performance memory, and optical networking. His understanding of semiconductor reliability requirements will be valuable as we expand our presence in AI and data center applications. To close, our record revenue, strong quarterly bookings, record effective backlog, and expanding customer opportunities have strengthened our confidence in the year ahead. With existing customers increasing production, additional AI processor programs advancing toward commercialization, and a significantly broader pipeline of opportunities across both our wafer level and package level burn-in platforms, we believe AIR is exceptionally well positioned for continued growth in fiscal 2027 and beyond. Our focus remains on executing against existing production commitments, expanding our installed base, and converting additional qualification programs into long-term production business. With that, I'll turn it over to Chris.