Aehr Test Systems (NASDAQ:AEHR) Q4 2026 Earnings Call

0:00 Good afternoon. Thank you for holding. Your conference will begin very shortly. Please remain on the line. Your conference will begin in just a couple of minutes. Good day. Welcome to the Aehr Test Systems

2:08 Fiscal twenty twenty Fourth Quarter and Full Year Conference Call. At this time, participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Jim Byers at Ponder Wilkinson Investor Relations. Jim, you may begin.

2:35 Thank you, operator. Good afternoon, and welcome to Aehr Test Systems fiscal twenty twenty six 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 Yu. Before I turn the call over to Chris and Gain, I'd like to cover a few quick items. This afternoon, right after market close, Aehr Test issued a press release announcing its fiscal twenty twenty six 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 the company's website. And 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.

3:33 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 Aehr Test Systems undertakes no obligation to update the forward looking statements. Now with that said, I'd like to turn the call over to Gayn Erickson, President and CEO. Thanks, Jim, and good afternoon, everyone, and welcome to our fiscal twenty twenty six fourth quarter and full year earnings conference call. I'll start with an update on the key markets driving our business, including the strong demand we're seeing in the AI and data center infrastructure markets, as well as the significant progress we made this year in diversifying and expanding our end markets. Chris will then go over our and review our financial results and open up the call for questions.

4:22 We're very pleased with our fiscal fourth quarter, which exceeded consensus street expectations and capped a year of significant bookings and revenue diversification for AEHR. Record quarterly bookings, a very strong and record backlog and growing demand across AI processors, silicon photonics and power semiconductors for both our wafer level and package level burn in solutions positions us well for significant growth in 2027 and moving forward fiscal twenty twenty seven that is. With strong momentum and a record backlog heading into fiscal twenty twenty seven, we're expecting revenue of between $130,000,000 and $150,000,000 representing 2.6 times to three times the just completed fiscal twenty twenty six revenue.

5:08 Non GAAP pretax profitability at these levels is expected to come in between 1822%. With current customer forecasts that we're seeing across our wafer level and package level burn in platforms, we see the opportunity to increase our revenue guidance even higher as additional orders materialize. We believe we're not capacity limited even at the 150,000,000 revenue levels. To illustrate the progress we've made in diversifying its additional high growth markets, just two years ago, over 95% of our business was tied to silicon carbide for electric vehicles, whereas today, almost 95% of our fiscal year twenty six revenue came from market not electric vehicles silicon carbide. Reliability and production wafer level burn and screening for AI accelerators, CPUs and network processors were our fastest growing markets this year, representing approximately 71% of our total annual revenue.

6:04 Optical device test and burn in for data center infrastructure transceivers, chip to chip IO and hard disk drives accounted for another 20%. We expect both of these markets to grow significant in fiscal twenty twenty seven, and we're seeing encouraging signs of recovery in the silicon carbide market as well as new growth opportunities for power semiconductors such as in gallium nitride and even silicon based power MOSFETs used in both automotive and AI data center applications. So let me provide an update on several of the key markets and customer initiatives, I'll start with wafer level burn in. Demand from AI related applications continues to accelerate. Our lead AI processor wafer level burn in customer is significantly ramping their products, driving an increase in forecasted capacity needs for our FOX systems and proprietary WaferPak full wafer contactors this year and over the next few years.

7:00 This past year, they've ordered our fully automated WaferPak aligners to integrate with their installed base, doubled their systems from us and are forecasting significant increases in wafer allocation from their foundry this year and into the future. This had been a challenge to their growth over the last year. We're happy to see them move all production burn in screening to wafer level burn in on our systems this past year. They no longer need to perform any system level screening of their products. This customer sees AEHR as a critical supplier and we're working to ensure we can meet all their capacity needs as they forecast significant growth in system purchases and WaferPaks this year and over the next few years. In addition, we're engaged with additional AI processor customers who are evaluating wafer level burn in to improve their product reliability and reduce yield loss from production burn in of their devices later in the manufacturing process.

7:55 This includes one of our largest package level burn in customers, who's now asking us about a wafer level burn in evaluation for future production of one of their AI accelerators and CPUs. This is in parallel with ensuring we can meet their package level burn in needs with our Sonoma systems. A key advantage of our proprietary WaferPak contactor technology is its ability to manage individual die temperatures, enabling significantly better thermal management than conventional package level approaches. Our systems can process up to a quarter of a wafer at a time with as many as nine wafers tested in parallel, delivering a compelling combination of throughput and cost efficiency. So let me provide an update on our wafer level burn in evaluation with a major supplier of AI accelerators, CPUs, and network processors.

8:44 We're excited to report that we successfully completed the benchmark testing of our wafer level burn in solution on one of their processors, achieving results that exceeded their expectations and in their words produced results better than they can get at package level. This top tier AI processor supplier has now expressed interest in moving to pilot production test validation at their semiconductor contract manufacturer in Taiwan for their current high volume device, which we just completed the benchmark on. Originally, this benchmark was to evaluate wafer level burn in for their next generation device. Instead, they indicated that based on the results, they're interested to pull this device in and to consider wafer level burn in on this current device as well.

9:29 They told us this current device is expected to continue ramping and achieve significant volumes over the next year or more. In addition, they also requested that we evaluate a second device in parallel. The potential revenue opportunity from one of these devices is significant to Aehr in terms of near and long term revenue streams related to the wafer level burn in systems and proprietary Aehr WaferPak contactors. Turning to wafer level burn in for silicon photonics devices, as we have anticipated for the last year, silicon photonics devices and the need for production burn in are now seeing strong momentum as AI data center architectures increasingly rely on optical IO and high speed optical interconnects. Our lead silicon photonics customer is ramping with follow on orders over the past year and more already in this fiscal year for fully automated wafer level burn in systems powering AI optical IO and data center interconnects.

10:26 These systems are fully integrated with their automated wafer handling equipment, enabling fully automated high volume production burn in with hands free operation using automatic guided vehicles, marking another important milestone with this long term customer.

10:42 In addition, our newest major silicon photonics customer, a global leader in networking products and solutions, has provided us with a forecast for additional systems this calendar year as it ramps capacity to support next generation hyperscale data center deployments. This customer first engaged with us just last November and has since ordered two of our nine wafer FOX test cells and two of our FOX NPs. This engagement progressed quickly from initial contact to their first order and our first delivery of fully integrated test cell. We believe our sales process is shortening over time as our wafer level burn in solutions are becoming more pervasive across multiple industries, customers and countries.

11:30 We believe the silicon photonics and optical test and burn in market has substantial growth potential and can be a meaningful long term growth driver for AEHR. So now let me share some highlights of our progress in power semiconductors and wafer level burden in the past year. We completed more than a dozen designs for gallium nitride wafer packs, which are now being sampled by potential customers. Many, if not all, are expected to move to volume production on our wafer level burn in systems, driving the need for systems in wafer packs this year and going forward. We also just completed the world's first 300 millimeter GaN wafer level burn in solution, using our high voltage WaferPaks to stress and test the critical high temperature reverse bias test needed to screen for GaN MOSFET defects in production.

12:19 Just recently, we closed the sale of our first FOX system for a silicon MOSFET wafer level burn in application. Prior to this, customers had purchased our FOX wafer level burn in systems only for non silicon MOSFETs such as silicon carbide and gallium nitride. We're working with this customer to determine test times and quality screening modes that we hope will lead to production burning capacity needs as the customer has indicated. We also captured our first silicon carbide customer in Taiwan. This customer works closely with several automotive manufacturers in Taiwan and China as well as other international companies. Securing this win was especially important to us because they chose Aehr over Semi, a Chinese company that recently reincorporated in Malaysia as Nexus Test for their silicon carbide wafer level burning products.

13:12 As some of you know, Aehr Test is currently suing Semi Nexus Test for patent infringement of their silicon carbide focused wafer level burn in system. We believe they're violating our IP and patents that we hold in many countries around the world, including China, Taiwan, Japan, Korea, Singapore, the EU, and The United States. We were chosen over semi due to technical superiority, cost and our reputation in the automotive industry for production wafer level burn in of silicon carbide devices for EVs. We are seeing encouraging signs of recovery in the silicon carbide power semiconductors and actively engaged to meet the wafer level burn in needs of several of the world's largest automotive OEM manufacturers, the car and EV suppliers, and several of their silicon carbide suppliers for their new electric vehicles.

14:02 We also announced today that we received approximately $8,000,000 in new orders in just the last month for silicon carbide wafer level burn and wafer packs as global electric vehicle programs accelerate. These include expanded production orders from our lead silicon carbide customer for wafer pack full wafer contactors and a key order directly from one of the largest automotive companies in the world for multiple wafer packs to be used in the qualification of silicon carbide devices from suppliers for the new generation of electric vehicles using Aehr's FOX wafer level burn in systems. This year, we expect renewed demand for both silicon carbide and GaN power semiconductor test and burn in, driven by automotive electrification and AI data center power infrastructure.

14:51 Let me talk a little bit about wafer level burn in for memory. We also continue to pursue opportunities in memory, including NAND flash and potential high bandwidth memory DRAM applications as part of our wafer level burn in solutions roadmap. The growth of these two memory markets may be stronger than ever with massive capacity increases planned for this decade. With our wafer level burn in benchmark with a global leader in NAND flash completed, we're in discussions on how to move forward. As we said last quarter, we hope to close on discussions about test system specifications needed for next generation flash memories, and in particular, their high bandwidth flash devices, which would lead to a development agreement to supply systems and WaferPaks to them over a twelve to eighteen month deployment development of our new memory optimized blades for our FOX XP and MP multi wafer

15:42 test and burn in platform. We're also in ongoing discussions with other key memory suppliers that produce high bandwidth memory, the new DRAM standard used in AI GPUs, as well as standard DRAM and flash memories to align our solutions with the production needs of these companies' new capacity coming online. As we've noted before, this is a key focus for Aehr this year with the goal of reaching an agreement with these customers to develop the enhancements needed to extend our FOX system into these markets. We believe this market could drive orders in fiscal twenty twenty seven with ramps in fiscal twenty twenty eight.

16:20 Now turning to package level burn in. Our package level burn in business for AI processors also gained momentum over the year, highlighted by record follow on production orders from our lead hyperscale customer for Sonoma Systems supporting high volume AI processor production burn in. This customer is a premier large scale data center provider and is forecasting substantial expansion of Sonoma system purchases for a second device, which is twice the power per package as the first device that they're using Sonoma systems for today. As their current and next generation devices ramp, we believe Sonoma systems and consumables can become an increasingly important contributor to Aehr's revenue. This past year, we secured key new device wins on the Sonoma platform for high temp operating life qualification.

17:10 We're also engaged with multiple current and prospective customers for package level reliability qualification and production burn in of AI accelerators, ASICs, network processors, and also for edge AI processors for automotive and robotics, which represent significant opportunities for Aehr over the next few years. Recently, we introduced an enhanced Sonoma high power configuration designed for next generation CPUs, GPUs, and high performance network processors used in AI data center and communications applications. This enhanced system expands the Sunnova product family's capabilities with per device power up to 2,000 watts or more, increasing total system power capacity and improved device count scalability.

17:56 It also includes an optional fully integrated auto aligner and a high throughput automated loaderunloader that enable completely hands free operation in a production environment. Unlike traditional batch flow burn in, the Sonoma high power configuration with its ALU is designed for continuous flow operation, enabling devices to begin testing immediately upon insertion. The automation and thermal systems run continuously, maximizing equipment utilization, throughput and return on investment for both engineering qualification and high volume manufacturing environments.

18:32 Our Sonoma systems deliver what we believe is the industry's lowest cost solution, enabling customers to transition seamlessly from early reliability characterization to full production burn in and early life failure screening. This approach helps reduce costs, improve quality and accelerate time to market. To meet anticipated demand, we've been expanding manufacturing capacity for both our systems and consumables. That's both on the wafer level and on the package level. This additional capacity positions us to support expected customer ramp ups and provides flexibility if demand exceeds our current outlook.

19:11 Looking ahead, we're very excited about our position entering fiscal twenty twenty seven. We have multiple customers who began production over the past twelve months and are now ramping up, creating the potential for meaningful follow on demand for systems and consumables. With multiple customers entering or expanding production, a record backlog and additional opportunities under discussion both wafer level and package level burn in, we believe Aehr is well positioned for multiple years of strong revenue growth. With that, I'll turn it over to Chris.

19:44 Thank you, Gayn. Before I review our financial results, I would like to provide a brief update on the steps we're taking to expand our manufacturing capacity and consumer support infrastructure to support our growing backlog and future growth opportunities. As Gay mentioned in the last conference call, we continue to scale our manufacturing capacity to support growing demand. In addition to our Fremont expansion, we began shipping Sonoma systems from one of our existing contract manufacturers in Southeast Asia. This adds capacity for more than 20 additional systems per month and gives us greater flexibility as we scale to meet customer demand. With the recent record 41,000,000 purchase order we received from our hyperscale customer in April, we are very active operationally as we build Sonoma systems to meet the customer's delivery schedule.

20:39 This system is expected to be delivered this year to the outset of our hyperscale customer, which is based in Taiwan. GAIN also reported today that we successfully completed benchmark testing of our wafer level burn in solution with a major supplier of AI accelerators, CPUs and network processors. The testing was completed on one of their processors and achieved results that exceeded their expectations. This top tier AI processor supplier has now expressed interest in moving to pilot production test validation for its current high volume device.

21:15 In anticipation of next stage of this project, we have recently signed a new lease to expand our office in Xinjiu, Taiwan. This expansion will allow us to increase our local sales and customer support personnel, deepen our engagement with customers and ecosystem partners in the region and strengthen our ability to support future production ramps.

21:37 With recent manufacturing capacity enhancements and an increased presence in Taiwan, we believe we are well positioned to support significant growth in both wafer level and package level burning systems as customers ramp production. Now to our financial results. Bookings in the fourth quarter of fiscal twenty twenty six were $60,700,000 up more than 500% from $11,100,000 in the prior year quarter.

22:05 The increase was primarily driven by purchase orders for Sonoma package level and FOX Wafer Level Burn In Systems, WaferPaks and burn in modules boards for AI and silicon photonics processor burn in, partially offset by lower customer orders for silicon carbide WaferPaks. Backlog at EN was a record $80,600,000 up from $15,200,000 at the end of fiscal twenty twenty five. Subsequent to EN, we received an additional $20,000,000 in bookings

22:38 during the four week transition period and the first two weeks of fiscal twenty twenty seven. As a result, our effective backlog increased to approximately $100,600,000 before taking into account minimal shipments during the transition period ended 06/26/2026, which is not part of fiscal year twenty twenty seven.

22:59 Turning to our Q4 performance. We're excited about our continued momentum in the artificial intelligence and data center markets. AI processors and silicon photonics burning accounted for more than 80% of our fourth quarter revenue compared with 56% in the prior year period.

23:18 For the fourth quarter, we had three customers representing more than 10% of total revenue. Two of these customers target the AI market and the third focuses on the data center optical transceiver market. Revenue for the fourth quarter totaled $18,800,000 up 34% from $14,100,000 in the prior year quarter. The increase was primarily driven by strong demand from AI and data center customers for our FOX systems, serial auto aligners and WaferPaks. Contactor revenue was $5,800,000 representing 31% of our total fourth quarter revenue compared with 30% in the prior year period.

23:59 This remains a sizable revenue stream for Aehr, driven by demand for new WaferPak designs as existing and new customers deploy FOX systems for additional device applications. Non GAAP gross margin for the fourth quarter was 45%, up 1,000 basis points compared with 35% in the same period last year.

24:19 The increase was primarily due to higher revenue levels, improved manufacturing capacity utilization and more favorable product mix. In the fourth quarter of fiscal twenty twenty five, our revenue was driven primarily by the sale of package level burn in systems, which had lower product margins. Non GAAP operating expenses in the fourth quarter were $7,500,000 compared with 5,400,000 in the prior year quarter. The year over year increase was primarily attributable to higher employment cost as we added headcount to support our R and D projects, as well as high commissions related to record bookings from customers in the AI and data center markets. As an update on our patent litigation against SendMite in China, we continue to incur legal fees during the fourth quarter to support our claims.

25:08 We are encouraged that the patent office in the Beijing District of the People's Republic Of China has upheld two of our Chinese patents, which is critical to our litigation against Semite.

25:19 The case is still ongoing and we anticipate incurring additional legal expenses in upcoming quarters as we continue to protect our intellectual property rights in China. Non GAAP net income for the fourth quarter, excluding the impact of stock based compensation and amortization of intangible assets was $3,600,000 or $0.11 per diluted share, well above Street consensus. This compares with a non GAAP net loss of $200,000 or negative $01 per diluted share in the fourth quarter of fiscal twenty twenty five.

25:54 Turning to the full year results, we reported revenue of $50,000,000 down 15% year over year. Full year non GAAP gross margin was 38.5% compared with 44% in the prior year. Full year non GAAP net income was 900,000 or $03 per diluted share compared with non GAAP net income of $4,600,000 or $0.15 per diluted share in fiscal twenty twenty five. At the end of the fourth quarter, cash, cash equivalents and restricted cash totaled $116,500,000 compared with $26,500,000 at the end of fiscal twenty twenty. During fiscal twenty twenty six, we raised approximately $100,000,000 primarily through our ATM program, significantly strengthening our balance sheet.

26:46 Although Aehr remains a capital light company with only $2,100,000 in capital expenditures in fiscal twenty twenty six, this enhanced financial position provides the working capital and flexibility to pursue larger customer opportunities and scale production to meet customer demand. Now I will share our guidance. For the fiscal year ending 06/25/2027, we expect total company revenue to be between 130,000,000 and $150,000,000 representing expected year over year growth of approximately

27:19 160% to 200%. This outlook is based on the information available to us today, including our current backlog and anticipated customer demand. We continue to pursue additional orders from existing and prospective customers. We also expect pretax non GAAP net income to be 18% to 22% of total revenue.

27:42 Lastly, looking at our Investor Relations calendar, Aehr Test will be participating in three upcoming investor conferences over the next couple of months. We'll meet with investors virtually at the Needham Sixth Annual Semiconductor and Semi Cap one on one Conference on Wednesday, August 20. The following week, we'll meet with investors in person on Tuesday, August 26 at the Jefferies Technology Summit Conference in Chicago. On September 10, we'll meet with investors in person at the Lake Street Capital Annual Big Ideas Growth Conference in New York City.

28:17 We hope to see some of you at these conferences. This concludes our prepared remarks. Operator, we're now ready to take questions.

28:26 Thank you. And the first question today is coming from Christian Schwab from Craig Hallum Capital Group. Christian, your line is live.

29:08 Thank you. Congratulations on the fantastic outlook. Gayn, I know you gave some description of revenue by application for the last fiscal year, but as we're thinking about the 130,000,000,000 to $150,000,000,000 not obviously asking by wafer level burn in or the Sonoma systems, but can you just give a rough idea of the assumption as far as product mix, you know, between AI chips, silicon photonics, power, and if there'll be any memory revenue, sounds like that's fiscal twenty eighteen. Yes. So we will. And the only challenge of course is, we've never done that before. And so in reality, our ability to always predict, but in our current kind of roll up right now, it's pretty similar to last year in terms of AI 70 ish percent, the silicon photonics maybe 15%, 20%, maybe in that same range.

30:13 And then the power semiconductor and miscellaneous is kind of the rest. But there's some pretty good and by the way, and I will state, we currently do not anticipate any memory revenue in even the 150 number. So upside in any potential revenue from memory would be in addition to that, but right now we're not assuming any of that. And the bulk of that, if not the majority of all of that range of 130 to 150 is coming from current customers. So not really even including, I want to give myself a little leeway of this new benchmark customer that that we just completed with amazing results.

30:59 That would be upside to that as well. So I think last year I talked about the silicon carbide customers a year ago, we're all talking about how great it's going to be and this is going be a turnaround year. They didn't really give us really detailed forecasts. So I think I shared a year ago, I'm kind of in a wait and see mode. I'll just believe it when I see the orders.

31:22 This year seems a little bit more specific. We had some people with real numbers, some real forecasts, some real targets. We're seeing the population of our installed base be at pretty well full capacity. So it does feel more real this year, and so I'm more optimistic. But we still have a pretty small number.

31:43 A pretty small number. Actually, I think we might have just exceeded it. So that'll that's probably one day, Chris is looking at me like I'm sharing too much. That order we just got, those orders we just got in, I think, were exceed what we were already planning. So we'll see how this goes. There's just a lot of opportunity. But AI is going to be a big chunk of our business this year, both in dollars and percentage.

32:11 Fantastic. Thanks for that clarity. And then just on the memory, it sounds like you feel more confident in the development program. Last quarter, you did mention kind of roughly the same words that

32:25 it could lead to orders in '27 and revenue in '28. But it sounded like you were more confident that you will get orders at some point in fiscal twenty seven for revenue in '28. Did I hear that right? Or or did I I hope I'm more confident than last I'm not sure I'm more confident than last quarter. I mean, I was moderately confident last quarter as well.

32:53 We're we're we have more detail. We've actually started to spend money on it. So we've hired some people and redirected some people, and we're doing architectural schematics and assessment. There's some software that started physical board layouts as part of the proposals to the customers.

33:15 But we really believe you need a committed customer to a project. There's a sort of whether it be a PO or a sponsorship, but you need to make sure you're aligned with what they want and what they're going to buy at the price point you're willing to sell them at. And that's the piece that we still need to get ourselves resolved to. There's been some dynamics during the last year, if you look in the last twelve months, what's kind of changed.

33:43 The introduction of high bandwidth flash is a doozy, right? That has really put, you know, at least a couple of months publicly known on their heels in terms of what they were going to do, how they could test it, and it broke a lot of things. The other piece is the new HBM, which is a DRAM. High bandwidth memory is DRAM, high bandwidth flash is, of course, flash. But HBM, new standards that are coming out, and I don't want to get too carried away here, some of which driven by specific end users, have embedded BIST capabilities in it, which means that the testability changes dramatically,

34:19 and we think could be in our favor. So it's given me some additional optimism with respect to our ability to maybe do HBM sooner than we were thinking, you know, certainly six months ago. But I'm gonna just keep a optimistic attitude that we're we're going after this business, but I, I would be hesitant for you to build models with a lot of revenue in that yet, certainly not next year.

34:45 Great. And then I'll just slip in one more, if I could. There was a lot of different discussions regarding capacity. And I guess I couldn't write all the answers down quick enough to kind of do the math. But as you sit here today, as far as top line revenue capacity, what do you believe it is?

35:10 Yeah, we've talked about some different pinch points. People that have visited us know that we have done the until recently, all of our systems and our consumable wafer packs came out of our Fremont facility. But the supply chain of our chambers, our blades, and all the subsystems and printed circuit boards are, of course, built by contract manufacturers. For the 150 employees or thereabouts that Aehr has, we have probably another two fifty people in direct contract manufacturers building stuff for us in low cost regions around the world.

35:55 We have increased our capability in our facility

36:02 maybe tenfold with the remodel and the other things that we've done. But we still are only running one shift from an operational perspective. We don't have the people to ship tenfold, but the capacity is here to be able to do

36:16 that. People go, well, that's crazy. Why would you do that? Well, as some of the deals we're talking about, if a customer comes to us and said, want 100 systems, you have to be able to say, can do that, and it won't take me three years to build it for you. In parallel, we talked about this in more detail last quarter. We pulled the trigger last September with one of the contract manufacturers in Asia that does assemblies of one of our chamber suppliers. And they upgraded their facility to near clean room space in anticipation of some of the projects that we wanted to outsource to them. We then initiated and gave them orders and worked with them to build our Sonoma systems. And then the last quarter, we shipped our first Sonoma systems directly to a customer out of that facility.

37:05 Our team was there working with them, bringing them up, qualifying everything, demonstrating, then observing, then qualifying the tools. But those systems are actually being installed, I think, last week or this week at our large hyperscaler customer. And their entire backlog is expected to ship directly out of there. We think the capacity out of that is probably upwards of 20 Sonoma systems a month. And that would basically not impact any of our capacity here. So our capacity is significant, measured in hundreds of millions of dollars for sure. And we're doing some things to even potentially increase that. Not that we would then ship $1,000,000,000 a year, but what happens if we have to ship

37:57 a couple 100,000,000 in a quarter? Think of it that way. So one of the challenges in our business is that it's always going to be lumpy. And we do not want to put money in place and infrastructure that's permanent, because the business is cyclical. And five, eight years from now, what's this thing look like? We don't want to have built up into an enormous business. And if there's a softer year that we start losing money or not making as much profit. So I know that's a negative tone on this thing, but the discipline is how do you build up massive amounts of capacity without building up massive amounts of just fixed infrastructure. Got it. That's fantastically clear. Thanks. No other questions.

38:44 Thanks, Christian. Thank you. Thank you. The next question is coming from Jed Dorsheimer from William Blair. Jed, your line is live. Hey, thanks. Thanks for taking my question and big congratulations to you, Gayn and Chris. I know how long it's been coming in terms of this inflection. Few questions for you. I guess, first one, maybe just piggyback off your last response gained to Christian there. Did you did I hear you correctly, 20 Sonoma systems per month? And if that is the case, that's about $100,000,000 of Sonoma. Is that the right way to think about that in terms of the 140,000,000 midpoint of guide? So let me make sure I can say it. So at our 140 midpoint, that's nowhere near 20 Sonoma Systems a month.

39:38 Production Sonoma Systems that we have in backlog, we've shared this with different people, including the consumable elements are somewhere in the $600 $700,000 a piece. They're actually smaller configurations by then times quantity. And I think that we've done a pretty good job of announcing orders along the way. So our package level burden in Sonoma revenues are make sure I do this. I have them in front of me right now. Probably 50,000,000, something along that range. I think that's good. Sorry, guys. I should have that in front of me. So, you know, that's think of the math of that, whatever that sixty, seventy systems or so. So but we're actually shipping those are the customers actually asked for those kind of in a small period of time, very much centered around our second quarter.

40:36 And so that's going to be one of the challenges. We're actually building them right now. We're going to start shipping them here during this quarter. And then the bulk of them actually get delivered in the second quarter. That is helpful. And then on the wafer level, if we took that midpoint, what are the are you mixing in? I'm trying to separate consumables from package and wafer level. Can you give some framework in terms of that breakdown? Well, let me answer that question, Jed. So if you heard me, I mentioned about, we're roughly in the 30% kind of distribution or wafer packs in revenue. And that's wafer packs and BIMs? Yeah. I think that's a good assumption. It's about 30%.

41:26 That sounds right to me as well. Okay. That's super helpful. And then two more from me. Just along the lines or maybe three more, sorry. But your largest processor, GPU, TPU, CPU customer, your AI customer, think is how you describe it. Do you in addition to the benchmark testing, I'm just curious that they're going with package level, but could you update on the activity or discussions around wafer level? I'm assuming that they're also engaged in kind of that open the door, if you will. So It's just an a bit of a lookup table. So I think what you're talking about is our lead AI production package level burn in customer, who we've identified as one of the big hyperscalers.

42:25 Okay? Alright. Are they use Sonoma for all their qualification. They had never done production burn in before, and they moved to production burn in as we acquired InCal. And that's been a great win for everybody because of our capabilities to support them and obviously to meet their capacity needs. That customer, the first device that ever went to production was on Sonoma. The second device is also going to be on Sonoma. They already bought some of the systems for it. That particular device has been a little bit delayed in terms of its timing, but is still expected to ramp or at least start the ramp during our fiscal year at this point. That's the one I described that has twice the power, and they're expecting higher volumes off of it. And then that same customer talked to us, what, maybe six months ago, first time, the third device, they really want to consider wafer level burden.

43:23 And one way you might want to think about it is if there's a progression of number of compute single package, as they get higher, wafer level burn in has a huge advantage because the devices fail during burn in. And if you fail one of the compute chips, you throw away the other compute chips and all of the memory. And so at that point, it gets extremely expensive from a yield loss to continue to do package level burden. So that would be where you'd want to cut in that wafer level burden. So they've actually recently, again, this quarter, again, they're just bringing up their second device, but the third one, they've been talking to us about, okay, what DFT do we need to do? What do we need to put in? How do we optimize it around the FOX system? So it's pretty encouraging. Got it. That's helpful. And just shifting gears, silicon photonics and co packaged optics, I know you mentioned activities.

44:19 The gallium nitride really had struggled with reliability in the auto. Auto requirements are far lower than in data center by about 5x in terms of meantime failure. So I think that would be a good thing for you guys, but I'm just curious how you're thinking about market adoption, timing and then role in GaN specifically. I know what you've got for silicon carbide. Just curious in terms of activity around GaN and the higher failure rates there. Okay. You actually mentioned silicon photonics. You mentioned silicon carbide and GaN.

45:05 Let me just do a think through that window. GaN has been interesting. If you remember a year and a half ago or so when we were engaged with the first GaN customer, we didn't know if they were going to go to production burden or not. Since then, we've been able to verify they are, and they're going through a major qualification with a bunch of industrial, automotive, and infrastructure, and data center applications. Unlike silicon carbide that's like two or three big applications, GaN, we've done like 12 different types of devices. So they're like different voltages and power requirements that they go through all, know, from solar to data center to electric switches in infrastructure and homes to automotive. They're all over the place.

45:50 So they all have different kind of requirements, but so far as we can tell, every one of them needs a production burn in screening to meet the reliability requirements. And it's been a learning process for us. Silk can, again, is extremely difficult to actually test and burn in at wafer level, we've learned. But it's now been debugged and fully working through, and things are going really well for us right now. So we think that that will grow. Now the GaN market by the market forecasters is just dollar wise is measured in single to tens of billions of dollars in this decade, whereas AI or memory is 10x that. So they simply could never spend as much money as some of the other markets. But from a reliability perspective, it's very clear the value of burn in. And we've been proving and validating the value of wafer level burn in, again, similar to silicon carbide. And then silicon photonics similarly, that's been the big debate is as the data centers really need to go to burn in or to silicon photonics, optical transceivers for fiber optic communication, basically, the burn in requirements are kind of very clear in front and center. So the hyperscalers, the big data center guys are all talking about this. And it's sort of cool to be in Vernon, if you will,

47:22 right now. That sounds kind of funny, a plan in words. I've actually, Chris is laughing. I've never said that before. But it is. Right now, a lot of people are talking about burn in as the of the place I believe that burn in is by far the fastest growing segment in all of semiconductor tests right now, and wafer level burn in in particular. Awesome. Last question for me, promise. Chris, can you just help with cadence in terms as you look at the year? How are you thinking? I mean, Gaye mentioned second quarter in terms of some concentration on the package level burn in systems. Is there some way to think about there's a pretty big shift year over year in terms of the uplift, how to think about that flow as we go through the year?

48:15 Any thoughts there or not specific guidance, but just general seasonality in revenue run rate? Yes, exactly. So if you know historically, we kind of said, hey, our first half is softer than the second half. But I would say this year it's hard to say that because as Gabe mentioned, we're going to ship a lot of the package level Sonoma Systems in the second quarter. So second quarter is going to be a big quarter. You could quarter allow going be pretty good. Maybe third quarter is flattish, fourth quarter is up from there. So there's a high likelihood that the first half might be the same or even better than second half. But second quarter is going to be a good very strong quarter for us.

49:07 Got it. I'll jump back in queue. Thanks guys. All right. Thank you. Thanks, Jack. Jack. Thank you. The next question is coming from Max Michaelis from Lake Street Capital Markets. Max, line is live. Hey guys. A few questions for me. One is a clarification question. So that April order you put out, I think it was a $41,000,000 production follow on order with a lead hyperscaler. I think that was an order a production order for the Sonoma systems. Just to be clear, they aren't transferring over to wafer level burden. This is a completely different customer, correct? No, that's the one we're talking about. That is currently on package. Then the second part is package, and the third part is wafer level or potentially being evaluated for wafer level. It gets kind of interesting because they want to make sure we can also do the package for the third one.

50:03 So we have to, you know, we kind of, I guess, we have two dogs in that race, and it's a two dog race. So yeah. Okay. So But by the way, that we third device, we think, is is not even this fiscal year. Okay. And I guess my follow-up to that would be expect sort of a similar order size, I mean, for the on the wafer level side for them? Good question. If they do the same capacity, it would be higher. Our wafer level systems do in fact cost more per dot than the package level today.

50:49 Margins are better too, but the value proposition is different because you get the yield advantage, which more than makes up for the price of the machine. So just from a product positioning and a pricing, I mean, have a lot more IP in it, there's a lot more R and D people, we have enormous investments that we recover through the wafer level, and we have all this IP that is worth it. So customers come to us not just to cost effectively do burden, but at wafer level, it's because the device doesn't even exist in another form, or they put the device in with something else, and then if they burn it in and it fails, then something else gets thrown away. And so the wafer level burn in value proposition has more to do with the yield improvement, which can be measured in 1% of all products.

51:44 If they have you know, eight devices in a package, it's equivalent of 8% yield advantage. The cost of test might be point 1% or point 101%. So the price doesn't really come into effect. Okay. And then last one for me, and I don't know. You you might have mentioned it, but that second a major AI processor that just completed the benchmark testing, I mean, what's sort of the ramp up there? I mean know you kind of left it open ended with the guidance range of being 130,000,000 to $150,000,000 Could you take it higher? I mean, could you see a major order come in, in fiscal year twenty seven be able to complete that? Yes. Pretty brief. Yeah.

52:32 We can. We can. I mean, as we've been adding capacity, and we have multiple AI customers that are engaged with, to some extent, we can build to forecast. We are having discussions about what if you throw a party and everybody comes, right? What does that look like? And we're trying to meet at very high levels with the customers and potential customers and make sure we get an idea of what kind of capacity they look like. These systems have a lot of capacity, though. I mean, when you think about a tester that in the footprint of a competitive ATE machine, like a 93 ks from Advantest, I'm testing nine AI wafers in parallel.

53:20 I would say a quarter of the 60 devices that are running, there's a lot of capacity that you put in place. So if we say, oh, I'm going to go ship 20 machines, right, it's 180 blades, 180 wafers of capacity. 180 wafer test floor is a big test floor. And we could put 18, you know, we put 20 of these, and it's in the size of 20 parking stalls in the garage, out in your parking lot. Think of 20 cars out there that's more than enough to support 20 of our machines. Now think of 180 of our competitors in the same garage. And these are state of the art clean room space.

54:07 These are bunny suited test floors. Awesome. And I always have to remember that when someone says, oh, you can ship, you know, five XPs a month. If there are 18 blade machines, they're 100 testers a month of capacity. And like in silicon carbide, testing all 3,000 die in parallel in one insertion per wafer. These are very high volume, very capable machines. It's, you know, why we get several million dollars apiece for them, upwards of six, including WaferPaks. Okay? Oh, we lost you, Max. It's all good for maintenance.

54:53 Okay. Thank you, Max. Thank you. The next question is coming from Larry Chlobina from Chlobina Capital. Larry, your line is live. Hi, Gaine. I just want to quantify the capacity in Fremont. You mentioned one shift, two shifts. So on the Sonoma side, what I call Sonoma Max, I guess those are fully automated. What is the throughput capacity expected in Fremont? Is it still 20 Sonoma MAXs So if you were to come and look at our facility, as many shareholders have, what we did in our big modification upgrade a couple years ago was add enormous amount of additional cooling and power capacity.

55:50 That gives us drop locations for upwards of potentially 16 locations, physical locations for the equipment to be plugged in, another four mechanically, plus the test labs. What does that mean? That means that theoretically you could have 16 of these machines plugged in and powered up and going through different levels of test. Now depending on the tool, they could take from, you know, several days to several weeks to be on that floor. What we've been doing in parallel is bringing up the CMs to be doing most of that work so that when it comes into the facility, maybe they only sit there for one week. So if you do that math, you're like, well, wait a minute. You could do 16 a week and four per week. Wow. That's a lot. What I've shared with people is, you know, we can reasonably see the ability to do, say, 20 combination of package or wafer level systems a month out of this facility within the supply chain infrastructure that we have.

56:55 But we have not initiated all of that. But in certain cases, have, like chambers, we've been talking to the CMs about auto aligners at both the package and also the wafer level. And so, you know, if those were, say million dollar Sonoma maxes as you call them, we actually call them ultras. Okay? It's $20,000,000 a month of Sonomas. If you were 20 wafer level burning systems a month, they have an ASP closer with the WaferPaks of $5,000,000. They're a $100,000,000 a month. So people are like, oh my gosh. You have one, you know, billion dollars worth of capacity. Conceptually, yes. We've so For for my employees that are listening, we need to hire more people, and there's a lot more work that needs to be done. But with a running head start and a customer forecast, we could do enormous amounts relative to our current size just out of this facility.

57:53 So actually the number would be 20 Sonoma Ultras per month or 20 XPs per month, not both, not 20 each. Yeah. Okay. So you're right. You caught me on some, except for we just initiated the 20 Sonomas outside of our facility. No. I know I I know about that. I No. That what it means, Larry, is we could run the 20 Ultras shipping directly from Southeast Asia and then still do 20 XPs here a month. Okay. And and by the way, I need to put some disclaimers for all all the attorneys listening.

58:38 You know, some of these challenges would be, you know, particular material or getting access to some of the challenges that we've seen on the power supplies, for example, on Sonoma's, is some of the power supply manufacturers that we use in Sonoma are supplying to NVIDIA and others. And they've come back and they've raised their prices 40%, if you want to get them. And so we've been buying components with long lead time items and things like that. So, you know, if we make it sound easy that we're overstating, it's actually quite difficult to do what we're doing right now. But so far, we're able to keep ahead. And then I think almost everything in my backlog, we could ship before the customer has requested it.

59:24 I'm thinking like all the Sonomas, Chris, you know, all my silicon photonics customers. So, so far, we've been on top of that. And our goal is to stay ahead of that. So customers, they want it, we could ship it within the as soon as they'd like it. Okay, then on the paid evaluator, did you say that in your guide for the full year, you don't really have any revenues in there from this particular potential customer? Is that you say that Let's call it little to none at this point. It's in the noise level. So that's a big upside, assuming that gets kicked And then lastly, in your written release, you mentioned on the memory side that you work with model, you're working with multiple memory suppliers.

1:00:19 Does that mean more than one HBM? I mean, how far are you engaged with the HBM potential customers? You've had specific conversations with suppliers. Okay. Let me make sure I do this right. Two to three on on Flash and two on DRAM. Okay. And the and the primary For those that are listening that aren't aware, there's literally, like, four memory manufacturers in the whole world that matter, so apologize. So and if you're not if for those that are in the fifth and sixth, they might be offended by that. But of the top ones, I'm listening Okay. From And and then the the primary flash, you engaged them over two years ago and yet they have, any revenue or orders from.

1:01:10 Is that nothing gonna happen there unless HBF gets kicked off or, as far as you can see? I don't know. You know, that that was a huge change amongst some other organizational things that happened to them pretty dramatically about a year and a few months ago. So at this point, feedback recently has been, you know, they really need something for the HBF, but they really want something for their standard flash. HBF architecturally is way more power, more power supplies. It's technically a more expensive tester, but they really like the price point of the current test capability and so we're kind of working through that. We got to find the math for that. And, you know, you know, we we need their help to sort of get the ball going because, you know, we obviously have a lot of opportunities ahead, in all kinds of markets, and we just soon them sort of help us help them.

1:02:10 Yep, but on a memory side that would still be the first potential sale revenue for any of the four memory people you're talking to. They would I be think so, Larry. I'm gonna I would put a some some bet on a wildcard because this new HBM has a logic interface for its testability. It's breaking the memory testers. And technically, when I describe a new memory tester, I am talking about, well, most people don't know or care on this call what a memory tester is, but a memory tester is built with algorithm pattern generations. It's sort of a different architecture and a different beast than a logic machine.

1:02:57 So if you have an APG based memory tester, it would be really good for flash or DRAM. But if you had a logic best engine in the device, then it may not even be very good at doing best. And so you would need something that looks like a logic tester, which candidly is more like what we build today with flash. The Fox XP was originally designed for the best engine of a couple of the big Flash memory manufacturers. Flash has built in self test. DRAM, until recently, never has. You mentioned that they were coming to you, these HVM potential customers. Would that be a function of potentially this paid evaluator telling them, hey, get over to Aehr Test and get your reliability better before you take our accelerators.

1:03:50 Is there any angle on that? Do you think that could be great? That would be a little too bold for me right now. I don't think that's the case. I do think there is a general tone amongst and growing amongst the data center buyers, all the hyperscalers from Google and Meta, all the papers that you see, Apple, certainly Tesla, of an increasing expectation of test and reliability to screen out defects so that doesn't show up on my data center floor. So that's more of a go get your act together in general than necessarily go to air. I will say that by contrast to the automotive guys, we specifically have automotive EV suppliers telling their suppliers go get air.

1:04:36 Okay, I mean, that's true. So that's a different. We love that. But imagine one of the biggest, one or two biggest automotive suppliers in the world buys our WaferPaks, tells their suppliers, we'd like to qualify you for your silicon carbide reliability, and we're gonna use the Aehr Test box system with our WaferPaks to validate your devices, and good luck to you. Pretty impactful. Right? Yep. So I don't have that with the AI customers today. That would be nice, but we don't have that. Chris, not Good job. Hey, I'll let you go. Thank you.

1:05:21 Thanks, Larry. Thank you, Larry. Thank you. I'm not seeing any other questions in queue at this time. I now turn the call back to management for closing remarks. All right. Well, thank you everybody for listening in and joining us. We're really excited to work hard for you guys this year. This is going to be a great year for Aehr and hopefully for our customers and our shareholders as well. And we look forward to giving you guys an update as we go along. Take care. Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.