Aehr Test System reports Q1 revenue of $11 million, surpassing analyst estimates, driven by AI processor demand and customer engagement in semiconductor testing.

OPERATOR - (00:00:37)

Greetings welcome to the AEHR Test Systems Fiscal 2026 First Quarter Financial Results conference call. At this time, all participants are in a 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 0 on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Jim Byers of PondelWilkinson Investor Relations. You may begin.

Jim Byers - Investor Relations - (00:01:06)

Thank you operator. Good Afternoon. Welcome to AEHR Test Systems First Quarter Fiscal 2026 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 Gain and Chris, I'd like to cover a few quick items. This afternoon, right after market close, AEHR Test issued a press release announcing its first quarter fiscal 2026 results. That release is available on the company's website at aehr.com this call is being broadcast live over the Internet for all interested parties and the webcast will be archived on the investor relations page of AEHR Test's website. I'd like to remind everyone that on today's call management will be making forward looking statements 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 and 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 conference call over to Gayn Erickson, President and CEO.

Gain Erickson - President and Chief Executive Officer - (00:02:24)

Thanks Jim. Good afternoon everyone and welcome to our first quarter fiscal 2026 earnings conference call. I'll begin with an update on the exciting markets areas targeting for semiconductor test and burn-in with an emphasis on how these markets seem to share a common thread of market growth related to the massive expansion of data center infrastructure and Artificial Intelligence (AI). After that, Chris will provide a detailed review of our financial performance. And finally, we'll open up the floor for your questions. Although we started with the typical low first quarter revenue consistent with the last few years and actually higher on both top and bottom lines than Wall street analyst consensus. We're pleased with our start to this fiscal year. We had revenue from several market segments and strong momentum in sales and customer engagement, both wafer level and package part testing burn-in of artificial intelligence or Artificial Intelligence (AI) processors. Again, although we did not provide guidance for the quarter. Our first quarter results surpassed analyst consensus estimates for both the top and bottom lines. We saw continued momentum in the qualification and production burn-in of packaged parts for Artificial Intelligence (AI) processors which is fueling sales growth in our new Sonoma Ultra high power packaged part burn-in systems and consumables. During the quarter, our lead production customer, a leading hyperscaler, placed multiple follow on volume production orders for Sonoma systems requesting shorter lead times to support higher than expected volumes as they accelerate the development of their own advanced Artificial Intelligence (AI) processors. This customer is one of the premier large scale data center providers and has already outlined plans to expand capacity for this device and introduce new Artificial Intelligence (AI) processors over the coming year to be tested and burned in on our Sonoma platform at one of the world's leading test houses. We're also collaborating with them on future generations of processors to ensure we can meet their long term production needs for both package and even wafer level burn-in hyperscaler companies like Microsoft, Amazon, Google, and Meta like Microsoft, Amazon, Google and Meta are increasingly designing and deploying their own application specific integrated circuits or ASICs for Artificial Intelligence (AI) processing to meet the unique demands of their massive scale workloads and gain a competitive advantage. AEHR allows customers to perform production burn and screening, qualification and reliability testing for GPUs, Artificial Intelligence (AI) processors, CPUs and network processors directly in package form. Our Sonoma systems provide what we believe to be the industry's most cost effective solution, enabling customers to smoothly move from early reliability testing to full production burn-in and early life failure screening which helps reduce costs, improve quality and speed up time to market. In the last year, AEHR has implemented several enhancements to the Sonoma system to meet qualification and production test and burner requirements across a wide range of Artificial Intelligence (AI) processor suppliers, test labs and outsourced assembly in test houses or OSATs. Major upgrades include increasing power per device to 2,000 watts, boosting parallelism and adding full automation with a new fully integrated package device handler. Over the last quarter, including a very successful customer open house we held last week at our Fremont, California headquarters, 10 different companies visited Artificial Intelligence (AI)R to see our next generation Sonoma system and new features including the fully automated device handler for completely hands free operation which we've installed here at our Fremont facility. Customer feedback regarding these enhancements has been very positive and we expect these new features to open up new applications and generate additional orders this fiscal year. As I've mentioned before when one of the biggest benefits of our acquisition of NCAL technology one year ago is that it gives us a front row seat to the future needs of many top Artificial Intelligence (AI) processor customers, providing us with close insight into the burn-in requirements. As the only company worldwide that offers both proven wafer level and packaged part burn-in systems for qualification and production burn-in of Artificial Intelligence (AI) processors AEHR is ideally positioned to assist them with regardless of their burn-in method. Consequently, we are experiencing increased interest in our Sonoma high volume production solution for package level burden and some of these same customers as well as other Artificial Intelligence (AI) processor companies are approaching us to learn about our production wafer level burning capabilities. This past year we delivered the world's first production wafer level burn-in systems for Artificial Intelligence (AI) processors. Importantly, these systems are installed at one of the largest OSATs worldwide, providing a highly visible showcase to other potential Artificial Intelligence (AI) customers of our proven solution for high volume testing and burn-in of Artificial Intelligence (AI) processors in wafer form, thereby strengthening our market position. We anticipate follow on orders from this innovative Artificial Intelligence (AI) customer as volumes increase and other Artificial Intelligence (AI) processor suppliers have already approached us about the feasibility of wafer level burn-in of their devices. We're also developing a strategic partnership with this world leading OSAT to provide advanced wafer level test and burn-in solutions for high performance computing and Artificial Intelligence (AI) processors. This joint solution already in operation at the facility marks a significant milestone for the industry. By combining Aehr Test Systems's technological leadership with this OSAT's global reach, we can provide unique capabilities to the market. This model offers a complete turnkey solution from design to high volume production and several customers have already begun discussions to learn more about our high volume wafer low test and burn-in solutions for Artificial Intelligence (AI) processors. This OSAT and Artificial Intelligence (AI)R have a long history of innovation together including the first Fox NP wafer level burn-in system installed in the NOSAT for high power Silicon Photonics wafers. Now the world's first wafer level test and burn-in of HPC Artificial Intelligence (AI) products using aehr's Fox XP systems and they're also one of the largest installed bases of AEHR's Sonoma system for high power Artificial Intelligence (AI) and high performance computing processors. Additionally, this last quarter we launched an evaluation program with a top tier Artificial Intelligence (AI) processor supplier for production wafer level test and burn-in for one of their high volume processors. This paid evaluation which includes a custom high power wafer pack and the development of a production wafer level burn-in test program will feature a comprehensive characterization and correlation plan to validate aehr's Fox XP production systems for wafer level burden and functional testing of one of this supplier's high performance high power processors on 300 millimeter wafers. We believe this represents a significant step toward adopting wafer level burn-in as an alternative to later stage burn-in and into future generations of their products. Our Fox XP Multi Wafer test and burn-in system is the only production proven solution for full wafer level test and burn-in of high power devices such as Artificial Intelligence (AI) processors, silicon carbide and Gallium nitride power segment connectors and silicon photonics integrated circuits. Beyond Artificial Intelligence (AI) processors, we're seeing signs of increasing demand in other segments we serve including silicon photonics hard disk drives, Gallium Nitride and Silicon carbide semiconductors. We're experiencing ongoing growth in the silicon photonics market driven by the adoption of optical chip to chip communication and optical network switching. This quarter we upgraded another one of our major silicon photonics customers Fox XPS to to the new higher power configuration, doubling their device test parallelism with up to 3.5 kilowatts of power per wafer in a nine wafer configuration. This latest system shipment includes our fully integrated and automated wafer pack aligner configured for single touchdown test and burn-in of all devices on their 300 millimeter wafers. We anticipate additional orders and shipments this fiscal year to support their production capacity needs for their optical I O. Silicon Photonics Integrated Circuits in Hard Disk drives Artificial Intelligence (AI) driven applications are generating unprecedented amounts of data, creating ever increasing demand for data storage and driving new read write technologies for higher density drives, particularly for data center applications. We're ramping and have shipped multiple FOX CP wafer level test and burn-in systems integrated with the High Power Wafer Prober and unique wafer pack high power contactors to a world leading supplier of hard disk drives to meet the test, burn-in and stabilization needs of a new device used in their next generation read write heads. This customer is one of the top suppliers of hard disk drives worldwide and has indicated they're planning additional purchases in the near term as this product line grows. Gallium nitride devices are increasingly used for data center power efficiency, solar energy, automotive systems and electrical infrastructure. Gallium Nitride offers a much broader application range than silicon carbide and is set for significant growth in the next decade. Our lead production customer is a leading automotive semiconductor supplier and a key player in the GAN power semiconductor market and we have multiple new engagements with other potential GAN customers in progress. We're currently in design and development of a large number of wafer packs for new device designs targeted for high volume manufacturing on our Fox XP systems. Although silicon carbide growth is expected to be weighted toward the second half of the year we continue to see opportunities for upgrades, wafer packs and capacity expansion as that market recovers. Demand for silicon carbide remains heavily driven by battery electric vehicles. The silicon carbide devices are also gaining traction in other markets including power infrastructure, solar and various industrial applications. Late in last fiscal year we shipped our first 18 wafer high voltage Fox XP system extending beyond our previous 9 wafer capability to test and burn-in 100% of the EV inverter devices on 6 or 8 inch wafers in a single pass with up to plus or minus 2000 volt test and stress conditions at high temperature. We believe we're well positioned in this market with a large customer and base and industry leading solutions for wafer level burden. I also want to give a quick update on the flash memory wafer level burden benchmark we've discussed earlier. This benchmark is ongoing and we've now begun testing with our new fine pitch wafer pack that can meet the finer pitches and higher pin count costs, more cost effectively for flash memory, but also can be applicable for DRAM and even Artificial Intelligence (AI) processors if they require fine pitch wafer probing. This is the first wafer packed full wafer contactor demonstrating this capability. The benchmark has gone slower than expected with some challenges with the test system bring up but appears to show positive results of the new wafer package, our ability to do an 18 wafer test cell and using our full automated wafer handler and wafer pack aligner for the 300 millimeter NAND flash wafers. Interestingly, the market for NAND flash is in a state of flux with earlier announced transition to hybrid bonding technologies for higher density nand flash on 300 millimeter wafers driving new requirements for higher parallelism and higher power to now a push for high bandwidth Flash or HBF which drives very different requirements in terms of test system capabilities. This is exciting news for AEHR as both are driving power requirements up substantially which is right in our wheelhouse. High bandwidth Flash or HBF is an emerging technology developed by two of the flash market leaders and aims to provide a massive capacity memory tier for Artificial Intelligence (AI) workloads by combining the DRAM High bandwidth Memory or HBM like packaging with 3D NAND flash. This innovation is said to offer 8 to 16 times the capacity of HBM DRAM at a similar cost delivering comparable bandwidth to dramatically accelerate Artificial Intelligence (AI) inference and process larger models more efficiency while using less power than traditional dram. We're working with one of these leak customers on the now newer tester requirements to provide them with a proposal to meet even these newer higher performance and higher power requirements within our Fox XP 18 wafer test and burn-in system infrastructure. We expect to have yet another update out at next quarter's earnings call. The rapid advancement of generative artificial intelligence 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 these devices 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. 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. To conclude, we're excited about the year ahead and believe nearly all of our served markets will see order growth in the fiscal year with silicon carbide growth expected to strengthen further into fiscal 2027. Although we remain cautious due to ongoing tariff related uncertainty and are not yet reinstating formal guidance, we're confident in the broad based growth opportunities ahead across Artificial Intelligence (AI) and our other markets. With that, let me turn it over to Chris and then we'll open up the lines for questions.

Chris Yu - Chief Financial Officer - (00:17:57)

Thank you gain and good afternoon everyone. Looking at our Q1 performance results exceeded analysts expectations for both revenue and profit. First quarter revenue was 11 million.