AEHR earnings call analysis

NASDAQ:AEHR Q4 2025 Earnings Call Transcript Generated on 6/8/2026 Operator | Conference Operator: Greetings. Welcome to the Aehr Test Systems Fiscal 2025 Fourth Quarter and Full Year 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 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 Pondell Wilkinson Investor Relations. You may begin. Jim Byers | Investor Relations Host, Pondell Wilkinson: Systems Fiscal 2025 Fourth Quarter and Full-Year Financial Results Conference Call. On today's call are Aehr Test Systems President and CEO, Gane Erickson, and CFO, Chris Siu. Before I turn the call over to Gane 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 Fiscal 2025 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. 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 are only valid as of this date, and Aehr Test Systems undertakes no obligation to update the forward-looking statements. And with that, I'd like to turn the conference call over to Gane Erickson, President and CEO. Gayn Erickson | President and CEO, Aehr Test Systems: Thanks, Jim. Good afternoon, everyone. Thank you for joining us on Aehr Test Systems' fiscal 25 fourth quarter full-year earnings conference call. Before we begin, I'd like to thank our customers, employees, and partners for their dedication throughout this transformative year of execution. expansion and strategic diversification for Aehr in fiscal 2025. I'll start with an update on the primary markets Aehr is targeting for semiconductor testing in Vernon, as well as the significant progress we've made in this year in new markets. After that, Chris will give a detailed review of our financial performance. And finally, we'll open up the floor to your questions. I just want to also point out that we've had a lot of inbound questions related to the AI market and what that means to air test. So we'll be doing a deep dive as we have often done in other markets today to hopefully let people really understand the implications and how air is playing in that. This past year, we made significant progress expanding into additional key markets for our semiconductor burn-in solutions, including artificial intelligence 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 devices used in electric vehicles during our previous fiscal year. Silicon carbide wafer-level burn-in accounted for over 90% of our revenue in fiscal 24, whereas it made up less than 40% of our revenue this fiscal 25. In contrast, the burn-in of artificial intelligent processors represented 0% of our revenue last year, but this year accounted for over 35% of our revenue. And we had three companies representing over 10% of Aehr's revenue this year, with two of these representing new markets and customers. As we grow, we expect that expanding into new markets and customers will not only allow us to grow faster, but also do so sustainably. The main growth areas for us in markets beyond silicon carbide included production wafer-level burn-in of AI processors, package part burn-in for qualification and ongoing process monitoring of AI processors, and also production package part burn-in and screening of those AI processors. We also had wafer-level burn-in of gallium nitride semiconductors and silicon photonics integrated circuits wafer-level burn-in. And while there was only a small amount of revenue in the fiscal year from wafer-level burn-in of hard disk drive components, About 10% of our order bookings for the fiscal year came from this new market, all of which we expect to ship and generate revenue from during this fiscal year, now 26. Looking back on the year, we're excited about the significant progress we've made with the key initiatives to expand these total addressable markets, diversify our customer base, and develop new products, capabilities, and capacity, all aimed at driving revenue growth and increased profitability. One of our biggest milestones this past year and what we believe is currently the most important for future revenue growth was the completion of development, validation, shipment, and customer acceptance of the first-ever wafer-level burn-in system for AI processors. Delivering the industry's first wafer-level burn-in solution for the AI processor market, the only one of its kind in the world, marks a major technological and commercial milestone and significantly expands the market potential for our Fox XP wafer-level test and burn-in systems. Our new high-power Fox XP wafer-level burn-in system can test up to nine 300-millimeter AI processor wafers at the same time. This achievement is a result of extensive development efforts over the last decade in test technology, particularly in delivering massive amounts of power and current to a wafer during test, wafer contacting technology, and thermal control and heat removal as well as wafer handling and automation. When our lead AI customer first approached us about testing and burning their AI processors at the wafer level, it wasn't clear if this was even technically feasible, even with our proprietary and unique technology. We leveraged the technical capabilities we had developed over the years, along with the technology and design for test methods used in state-of-the-art wafer foundries to meet these unique test and burn and stress requirements. This included applying thousands of amps of current to a single wafer to test devices capable of withstanding thousands of watts, and then not only doing it with one wafer, but nine wafers simultaneously. We also expanded our proprietary wafer pack contactor to support very high current testing capabilities, including the ability to adapt the thermals to create uniformity across a wafer that, by definition, is not otherwise uniform during burning conditions. With Aehr demonstrating and now shipping the first-ever solution for wafer-level burn-in of AI processors in partnership with this customer's outsourced assembly and test partner, one of the largest OSATs worldwide, we have proven that our high-power Fox XP multi-wafer systems and proprietary wafer pack contactors are a viable solution for high-volume testing and burn-in of AI processors in wafer form. This approach eliminates the need to burn in these devices in package or system form, where test costs and yield losses due to failing devices during burn-in are significantly higher and have a much more significant impact on overall manufacturing yield. Many AI processor companies are talking about billions of dollars of devices a year, with the largest AI processor company in the world shipping over $100 billion worth of processors in the data center applications this year alone. Even a 0.1% increase in yield by shifting the burn-in of devices from the system or heterogeneous package level to wafer level is very significant. Today, burn-in related screening and early life failures at the system or package level causes the entire package or system to be discarded due to the inability to repair these devices at this stage. Moving this screen to wafer level allows devices that would otherwise fail during screening at the package or system level to be removed before they're packaged, or worse, put into the system level. We believe using wafer level burn-in will result in savings in manufacturing costs, increases in revenues associated with the limited supply of these devices, and a reduction in field-related failures and warranty costs, as you can afford to put more screens in place or burn in longer to ensure the highest quality and reliability of devices. We're also receiving feedback from potential customers that doing this screening at wafer level is not only cheaper overall, but requires less electrical power from the grid, which has significant benefits. An important part of our story, which we have discussed for years, is the evolution of semiconductors that has driven the increased need for wafer level burn-in. This includes the fact that semiconductors are becoming less reliable with the transition to smaller geometries, devices are physically larger, And more devices are being developed on compound semiconductors like silicon, carbide, and gallium nitride, which require additional burn-in and stress testing, such as Aehr provides, to meet the stringent quality and reliability needs of their customers in the end markets. AI processors and other high-performance central processing units, or CPUs, and network processors are also facing limitations related to their physical size due to the reticle limit in semiconductor manufacturing. The reticle limit is the maximum area that can be exposed in a single pass of the lithography equipment. Due to the reticle limit, a single chip or die cannot exceed this maximum area. This is a physical constraint imposed by the manufacturing process. AI models, especially large language models, require massive amounts of computation and memory. This translates to the need for increasingly large and complex chips. The GPUs used for AI training have already reached the reticle field limit. In order to overcome the reticle limit that prevents them from building a single massive chip, manufacturers are using chiplets, which are smaller die that can be interconnected to form a larger system. This approach effectively circumvents the reticle limit and allows for much larger total transistor counts. Advanced packaging technologies such as COAS, or chip on wafer on substrate, and SOIC, or system unintegrated circuits, enable the integration of multiple chiplets onto an interposer allowing for complex high-performance systems that exceed the size of a single reticle. As AI processors require increasingly large and complex designs, chip-like architectures and advanced packaging technologies are being used to overcome this limitation and enable the continued scaling of AI compute power. The reason these matter to Aehr Test is that these devices all need production burn-in screening to remove early failures that would otherwise occur during the lifespan of the AI processor. These failure rates are unacceptable and costly, impacting the end customer and increasing warranty costs for the supplier. In many cases, they can also pose safety issues, especially for processors used in autonomous or driver-assisted vehicle technologies. The screening and burn-in durations vary by process and device, but generally range from one to several hours or even 24 hours or more, depending on the desired quality and reliability level for the end application or customer. These GPUs, particularly those used in data centers and in the creation and use of large language AI models, are not the commodity consumer semiconductors of the 90s and 2000s. These are not chips used in $200 graphics cards for gaming. Instead, these are nodes worth tens of thousands of dollars operated in parallel, thousands at a time. If one node fails, it can completely disrupt the development or construction of the entire language model. As we've discussed with automotive and other applications, reliability is critically important for these customers. Aehr now offers a high-volume production solution for package-level burden with our new Sonoma product line following the acquisition of in-cal technology last year. For customers seeking to perform production screening of these devices in package form, we now provide a highly cost-effective solution with upcoming fully automated JEDEC trade-to-trade device handling and testing. Before our Fox XP wafer-level test and burden system, The only solution for doing this screening was products like our Sonoma system. And while this screening step is cost-effective, and we believe our Sonoma systems offer the lowest cost solutions on the market for packaged part burn-in of AI processors, it not only weeds out defective processors or memory, but also results in discarding highly expensive advanced packages, such as the co-op package and substrate, along with all of the other devices packaged in the failed device. For example, multiple new AI processors feature two or more AI, ASICs, or GPO processors in the advanced package, with each AI processor die containing up to four high-bandwidth memory or HBM stacks, totaling up to eight or more HBM stacks per package. Keep following here. Each of these HBM stacks can be eight die or more in the future, meaning it has eight stack memory dies for HBM stack. You go through all the math and there's a total of up to 64 or more HBM dies and two or more AI processors plus a very expensive co-op package substrate per package. If one of the AI processors or one of the HBM die fails during the production burn-in after packaging, all of the other die plus the co-op substrate are discarded. You can see the cost impact of performing burn-in at the package part level. If you take this a step further, companies also perform a burn-in at the system level when the GPU or AI processor multi-die package is installed on a computer system printed circuit board, along with the device power supplies, heat sinks, and supporting infrastructure, such as all the high-speed interconnect technology for AI processor to AI processor communication. Performing burn-in at this stage impacts cost and yield even more significantly. You can see why the industry is showing such interest in our ability to test these devices at the wafer floor. In addition to this lead customer for AI wafer-level test, we have now received multiple inbound requests from several high-profile processor companies that are very serious about wafer-level testing. This ecosystem is very small, and having demonstrated that wafer-level burden of high-power AI processors is feasible, We're gaining visibility beyond our own sales and marketing efforts with the growing recognition that moving the AI processors and CPUs to wafer level is overwhelmingly advantageous from both a cost perspective and for yield. We're extremely busy right now engaging with multiple companies who are asking, can you test my parts? The conversation is, can Aehr do it, not do we want it? I'm very excited to report today that one of these companies has now asked us to move forward with an evaluation for wafer-level testing of their devices with one of their current high-volume processors. This feasibility study will allow them to see the real advantages and performance of doing a production burn-in at wafer level instead of in package or system-level form as they do today. Based on what they have shared with us, we believe that if this evaluation succeeds, they plan to transition to high-volume production wafer-level testing which would be a significant opportunity for Aehr. While this evaluation involves new wafer packs for their specific wafers, we believe that Aehr can address the needs in the near term with our proprietary AI processor optimized wafer packs designed specifically for these devices. We also have systems needed to run their wafers on our floor today, demonstrating this capability, as well as fully automated aligners to showcase the automation of the 300 millimeter wafer handling. We expect this evaluation to take one or two quarters to complete fully. At the same time, we're working with this customer to determine their production capacity needs and discussing lead times to meet their requirements. Their capacity requirements are significant, and we feel we have the manufacturing capacity for systems, aligners, and wafer racks to meet the potential demand if we're successful with this evaluation and they decide to move to wafer-level burn-in using our solution. We also expect to move to evaluation phases with other AI companies during this fiscal year and believe we can capture a meaningful share of the total production burn-in market for AI processors with our FOX wafer-level test and burn-in systems and proprietary wafer pack contactors. So let me spend a few minutes on some of the other markets quickly, and I'll start with package part burn-in. As I mentioned earlier, we also offer customers the option to perform their package part burn-in screening as well as a qualification reliability characterization for their GPUs, AI processors, CPUs, and network processors. We completed our acquisition of NCAL last July 31st, expanding our product portfolio to include their highly regarded package-part reliability burn-in and test solutions, especially their ultra-high power capabilities for AI processors, GPUs, and computing processors. Since that date, Aehr has shipped more package-part burn-in systems than NCAL did in the last three years. It is a record-breaking sales achievement for the qualification and production burden of AI processors. We're very excited that with the added capabilities and resources from Aehr, we have been able to ramp up production to levels that Intel had never achieved, meeting the demand from AI processor companies for the qualification and production of their devices. With the addition of significant number of people, processes, and scale, we've been able to shorten lead times, maintain low costs, address quality, and do this in a high reliability platform. which has been overwhelmingly positive for customers. As a result, we won our first production AI processor customer for package part burn-in during the fiscal year, receiving initial volume production orders for the multiple Sonoma ultra-high-power systems. This customer is one of the premier large-scale data center hyperscalers that is making their own AI processors and is growing this capacity significantly. These are their first devices that use a production burn-in system at the package part level instead of at the system level. They plan to ramp this device over the next year and are already discussing their next generation process, as well as the one after that with Aehr, to ensure we can meet their production capacity needs. We said before that one of the best things about this acquisition is that it gives us a front row seat to the future requirements of a large number of these AI processor customers, providing us with visibility into the production burning needs. As a result, some of these customers from packaged part side are coming to us asking right away for level burning capabilities. Aehr is the only company in the world that offers both a wafer-level and packaged part burn-in system for both qualification and production burn-in of AI processors. We can provide them with options and show direct side-by-side comparisons of cost of test, capacity output, footprint, operational costs, and impact on yield based on how they decide to do their burn-in. We're in the perfect position to help them while also remaining balanced so we can tell them yes, regardless of how they want to do their burn-in. We're very excited about all our new AI product offerings and the expanded total adjustable market they bring to air, and we look forward to discussing our progress to further capitalize on this new market as we move through our new fiscal year. Another key milestone this past year was expanding the production level burn-in for gallium nitrate power semiconductors. We secured an additional order for our Fox XP high-power wafer production system with high-volume for volume production of GaN devices from a leading automotive semiconductor supplier and a key player in the GaN nitride power semiconductor market, marking their commitment to advancing volume production wafer-level burn in other GaN devices using our XP platform. This achievement expands our production wafer-level burn in market for power semiconductors beyond silicon carbide applications used in electric vehicles, data center power conversion, and solar to now include GaN a high-performance compound semiconductor optimized for mid-power applications such as data centers, solar energy, automotive systems, and consumer electronics and PCs. Additionally, we're in discussions and engagements with multiple other potential new GaN customers about their needs. GaN's a new and exciting semiconductor technology with high-value applications, including automotive power conversion, solar inverters, and solid-state transformers and breakers. GAN offers a much broader application range than silicon carbide and is poised for significant growth in the coming decade. We've also made significant progress in the hard disk drive market. This past year, a lead customer began ordering multiple Fox CP single wafer production test and burn-in systems, featuring an integrated high-power wafer probe for their new high-volume parts in a new application for burn-in and stabilization of new devices in hard disk drives. These are follow-on system orders to the first production order received all the way back in 2019. As we stated in previous calls, their plans for this new product were delayed during the pandemic, but they continue to work on this new device continuously over the last five years to ensure the performance and reliability of their devices. We understand from several analysts and shareholders that this customer has publicly called out our Fox systems as a key contributing factor in helping them achieve the long-term reliability needs of this market. This customer is one of the top suppliers of data storage devices, and we're very excited to start this production ramp after all these years of working with them on qualification and process development. During our last earnings call, I noted that the high-power probers for our Fox CP for this HDD customer are sourced from Japan, and it was unclear how the tariff uncertainty might affect the timing of receiving these probers. At that time, we were hoping to receive this shipment by the end of May, But because of tariff uncertainties, these programs did in fact get significantly delayed. We just received the first one last week. We're working quickly to do the integration and engineering steps needed to finalize the test cell to be able to make the first shipments this quarter. In addition to multiple systems and backlog, the customers told us that they will be purchasing additional systems both in the short term and over time. I know it must be a broken record to hear terms like uncertainty around tariffs on many company earnings calls, but this is still the case. Despite this, we're extremely excited about our growth opportunity for our wafer-level solution for HDD market and look forward to updating you further on the progress next quarter. Now turning to silicon photonics ICs. This market continues to demonstrate market adoption for optical chip-to-chip communication and optical network switching. Several companies, including AMD, NVIDIA, Intel, TSMC, and Global Foundries have announced product roadmaps for devices that utilize optical chip-to-chip communication. We have several customers in this space. At last count, it was five to six customers, with one of the customers being an OSAT that purchases our tools for one customer but is marketing it to others. We've seen a significant number of new wafer pack designs from our install base of systems for new designs that they use for qualification development work on their FOX wafer-level test and burn-in systems. We also now offer a new system with higher power, 3,500 watt per wafer configuration, to meet the needs of new higher power wafers for optical IO and chip-to-chip communication devices. This is also available as an upgrade to our Fox NP systems for low volume production, as well as for Fox XP 9 wafer production systems. Recently received another order for an upgrade to one of the Fox XPs we shipped a few years ago that includes upgrading to include our new integrated wafer pack auto liner, which provides fully hands-free factory automation of silicon photonics integrated circuit wafers. We also have forecasts for new systems for incremental capacity this fiscal year for both systems and wafer packs. We're well prepared with expanded manufacturing capacity for Fox high-power systems and remain enthusiastic about the silicon photonics market, especially for the new application of silicon photonics integrated circuits and optical chip-to-chip communication, which we see as a significant market opportunity for our products. It seems odd to wait this long to talk about silicon carbide, but let me talk a little bit about that market as well. The silicon carbide power semiconductor market remains a significant opportunity for air, and we believe we're well positioned to continue to grow with our current customers in this sector, as well as add some additional customers in this space over time. Despite a slowdown in the growth of electric vehicle shipments, electric vehicles are still growing significantly worldwide, and we believe the silicon carbide market continues on a robust long-term growth trajectory. Demand for silicon carbide remains significantly driven by battery electric vehicles, but silicon carbide devices are also gaining traction in other markets, including power infrastructure, solar, and various other industrial applications. This quarter, we shipped our first configuration of the Fox XP, which can test 18 wafers at a time in a single system with support for our high-voltage test resources that can test devices up to 2,000 volts in wafer form. The system also includes a proprietary arc suppression technology that prevents the devices from electrically arcing at these high voltage while testing all devices at a time in a single insertion on each of 18 wafers. This capability has already proven in our nine wafer configuration but is now extended to the 18 wafer system. It's also capable of being directly docked to our fully automated wafer pack aligner that takes industry standard wafer cassettes and foops to allow full factory integration. We believe we're well positioned in the silicon carbide market as we have a large customer base and the industry leading solution for wafer level burn-in. So lastly, a little bit on our flash memory proof of concept project that we've been working on this year. As noted in earlier calls, we're collaborating with one of the world's leaders in flash memory to demonstrate the capability and cost effectiveness of our Fox XP platform for high volume production wafer level testing in burn-in and flash memory wafers. This is very exciting because we believe Aehr can successfully demonstrate how to create a high density, high power, fully automated test cell, which will help us move to the next development phase. That next step involves working together to develop a next-generation test system specifically designed to meet this customer's needs. Although this memory validation benchmark has taken us a bit longer than expected due to shipment delays in some of the components of this integrated system, the new MEMS-based fine-pitched wafer-packed full wafer contactor is in-house and ready to complete the benchmark. We're very encouraged, and we hope to generate data and results this quarter with the aim of completing the benchmark by next quarter. New technologies in NAND are driving new requirements for wafer-level burn-in to address the manufacturing and negative yield implication of testing these devices at package or system level. We believe that AERS-FOX wafer-level test and burn-in platform, combined with our proprietary wafer-packed full wafer contactors, is well-positioned to offer a competitive and cost-advantaged solution in this market. Looking ahead and concluding, Aehr is well positioned to capitalize in growth in the overall semiconductor market. We remain focused on addressing the critical reliability requirements of next generation applications and leveraging key megatrends shaping our industry. Today, reliability is a vital priority across diverse sectors, including combustion, electric vehicles, data centers, infrastructure electrification, and then expanding range of AI applications. As we enter fiscal 2026, we've established the infrastructure and capacity to support significant growth. This was the purpose of the investments we made this past fiscal year, including the upgrade of our manufacturing facility, including upgrades to power and infrastructure, consolidating package and wafer-level burning under one roof, and implementing the necessary processes to support a very high volume of both wafer-level and package-level test and burning systems and our proprietary wafer pack contactors. These foundational efforts are now complete. In the year ahead, we plan to increase our research and development investment to support further product enhancements, expand our R&D resources, hire additional talent to serve our growing AI customer base, and enhance automation to improve scalability. Beyond these initiatives, the new fiscal year will focus on securing and executing orders. We believe that nearly all the opportunities and market verticals we discussed today will experience order growth in fiscal 2026. The one exception may be silicon carbide, as customer forecasts for this market are back half loaded, with stronger growth expected in our fiscal 27. Still, there are many variables, and silicon carbide may end up growing faster than expected, giving the market share shifts currently underway and our lead customers increasing market share in the industry. During our previous earnings call, we announced the temporary withdrawal of our financial guidance following the U.S. administration's tariff announcements just a few days earlier. At that time, we were concerned about the potential secondary impacts on our current and prospective customers, as well as the possibility of pauses or delays in customer orders, shipments, or supply chain deliveries. We remain very confident errors long-term outlook, but we are still seeing the impact of tariff-related uncertainty on the timing of specific orders, particularly in our first quarter. As a result, we've chosen to maintain a cautious approach and are not reinstating specific guidance at this time beyond what we've already stated, which is that we anticipate order growth across all segments in this fiscal year, with this possible exception of silicon carbide. We're very optimistic about our growth opportunities in all the segments we've discussed and our ability to meet the potential demand of these markets. With that, I'll turn it over to Chris. Chris Siu | Chief Financial Officer, Aehr Test Systems: Thank you, Gane. Before I review our financial results, I'd like to provide an update on the integration of our in-cal acquisition, which we completed on July 31st of last year. Since the acquisition, Aehr has dedicated significant financial and human resources to ensure a successful integration of InCal into our operations. We have fully migrated InCal's financial records into our Oracle NetSuite Cloud ERP system and integrated their HR and manufacturing functions into Aehr's broad information systems. Additionally, we have completed transfer of all inventory, as well as comprehensive documentation of product designs source code and assembly and test instructions into AehrS processes. I'm pleased to report that our plan to consolidate personnel and manufacturing into AehrS Fremont facility was complete by the fourth quarter of fiscal 2025. And we successfully closed the in-camp facility on May 30th, 2025, ahead of our original schedule. I want to express my sincere thanks to our teams for their commitment, dedication and outstanding execution throughout this integration. As a result of the consolidation, we incurred one-time restructuring charges of $864,000 in our fiscal fourth quarter related to closure of the in-cal facility. With the integration of the two companies, we'll be able to create synergy and reduce our facility costs by over $800,000 per year going forward. Turning to the full year results, we reported revenue of $59 million down 11% year-over-year. Our full year non-GAAP growth margin was 44%, compared to 49.6% in the prior year. Our full year non-GAAP net income was $4.6 million, or $0.15 per diluted share in fiscal 2025, compared to non-GAAP net income of $35.8 million, or $1.21 per diluted share in fiscal 2024. which included the impact of a one-time tax benefit of approximately 20.7 million, resulting from the release of the company's full income tax valuation allowance. Our annual bookings in fiscal 2025 were 61.1 million, up over 24% compared to 49 million in the prior fiscal year. The increase in bookings was primarily related to the sales of AI processor burning systems. wafer packs, and burn-in module boards, partially offset by lower customer orders related to silicon carbide wafer packs. Our backlog as of the end was 15.2 million, with 1.1 million bookings received in the first five weeks of the first quarter of fiscal 2026. We now have an effective backlog of 16.3 million. Turning to our Q4 performance, we're excited about our continued momentum in penetrating the artificial intelligence market. with AI processors burning now accounting for over 35% of our business this year, compared to zero last year. For the fourth quarter, we had three customers representing over 10% of total revenue, and two of these customers target the AI market. Revenue for the fourth quarter totaled $14.1 million, a 15% decrease compared to $16.6 million in Q4 last year. The year-over-year decrease was primarily due to a delayed shipment of a Fox CP system that was forecasted to be shipped to our hard disk drive customer. Because of tariff-related uncertainties, public source from Asia to support the Fox CP system were delayed. We now expect to complete this shipment in our current quarter, Q1 of fiscal 2026. Wafer pack revenues were $4.2 million and accounted for 30% of our total revenue in the fourth quarter. Wafer Pack revenues continue to represent a sizable revenue stream for our business, driven by the ongoing demand for new Wafer Pack designs from both existing and new customers, and they secure new end customer designs and strive to meet their market requirements. We are pleased with the significant progress we made integrating products from our in-cal acquisition into our product portfolio to capitalize on emerging opportunities in the AI market. Sales of our Sonoma, Tahoe, and Echo package part burning systems continue to contribute strongly, accounting for 44% of our fourth quarter revenue. We believe our strategy to expand Aehr's product offerings and diversify beyond second callback applications is gaining meaningful traction in the marketplace. Non-GAAP growth margin for the fourth quarter was 34.7%, compared to 51.5% in the same period last year. Non-GAAP growth margin decreased primarily due to lower overall revenue level compared to Q4 last year and less favorable product mix. Additionally, we incurred high manufacturing overhead due to underabsorption as our manufacturing capacity utilization was lower during the renovation of our Fremont site and the consolidation of inventory from the in-cal facility. Non-GAAP operating expenses in the fourth quarter were $5.4 million, reflecting a 6% increase from 5.1 million Q4 last year. This year-over-year rise is primarily attributed to the inclusion of in-cows operating expenses in our financial results, as well as higher legal and professional service fees. We anticipate incurring additional legal expenses in the upcoming quarters as we continue to protect our intellectual property rights in China. Non-GAAP net loss for the fourth quarter excluding the impact of stock-based compensation, amortization of intangible assets, and restructuring charges was $248,000, or negative one penny, per diluted share, in line with the street consensus. This compares to a non-GAAP net income of $24.7 million, or $0.84 per diluted share, in the fourth quarter of fiscal 2024, which, as a reminder, including a one-time tax benefit of approximately $20.7 million resulting from the release of the company's full income tax valuation allowance. Moving to the balance sheet, at the end of Q4, our cash, cash equivalents, and restricted cash totaled $26.5 million, down from $49.3 million at the end of Q4 fiscal 2024. During fiscal 2025, We used $11 million to acquire Incal, which enabled us to enter the AI market and secure key customer relationships with his superior package part burn-in product, Sonoma. Additionally, we spent $5 million on CapEx to support the consolidation and upgrade of our Fremont manufacturing facility and headquarters, and used $3.6 million to procure inventory and $3.8 million for the remaining working capital. We have no debt and continue and continue to invest excess cash in money market funds to generate interest income. Let me provide an update on the class action claims and derivative lawsuit filed against Aehrtas on December 3, 2024. We are pleased to report that on May 16, 2025, the court appointed lead plaintiff for the class action lawsuit elected to voluntarily dismiss the case, with all parties bearing their own fees and costs. On June 9th, 2025, the court also dismissed the derivative lawsuit without prejudice. The company believes the claims in all these cases were without merit. Following the voluntary dismissal of the shareholder class action and the court's dismissal of the consolidated derivative action, no related proceedings are currently pending. As Gayn mentioned, considering the secondary effects of the tariff announcements on our current and potential new customers, along with the uncertainty this quarter regarding possible pauses or delays in customer orders, shipments, or supply chain delivery delays. We're temporarily withholding our guidance for our fiscal 2026 year, and we'll reassess our guidance policy as clarity develops. Despite the uncertainties around tariffs, we're excited about the long-term growth opportunities across our more diverse target markets. We're especially encouraged by the progress we've made in addressing the artificial intelligence processes market and other potential high-growth sectors, including gallium nitride power semiconductors, data storage devices, Seacom Photonics integrated circuits, and flash memory. To succeed in these new markets, we plan to increase our research and development investments this fiscal year by expanding our R&D resources and hiring additional talent in the US and the Philippines to support our growing AI customer base and increase automation for scalability. With more R&D talent, a strong infrastructure, and enhanced manufacturing capabilities in place, we're more prepared than ever to achieve our growth objectives. Lastly, you may have noticed that we are holding this earnings call one week earlier than usual because of the CEO Summit has been pushed back from July to October and will be held in Phoenix instead of San Francisco. Looking at the investor relations calendar, Aehr Test will be participating in two upcoming conferences over the next month. We'll be meeting with investors virtually at the Needham Sixth Annual Semiconductor and Semicab One-on-One Conference on Wednesday, August 20th. The following week, we'll meet with investors in person on Tuesday, August 26th at the Jefferies Technology Summit Conference in Chicago. We hope to see some of you at these conferences. This concludes our prepared remarks. We're now ready to take your questions. Operator, please go ahead. Operator | Conference Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Once again, please press star one if you have a question or a comment. Our first question comes from Christian Schwab with Craig Hellam. Please proceed. Christian Schwab | Analyst, Craig-Hallum Capital Group: Again, I've received a lot of questions regarding your most recent slide in your investor deck with a lot of well-known marquee names. Should investors think of that list as a list of current and previous customers, or does it include maybe names of prospective customers you know, such as new AI customers that you're working with or new silicon photonics customers, et cetera? How should we be thinking about that slide? Gayn Erickson | President and CEO, Aehr Test Systems: Okay. So when we introduced that slide, we updated the customer slide a few weeks ago compared to the deck that we've had on our website prior to that. And we were actually at a conference that had a public speaking. It is recorded and available to all people through our website. In that specific conference, I pointed out that we have updated the customer list to reflect the current customers from the in-cow package part burn inside of our business. Those are customers, not prospects. And yes, there's some notable names on there. Not every single customer is still on there. Actually, there's been some historical 10% customers that we had specific agreements with or limitations of ever saying their names publicly other than referencing when they were doing 10% of our revenue. But yeah, there's some good names on there. Christian Schwab | Analyst, Craig-Hallum Capital Group: Great. And that is, it's released to 10% customers. Are you, since you didn't mention it a few times without naming the names, is that going to be in your K when you file it, or are you not going to name the 10% customers? Gayn Erickson | President and CEO, Aehr Test Systems: So we're, yeah, we're, the new SEC rules do not require you to name it. So unless we already have prior arranged agreements with the customers to name them, we're no longer doing that. Prior to that SEC rule, we could name them even if the customers objected, if you will, but we're not doing that now. Christian Schwab | Analyst, Craig-Hallum Capital Group: Great. And then as the AI opportunity seems quite significant, I know you in previous conference calls said that that market could be materially bigger than what you had previously said, that the silicon carbide opportunity could be over time. if wafer-level burden was used by many people. Can you give us any idea of, not this year or next year, but over time, have you walked through the maps? Gayn Erickson | President and CEO, Aehr Test Systems: Yeah, as you can imagine, we have. So similar to how we built up the original silicon carbide models, that took a look at say the target applications for silicon carbide, which were primarily the electric vehicles, how many EVs, how many components would be in it, et cetera, et cetera. You could come up with how many wafer starts that would require in, say, 2030. And I know that you had put some models together at that time. There were about 4 million wafer starts. We looked at 12-hour burn-in times, single insertion with our systems. Long story short, we saw that the total market was somewhere 350 of our systems with ASPs about $4 million a piece or something like that. If you look at the AI market, the AI market, interestingly, in that same timeline, may actually be half as many wafers, which seems a little odd, but they're 300-millimeter wafers, and you actually don't test them in one single touchdown. They'll take multiple touchdowns to test these wafers because they might have 20,000 watts power on them and we're testing three four thousand watts at a time you can kind of go through the math at even significantly lower average burn-in times then say the silicon photonics I'm sorry the silicon carbide is that you go through the math and the the market is you know three to five times larger than the silicon carbide was one of the things that we'll be looking at is what are the burn-in times you know we have We're doing burn-in of customers around the world, and we have customers that are doing one-hour stress time, some four-hour burn-in times, and 24-hour burn-in times, for example, all the way up. So it'll be interesting to see, and we think that's related to how much – the longer the burn-in time, the higher the quality ends up being to the end customer. And so it kind of depends on both availability, capacity, and what the target customer is required, and how critically important it is to get to the quality levels. So there's a little bit of dynamics in here, but there's no way to do the math and not come out with it being significantly larger. Christian Schwab | Analyst, Craig-Hallum Capital Group: Fantastic. No other questions. Thanks, Gayn. Operator | Conference Operator: Thank you. The next question comes from Jed Dorsheimer with William Blair. Please proceed. Jed Dorsheimer | Analyst, William Blair: Hi. Yeah, thanks for taking my question. I guess first one, either Gayn or Chris, just the step down in gross margin quarter to quarter, or year over year or two. I'm assuming that it's a mix issue in terms of drop off of wafer pack consumables and a mix towards in-cow. Is there anything else that should be called out with respect to shift in margins? Of course, lower revenues to spread the fixed costs, but is it primarily mix in revenue levels? Gayn Erickson | President and CEO, Aehr Test Systems: There's two types of mix in this thing, too. There definitely was a mix in that we actually, when some of the wafer-level burden orders didn't materialize as we were kind of thinking at the time, we actually pulled in some packaged part systems. And the packaged part systems have a little lower margin. The consumables have a lot less margin than our wafer packs, for example. But the other piece is during that quarter, we had the full burden of the in-cal facility as well, which we talked about now not having kind of carrying forward. So we had the double whack of both facilities going on with, you know, primarily just package part burn-in revenues and some wafer packs. So I think as we go forward, you know, the same quarter would be materially better. And of course, we have the potential of much higher volumes as we go forward. Chris Siu | Chief Financial Officer, Aehr Test Systems: Yeah, just to add on that, also the utilization was not as high as before because we were moving. Some of the folks actually were helping with the moves into operations. Not building in any... Yeah, not building products instead of. So we got to expense those labor costs. That's helpful. Jed Dorsheimer | Analyst, William Blair: Thanks. And then, Gane, just maybe if you could... You know, your tenor around AI processors has certainly skewed much more positively over the past year. And, you know, I know that Silicon Photonics, you took time to call that out. Copackaged optics are becoming a more meaningful part of the design. I'm just curious... What was – you know, is it just the size of the TAM? There seems like there is a specific shift in terms of your excitement around this market, and is it a function of your technology and the moat that you have? If you wouldn't mind just explaining – and maybe I have that wrong, so – Oh, no. Gayn Erickson | President and CEO, Aehr Test Systems: Yeah, I think you're – I believe, I think people often ask, you know, what makes you lose sleep at night and what makes you excited? There's a material difference in our story related to AI from, you know, nine months ago, maybe six months ago. Nine months ago, we were serious when we said we're doing this evaluation with the first AI customer. And while we believe it will work, we still have to work through it. We also didn't finalize the burn-in times, et cetera. Now that we've proven that it works, understand the size of the market through the burn-in times, and candidly delighted the customer, if you will, we're now also recognizing that the features that we implemented in that machine are applicable to other customers. So at the time, if you said, okay, nine months ago, it's like, I think this is going to work. And the customer was cheering us on. Then it worked. And then the customer, you know, two quarters ago gave us an order and we shipped it, you know, weeks later it felt like, okay. To now we have inbounds from customers to we're now evaluating on paper the qualification of those devices and recognizing we can test your parts and this is why. So you're starting to see in the eyes of the customers looking back at you the value that you have in doing this and the sincere interest in trying to make this happen. They're like, how can you make this happen? So if it's not coming across clear enough, and I know as a CEO you have to be careful of, you know, I'm always a cheerleader, but this is very real in their eyes. And we used to talk about, you know, stacked memories and how important it would be to burn them in before you stack them. You're taking devices that are maybe $2 and you're putting them eight high to make a $16 or $20 part. Then we talk about silicon carbide devices that were going into these modules for EVs. We were taking $10 parts, putting 10 of them into a package and selling them for $200 and look at the value added by doing that. Now we're talking about HBM stacks where the stack of memory is hundreds of dollars times eight stacks processors that are $1,000 a copy of out of a TSMC fab, they're all stacked together and they all need production burn-in. The math is so obvious about the value of, move this to wafer level, that it's just more about what can you do to prove it. And we have the ability now to not only physically show it, we can bring customers in, we have tools in-house that are configured for AI, high power, 300 millimeter wafers with our aligners, They can see wafer packs. We've upgraded the facility with enough power to be building 10 to 20 systems at a time if needed. That's not to imply that that's how big our forecast is, but we have that capacity. And they come in and look and go, okay, I get this. So the other thing, and I made some comment, kind of a snide comment, the customer enthusiasm exceeds our ability to sell and market, and that's not a dig on my sales and marketing team. What we believe has happened is that these customers are being walked by the tool and tools, I should say, because it's tools actually, and seeing the feasibility of it. And so the biggest OSAP is marketing this capability. And we're getting these people calling and say, whoa, whoa, hold on a second. I mean, I guess I got the press release, but I just saw it or understand it. What do I need to do to do that? So you can imagine you'd be pretty excited about that. Jed Dorsheimer | Analyst, William Blair: Yeah, no, certainly. Um, that's helpful. Last question for you along those same lines. And you mentioned the OSAT that's starting to market. So you've got an OSAT in your silicon photonics, uh, an OSAT or two that you're working with in the AI processor. Um, and mostly customers, that own the design for the AI processors. What you haven't mentioned, you did mention TSMC, but I'm just curious from a foundry perspective, where are the discussions with foundries in the process? Are you seeing some cross-pollinization like you are with OSATs? Gayn Erickson | President and CEO, Aehr Test Systems: For sure. Yeah. So I'm going to use a little different vocabulary. In this world, there's only really two foundries. Well, to be respectful for Intel, maybe three that can build them. So Global Foundries isn't really building AI processors because of the nodes they're on. So you're really talking about TSMC and potentially Intel? Yeah. With TSMC having, right now I think everybody but Intel. And then you talk about design houses. Design houses are the companies that are actually working with the hyperscalers in designing their new ASICs or AI processors. So you're talking about Marvell, Broadcom, all chip as examples. Those are the big guys that are actually doing the new designs. Then, of course, some of the big hyperscalers have in-house design. They then work with the models, say, for example, with TSMC that will provide them with the models based upon what particular node they're at. That will have DFT, design for testability, features and functionality inside of it that interestingly make them common. And then they can outsource that to really two or three of the big OSATs, the biggest one being ASE, who also bought Spiel, but people think those are two different companies, but candidly, they're really the same. And then you have Amcor. You have Japan that is trying to get some of the business started. J-C-T, and then they're not an OSAT, they're just test, and that's K-Y-E-C. So it's a pretty small community and a lot of cross-pollinization of ideas, I would say, and awareness. And so once this system got put into production, the lights started to go on and the phone started to ring with people saying, hey, wait a minute, I thought that was just a marketing thing. This is real. Can you do my part too? Thank you. Larry Shlebina | Analyst, Shlebina Capital: I hope that helps. Operator | Conference Operator: The next question comes from Igor Dolmachev with Freedom Broker. Please proceed. Igor Dolmachev | Analyst, Freedom Broker: Hello, Jens. Thank you for the market comments. I wanted to get a glimpse into your outlook for 2027, especially for TSMC measure. Recently, JSMC reported that JSMC plans to win down Galleon Mid-Ride Foundry Services by 2027. Could you share your thoughts on how this shift in market can impact your business and address small markets? Gayn Erickson | President and CEO, Aehr Test Systems: Okay. So, I mean, we chose not to give guidance on 26. I'll be struggling with 27. But, you know, we do believe we can get back to the track of growing significantly over this period of time. The size of the market, for example, between AI, silicon photonics for optical chip-to-chip communication, and you add in silicon, you know, even silicon carbide are all kicking in pretty hard in 27. So, you know, we're planning for... you know, pretty significant growth. I'll leave it at that, okay? Now, you specifically talked about GAN and TSMC. TSMC, mostly I wake up every day thinking about all the AI wafers that TSMC is doing. GAN, you know, gallium nitride can be put onto multiple different process substrates. The most kind of interesting one would be on silicon, large silicon substrates. But a lot of the – they're both IDM folks around the world, like Infineon, for example, or people that have dedicated foundries. And then TSMC is also doing a foundry. I don't know what TSMC's market share is, but I – Candidly, when I talk to customers, I hear a lot more about the other foundries or their own IDM sources than TSMC. So I don't believe that it has a negative impact on us if they start to wind down that business. I think that just shows up somewhere else, either at one of the IDMs or one of the other foundries. Igor Dolmachev | Analyst, Freedom Broker: Okay, great. Thanks. And in terms of your new AI clients, how long will it take to pass all qualifications to reach your final decisions? for your client after you get the first client delivered? Gayn Erickson | President and CEO, Aehr Test Systems: So we already have the first client. We announced that we were, I think this year exactly, we announced that we had a commitment from a first customer to evaluate our solution for AI. We said we're very excited about it, but there was still a lot of uncertainties. The customer seemed extremely willing and pulling us in. I think I used the term they're more excited than we are and more hopeful about getting the business, which, of course, was good. Then within a quarter, we said it was progressing pretty well. The following quarter, we said we are now testing wafers and the data looked good. And within that quarter, they placed an order and we shipped it at the same time. That was the first customer, which there's some argument takes longer than the second one. I will tell you our enthusiasm and confidence is a lot more higher because of actual evidence, but there's still some variables and things that we still need to worry. My attorneys will always tell you, be careful, there's always risk, and you never know until the order's in hand. But we think that a decision could be made within, say, six months or so, and, you know, potentially orders placed somewhere thereafter. Igor Dolmachev | Analyst, Freedom Broker: Yeah, I got it. Thank you. It was useful. Operator | Conference Operator: Thank you. The next question comes from Larry Shlebina with Shlebina Capital. Please proceed. Larry Shlebina | Analyst, Shlebina Capital: Hi, Gane. That first AI customer at the OSAT. So are you under the... belief that they're really pleased with it and do you expect more orders from them in the near future? Yes, to both of those. Gayn Erickson | President and CEO, Aehr Test Systems: Wait a minute, you said near future. I want to be careful of setting any timelines, but I'll go out and say we expect just more this year, though. Larry Shlebina | Analyst, Shlebina Capital: And then now you have another AI customer in evaluation. So that's the second one for wafer-level burn-in. And then you have a third one that's going after the production in the package part burn-in. Are they three distinct AI customers, or are they – Yes. Igor Dolmachev | Analyst, Freedom Broker: Yes. Larry Shlebina | Analyst, Shlebina Capital: Totally different. Totally different. And in the write-up, you said that you shipped a 18 – wafer, high-power, silicon carbide system. Did that ship and book in the May quarter? Gayn Erickson | President and CEO, Aehr Test Systems: Yes, yes. And it was an upgrade to one of the systems that they had purchased earlier. Part of our strategy and one of our commitment with customers is this commitment to a platform that allows people to maintain forward-backwards compatibility. So that was a really big deal. They shipped the system here. We reworked the system and then shipped it back to them, capable of testing 18 wafers at a time at high voltage, which is amazing. Larry Shlebina | Analyst, Shlebina Capital: And that also included the automated aligner? Gayn Erickson | President and CEO, Aehr Test Systems: Actually, in this case, it did not. It shipped back without the automated aligner. Larry Shlebina | Analyst, Shlebina Capital: Do you anticipate... Gayn Erickson | President and CEO, Aehr Test Systems: By the way, they have automated aligners, but we only upgraded the system, basically. I see. Larry Shlebina | Analyst, Shlebina Capital: Do you anticipate going forward that all the silicon carbide systems will be high power? Gayn Erickson | President and CEO, Aehr Test Systems: Actually, we refer to them as high voltage, but I know what you mean. Mostly, yes. We've been working really closely with the OEMs and making them aware, like the car suppliers, the EV guys. to making them aware of the capability to be able to continue to provide lower and lower cost solutions that include the high voltage insertion as well if they want to do it. I would say that it's mostly likely that people will buy it with that. And it allows you to do it with multiple different stress conditions, but this allows you to also do the stress condition with high voltage, which is very valuable. Larry Shlebina | Analyst, Shlebina Capital: Does that include a premium? Do you get a premium price on that going forward or not? Gayn Erickson | President and CEO, Aehr Test Systems: Yeah, the option does cost additional dollars. That's correct. Larry Shlebina | Analyst, Shlebina Capital: Okay, I've got to get my memory question in. You talked up how it makes so much sense for HBM to go to wafer-level burn-in. When are you going to get a valuation going for an HBM application? Gayn Erickson | President and CEO, Aehr Test Systems: That's a good question. We've talked about, you know, walking before we run and the walking to begin with was the wafer level burn and application for the NAND flash. But one of the critical things that we mentioned last time, but I'll mention again today, one of the most specific things we were implementing was a new fine pitch MEMS wafer pack that allow us to get to very attractive price points at extremely high pin counts. But it also allows us to go to four times or one-fourth the pitch. These are distances, if you will, than what we have today. That fine pitch is technically fully capable of doing DRAM as well. We knew that on purpose. So one of the critical things is there was no way to contact a DRAM HVM device with our previous wafer packs, but we now enable it through this wafer pack. There's also things on the AI roadmap that are reusing the technology developed under this as well. Larry Shlebina | Analyst, Shlebina Capital: So now that you have the MEMS fine pitch wafer pack, And it's proven out on Flash, is that correct? We're trying to get it finalized throughout this quarter here. Okay, so it seems like that would entice one of the HBM guys to say, boy, this could solve a big problem that we have as we go from eight stacks to 12, possibly eventually up to 24 stacks. Yeah, I think you're right on that. All right. Well, we'll be waiting to hear when you do that. That's all the questions I have. Thanks, Larry. Thank you. Take care. Operator | Conference Operator: Okay. We have no further questions in the queue. I'd like to turn the floor back to management for any closing remarks. Gayn Erickson | President and CEO, Aehr Test Systems: All right. Well, I thank everybody for their patience, and I fully recognize that our prepared comments were At least 10 minutes longer, we added about a 15-minute chunk in the middle to do detail and get on record the information around the AI that we won't need to do next time as well. And hopefully we can just give you an update on the successes that we're having there. So I appreciate everyone's patience and listening through this. And if you have any follow-on questions, you can reach out to us. We'll be happy to take the call. Thank you very much. Chris Siu | Chief Financial Officer, Aehr Test Systems: Thank you. Operator | Conference Operator: This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation. jsPDF 3.0.3 D:20260608224625-00'00'

NASDAQ:AEHR Q3 2025 Earnings Call Transcript Generated on 6/9/2026 Operator | Conference Operator: Greetings. Welcome to the Aehr Test Systems Fiscal 2025 Third Quarter Financial Results 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 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 Pondell Wilkinson Investor Relations. You may begin. Jim Byers | Host, Investor Relations at Pondell Wilkinson: Thank you, Operator. Good afternoon and welcome to Aehr Test Systems' third quarter fiscal 2025 financial results conference call. With me on today's call are Aehr Test Systems President and Chief Executive Officer, Gane Erickson, and Chief Financial Officer, Chris Tiu. Before I turn the call over to Gane and Chris, I'd like to cover a few quick items. This afternoon, after market close, Aehr Test issued a press release announcing its third quarter fiscal 2025 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 Aehr website. I'd like to remind everyone that on today's call, management will be making forward-looking statements today that are based on current information and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These factors that may cause results to differ materially from the forward-looking statements are discussed in the company's most recent periodic and current reports filed with the SEC. These forward-looking statements, including guidance and other issues, are only valid as of this date, and Aehr Test Systems undertakes no obligation to update the forward-looking statements. Now I'd like to turn the conference call over to Gane Erickson, President and CEO. Gayn Erickson | President and Chief Executive Officer: Thanks, Jim. Good afternoon, everyone, and welcome to our third quarter fiscal 25 earnings conference call. Thanks for joining us today. I'll begin with a few opening comments, and then I'd like to spend some time discussing tariffs and air's perspective on the near and long-term implications, as this topic is obviously on everyone's mind. We received many inquiries seeking answers regarding this matter. I'll then provide a brief overview of the quarter's key highlights and share updates on the primary markets that air targets for semiconductor testing and burn-in including the significant progress we've made so far this year in new markets. After that, Chris will deliver a detailed review of our financial performance. And finally, we'll open up the floor to your questions. We're pleased to report third quarter revenue growth in solid bookings and backlog, and that we exceeded the street financial forecast consensus for both revenue and bottom line for the quarter. We're particularly excited by the significant progress we've made expanding into additional key markets and unlocking new opportunities to attract customers and drive revenue growth. Recent wins have helped us meaningfully diversify beyond silicon carbide and into high-growth markets like AI processors with our industry-leading wafer-level and packaged part test and burn-in solutions. Okay, so tariffs. Currently, it appears that the actions and announcements from the U.S. administration regarding tariffs are dominating the news cycle. At this time, we do not believe that the impact of the tariff announcements made by the U.S. administration last week will significantly affect air directly. However, we're looking at the near-term secondary effects on our current and potential new customers, along with the uncertainty this quarter regarding possible pauses or delays in customer orders, shipments, or supply chain delivery delays or disruptions. Our immediate goal is to assess the impact on a customer-by-customer basis and communicate this to them quickly to remove any uncertainty or risk so that they do not slow down or delay any orders. We already have on hand the material needed for shipments of our wafer-level burn-in and packaged part burn-in systems over the next couple quarters. For wafer-level burn-in systems, it's much longer than that. For consumables, such as our wafer packs for wafer-level burn-in, and burn-in boards and modules for our package part burn-in systems. These are quick turn items with material purchased and built to order. We're already redirecting these materials and looking to drop ship finished goods from our subcontractors as well as shifting assembly and test of our wafer packs to one of our international locations as needed to minimize tariffs and avoid any possible supply chain disruption. We also have wafer pack aligners on hand to buffer us from any tariff noise for several quarters. For the high power probers for our Fox CP, for our hard disk drive customer, the probers come from Japan. And we may look to drop ship directly from Japan to this customer so as to not even have to consider the US tariff implication. However, give it a couple of days and we may have a new tariff number with Japan or it may be zero. I provide this detail to help our customers and shareholders understand that we do have a robust supply chain and have put thought into the resiliency of our shipments for customers so they can count on us. Again, we do not believe the impact on margins or demand will be significant for error or on customer demand over time, but the challenge is not being able to control near-term secondary effects on our current and potential new customers, such as possible near-term delays in customer orders or requested delivery dates given the unknown potential tariff implications on their products or supply chain. I'll be happy to answer any additional questions on tariffs as best I can in the Q&A section. Okay, now on to running our business and to meet the needs of our customers and shareholders and stakeholders. We have been laser focused on the initiatives we set out to expand our total addressable markets, diversify our customer base, and develop new products, capabilities, and capacity to grow the business moving forward. I'll cover this in more detail, but we believe that the total available market for these target wafer level and packaged part burn-in markets we're addressing this year, plus the added flash memory wafer level burn-in that we're working on, has an addressable market of over $500 million in systems alone, plus another $500 million in consumables and wafer and device handling equipment by 2027. We're excited by the significant progress we've made this year in expanding into new key markets and unlocking new opportunities to attract customers and drive revenue growth, and particularly in diversifying our markets and customers beyond our revenue concentration last fiscal year with silicon carbide wafer level burn-in. Silicon carbide wafer level burn-in accounted for over 90% of our business in fiscal 2024. while this year it's tracking to less than 40%, with artificial intelligence processors burn-in representing over 35% of our business in just the first year. For the third quarter, we had four customers representing over 10% of revenue, and three of these are new customers slash markets for Aehr. Wafer-level burn-in for AI processors packaged part burn-in for qualification and ongoing process monitoring of AI processors, and wafer-level burn-in of gallium nitride semiconductors. If you look at bookings, yet another customer in market, hard disk drive components, accounted for over 15% of bookings. We're very excited about our expansion into new customers and markets, while at the same time, we believe we're well-positioned to continue to grow our business in the silicon carbide wafer-level burn-in market. For AI processors during the quarter, we qualified, received orders for, and shipped the world's first wafer-level burn-in systems specifically designed for AI processors. Our new high-power Fox XP wafer-level burn-in system can test up to nine 300-millimeter AI processor wafers simultaneously. This new customer ordered multiple XP systems and sets of air proprietary wafer-packed full wafer contactors for installation at their OSAT test house, which is the offshore or outsourced assembly and test house. Aehr has worked with this OSAT test house for many years, including working on wafer-level burn-in and silicon photonics devices and optical sensors on our Fox systems and on packaged part burn-in of AI processors and ASICs on our Sonoma ultra-high power test and burn-in systems. Aehr is the only company on the market that offers both a wafer-level burn-in system as well as a package part burn-in system for both qualification test and production screening and burn-in of AI processors. Another new market for Aehr is adding the production side of package part burn-in for AI processors in addition to the processor qualification burn-in. We've now shipped multiple Sonoma production burn-in systems this year to a world-leading hyperscaler for production package part burn-in of their AI application-specific processors, and expect to complete the installations on this initial order by the end of the current quarter. We've also successfully integrated the Sonoma system from the acquisition of NCAL Technology last August into Aehr's engineering and manufacturing operations, which has enabled us to scale our output to two to three times the previous record shipment volume. In addition to AI-related orders and installations for wafer-level burn-in and packaged part burn-in this quarter, Aehr achieved several other key milestones. We expanded into production wafer-level burn-in for gallium nitride power semiconductors. We secured our first high-volume production orders for the new wafer-level burn-in in hard disk drives. We completed production qualification of our new high-power multi-wafer system for wafer-level burn in the silicon photonics devices used in co-packaged optics and optical I.O. devices, and we made significant progress on proof-of-concept work with a leading flash memory supplier on a new wafer-level burn-in system for high-volume production of next-generation flash memory devices. Let me expand on each of these for just a moment and then come back to silicon carbide. I believe our most significant achievement so far this year is the successful validation of our new high-power Fox XP wafer-level burning system, which can test up to nine 300-millimeter wafers simultaneously with a power output of up to 3,500 watts per wafer. The key lies in delivering thousands of amps of current to and from each wafer while maintaining precise voltages and thermally controlling these wafers to prevent thermal runaway. We achieve this by running bidirectional logic and memory test patterns on each device, ensuring accurate burning conditions and traceability, including reading device IDs and on wafer temperature sensors for every device. This customer has told us that they're very excited about our system and that no other product on the market has the capability or capacity to test their wafers like our system. They've ordered multiple Fox XP systems and sets of air proprietary wafer pack contactors and have already completed the first system installation and will complete the installations of all of the systems from this first order this quarter at the customer's OSAT, one of the largest OSATs in the world. As I mentioned, Aehr has worked with this OSAT test house for many years, including working on wafer-level burn-in silicon photonics devices and optical sensors on our FOX systems and on packaged part burn-in of AI processors and ASICs on our Sonoma ultra-high power test and burn-in systems. We believe that allowing customers to test and burn in their processors at the wafer level before packaging them into multi-chip arrangements with other processors and memory adds significant value. We're confident that we're not only years ahead in this technology, but we also hold critical IP and patents around the world to safeguard our wafer level burn-in technology and solutions. The cloud accelerator semiconductor market is experiencing explosive growth. UBS estimates that revenues in 2024 will exceed $120 billion, and the market is growing at a CAGR of over 30%. These devices are currently burned in almost entirely at the system level, where a failed device during burn-in is significantly more expensive than at the wafer level. It is not just the cost of the advanced packaging that matters, but also the expense of co-packaged memory, as well as customers shifting to multiple processors within the same package. An annual capital test budget of 2% to 5% of revenue is typical in the semiconductor testing industry, implying a budget of $3 to $9 billion for overall testing in 2024. The potential for a solution that can do test and burn-in screening of devices while still in wafer form is remarkable, and Aehr is the first and only company in the world to demonstrate and successfully achieve this for production burn-in at the wafer level. I'm very proud of our team for this achievement with AI wafer level burn-in. Simultaneously, the finance, R&D, and manufacturing teams did an incredible job integrating NCAL technology into Aehr. Within months, they ramped up production to levels that NCAL may never have been able to reach to meet the demand from AI processor companies for the qualification and production of their devices. Aehr has shipped more NCAL package part burning systems in the past nine months than NCAL had shipped in the previous three years. Great job to the combined team. Let's keep it up as we ramp these new customers into volume production with these systems. We're also already developing multiple enhancements to increase power, cooling, parallelism, and add automation to meet the needs of the AI processor market in the future. I'm very pleased with the customer feedback on these enhancements so far. We also shipped our first Fox XP high-power multi-wafer production system with high voltage to a world-leading gallium nitride power semiconductor supplier this quarter. The system is installed and configured with our fully automated integrated wafer pack aligner, which can test 6-inch and 8-inch wafers and can even be configured for future 12-inch or 300-millimeter GaN wafers. While the system is installed for volume production of GaN devices, It is also configured to test silicon carbide wafers in the same system by simply changing the wafer pack for wafer contactors. GaN is a new and exciting semiconductor technology with high value applications such as automotive power conversion, solar inverters, and solid state transformers and breakers. We're thrilled to have been selected as the production solution for this company, which is one of the largest suppliers of power and automotive qualified semiconductors in the world. Another exciting market opportunity we're making significant progress on is the hard disk drive market. This quarter we received orders for multiple Fox CP single wafer production test and burn-in systems with an integrated high power wafer prober for the burn-in and stabilization of new devices and hard disk drive heads. We're excited to finally start this production ramp after several years of working with this company on qualification and process development. This order arrived later than we expected However, the customer is requesting shipment of all the systems as soon as possible and has already requested a forecast from when we can ship additional systems. Lastly, I want to update you on our flash memory proof of concept project that we've been working on this year. As noted in earlier calls, we're collaborating with one of the world's leaders in flash memory to demonstrate the capability and cost effectiveness of our Fox XP platform for high volume production testing and burning of flash memory wafers. Our goal has been to demonstrate this over the next quarter, and we're on track. We're setting up the test cell and new wafer packs with a high-density, fine-pitched probe head during the upcoming month. This is very exciting, as we believe Aehr has the ability to successfully demonstrate how we can achieve a high-density, high-power, and fully automated test cell, enabling us to advance to the next development phase. That next phase involves collaborating to develop a next-generation test system specifically tailored to meet this customer's needs and future requirements. Stay tuned for more updates on this demonstration and the potential for the NAND wafer-level testing and burn-in market. To provide perspective, the NAND market in 2025 is expected to exceed $80 billion U.S., according to Yole Group. Again, using the 2% to 5% rule of thumb for the budget for overall testing of semiconductor devices annually translates to a capital and expense budget in 2025 of between $1.6 and $4.2 billion. Another way of looking at it is that a 1% yield improvement on the $80 billion market amounts to $800 million. New technologies in NAND are driving new requirements for wafer-level burn-in to address the manufacturing and negative yield implications of testing these NAND devices in package or system level test. It's easy to see why the potential for the market for wafer level burden for NAND is substantial. Okay, so now let me close with silicon carbide wafer level burden market. The silicon carbide market continues to be a large opportunity for Aehr, and as I noted earlier, we believe we're well positioned to continue to grow our business in this market. Recently, we've noticed some signs of improvement in the utilization rates of our installed base of wafer-level burn-in systems for silicon carbide. Demand for silicon carbide remains significantly driven by electric vehicles and has even further strengthened its presence in EV market due to lower prices and better supply availability. Battery electric vehicles are still expected to be over 30% of all vehicles shipped in 2030 worldwide. Simultaneously, silicon carbide devices are gaining traction in other markets, such as power infrastructure, solar, and various industrial applications. According to market research firm Yol Group, despite a temporary slowdown in battery electric vehicle shipments, the silicon carbide market continues on a robust long-term growth trajectory. Yol projects that the power silicon carbide market will exceed $10 billion by 2029 and driven by a strong rebound expected in 2026, along with a compound annual growth rate of nearly 20% from 24 to 29. In response to this growing demand, we've expanded our wafer-level burn-in offering for silicon carbide to support high-voltage testing across up to 18 wafers on a single system, doubling the capacity of our industry-leading 9-wafer Fox XP system. We've already received our first order for this 18 wafer high voltage system as an upgrade to a customer's existing Fox XP configuration. This enhancement further strengthens our technical and cost advantages for silicon carbide testing and is also highly applicable to high volume production of GaN devices, an important capability for customers working on both types of wide band gap compound semiconductors. Now, here's some more details mentioned, I would say, on our available market assumptions. According to market researcher verified market research, which aligns with air internal forecast based on customer and other data from YOL, UBS, and other market forecasters, the burn-in test systems market for semiconductors is estimated to grow from approximately $750 million in 2024 to over $1.2 billion in 2030, a CAGR of 9%. This is for systems alone, not the consumables, such as our wafer packs or bibs, or handling equipment, such as our aligners, probers, or autoloaders for package part burn-in. Historically, semiconductor burn-in consumables are up to three times the annual spending on burn-in systems. By 2027, the burn-in systems TAM is forecasted to be $1 billion, and we estimate that just For the new systems purchased in 26 and 27, the consumables and handling equipment are at least another billion dollars. In this TAM are AI and high-performance computing processors, other microprocessors, DRAM, flash, optical, and compound semis. DRAM and MPUs are interesting in that the top MPU company and one of the top three DRAM companies make their own burn-in equipment. So this is not included in the system TAMs. With the introduction of our new products in compound semi, optical, both wafer-level and packaged for AI and high-performance computing processors, and our target to enter the flash wafer-level burn-in market, Aehr addresses over half of this TAM. We believe that we can address over 500 million of this TAM in 2027 for systems alone. And since Aehr provides turnkey solutions for handling and consumables, We address another $500 million annually for a total of a billion-dollar TAM. The largest portion of this is clearly the AR market, followed by the flash market, with GaN and SICK, silicon photonics, and hard disk drive optical devices rounding out the total addressable market. Obviously, we're very excited about all of these opportunities for growth. Now let me close it out and hand it over to Chris. Looking ahead, with our $45 million in revenue, and $22 million in backlog to date this fiscal year, our customer forecasts, and our success in adding new markets and customers, we feel very good about our business. We've already surpassed $66 million in combined revenue and orders this fiscal year. Currently, we do not believe that the impact of the tariff announcements made by the U.S. administration this week will significantly affect Aehr directly. However, considering the secondary effects on our current and potential new customers, along with the uncertainty this quarter regarding possible delays or pauses in customer orders, shipments, or supply chain delivery delays or impact, we're temporarily withdrawing our guidance for this quarter slash fiscal year, which ends May 30th, and we'll reassess our guidance policy as clarity develops. We're encouraged by the increasing number of engagements with both current and potential customers, as well as the long-term growth potential across our diverse target markets. Our strategic expansion in the high-growth sectors, including artificial intelligent processors, gallium nitride power semiconductors, data storage devices, silicon photonics integrated circuits, and flash memory, opens up new opportunities to attract customers and drive revenue growth. With that, let me turn it over to Chris, and then we'll open up the line for questions. Chris Tiu | Chief Financial Officer: Thank you, Gayn. Before reviewing our financial results, I would like to provide an update on the integration of our in-cal acquisition, which closed last July. Our plan to consolidate personnel and manufacturing into Ayer's Fremont facility is progressing well, and we remain on track to complete the integration by the end of this fiscal year on May 30th. As part of this effort, we have upgraded water and power systems and added new clean rooms to our remodeled Fremont headquarters to ensure the infrastructure supports the needs of both organizations. We'll be shutting down the in-cal facility no later than the first quarter of fiscal 2026. Since the acquisition, Aehr has committed significant financial and human resources to successfully integrate in-cal into our operations. We have completed the migration of in-house financial, HR, and manufacturing functions into AehrS systems. In addition, we have finalized the transfer and documentation of all product designs, source code, and work instructions for assembly and test into AehrS release processes. I want to extend my sincere thanks to both teams for the dedication and outstanding execution throughout this integration. Turning to our Q3 performance, which included a full quarter of the financial results from the in-cal acquisition, our Q3 results exceeded the analysts' consensus on both the top and bottom lines. While we faced a challenging environment marked by continued softness in the silicon carbide power semiconductor market, we were encouraged by our success in penetrating the artificial intelligence market, with AI processors burning now representing over 35% of our business this year. During the third quarter, we had four customers representing over 10% of total revenue, and two of these customers are new customers that target AI market. Revenue for the third quarter totaled $18.3 million, a 142% increase compared to the $7.6 million in Q3 last year. This significant year-over-year revenue growth was driven primarily by the shipments of our new high-power FoxXP solution, for wafer-level production tests and burning of AI processors delivered to our first AI processor customer, which we announced in December. In addition, we're pleased with the significant progress we've made integrating products from our acquisition of InCal into our product portfolio to address the AI market opportunities. System sales from our Sonoma, Tahoe, and Echo package part burning products made a strong contribution to our third quarter revenue. We believe our strategy to broaden AehrS offerings and diversify beyond CconCobb applications is beginning to show positive results both operationally and financially. WaferPak revenues were $5.9 million, accounting for 32% of our total revenue in the third quarter, a decrease from 63% in the same period last year. The company recognized bookings of $24.1 million in the third quarter of fiscal 2025. compared to $9.2 million in the second quarter of fiscal 2025. Our backlog at the end of the quarter was $18.2 million. Since the end of the third quarter of fiscal 2025, we have received $3.6 million in additional bookings. With these recent bookings, our effective backlog now stands at $21.8 million. Non-GAAP growth margin for the third quarter was 42.7%, compared to 42.5% in the same period last year. the overall change in gross margin was flat, primarily due to a much higher overall revenue level than in Q3 last year, offset by a less favorable product mix and one-time items. Even though our revenue in the third quarter was much higher than that in the same period last year, our non-gap gross margin was lower than expected due to certain one-time charges to our cost of revenue. After we upgraded our ERP from our legacy system to Oracle NetSuite, Our new ERP allowed us to account for standard costs in inventory more precisely and revised certain accounting estimates, which resulted in a one-time charge in the third quarter. Additionally, we incurred high manufacturing overhead due to under-absorption as we had lower utilization of our manufacturing capacity due to the renovation of our Fremont manufacturing facilities. Non-GAAP operating expenses in the third quarter were $6.3 million, reflecting a 34% increase from the $4.7 million in Q3 last year. This year-over-year rise is primarily attributed to the inclusion of in-cows operating expenses in our financial results, along with higher legal and professional service fees. We anticipate incurring additional legal expenses in the upcoming quarters as we strive to protect our intellectual property rights in China and defend against the class action and derivative complaints in the United States, which we believe lack merits. Non-GAAP net income for the third quarter, excluding the impact of stock-based compensation, acquisition-related costs, the fair value adjustment to inventory related to the acquisition, amortization of intangible assets, and the accelerated severance benefits paid to an executive, will pass away unexpectedly in December. was $2.0 million, or $0.07 per diluted share. This compares to a non-GAAP net loss of $888,000, or negative $0.03 per diluted share in the third quarter fiscal 2024. Turning to our balance sheet, at the end of Q3, our cash, cash equivalents, and restricted cash totaled $31.4 million, down from $35.2 million at the end of Q2. During the quarter, we used $1.6 million in operating cash flows primarily to pay our supply and service providers. We have no debt and continue to invest excess cash in money market funds. In the third quarter, we earned $270,000 in interest income. As Gabe mentioned, considering the secondary effects of the tariff announcements on our recent and potential new customers, along with the uncertainty this quarter regarding possible pauses or delays in customer orders, shipments, or supply chain delivery delays. We are temporarily withdrawing our guidance for our current fiscal 2025 year, ending May 30th, and we'll reassess our guidance policy as clarity develops. Looking ahead to fiscal 2026, we are encouraged by the growing number of engagements with both current and potential customers. as well as the long-term growth potential across our diverse target markets. Our strategic expansion into high-growth sectors, including artificial intelligence processors, gallium nitride power semiconductors, data storage devices, Zircon Photonics integrated circuits, and flash memory, opens new opportunities to attract customers and drive revenue growth. Lastly, looking at the investor relations calendar, Aehr Test will be participating in two investor conferences over the next couple months. We will be meeting with investors at the Craig Hallam Institutional Investor Conference, taking place in Minneapolis on May 28th. And we will be presenting and meeting with investors on June 3rd at the William Blair 45th Annual Growth Conference, taking place in Chicago. We hope to see some of you at these conferences. This concludes our prepared remarks. We're now ready to take your questions. Operator, please go ahead. Operator | Conference Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Once again, please press star 1 if you have a question or a comment. Our first question comes from Christian Schwab with Craig Hallam. Please proceed. Craig Hallam\ Hey, guys. This is Tyler on behalf of Christian. Thanks for letting us ask a couple questions here. So maybe first to start on the tariffs and the uncertainty here, I guess any color on which end markets you are seeing maybe the most potential impact or most potential uncertainty being caused on the near term here? Gayn Erickson | President and Chief Executive Officer: I think we certainly prepared lots of different things. That's a good question. No, it's not markets. Sometimes it's more customers and geographies, right? So in this case, I'll give you one example. Our hard to strive customer has systems that are going to be going to a location outside the US. It includes a prober. We basically worked with a supplier that developed a high-power prober specific for this requirement. Prober companies are out of Japan or Korea, basically, without saying which one it was. They both are currently subject to a tariff. If that prober landed in the port tomorrow, it's going to get hit by a tariff. If it lands Friday, it may not. And so I think people are like, well, let's wait and see what happens. I mean, because I don't think anybody believes that if you write a check for the tariff, you get it back necessarily. Now, having said that, we're also looking at tariff drawbacks, which is basically a process by which historically with duties, you can, if we import something to assembly and then export it out, you can actually recover that up to 99% of it or so, although there's some people saying that the people that help you with that get a cut. So we're working through that as well. Now, in the meantime, I'm going to drop ship the probers directly to that customer past the first one. So the very first one is being impacted by, which is kind of the over-under, Unlike with respect to the end of our fiscal year, because we're going to do some integration of it here. We may even have to relook at that. So it's that sort of tactical thing. And, you know, give it a couple of days. We're what, three days in where Chris and I were saying, could we have another week? Let things settle out before this call. Again, a lot of the material we have, we have already on hand. It will never be subject to any tariffs. I guess, unless we ship it out to someone who then increases their tariffs. Last night I went to bed thinking that Europe was going to come back and raise their tariffs. Today they wake up and they say zero for zero. So, you know, it's kind of hard to look at it. And honestly, we're not, I don't think anyone's so desperate to try and solve these things in the next couple of weeks either, if you look at just schedules. And so I think we can manage through this. And then even then we start looking at material in many cases because, remember, our inbound material tariffs are on the material. We then, of course, have a markup or margin to ship it. And so a tax on the material of 10% is not a tax of the price. Does that make sense? So we kind of walk through that. I would say that there's not a specific market, you know, Obviously, China is its own challenge in that, you know, I think they came back and said it's 104% starting tomorrow. We actually have, if you specifically look at kind of risks related to China, just a couple of things. Aehr has basically had no revenue shipments into China for the last few years. That includes both our wafer-level stuff and the in-cow products. So... you know, we're not depending upon shipping a lot of revenue into China. That's not been the plan. And, you know, so if China comes back and says, you know, we're going to halt shipments or we're going to double the tariffs or whatever, it doesn't really affect us right now. Similarly, we have been pretty happy and proud that we almost do nothing in China from a supply chain perspective. I've said that in previous calls. We actually have some things like Blank printed circle board fabs, but not the assembled ones. And so it's pretty simple. And we have secondary suppliers for that just from a risk perspective. We continue to buy from them because the landing costs made more sense, but we also can supply it out of several other countries. we wake up and like, which country should we supply it from? It's like, give it a day. So there's a little bit of like settling out on this. And that, again, isn't even so much of the cost implications to margins as potential supply chain risks. What if, you know, they put that in a crate, it's shipped over here and it gets stuck in customs because people are trying to figure out what country it came from and on what day did it come in because that's the tariff it's applied to. So we're actually doing things to try and avoid anything coming into U.S. for customs in the near term. Not even so much for tariffs, just simply don't cluster, you know, have it get cluttered up and then you have it in the wrong place. We can redirect things. We have things, we have supply from material and subsistence from all over the world. they can drop ship directly into a customer internationally. We don't even have to worry about any of this stuff. So, you know, we have the infrastructure, we have the ERP systems, we have the legal entities that we can do that. And candidly, we're kind of proud of that supply chain customer. You know, I mean, with the China COVID thing, I think everybody had to take a look at it. We actually were also quite immune from anything during COVID. But, you know, this has been an important thing to tell your customers. What happens if such and such happens? We've said, you're not going to miss a shipment. We're going to be okay, right? So it's kind of an important thing to note so people understand it. But at the same time, we can't answer everything. Remember, May 30th is, what, seven weeks away. I mean, we're like, and as you know, your plus or minus one system on ours can move the bar. So that's why we just pulled the near-term guidance. Craig Hallam\ Alright, I appreciate that. That's a bunch of really great colors. So I guess following up on that then, you know, giving those comments, uncertainty around additional orders and, you know, timing of, you know, when customers might demand shipments. You know, you had $18 million in backlog X in the quarter, $22 million effective since then. Would it be reasonable or, you know, erring on the conservative side, at least a reasonable to think that you probably won't even ship all the backlog you currently have on hand in the quarter? Or is that not a great way to think about it? Gayn Erickson | President and Chief Executive Officer: One of the keys is if we're going to say we're not going to give guidance, we can't really give guidance. But nevertheless, let me still answer that directly. For sure, some of that backlog is not going to ship this quarter because it's multiple systems for the hard disk drive guy. And we were only planning to maybe ship one of those. We said that last quarter. So the over-under right now is one, maybe a second one for this quarter, but not all of them. So some of those are already planned for the... The interesting thing is we have multiple customer forecasts for things to ship this month or this quarter that they haven't ordered yet. And you're like, okay, is that going to happen? Would that happen and I can still turn that? Some of it we have material on hand and some of it is stuff that's inbound. So... I'd love to tell you it's that simple. And if it was, I'd probably just give you a new guidance, but it's sort of, you know, there's, there's kind of upside and downside to all of this. So, um, I apologize for not being really clear. I think the important thing is, you know, if we, okay, we miss it, we miss it by a little, whatever, or we're, it's going to be close. It might chip on, you know, the next week. That's the, that's the thing that's really can be very scary as a public company, right? If they're private, I wouldn't even worry about it. I'm only worried about the customers getting their shipments, getting to them on time. You know, but plus or minus one day on my 30th is a big deal to us as a public company. So this is more, you know, the things I'm talking about here, this is just timing stuff, we think. This is more timing things. I don't think, you know, the customers that are already buying, they've taken, you know, in some cases six months, you know, to a year to qualify. I mean, if you look at the GAN customer, the hard disk drive customer, this AI customer, the package part burn and AI customer, we've worked with them for over a year. They're fully qualified. They're committed. Now the question is, how do we make sure that they, you know, they can get the equipment on time with the least duties or tariffs at all possible? Craig Hallam\ Okay. All right. I appreciate that. That's great. If you think of another one... Gayn Erickson | President and Chief Executive Officer: If you think of another one, Tyler, you can always come back too. Go ahead. What's the next question? Sorry. Craig Hallam\ No, let's move on past the tariff. So as we think about next year in growth, you've diversified your revenue nicely away from silicon carbide. Maybe at least rank order, it sounds like silicon carbide is expected to continue to recover. We would expect to see growth there, but maybe AI is going to be the primary growth driver as we look out the next year or two. Just any color kind of rank order and where you expect to see the growth from your more diversified end markets? Gayn Erickson | President and Chief Executive Officer: Yeah, I mean, we're feeling really good about next year. I mean, there definitely is evidence that silicon carbide will kind of get back to capital equipment growth and putting more capacity in place. We're also seeing a shift from low voltage gate to high voltage testing. something we've done by working with several of the OEMs, the actual EV suppliers, for quality that they're driving to their customers, which drives them towards us, that even if they have equipment, they may need to upgrade it. That also turns into wafer pack revenue. So we think we can see revenue from our current installed base in both wafer packs and system upgrades, but then also incremental capacity. And there's still a few customers that effectively selected us, if you will, and haven't bought their first systems because they've delayed some of their fabs, that YOL is saying they will start to turn on in 26. And 26 is, when they say it's calendar, my fiscal 26 starts June. So, you know, some of that capacity may be second half, but we feel some of this already in our first half or second half of 25. Our fiscal year has kind of messed people up. Let's see here. GAN, we're pretty excited about that. There's some, you know, we have done a large number, I mean, a good number of designs that have been qualified into automotive industrial applications. They're now just going into production. So we've kind of got our fingers crossed related to that around their capacity and their needs to grow. And we're talking with several other customers We've actually heard our silicon photonics customer is talking now about ramping this year. And that's with the very high power. Remember, we upgraded their fleet to the extra high power system, which needs new wafer packs and needs new system upgrades. That's encouraging because of all the stuff that's finally going on around the silicon photonics side. But I think we think that the package part burn and qual is going to continue to grow. There's a lot of new devices coming out with higher power that's going to drive demand. And then burn-in, the production side of it. So the production burn-in, we're seeing our first customer ramp. It's in a very visible OSAT. And we're literally shipping all the systems. We finish it this quarter, and then they start their first ramp. We think they'll need more systems. We're also working on some enhancements. I don't want to get ahead of myself here in too much public, but we're working on some automation and some very specific things in the capability to add to that package part burn-in and have been communicating that to the customers and the OSATs right now. And I'm very hopeful and encouraged by the feedback that could drive more and more production burn-in to our systems with full automation with the Sonoma line. And then lastly, but honestly, maybe most impactful is what's going on with the wafer level. That first customer is expected to ramp. And we already have inbounds from other people. People are really leaning in to understand what do they need to do? What testability modes do they need to add to their wafer? How can they do this? Because The implications of being able to weed out the failure of that processor before you stick it into a large package with co-packaged memory, optics, and other processors is huge. That could be some of the most exciting stuff that's going on. Flash memory, actually, we're spending a significant amount of R&D money this year. We're spending our money, I say our as collectively as shareholders, it's a great investment. We're going to need to invest even more next year in developing the test solution to go in that. Maybe we could get some revenue at the end of the year, but this is really a early 27 is what we're thinking in terms of the timing. That's why I use those TAMs around 27 to kind of capture. At that point, we would hope to have flash memory revenue, wafer-level burn-in across more than, you know, hopefully several or more customers, package part burning across several customers, silicon carbide hitting, GAN starting to ramp, and the hard disk drive just, you know, continuing to buy along with silicon photonics. Craig Hallam\ That's great. All right. That's all for us. Thanks, Gabe. Okay. Operator | Conference Operator: The next question comes from Jed Dorsheimer with William Blair. Please proceed. Jed Dorsheimer | Investor, William Blair: Hi, thanks for taking my question. So, Gane, you know, I don't want to ask you a bunch of questions you don't want to answer. Just, I guess, first one, just on the balance sheet, I'm curious, AR, your accounts receivable jumped up quite a bit. Is that just from INCAL? Is there a change in terms? Could you just talk about what was going on there? Because I saw that positively inventories actually came down while revenues grew. So I'm just wondering about the receivables seem to jump out. And then I get a follow-up. Chris Tiu | Chief Financial Officer: Yeah. So we also have an unbilled receivable in our receivable balance that we were able to recognize revenue but cannot bill yet. But I think by now we have sent out the invoice at this point. Gayn Erickson | President and Chief Executive Officer: AR, it's called shipments towards the last month of the quarter. Not atypical of that. I think that was it. I think we may have had a special term with one of the customers with respect to billing at final shipment or something on the first tool. A couple of those things. I wouldn't read too much into it. Over time, and I want to Be sensitive to this because we have customers listening as well. We do do down payments under most circumstances. Sometimes with short lead times and things like that, we will work with the customer. Billing them 30% and then two weeks later hitting them with the other one sometimes isn't most optimum. We try and be balanced on it. But in general, we want to make sure that customers have skin in the game when they're placing the orders on these systems. And so there's a little of that. But yeah, there's no flags, no nothing. There's nothing there. Jed Dorsheimer | Investor, William Blair: Okay. And then just on that, the AI on the processing side of things and burning, I was wondering if you could go through the value proposition and a little bit more granularity. And what needs to be achieved for this? Has this gone from R&D to commercial level or Or do you feel like there's still, you know, even though the size and scale of the orders might be, you know, commercial size compared to that of silicon carbide for these customers, do you feel like it's progressed more, you know, that it's gone beyond and you're, you know, what are you looking at to get the determination that, you know, okay, we're going to start ramping on this in a durable way. Gayn Erickson | President and Chief Executive Officer: All right. So, Jed, I think I understand it. Let me try and answer it while repeating the question a little bit along the way. So, if the question is, is this sort of like an NPI prototype, you know, like a trial run, and they haven't really worked, you know, that kind of thing? That's not the case. So this customer, and we've alluded to it before, and we have to be somewhat sensitive to what's known publicly and what they've said. And yes, we have not identified who it is yet, okay? But what we have said is that they were doing, which is very similar to a lot of other AI guys, they were doing this burn-in at what's known as system-level test, okay? So this is very late in the process, basically damn near at the product side of things, okay? And the problem with doing it at system level test is that, you know, it's very late in the process and any processing implications, et cetera, and you have to use a much more different and sophisticated piece of equipment or the equipment itself to burn itself in to actually find these failures. The other challenge is, is that In a system-level test, you often have this memory or this processor coexists. And I'm going to be a little careful about too much detail on this because people are all trying to figure out, what kind of AI processor is it? We hope to come much more public with it. The customers talked about doing that. But it exists with other things, memories, infrastructure, heat sinks, power supplies, and all this. Burn-in... you know, I know a lot of people understand is what it sounds like. You basically are heating it up and you're actually adding more power to it to stress the device to a point that it'll weed out infant mortality or weak devices. You do not want to break it, okay? So the trick is to try and get it right to the edge to accelerate this stress test to weed out things as short a time as possible, okay? And generally speaking, the more power you put in and the more heat you put in, the faster you can do it. If you put in too much power and too much heat, you wreck the part, right? Now, so it turns out each device has a different optimum spot. Flash memory is like 85 degrees. DRAM can be 105 degrees. A microprocessor is 125 degrees. Silicon carbide is 140 degrees. They're all at different numbers. If you put them all into the same package, and I'm not saying you put silicon carbide into that package, but let me throw in silicon photonics. There's actually two burn-in temperatures for it. You do one process at one temperature and one at the other for ideal. Now stick them all into a large package. What are you burning in at? It's a problem. So if you were to put it in an oven... and you burnt in the processor 125, you could wreck the DRAM. You certainly can't bring the processor to 140 degrees like you do the silicon photonics device. So what you do is you bring it to the lowest common denominator. But here's another problem. That system is not designed to be run hot. The whole point is it's being run cold with big heat sinks and water cooling. Think of all the stuff that's going on in these racks. So it's normally trying to run at 30 degrees, and I use centigrade. Sorry for everybody, you know, a little bit more room temperature, right? That's what you are trying to run it at. But when you burn it in, we're running it at 125 degrees centigrade, 25% more than boiling water. OK, you can't do that with a system. You would ruin everything. You'd ruin all the printed circuit boards. You'd wreck all the memory. The power supplies would all die. That's not good. So you burn it in way lower temperature, maybe 60 degrees. Well, if you do that, then the burning time is like 10 times longer. So if you actually move it to the wafer level, I can burn in your memory right within a few degrees or 125 degrees. and keep it from going in a thermal runaway. That minimizes the burn-in time. I perfectly optimize that, and you take that device, and now when you put it in the system, it will not fail. It's a big deal. It's a really big deal. And by the way, like on our package part burn-in systems, which we have, one of my favorite things is I have a front row seat. On the Sonoma systems, we're testing these packages, and we're testing the memory stacks in there and the processors and the chipsets. And we have to actually test those at different conditions. It's a very interesting challenge, but it's way more effective if you can break it down and do it at the wafer level. But until now, no one has ever even imagined doing that. And we now have the technology with the power, the power supplies, the capability, the JTAG and M-BIS patterns and functionality and read and write capability to actually test these things at a wafer level in a cost-effective way. that's a real alternative to doing system-level test or a package-level burn-in test. And by the way, if you want package-level burn-in test, I'll sell them to you all day long with my Sonoma systems. Okay, hope that helps. Jed Dorsheimer | Investor, William Blair: It does. What's the stability of the power over that duration? That seems like it would be a critical feature in terms of within a tight tolerance. Gayn Erickson | President and Chief Executive Officer: Yeah, some of the many tricks and the keys are being able to actually regulate and drive power to each device on the wafer individually. Now, that doesn't seem intuitive, right? In traditional package port burn-in systems, like those from our competitors, they have bulk power supplies that supply to each of the devices all with the same voltages. They achieve a parallelism by actually trying to share all that That didn't work very well because each of the devices need a different voltage. Sonoma, one of the greatest things about it as a package-part burn-in system is we can individually program the power for every device that's being tested. We'll actually read an ID in the device, come back, adjust our power, and tune it for that device for an optimum burn-in. That's an amazing thing that people don't have in package-part burn-in that we do in Sonoma. We're doing the same thing at wafer level. OK, so and there's more tricks and I'm just not going to do them publicly. There's other things that we've done. In fact, there's some patents you can go and find that we've done by that we can implement in our wafer level burning system in our wafer pack that you just can't do in a normal wafer probing environment either that allow us to be able to test these devices. But it's it's pretty fun talking with the customers because they kind of light up as you talk about what you can do. And they're like, wait a minute, I've never even thought of that before. I'll give you one other hint, okay? One of the reasons everyone says this will never work at wafer-level burn-in is because these devices might, you know, one core might take 100 amps. Maybe it takes multiple 100 amps, okay? So what you do is you have a 100-amp power supply, and you run it through a probe card, and the probe card needles can only do maybe a half an amp or 50 milliamps, I heard somebody say the other day, okay? And then, so I have to put 100 of them in parallel, whatever the math is, sorry, I'm always tough online like this, to get you to 100 amps, okay? Or 1,000 pins to get to 100 amps with this. What happens if that section of the device fails and shorts? It'll ruin your probe card. So when people, when we first engage them, they're like, this is absolutely impossible because every wafer I have a device that shorts in the middle of the burn-in And it's going to ruin your probe card. And we have features in our wafer-level burn-in systems that prevent it from doing that. We've not burnt one pin yet. We've been working on this AI with this customer at wafer-level burn-in for nine months. We've not burnt one pin, which is crazy. People are like, I don't even understand how you do that. So there's some cool things about it that are just not intuitive. that are as differentiated as anything, and we're excited about it. It's a fun market. Jed Dorsheimer | Investor, William Blair: All right, well, listen, that's it for me. I'll jump back in queue. Thanks, Gayn, for the additional color. You're welcome. Operator | Conference Operator: Okay, the next question comes from Larry Shlebina with Shlebina Capital. Please proceed. Larry Shlebina | Investor, Shlebina Capital: Hi, Gayn. When was the first AI processor XP developed? Let's see, was that with the auto aligner? When was that up and running at that OSINT? Gayn Erickson | President and Chief Executive Officer: That's a good question. We had it up and running here first. As those that have come and visited us, they know we have these test cell labs, which we're upgrading. And we were actually shipping wafers out of our facility here. It's now up and running, the first one, and we'll have the rest of them all completed this quarter, whatever, in the next few weeks here. Larry Shlebina | Investor, Shlebina Capital: But it was running at the OSAT when? Gayn Erickson | President and Chief Executive Officer: We haven't. All we've said is it's up and running now. Larry Shlebina | Investor, Shlebina Capital: All right. Hey, Chris, I've got a quick question. What was the package part revenue in Q3? Chris Tiu | Chief Financial Officer: Package part in Q3? Let me look at it right now. Q3 is... Well, in the past, we only disclosed it in the EN, but... I would say... Let me say this. I would say more than 20%. Larry Shlebina | Investor, Shlebina Capital: Okay, more than 20%. It's going to be in the Q1. That's all right. Hey, again... Is there any product launch on your Flash customer that they're particularly wanting to use your systems on? I know this is an enterprise application. I see these big SSDs coming up later this year that they have like 123 terabytes of data capacity on it, which if you do the math on it, they consume with a decent yield Each one consumes like a wafer and a half of NAN just to stuff into that two-and-a-half-inch form factor SSD. Is there a product like that that's – they're interested in using your system to improve the yields? Because obviously they're stacking a bunch of dyes. Is that the motivation? Gayn Erickson | President and Chief Executive Officer: Okay. I'm going to – Boy, this is three in a row we're answering a little bit indirectly. I just want to be a little careful of customers. But we talked to multiple. There's not that many NAND customers. And we have not talked to every single one of them for some geographical obvious reasons. But we've talked to several of them. And there is a general theme going on with those customers and with the industry if you watch what's going on. And that theme is so a couple of things. In general, revenues are growing. They were down last year and the year before, and they're growing again. But wafer capacity is not. So there's not a lot of NAND fabs that are coming online. And the capacity may be going to higher utilization, but the bits are exploding. So what that means is that there's more and more density per wafer. As you do that, the test methodology is, is either going to increase in test time or you're going to need to increase in power to address it. The other thing that's going on is there's multiple kind of technologies out there that like stacked or not stacked, that's the wrong word, layers. So the NAND layers are going to hundreds of layers, which are just basically, when I think of like a high-rise building, there's a lobby floor and then there's floors above. The lobby floor may have the logic on it for the interface, And the floors above are what store all of the information, okay? Now, some people might say the IO is on the top, but don't go into that. This is on one device. Then they take those devices and they stack them together into a package, like you said, with an SSD, okay? So one of the things that's going on in the memory itself is the die are actually getting taller, right? And to hit the right things, the footprint, the XY footprint is getting smaller, which means the die count on a wafer is getting up. So the way they're getting density is they're shrinking. They're getting the die, the footprint of that building to be smaller, and they're making it taller. And that's how they're getting more out of a wafer. But that's causing problems with respect to parallelism and power, which is a key thing that would be driving our new requirements. Now, the other thing that's going on is this thing around hybrid bonding. And this is the first time I've talked about this on a call, okay? But on the hybrid bonding, there are several people out there that are introducing products that are coming up over the next year or so. What they do is they make that lobby floor, the logic I.O., on one process wafer, and then they make all the buildings or the floors that hold all the data on another wafer. And then they actually glue them together with a hybrid bond. When they do that, they can actually make the lobby floor smaller and faster because they can use a CMOS technology that will work without it. That'll still that because they don't have to make a memory cell out of it. Then they take a different technology that is good at memory cells that is lousy at lobbies or the IO speed, and they can make those taller and So now I can make the building taller by separating the NAND cells from the lobby floor I.O., and I just have to glue them together. And I say glue, fancy. There are people that do this for a living, but it's a hybrid bonding process similar to TSV bonding when you think of some of the other things that are going on in the world. Larry Shlebina | Investor, Shlebina Capital: If you do that... Your system would be for the flash, for the NAND component of that, right? Gayn Erickson | President and Chief Executive Officer: And or the combined combination of it, et cetera. So there's some, I don't want to get into too much of it, but there's technological things that are breaking the infrastructure. And those are the opportunities to get in because it's not that someone's throwing in a new fab. Make sense? Yes. and why would you want to go build a bunch of new equipment for that? So that's the message I want to get across, and that provides an opportunity for things to be disruptive enough to actually change the way your process is doing. And it's not just one company. Ultimately, it would be all of them. Larry Shlebina | Investor, Shlebina Capital: I was just looking at one of those SSD drives and the amount of NAND that they consume. You know, for a reasonable expectation on sales of those drives, you work that number backwards and it seems like they would need something like $70 million worth of your equipment just to process those wafers in order to improve the yield that they get as they stack all those dyes on top of each other into that small package. Gayn Erickson | President and Chief Executive Officer: Yeah, that was where I was going within the in the prepared remarks that, you know, and I did not trying to get, you know, there's a couple of different ways of cutting this thing. But if you're spending 80 billion, if you're incrementally selling 80 billion dollars a year of NAND and the process is technology is changing to allow you to be competitive, to get more bits, to do whatever. what kind of spend would you be doing? It's interesting if you're saying that you're not necessarily spending it all on new capital equipment, your test budget might be bigger. So being able to spend $80 million, as you said, that's not at all out of reason. Larry Shlebina | Investor, Shlebina Capital: That's pretty astounding that one customer, one flash memory customer on one product could require that kind of spend in order to get the yields where they have to get them. Anyway, yeah. I want to switch your fine pitch wafer pack that I guess you're developing for that application. Doesn't that open up the DRAM high bandwidth market for you guys? Gayn Erickson | President and Chief Executive Officer: It opens it. Yes. In terms of being able to test the DRAM, there's other things that would need to be done in order to do that, particularly around the DFT and low pin count test modes. But the interesting thing, and I've shared this, you have all people kind of track it over what, you know, the last how many quarters. If you go back and look at what I said two years ago, I don't know whatever it was, just any quarter prior to AI, chat GPT. I kept saying that Wave Level Burning will first go to NAND, and then ultimately it will go to DRAM. But in order for it to go to DRAM, the DRAM guys need to have the critical requirement. There needs to be more pain involved. And the pain needs to be when they start stacking DRAM. And then when they do that, they'll have to figure out a low pin count mode and testability or else they're going to get eaten up in yield. So now what you see is with HBM, which is still not the biggest part, but it's certainly the fastest growing part of DRAM, HBM requires this advanced packaging and stacking. And guess what? Yield's a big problem for them. And now you saw, was it just last month, NVIDIA came out and told and said publicly, I'm now asking that all DRAM suppliers start supplying me with known good stacks of DRAM. What does that mean? Well, obviously it means they're not good. And I already told you 10 minutes ago that on my package part burn-in systems, when we burn in those devices, we're burning in the memories too. Why are we burning in the memories there? What a horrible place to do it. Anyhow, kind of interesting. Larry Shlebina | Investor, Shlebina Capital: But I thought the fine-pitched wafer pack, though, gets to the point where it can touch down on all those contact points on the DRAMs, so it opens that up. Am I missing something there? Gayn Erickson | President and Chief Executive Officer: No, no, no, not really. Okay, so on these HPM memories, they may have 1,000 pins on them. They're all TSVs. They're like 10 microns. No one can touch those TSV pads, not form factor, not anything. They're still testability pads, but on a DRAM like that, maybe it used to have 50 pins or 60 pins or something times, you know, 3,000 diodes. you go through that math, that's a big probe card. And so a full wafer probe card is quite expensive and cost effectiveness isn't really there. If you implement a DFT mode, interestingly, like is done in the package, but anyhow, you can drop down to a JTAG IOPort or an Mbis IOPort, which is a single IOPin. So why not do that? The NAND guys did. So as that is implemented, you could see that people might drive towards a DRAM And if any of the DRAM guys are listening, I'd love to talk to you again if I'm not already talking to you about this because I think we can help. Larry Shlebina | Investor, Shlebina Capital: They definitely have a yield issue. Last question real quick. There's a long-term customer of yours that's ramping up on a 3D packaging facility in New Mexico. And... They're assembling three to five chiplets onto a subchip. And I don't know, I think the throughput of that facility eventually will be at least $25 billion worth of product. At what point do you go to your customer and say, you're already in that fab on the optical side. At what point do you say, hey, what would you spend if I could – improve your yields, some of the things you said earlier, if I could improve your overall yield 3% on those heterogeneous chips, what would they spend to achieve that going forward? I mean, every year, you only have to spend it once. Wouldn't they spend like 300 million bucks to get that capability? I know you'd be testing all the incoming component wafers before they get singulated and put into the chiplets, but... Isn't that a hell of an opportunity for you guys? Gayn Erickson | President and Chief Executive Officer: Okay. Well, I've never mentioned that we have systems installed in New Mexico or all those things that you've said. And I won't confirm or deny anything here. I don't want to get myself in trouble with any potential customers. But someone who's doing that would certainly be attractive to us. What we've definitely said is, And what you were implying there is that we have, what, six, seven optical customers related to silicon photonics, one in particular that has been our lead customer and a 10 percenter several years. And they, you know, within that, those customers, we have worked with the largest to build this very high power silicon photonics based system. that is amazing and we've qualified that we shipped it for the first time what last year they spent the last year qualifying we've been doing all kinds of engineering runs and things with the different types of wafer packs and we've heard that they are talking about ramping this year um with these new optical devices which you know the target for those are chip to chip or chiplet type things uh when we say that out loud so I'm excited about that. I think, as you said, well, why not use it in every other chip along the way? I think that's a good point. And, you know, if we can do very well with what we're planning right now, maybe that opens up an opportunity with that customer, if not others. Great. You know, just as a reminder for everybody listening on the call, our tools set primarily are on the wafer level until the NCAL acquisition of package parts. was a system that was designed around these megatrends with semiconductors that are growing to a trillion dollars, where semiconductors are not more reliable year to year. They're less reliable due to line widths, the compound semiconductors like optical and silicon carbide, stacking them all together in multi-chip modules or in modules like memories that are put together for SSDs or modules that are power going in electric vehicles. And then unfortunately, they're putting them in things that matter to the reliability, like automotive devices or data centers or these very expensive AI processors. So that opens up an opportunity to do this burn-in stress conditions on those devices before they're put into the packages. And that's why the burn-in market now is so much bigger and more interesting than than it has ever been in its history, at least going back to the early 80s, because of its enabling capabilities technology-wise that otherwise you wouldn't have been able to. We are picking up customers and markets along the way. And I always say, give it a year and we'll have another one. And Larry, if you have a specific contact on someone along those lines, it would not be the first time one of my shareholders has introduced me to a customer and I got an order out of it. So thank you. Larry Shlebina | Investor, Shlebina Capital: Well, that would be a big one. All right. Thanks for your time. Operator | Conference Operator: Thank you. Okay. Your last person in queue is Charles Tao, private investor. Please proceed. Charles Tao | Private Investor: Hi, good morning. Good afternoon. Thanks for taking my question. I think my first question has been asked by Larry. So my second question is, Again, if everything is on track, when do you expect to receive mass production orders from the flash memory company you are currently working with? Gayn Erickson | President and Chief Executive Officer: Yeah, it's a good question. What we've said, right or wrong, so that we're trying to be relatively visible, it's always a little dangerous with all your potential competitors listening in, is that this year we spent the year working on some technological steps to prove the proof of concept of our low-cost test cell that is really around this wafer pack carrier that allows everything else to be lower cost and allows higher power, higher density. If with that, our hope is upon successful completion of that, which we were targeting to try and be around this next quarter or so, We then want to work with the customer around the next step, which would be in co-development of a test system that would go into that machine. We think that's going to take about a year or so. Maybe it could take longer, but there's reasonably maybe a year. And so I wouldn't expect volume orders for that until the following year. So we're a year out or so, but you know what? If you told me I was taking volume orders and shipping for revenue in our fiscal 2027, which begins in June of 26, I would tell you that's awesome. Charles Tao | Private Investor: Okay, so what size, how big the size, can you imagine? Gayn Erickson | President and Chief Executive Officer: How big is the size? Charles Tao | Private Investor: Size? Size? Gayn Erickson | President and Chief Executive Officer: The size of the market? Yeah, I mean, this is where what we think is, if you were to look at, and I don't want to pick on any customer, okay, but the market just this year is $80 billion. I think it's growing at maybe 10%, 20% revenue. Bits are growing 40%, something like that. So two years out from now, I mean, okay, maybe it's... $100 billion, something like that. How much that is. You divide it by what? There's six customers, five customers that matter. They are not all even, but each one has 20%, maybe a little less. Then that spend by them is substantial. And the cost savings advantage to be able to do that would be substantial. So in order for us to actually help them with yield, there's a considerable market. This is embedded in the number that I said during my prepared remarks, that the total available market is a combination of 500 in test and $500 million in consumables. And the flash memory could be certainly 10%, if not more, of that overall market. So $100, $150 million, just wait for a little burn-in for flash memory in that time frame. Minimum? Charles Tao | Private Investor: Okay. Thank you. Gayn Erickson | President and Chief Executive Officer: You're welcome. Operator | Conference Operator: Okay. I show no further questions in the queue. I'd like to turn the floor back to management for any closing remarks. Gayn Erickson | President and Chief Executive Officer: All right. Well, I appreciate everybody, as always, for jumping on here. I just want to do, before closing the call, just one personnel-related thing I hadn't gotten to. I'm just happy to announce the addition of a new member to the team, Didier Wimmers. to our organization as our EVP of engineering. He's replacing Ovi, who, as we previously announced, passed away unexpectedly last year. Didier is an incredible addition to Aehr. He brings decades of direct experiences leading engineering teams in semi-tests. He's pretty well known. I joked around and said he's famous in the ATE space. He headed up all of Schlumberger ATE for many years, also managed the engineering team at FormFactor. who's basically one of the largest semiconductor test probe cart companies in the world. I worked with FormFactor for many years in my memory experience before, and that's where I had met DDA in the past. So I've known him for a long time, maybe 20 years myself. He's a great leader, extensive knowledge in ATE, wafer probing, great experience. He's a great manager and also a nerdy guy, which I say very in a warm way. He's a great team member. I'm excited to have him on because of his experience in ATE, system-level testing, and even burn-in systems before joining Aehr. So we welcome him on board and excited to have him. As always, we appreciate everybody joining in. If you happen to be anywhere near the Bay Area... and are interested, we can try and set up something. Our facility here, we're getting right down to the final of it. We're about a month away from it being pretty well completed. And we've done a little bit of just a remodel in general for cubes and facility areas for the employees, which they really love. But we did a major remodel in the manufacturing and the clean room labs area. which allow us to increase both manufacturing, prototype, engineering capacity, but particularly manufacturing capacity of our systems, our new package part systems from Sonoma, that those systems will be coming over here over the next couple of months, and also our wafer packs and our BIM consumables from the package part side. So all that will be consolidated here Q1-ish, I don't know, this summer. OK, but if you come by, then it will probably be, you know, finally happy with everything kind of put together and all the lights are up and everything, too. So I thank you, everyone, for for your encouragement. I've got a lot of calls of hang in there. A lot of people very excited about the stuff that we're working on. And, you know, we're all kind of enduring through all these tariff things. But this, too, my favorite saying, this, too, shall pass. So thank you all and we'll talk to you next quarter. Operator | Conference Operator: This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation. jsPDF 3.0.3 D:20260609232130-00'00'

NASDAQ:AEHR Q2 2025 Earnings Call Transcript Generated on 6/9/2026 Operator | Operator: Greetings. Welcome to the Aehr Test System's fiscal 2025 second quarter financial results 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 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 Pondell Wilkinson Investor Relations. You may begin. Jim Byers | Pondell Wilkinson Investor Relations: Thank you, operator. Good afternoon, and welcome to Aehr Test Systems' second quarter fiscal 2025 financial results conference call. With me on today's call are Aehr Test Systems President and Chief Executive Officer, Gane Erickson, and CFO, Chris Hsu. Before I turn the call over to Gane and Chris, I'd like to cover a few items. This afternoon after market close, Aehr Test issued a press release announcing its second quarter fiscal 2025 results. That release is available on the company's website at aehr.com. This call is being broadcast live over the internet for all interested parties and the webcast will be archived in the investor relations page of the Aehr Test website. I'd like to remind everyone that on today's call, management will be making forward-looking statements today that are based on current information and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These factors that may cause results to differ materially from those in the forward-looking statements are discussed in the company's most recent periodic and current reports filed with the SEC. These forward-looking statements, including guidance provided during today's call, are only valid as of this date, and Aehr Test Systems undertakes no obligation to update the forward-looking statements. Now, with that, I'd like to turn the conference call over to Gane Erickson, President and CEO. Gayn Erickson | President and CEO: Thanks, Jim. Good afternoon, everyone, and welcome to our second quarter fiscal 25 earnings conference call. Thanks for joining us today. I actually have a number of topics that I'm going to go through. I'll try and get through them quickly. We've had a lot of inbound requests for information and to clarify all the different markets that we have been expanding into, particularly a lot of questions around the AI side. So I thought I would spend a little bit of time just making sure to bring everybody up to speed and kind of normalize what everybody understands about that. So bear with me as I go through this. Chris will then cover some details related to our financials, a little bit shorter than normal to make up for my longer portion of this thing, and then we'll open up for questions. I'll start with a brief overview of the quarter's key highlights and share updates on the key markets we're targeting. for our semiconductor test in Vernon, including notable progress in those new markets. We're excited to share the significant progress we've made on the key objectives we outlined at the start of the fiscal year, particularly expanding our product reach into additional large and fast-growing markets. Our market diversification into sectors such as artificial intelligence processors, gallon nitride-powered semiconductors, data storage devices, silicon photonics integrated circuits, and flash memory is driving new opportunities to attract customers and drive revenue growth. This progress includes our wafer-level burn-in solutions and also the success we're achieving with the new semiconductor package part test and burn-in product lines we acquired through our acquisition of Intel Technology that we closed last August. This acquisition has led to the acceleration of our market diversification, with particular success and leverage expanding our total available market in AI processors. We're pleased to report meaningful progress in our efforts to penetrate the high-power processors market, including artificial intelligence, or AI processors, graphics processor units, or GPUs, and application-specific integrated circuits, or ASICs, AI processors and accelerators. These advancements include wins in both wafer-level burn-in and packaged part burn-in applications. Let me start with our new success with the AI processors for wafer-level test and burn-in. Last month, we were thrilled to announce a major milestone for us, securing our first AI processor customer for wafer-level burn-in. After successfully demonstrating the performance and throughput of our systems at our headquarters here in California, this innovative AI customer selected our new high-power Fox XP solution for production wafer-level test and burn-in of their AI processors. This includes initial volume production orders for multiple high-power Fox XP systems and our proprietary wafer pack contactors, which enable full wafer contact for testing and burning in of AI processors in wafer form before system integration. This achievement represents a significant technological and commercial breakthrough for Aehr, significantly expanding the market potential for our Fox XP wafer-level test and burning systems. AI processor burn-in is a significant opportunity rare. AI processors have tens of billions to even greater than 200 billion transistors on a single semiconductor die. Transistors act as the fundamental building block functioning as an electronic switch to control the flow of electrical current, essentially representing the on and off states necessary for processing information on digital circuits. allowing for the creation of complex logic operations within the single chip by combining numerous transistors together. Large complex processors have always been subject to the challenge of early failure rates that are higher than the application requires. Companies like Intel, AMD, and Nvidia have always had many of their products, and for some companies, all of their processors require a production burn-in for screening out early failures. This is also the case for AI processors and ASICs. Companies use test and burn-in systems to qualify a new process and AI processor design to determine the device's early failure rates, intrinsic and steady state failure rate over time, and also how long the devices will last before they begin to fail due to the end-of-life wearouts. This is really where our acquisition of NCAL plays a huge role in our strategy for AI processors, as the Sonoma ultra-high power package per test and burn-in system is extremely good for this qualification application. I'll also talk about Sonoma in more detail later. During the semiconductor qualification process, customers characterize the failure rates over time for a given device and then implement a production burn-in to effectively accelerate and induce the early failures so that these devices can be screened out and not shipped to customers. In the case of wafer-level burn-in and screening, they can remove the devices before they're packaged with other processors and high bandwidth DRAM memory or HBM into very expensive packages using substrates like co-op packaging from TSMC. Once you understand that AI processors need production burn-in and then you look at devices such as Hopper or Blackwell from NVIDIA or the AMD Instinct MI325X GPU accelerator, it becomes intuitively obvious why customers would like to move this production burn-in step to wafer level if they can to avoid throwing away very expensive packages and the remaining good processors in HBM. With Aehr providing the first-ever solution for wafer-level burn-in in an AI processor in partnership with this customer and their outsourced assembly and test or OSAT partner, we have shown that our high-power Fox XP multi-wafer systems and proprietary wafer pack contactors can be a viable solution for testing and burn-in of AI processors in wafer form to avoid having to burn-in these devices in package or system form where the cost of test and the cost of yield loss due to failing devices during burn-in is much more expensive and impactful to overall manufacturing yield. We've already shown the solution working at our facility in California and will begin shipping the production systems and wafer packs already this month. The systems will have a very visible footprint at the OSAP they will be installed and used at, and we're working together on marketing this wafer-level production burn-in capability to other AI processor suppliers in partnership with this OSAP as they speak. Now let me turn to the package part test and burn-in level of AI processors using our new Sonoma system. During the second quarter, we secured our first production AI processor customer for package part burn-in receiving initial volume production orders for multiple Sonoma ultra-high power systems. This customer is a large-scale data center hyperscaler, providing computing power and storage capacity to millions of individuals and organizations worldwide. System shipments have already commenced to their OSAT contract manufacturer, doing test and burn-in for them in Asia. Again, this is for production burden screening of all devices shipped to screen out early failures. This customer was and continues to use the Sonoma system for process and device qualification as I detailed a few minutes ago. The Sonoma system is a system that combines high parallelism of ultra-high power devices under tests or DUTs with very high current, high performance power supplies that allow many voltage zones ranging from multiple core power zones to many other lower power zones on the same device. Very flexible digital test resources for device. Individually controlled liquid cooling of each device under test. And what we feel is the world's best software and user interface for device testing and debug for device qualification and reliability testing and bringer. I have personally heard from multiple customers that they often use the Sonoma system to debug the test patterns of their devices and use this data to feed back to their multi-million dollar ATE systems from the likes of Advantest and Teradyne. We have a large and growing installed base of Sonoma systems around the world at test labs, OSATs, and IDMs used for this qualification and reliability testing of new devices and semiconductor process nodes. What is new is this is the first customer, and it's a large one, that is purchasing Sonoma for their volume production needs for test and burn-in of their AI processors. This is an area where the combination of NCAL and Aehr was very well received by customers, as NCAL simply did not have the support infrastructure worldwide as Aehr does to support the needs of production customers. nor did they have the manufacturing capacity that we do to build a large number of systems for production customers. We see significant potential to expand our package part test and burn-in business in the rapidly growing AI semiconductor market with the ultra-high power Sonoma product line, and already have a team working on multiple enhancements to address both qualification and production test and burn-in needs of a wide range of AI processors, suppliers, test labs, and OSAPs. Aehr is now able to offer our customers both the ability to do production wafer-level burn-in of their AI processors and accelerators, as well as reliability qualification and production burn-in at the package part level with our Sonoma system. Aehr Test Systems is the only company in the world offering the flexibility to customers of both wafer-level and package-level test and burn-in solutions for AI processors. We estimate that the combined market for wafer level and package part reliability testing production burden of AI processors will surpass $100 million annually in the future. The AI semiconductor processor market is growing very fast. According to the SNS Insider, the AI chip market size was valued at over $60 billion in 2023 and is expected to grow to over $600 billion by 2032. a 10x increase and a CAGR of almost 30% over that period. The types of processors and applications for AI processors or processors with AI focus is also expanding rapidly from the historical general-purpose GPU-based processors used for LLM generation and inference to application-specific integrated circuits aimed at specific accelerator functions in data centers and hyperscalers and edge AI processor used in autonomous vehicles robotics, and security. These devices and their applications demand extremely high quality, reliability, and security. With our comprehensive product portfolio for reliability, test, and burn-in of AI semiconductors, we feel Aehr is poised to capture a meaningful share of this market. Now let me talk about the expansion into our gallium nitride market. Last week, we're excited to announce another exciting milestone with our first gallium nitride or GaN semiconductor production order. This customer is a leading automotive semiconductor supplier and a key player in the gallium nitride power semiconductor market. We're thrilled to have received their initial production purchase order, marking their commitment to advancing volume production, wafer-level burn, and other GaN devices using our Fox XP platform. This achievement expands our production wafer-level burden market for power semiconductors beyond silicon carbide applications used in electric vehicles, data center power conversion, and solar to now include GaN, a high-performance compound semiconductor optimized for mid-power applications such as data centers, solar energy, automotive systems, and consumer electronics and PCs. Over the past 12 months, we've collaborated with this lead customer using our Fox NT system, leading to their purchase of multiple wafer pack reference designs on a diverse set of GaN applications. GaN offers a much broader application range than silicon carbide and is poised for significant growth in the coming decade. While the largest market segment for silicon carbide, about 70%, is for the electric vehicle and EV charging infrastructure markets, GAN is very diversified and is not dominated by EVs or autos. With many more end-use applications, there are many more customers and broader market for GAN semiconductor suppliers than for SICK, where there are fewer EV and charging customers, but are at higher volume per customer than the average customer for GAN suppliers. With an expected compound annual growth rate, CAGR exceeding 40%, The GaN market is projected to surpass $2 billion in annual device sales by 2029, according to Yole Group. Additionally, Frost & Sullivan estimates GaN semiconductors will account for over 10% of the worldwide power semiconductor as soon as 2028. This transformative technology represents a significant growth opportunity for AERS wafer-level test systems and wafer-packed full wafer contactor, positioning us to capitalize in the expansion of the GaN market. My next topic is silicon photonics, which continues to show signs of market adoption for chip-to-chip communication and for optical networking switching. We remain very enthusiastic about the silicon photonics market, particularly for the new application of silicon photonics integrated circuits for use in optical chip-to-chip communication that we see as a significant market opportunity for our products. Last year, we shipped a new high-power configuration of our Fox XP system to our lead customer for a new family of silicon-photonous integrated circuits aimed at optical chip-to-chip communication. This system with our proprietary wafer-packed full wafer contactors allows for testing over 8,000 high-power optical devices in parallel on each of nine wafers before they're singulated and placed into a fiber optic transceiver for data center and telecommunications infrastructure or for placement and co-package optics for optical chip-to-chip communication. Multiple companies, including AMD, NVIDIA, Intel, TSMC, and Global Foundries have announced product roadmaps for devices using optical chip-to-chip communication, with new announcements in just the last week coming out of Taiwan on new silicon photonics-based ICs by TSMC and NVIDIA. The new Fox XP system configuration with higher power wafer packs enables production test of up to 3,500 watts of power per wafer and up to nine full wafers in parallel. It also includes AehrTest's latest chamber configuration, which has a smaller overall footprint and is compatible with Aehr's new wafer pack auto aligner that provides Aehr customers with fully automated material handling, enhanced re-operation of 6 to 12-inch wafers using industry standard wafer cassettes and foobs. and can also support mobile robot and overhead transfers of wafers in those foobs. This is a system that we leverage for the production system for wafer-level burn-in of AI processors as well. We've designed a number of new wafer packs for engineering and initial samples for this lead customer of our high-power silicon photonic solution this fiscal year. These are very impressive devices with significant improvements in size, power, and data rates that we feel are likely to rev to production in time to address the chip-to-chip optical communications market opportunity. The hard disk drive market is another opportunity for Aehr's wafer-level test and burn-in systems, and we're excited about our opportunity for production burn-in and stabilization of devices used in hard disk drives using our Fox CP systems and wafer pack contactors. Excuse me. Our lead customer for this application is ramping this year and has told us they will purchase multiple production systems from us over the next few quarters to support their planned production rollout and ramp. This customer, first announced back in 2019 prior to the COVID-19 pandemic, initially purchased our Fox CP single waiver test and burden solution to support the qualification and early test stages of this new product aimed at the enterprise and data center markets. We view the data storage market both for hard disk drives and flash-based semiconductor solid-state disk drives as significant growth opportunities for our systems. These markets have applications with devices made up of multiple die in complex structures or in multiple die stacked on top of each other before they are put into higher-level packages or systems. These devices require exceptionally high levels of quality and long-term reliability of the die before they are put into the packages or systems. which aligns perfectly with the capabilities of our wafer-level test and burn-in systems. And speaking of solid-state disk drives and NAND flash memory, we're making steady progress on our ongoing benchmarking project with a major flash memory supplier to evaluate the benefits of using our Fox XP solution for wafer-level test and burn-in other flash memory devices. This application is for 100% test and burn-in of devices to be used in mission-critical applications such as enterprise storage. As part of this evaluation, we're advancing the development of a low-cost, high pin-down, fine-pitched MEMS-based wafer pack for full wafer contact of all NAND devices on a 300-millimeter wafer, including support for high-density 3D NAND technology supporting up to greater than 200 layers. One of the key challenges with addressing the new devices on customers' NAND roadmap is that not only is there a significantly higher number of dyes per wafer, but the power per die and therefore power per wafer to test these wafers has increased significantly. Support for high-power wafer testing is something that Aehr is particularly good at with our Fox XP multi-wafer test and burn-in systems and wafer packs. This new wafer pack design is also capable to support DRAM testing should customers choose to pursue DRAM burn-in in the future. We aim to complete the proof-of-concept phase in a few months, enabling us to advance this benchmark to either a production solution evaluation or secure a commitment from the customer to develop a production test cell. This would position us to generate our first revenue from this NAND opportunity as early as our next fiscal year. We believe this represents the leading edge of a significant opportunity for our solutions for semiconductor memories, with the NAND flash market being the key initial focus. Looking ahead, we see long-term potential to expand the DRAM wafer-level test in Burnin further broadening our market reach. So you'll notice that I led with the new market opportunities, but will now provide an update on silicon carbide wafer-level test and burn-in, a market that in fact was almost 90% of Aehr's revenue last year. Aehr also continues to expand its presence in silicon carbide power semiconductor market, a critical sector for power conversion for electric vehicle traction inverters, charging infrastructure, and a range of industrial data center and infrastructure applications. Based on recent market forecasts and large suppliers of silicon carbide semiconductors, growth in silicon carbide sales outside of China should remain challenging before recovering in calendar 2026. We believe we're well positioned in this market as we have a large customer base and are currently engaged in benchmarking efforts with multiple potential new silicon carbide customers around the globe, including in China. While we remain cautiously optimistic about the opportunities in China, we also recognize the geopolitical, trade, and intellectual property risks associated with this market. Recently, we filed a lawsuit in China against a local supplier for intellectual property infringement. This action relates to features of products by that company targeted at wafer-level burn and silicon carbide devices that we believe infringe on Aehr's intellectual property and patents granted to Aehr by the Chinese Patent Office. Our current fiscal year forecast includes contemplated orders and revenue yet to be booked for silicon carbide wafer-level burning systems and wafer packs destined for silicon carbide manufacturers in China. It is important to bring this to our shareholders' attention as recent trade-related developments in the U.S. and the emergence of competitive offerings in China that we believe infringe on our intellectual property have heightened the risk associated with bookings and revenue from Chinese customers. As we look at the composition of our total revenue for this fiscal year, silicon carbide is expected to account for less than half of our total revenue as we've seen our expansion into additional other markets capture real market share gains. AI processors, including wafer-level and packaged parts, could comprise as much as 40% of our total revenue this fiscal year, up from effectively zero revenue last year. GaN, hard disk drives, silicon photonics integrated circuits, and other semiconductor package part revenues will comprise about another 20% of revenue. We're not pivoting away from silicon carbide, but rather are generating what we see are the growth in the other market opportunities while not seeing the growth in silicon carbide this year like we saw last year. According to recent market research from companies such as YOL, the estimated revenue for silicon carbide semiconductors in 2024 was around $2.5 billion and expected to reach $10 billion by the end of the decade, a 4x increase. To put this into perspective, the semiconductor market is projected to grow from about $600 billion overall in 2024 to over $1 trillion by the end of this decade. So silicon carbide will be about 1% of the overall semiconductor market by 2030. Aehr's innovative solutions are poised to capitalize on this growth in the overall semiconductor market by addressing the critical reliability needs of next-generation applications and leveraging key megatrends shaping the semiconductor industry. Reliability has become a critical priority across a wide range of industries, including combustion and electric vehicles, data centers, electrification of the world's infrastructure, and a wide range of artificial intelligence applications. Factors such as smaller semiconductor geometries, the increase in adoption of compound and optical semiconductors, and the complexities of ensuring semiconductor reliability on ever-increasing power and performance of semiconductors and advanced packaging are driving the demand for wafer-level and package-part testing burn-in systems. Aehr solutions are instrumental in reducing early operational failures and ensuring long-term device performance in these rapidly advancing markets. With strong customer engagements, expanding market opportunities and innovative products designed to meet evolving demands, we're optimistic as we move into the second half of our fiscal year and maintain our previously stated financial guidance for the fiscal year. As we've stated before, Though given the nature of our business with our high average selling prices of a single production system and a set of wafer packs, our quarterly revenue can experience significant variability if system orders anticipated by the quarter end are delayed by even a few days. This was the case in last quarter. And one of the key reasons we do not provide quarterly guidance. In the case of both our new GAN and wafer level AI customers, Both requested us to pre-build systems that we fully expected to ship to them within the quarter. However, the purchase orders were not finalized until after the quarter ended. Looking ahead and above the quarter-to-quarter variations, we're excited about the current and emerging market opportunities for our products, which not only position us for a successful fiscal year, but also lay a solid foundation for long-term sustainable growth in years ahead. Lastly, and before I turn it over to Chris, it's with great sadness that we acknowledge the passing of Ovi Rechudri, our EVP of Research and Development, who lost his battle with cancer last month. On behalf of everyone at Aehr Test, we extend our deepest sympathies to his family. Ovi's friendship, leadership, and the tremendous contribution to Aehr Test will always be remembered and cherished. It was an honor to work alongside Ovi, and he'll be deeply missed. In the interim, Don Richmond, our CTO who previously held this role before Obi joined us a year and a half ago, had stepped in and assumed Obi's responsibilities at Aehr and would continue in this capacity until further notice. With that, let me turn it over to Chris, and then we'll open up the lines for questions. Chris Hsu | CFO: Thank you, Gang. Good afternoon, everyone. The company recognized bookings of $9.2 million in the second quarter of fiscal 2025. compared to $16.7 million in the first quarter of fiscal 2025. At the end of the quarter, our backlog was $12.4 million. In the first six weeks of the third quarter of fiscal 2025, we received $14.2 million in additional bookings. This growth was driven primarily by the first AI processor customer, utilizing our high-power Fox XP solution for wafer-level production tests and burning of AI processors, which we announced in December. With this recent bookings, our effective backlog has now reached 26.6 million. Turning to our Q2 performance, which included a full quarter of the financial results from the in-cal acquisition, we face a challenging environment due to overall softness in the Zircon Carbide Power Semiconductor market. Second quarter revenue totaled 13.5 million, a 37% decline compared to 21.4 million in Q2 last year. A significant portion of this revenue was driven by demand for our wafer packs and Sonoma Ultra high-power systems acquired from the In-Cal acquisition, which support high-volume production tests and burning of AI processors. Wafer pack revenues came in at $8.6 million, accounting for 64% of our total revenue in the second quarter, an increase from 43% in the same period last year. This highlights the important role of our wafer packs as a key source of recurring revenue for our business. Additionally, system sales from our Sonoma and Tahoe package part burn-in products made a substantial contribution to our second quarter revenue. We are excited to see the significant progress we made to incorporate the in-cow products into our product portfolio to address the AI market opportunities. We believe our strategy to expand Aehr's product offerings to diversify into sectors beyond silicon carbide applications such as AI, gallium nitride power conversion, and other sectors will drive revenue growth in the future. Non-GAAP growth margin for the second quarter was 45.3% compared to 51.6% in the same period last year. The decline was primarily due to a lower overall revenue level compared to Q2 last year. partially offset by a favorable product mix of higher margin wafer packs. Non-GAAP operating expenses in the second quarter were $5.9 million, a 19% increase from $5 million in Q2 last year. The year-over-year increase is primarily due to incorporating a full quarter of in-cows operating expenses into our financial results, as well as higher legal and professional services fees. We expect to incur higher legal fees in the next few quarters, as we vigorously protect our intellectual property rights in China and defend class action and derivative complaints in the United States. In Q2, we recorded income tax benefits, totaling $217,000. Non-get net income for the second quarter, which excludes the impact of stock-based compensation, acquisition-related cost, the acquisition-related fair value adjustment to inventory, and the amortization of intangible assets was zero or 2 cents per diluted share for the second quarter. This compares to non-GAAP net income of 6.7 million, or 23 cents per diluted share in second quarter fiscal 2024. Now turning to the balance sheet. At the end of Q2, our cash, cash equivalents, and restricted cash totaled 35.2 million, down from $40.8 million at the end of Q1. During the quarter, we used $5.9 million in operating cash flows, primarily to pay our suppliers and service providers. With a strong balance sheet, we continued to invest in scaling our business and pursuing new market opportunities. We have no debt and continue to allocate excess cash to money market funds. In the second quarter, we earned $228,000 in interest income. On October 15, 2024, We filed a new S3 registration statement with the Securities and Exchange Commission to support potential future financing needs. The new S3 shelf filing for $100 million was approved by the SEC on October 25th and is good for three years. Looking ahead to the remainder of fiscal 2025, which ends on May 30th, 2025, we are reaffirming our previously provided guidance. As Gay noted, we expect total revenue of at least $70 million with a non-GAAP net profit before taxes of no less than 10% of revenue. Lastly, looking at the investor relations calendar, Aehr Test will be participating virtually in the Needham Growth Conference on Thursday, January 16, 2025. We look forward to connecting with many of you during this event. This concludes our prepared remarks. We now ready to take your questions. Operator, please go ahead. Operator | Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Once again, please press star one if you have a question or a comment. And the first question comes from Christian Schwab with Greg Hallam. Please proceed. Christian Schwab | Greg Hallam: Hey, good afternoon, guys. So, Gabe, thank you for all the detail on all the different market opportunities. I guess the question – we only have one question. It's a question we get all the time, you know, is we've been at, you know, $65 million, $70 million here for three years now. And, you know, what year is kind of the inflection point of long-term sustainable growth? You kind of ended with a summary of all that. You felt confident, long-term sustainable growth. I'm just wondering, you know, do we start seeing strong top-lying growth rate next fiscal year, fiscal year 26 and beyond? And if we do, what does that top-lying, you know, growth rate look like? That's it. Thank you, Gaynes. Gayn Erickson | President and CEO: All right, Kristen. Well, as you know, and maybe not everyone else knows as well or understand, we have yet to give multi-year forecasts, which is kind of going to feel a little less than what you were asking for. But let me at least try and put it in perspective as well. We had been, if you go back and look at multiple quarters, we've been talking about some of these other markets. and alluding or being very direct about some of the expansion, whether it be us talking about the investments in the silicon photonics, our initial engagement with customers in GAN a year and a half ago that said we were evaluating them for production use in hopes that it would prove out that they need production burning, which we've now determined have. engagements with the flash memory. And we even, we were a little more guarded about it, but about a year ago, if you look at the notes, I was referring to another exciting application for a high power application for way below burning we were engaged in, which was actually the leading edge of the AI stuff. Those were markets that we saw driving our revenue, but candidly, most of the energy was, of course, about the silicon carbide and EV. We saw those markets easily driving for, you know, as we talked about AI, you know, these could be $100 million a year numbers. And flash memory is probably the largest among it, and DRAM larger than that. There are enormous opportunities in the space kind of as a whole in semiconductors. But, of course, we were seeing this year-over-year growth of, you know, 40%, 50% for silicon carbide, and that seemed to be where the focus was. So I've always tried to balance, particularly with our customers that still really need us for their silicon carbide ramps and their fabs they're putting in. We're not a banning in the silicon carbide. I think we have the most competitive solution, the best roadmap as well to continue to meet customers' needs. And we'll see that growth. We think that silicon carbide still has a lot of legs on it as we still anticipate 30% electric vehicles by the end of decade, of total vehicles being electric vehicles. It's just by contrast to all the craziness that was going on a year and a half ago, it seems quite more disappointing. So I think silicon carbide has a chance to grow next year from this year. I think the other markets for sure have a chance to grow year over year. We're still getting our arms around it and doing some introductions as we're taking the NCAL package for our burn-in production system and marketing around the world, and at the same time having conversations with customers about the wafer level. And we'll hopefully be able to give you more insight as to what that looks like. And, of course, we'll provide our annual guidance in our July release, which will summarize the fiscal year as we head into fiscal year 26. Christian Schwab | Greg Hallam: Great. Thank you for that, Gane. No other questions. Thank you. Thanks, Christian. Operator | Operator: Up next, we have Jed Dorsheimer with William Blair. Please proceed. Jed Dorsheimer | William Blair: Hi. Yeah, thanks for taking my questions. Gane, despite the mess, backlog looks pretty strong. So I'm just wondering, you know, were there any tools on the shipping dock? Is this more of a timing issue? I'm guessing that it is, but I'm just curious if you could add any more color, and then I have some follow-up questions. Don Richmond | CTO: Yeah, they were on the shipping dock, very much so. Gayn Erickson | President and CEO: Yeah, we were quite frustrated. I don't want to get into it. This isn't the first nor the last time we had... I'll just say one or more customers because kind of narrowed down the two, asking for some concessions and things that just seemed quite unreasonable, recognizing it was the end of our fiscal quarter and we dug our feet in at the same time. But it's very interesting that, you know, here, you know, several weeks after the quarter or even right afterwards and now it's like, hey, I need you to ship ASAP. So We're still working on that expectation management with our customers around that. But yeah, these are, they're both orders for immediate shipments because we had pre-built them into it. And had we, you know, had we had either one of those orders ahead of time, you know, our quarterly number would have been significantly higher. Don Richmond | CTO: But it just moved into this quarter. Jed Dorsheimer | William Blair: Got it. And thanks for the color. Maybe to Christian's previous question, just but framed a little bit differently, if I kind of read the tea leaves in terms of all of the market details that you provided at the beginning, it sounds like the hard disk drive, I think for the hammer process product or platform, that's the biggest near-term driver of the business beyond, you know, X silicon carbide and that, but you've got a lot of different irons in the fire around AI and even HBM. So in my misunderstanding, I'm just trying to understand sort of near-term drivers that then potentially lead to, you know, inflection on future growth. Gayn Erickson | President and CEO: So we've never given, a lot of clarity on what the hard disk drive application is. I'll just leave it at that. No confirming or denying, okay? But realistically, if you look at our, so if you go through the numbers of our, just by the numbers, we did what, 26 something? We have 26 something in backlog. We have 75% almost to the dime of revenue scored and or backlog of the $70 million. So we have like 16, 17 million to go, I think, whatever the math is. We've identified what those customer opportunities are. There's upside and downside to kind of each one of those, like some of them could push out, et cetera. So it's always a challenge to try and put a number around it. You guys think this is easy, it's not with the granularity of our stuff. But near term, we've got some silicon carbide orders in our expectation for Q4. with some new customers. We've got more AI production, both in package part and wafer-level burn-in. I think both of those, all three of those, are probably bigger than the hard disk drive one in the near term. Over the next several years as they ramp out, the hard disk drive business looks to be really attractive, and there's some variation on some of the stuff we can't get into with respect to their forecast, but we're pretty happy with that, and they're very happy with us about that. application. You know, Flash, for sure, is kind of bigger than everything, although maybe the AI stuff will end up being bigger than Flash. We'll see how it plays out, but that's a year out, and we're not alluding to a timing of when the DRAM stuff comes, but... You know, it's pretty full plate. You guys, we're still, you know, you hear it all the time. We're still doing benchmarks. I mean, you know, Vernon and I will tell you, we've won customers that haven't placed orders yet for silicon carbide. It's a very interesting market and all the dynamics that are going on in there. You know, winners and losers and market share shifts between customers, between the customer's customers, different model years that we have a lot of insight into. and the implications of both China and also just cars going to modules versus discrete devices. There's just a lot of moving parts. But I try and use this 80-20 rule. Vern and I talk about Vern's our VP of sales for people that don't know. We try to talk about this all the time. We can't wake up every day and spend 80% of our time on silicon carbide. We've spent a ton of energy. We've got these great solutions. We've won these benchmarks. The customers need us to be there. But most of the days we wake up, we're focusing on these other market opportunities where we can really have an impact. And we'll let Adel, our VP of operations or COO, deal with manufacturing capacity. Just take the orders and ship them because we certainly bought the inventory against what we really believed a forecast was going to be there last year. bought the inventory against those forecasts from verbal forecasts from customers that have pushed out, we still think are going to come. Jed Dorsheimer | William Blair: Got it. One last question for me, and then I'll jump back in the queue, and maybe it's for Chris here. Just margins, gross margin took a steep decline. I'm assuming that that's mixed shift from the wafer packs to the In-Cal systems, Sonoma, but I'm just curious, do you expect Do you expect to be at these levels? You mentioned in backlog that you have some silicon carbide. I'm assuming some wafer packs there. How should we think about the normal margin levels? Certainly, to achieve your $70 million would imply Chris Hsu | CFO: uh you know getting a pretty big bump in uh in revenues how should we think about that for the rest yeah so you're correct yet so so as we talked about it before the incal products the gross margins is it's a little bit lower than what we have um in legacy air test systems and wafer packs so so the order you can think about it is the waiver packs always has the best and then the air test systems, and then would be the in-cow system. So it really depends on the product mix, even within in-cow, because, you know... And the in-cow consumables have... Yeah, consumables have lowered, too. Gayn Erickson | President and CEO: The other piece we haven't given a ton of... I think we may have said in early discussions around the in-cow acquisition. So we're at a good point right now. We, of course, do all these live, and you don't hear the construction in the background, but we're doing our remodel here. adding a huge amount of capacity capability out on the floor, clean room space, et cetera, before we move the in-cal products over. They're only a few miles down the road. But that whole team and the manufacturing will be in here, we think, completed by the end of our fiscal year. So it's only a few months out. That facility is also burdening our cost of sales, too. So that comes off our books by a year and a half. That's about a half a million dollars a year or something like that, too. So we'll get some goodness out of this thing. We don't really focus our energy on the goodness of the in-cow merger. Mostly it's the revenue opportunities and the customers, but there will be some operational efficiencies as well. Jed Dorsheimer | William Blair: Great. Thanks for the caller. I'll jump back in the queue. Thanks, guys. Thank you, Jed. Operator | Operator: Once again, if you have a question or a comment, please indicate so by pressing star 1 on your touchtone phone. The next question comes from Tom DeFilly with DA Davidson. Please proceed. Yeah, good afternoon, and thanks for the question. Tom DeFilly | DA Davidson: Again, curious what your view is of the Chinese market for silicon carbide if you are not successful in your pet infringement case. Is there still a market there for you? Gayn Erickson | President and CEO: That's a good question. Yes, I guess. I mean, there's kind of two things. One of them is the patent infringement case against these guys, and the other one is, you know, our competitiveness. And obviously, the trade-related things between the U.S. and China, particularly kind of recently, those are harder to get your finger on. The system, and you know, I want to be careful too much. That system that we've named in our 10Q, et cetera, it's not very good. I know that's pretty directed. We've had feedback from customers that it's not working very well. It has repeatability issues. It can't really do what we do, we have parallel advantage, we have number wafers, we have automation, we have a lot of capability. But nevertheless, we're not just going to put up with people trying to encroach on us and step on patents that we have in China, provided by the Chinese Patent Office, and so we're not going to put up with it. You know, there's two things. There's a legal aspect of this thing, and then there's just the flat-out competitiveness. And, you know, we have a team of people in China I think we've already talked about. I think we had 14 customers in China over time. One of them is waiting for the rest of their package part from air test. So we've done business in China for a long time. It's not our plan to change. It's just some of the uncertainties related to how to just trade things that make it a little harder to put your finger on, and we're just trying to be open with that with people. Tom DeFilly | DA Davidson: Okay. So, so maybe to summarize, if, uh, you know, worst case scenario, they're able to get away with whatever they've copied on their tool. Uh, you feel like you still have a pretty strong competitive advantage, uh, for both reliability and productivity versus their system as it is. Gayn Erickson | President and CEO: Um, we, we do, we do, you always have to be careful because people have roadmaps and we have roadmaps too. I don't want to get too carried away with that, but, uh, Yeah, that is the case. And again, it's very focused on silicon carbide. It has issues even testing gallium nitride. It doesn't do power semiconductors. So it's kind of a specific niche target at something. But nevertheless, we're taking it seriously, at least in China. Tom DeFilly | DA Davidson: Okay. And then your concern over the orders this year is the concern that you lose them competitively or that they get pushed out? Gayn Erickson | President and CEO: Well, there's always, you know, I worry about a lot of stuff, Tom. But in general, when we were trying to describe China, you know, we have some, you know, we have a production system in our plans, at least in those numbers. We also have other opportunities and things like that, too. But, you know, an ASP of our wafer low burn systems, which sets away from taxes, you know, several million dollars. And so if, you know, something happens and, you know, there's some regulatory thing that slows us down or precludes us or something. I don't know really how to handicap that. That's a new one for me. There's always the, they still buy us, but they don't take it by May. That's kind of the normal thing we've been dealing with. I mean, I think a lot of people understand. I mean, a lot of our shareholders are experts in semiconductor, semiconductor tap. I mean, semiconductors are in a downturn right now. I mean, outside of AI, there's a lot of – it's tough out there in automotive customers, et cetera. And so, you know, as those of us that have been here for a long time, this too shall pass. And, you know, if you look at it in the scheme of a couple-few-year window, you know, it always gets better. So, you know, sometimes we wake up and things have been pushed out. You know, you get a couple – you know, call from your customer and say, oh, can you help us with pricing, you know, because we're struggling and you're like, you are 50 times larger than I am. I'm not sure I can help you with your numbers, but we're here for you, you know, kind of thing. So there's just some of that in the background. Tom DeFilly | DA Davidson: Yeah. Okay. And maybe one last question on the flash market. When you look at the opportunity for you specifically, is that going to be driven by a technology change you in the chip or the package or What do you think really starts that market for you? Gayn Erickson | President and CEO: Yeah, I mean, flash memory, as actually, Tom, as you know from my history in HP Agile at Verigy, running the memory business there for many, many years, people refer to it as a treadmill. You get on it and you always have to keep going because the customers every two, three years are shipping more bits at the same price, so they have to always look at ways to be more and more cost-effective. That's true in their process equipment, their front-end equipment, and their back-end equipment and test equipment. So there are things specifically on the NAND flash roadmap that in addition to just cost disconnects, meaning I've got to ship way more flash memory in four years than I am today, and my revenue is not going to be up 4x. How do I do it more cost-effectively? So that's sort of a commercial approach. There's also technical issues, and I was pretty specific in there to be clear. You know, these NAND devices are 3D stacked. They're not actually stacked. They're just printed, you know, several... I mean, NAND guys are out there, but they're all talking about 200-layer NAND. What that ends up being is you end up having way more power per device to think of, like, a 200-story building, and the amount of light... You know, when you light up the light on the first floor, that takes certain power. But when you have light on 200 floors, you have 200 floors of lights on. When you go to test, there are some test methodologies whereby you can do things by testing multiple floors at a time. But when you do that, all the energy is used as if you're lighting up all those floors. Whereas in normal application, you're reading and writing data only on one floor at a time. So the actual device in its application is using 1 200th of the power, but you could do test methodologies to test 20 floors at a time, but then you need 20 times the power. That's a thermal problem. That's a tester resource problem. Those are things we're really good at. So I'm trying to give you some hints there as to what's going on. So there's some technical disconnects that we are looking to address as well as the commercial side on the man side. And by the way, DRAM, I'll go into that too, just the whole HBM is super dynamic, and there's so many things going on with Spectre, because DRAM also needs to be burnt in. So how are you doing that again before you put it into an HBM stack onto a co-op package along with an AI processor? So I like where we're at right now. There's a lot of vectors pointing towards us right now. Tom DeFilly | DA Davidson: Great. Operator | Operator: Appreciate the color. Thanks, Ken. Gayn Erickson | President and CEO: Thanks, Tom. Operator | Operator: Once again, if there are any remaining questions, please press star 1 on your touchtone phone. The next question comes from Larry Shlebina with Shlebina Capital. Please proceed. Larry Shlebina | Shlebina Capital: Hi, Gane. I got a question on your recent $10 million win on the GPUs for the accelerator. I know you said that the potential market with the package part would be over $100 million a year down the road, but I'm looking at the wafer level portion of it if if i you said that that customer was not nvidia not the big guy it has over 90 percent market share so assuming it's the second largest which is i think around five percent and uh the 10 million represented two machines that would be like 30 possibly 40 um xps or just doing the gpus um is that the right way to look at that Gayn Erickson | President and CEO: Okay, so I don't want to help you with who that customer might be, so anyone listening, I'm ignoring you on that one, Larry. Yeah, the numbers are really big. You don't have to try very hard to fall out of bed and hit a $100 million number, and we're not trying to poo-poo that, but, you know, this gets into available, addressable timing of this. You know, it could be a lot bigger than that. Larry Shlebina | Shlebina Capital: Right. That's not really what I'm getting at. I'm actually getting at the next component on the accelerator, the HBM, high bandwidth memory. The current 12 stack, eight 12 stacks, if you do the math on the silicon involved, it's about six times the silicon in the GPUs currently. And they're talking about going to 16 high stacks later this year. with a roadmap to get to 24 high stacks next year, which would be 12 times the silicon. My point is, with your fine pitch wafer pack, it just seems like you ought to have a ready, very interested bunch of potential customers wanting to see if you could help them on their yield issues, that as they stack higher and higher, you could address that. Gayn Erickson | President and CEO: help them out when we talked a couple years ago and you know imagine DRAM and what was going on I would have and certainly did say that we thought that was something probably more towards the end of the decade because companies just weren't that motivated to try and figure out how to do you know DRAM wafer level burning compared to what they were doing and it's you know maybe it would take something else and you now you look at AI, which, you know, most of us weren't even talking about two years ago, right? And you look at these and it's like, wow, are you motivated now? So I agree with you in terms of the motivation to put in the DMT and local contest modes and to try and address this issue. Larry Shlebina | Shlebina Capital: I think part of the reason why HBM is more expensive than the GPUs is probably their terrible yields that they're experiencing, and hopefully you can help them out on that. Gayn Erickson | President and CEO: Well, on each stack, if you will, or each individual die, and then just, you know, I always have to remind people, the reason you do production burn-in is because things fail. It's not to make you feel good. As soon as they stop failing, you would stop doing it. So when I state, oh, people are doing a production burn-in of these devices, you have to recognize that means there is a non- There's a material number of failures that they do not want to ship to their customer. Every one of those takes out all those HBM stacks in the co-op subsidy, plus the package. So it's, you know, our whole premise about things moving to multi-tip modules that we've been touting for the last, you know, five, six, seven years with, you know, kind of the leading edge of what's going on with waiver level. At that time, we were struggling. You know, people were like, okay, which devices is that going to look like? And we kept saying they're coming. And because of Moore's Law is failing, failed or has fallen down, you now need to put multiple devices together and stack them up and put them side by side in order to get the functionality that used to just be done with a shrink of a wafer. So, yeah, more vectors heading our way there. Larry Shlebina | Shlebina Capital: Assuming this comes to pass, would you be able to handle all that demand through the capacity of potential capacity in Fremont? Is that even possible? Gayn Erickson | President and CEO: Well, for those that haven't attended us, especially with our new facility upgrades that we're doing right here, you know, we have, I mean, the manufacturing capacity I have here is bigger than I had at, you know, Verigy. So people might be shocked at that. So, you know, There's always ways of doing it. Keep in mind, we use subcontract manufacturers. In most cases, we have multiple suppliers of every subsystem. In many cases, one of the hard things is your printed circuit boards and your assemblies. That could be increased 100-fold if you need it without actually impacting our resources. So even though we do assembly tests here, What we do is just a small piece to control the final assembly and quality before it ships and we have some other tricks up our sleeves. So right now I have more capacity than demand. uh by a lot and we could increase our capacity significantly if we needed to for different market opportunities and and and when we bring customers through by the way that is very obvious when they walk when they come in and look at our facility they kind of go wow okay this is not you know this is not your typical derail burning company in terms of the capacity we have Larry Shlebina | Shlebina Capital: Well, you've got great opportunities. I'll be looking forward to seeing you accomplish them. Good luck. Christian Schwab | Greg Hallam: Thank you, Larry. Thank you. Larry Shlebina | Shlebina Capital: Thank you. Operator | Operator: Okay, I'm showing no further questions in the queue. I'd like to turn it back to management for any closing remarks. Gayn Erickson | President and CEO: Okay. Thank you, operator. Everyone, I appreciate your time here. I know we tried to cover a lot of detail. I hope to see you at one of the investor conferences, or if you want, please get in contact with our folks so we can set up a follow-on meeting to discuss your questions further. Until then, we'll see you next time. Operator | Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation. jsPDF 3.0.3 D:20260609232334-00'00'