Good day and welcome to the Aehr Test Systems Fiscal 2023 Fourth Quarter and Full Year Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jim Byers, MKR Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon and welcome to Aehr Test Systems Fiscal 2023 Fourth Quarter and Full Year Financial Results Conference Call. With me on today's call are Aehr Test Systems' President and Chief Executive Officer, Gayn Erickson and Chief Financial Officer, Chris Siu. Before I turn the call over to Gayn and Chris, I'd like to cover a few items. This afternoon right after market close, Aehr Test issued a press release announcing its fiscal 2023 fourth quarter and full year results. That release is available on the company's website at aehr.com. This call is also being broadcast live over the Internet for all interested parties and the webcast will be archived in 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 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. And now, with that said, I'd like to turn the call over to Gayn Erickson, President and CEO.

Thanks, Jim. Good afternoon, everyone, and welcome to our fiscal 2023 fourth quarter and full year earnings conference call. Thanks for joining us today. Let's start with a quick summary of the highlights of the quarter and fiscal year we just completed in May and the continued momentum we're experiencing in the semiconductor wafer level test and burn-in markets, then our new CFO, Chris Siu, let's make sure I get that right, Chris Siu, sorry. That's awful. Who is sitting here with myself and Ken Spink, who is retiring soon will go over the financials in more detail. After that, we'll open up the lines to take your questions. We are pleased to report record financial performance for both the quarter as well as the entire fiscal 2023 year ended May 31st. For fiscal '23, our total revenue grew 28% to a record $65 million, bookings reached a record $78.3 million and our GAAP profit of 14.6 million and non-GAAP profit of $17.3 million were also records, growing 54% and 62% year-over-year respectively. This record performance was significantly driven by bookings and revenue shipments of our wafer level test and burn-in systems and contactors for silicon carbide semiconductors used in electric vehicles and electric vehicle charging infrastructure and silicon photonics devices used in data and telecommunications infrastructure as well as an up and coming new application for chip-to-chip optical I/O that I'll provide more detail on later in this call. We saw fiscal 2023 as a breakout year for our unique wafer level test and burn-in products. These products provide complete solutions for semiconductor manufacturers for high volume test, burn-in and stabilization of semiconductors such as those used in electric vehicles, electric vehicle charging infrastructure, photovoltaic or solar power conversion and data and telecommunications infrastructure. We also see on the…

Thank you, Gayn. Good afternoon, everyone. I'd like to begin by saying that I'm thrilled to have joined Aehr test and we're very excited about the opportunities ahead of us. On today's call, I'll summarize our results for the fiscal year 2023 and Q4 as well as provide our guidance for fiscal 2024. As Gayn noted, we reported record financial performance for both the fourth quarter and the fiscal year 2023. On a year-over-year basis, revenue increased by 28% to a record $65 million. GAAP gross margin increased by 390 basis points to 50.4%. Our full year non-GAAP net income increased by 62% to a record $17.3 million. We generated a record $10 million in operating cash flow in fiscal 2023 up more than 500% from the prior year. In the fiscal year, demand for our products was very strong with record annual bookings of $78.3 million up 30% from our total bookings of $60.2 million for the prior fiscal year. Bookings in the fourth quarter was $15.2 million. Backlog as of yearend was $24.5 million, up 121% from a year ago. With more than $15 million bookings received in the first six weeks of the first quarter of fiscal 2024, we now have an effective backlog of nearly $40 million. Moving to our Q4 results. We delivered record quarterly revenue of $22.3 million up 10% from $20.3 million year-over-year. Demand for our FOX-P systems drove the record revenue in the fourth quarter. We encourage to see that install base of our systems continues to grow as our product solutions are validated and recognized by our existing and new customers. WaferPak and DiePak consumables revenue accounted for 38% of our total revenue in the fourth quarter compared to 45% of revenue in the prior year quarter. As we've noted before,…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Christian Schwab with Craig-Hallum. Please go ahead.

Hey, guys. Thanks for taking my questions. I just have a few. So, Ken, when would you expect to file your 10-K?

We're filing our 10-K at the end of August. I think August 28th is our proposed filing date right now.

Could you be willing to share if there was more than one 10% customer and exactly if there was only one exactly how much revenue came from just the one customer?

Absolutely. We did actually have two customers over 10%, one at 79% of revenues and the other at 10% of revenues.

Excellent. And, Ken, when you guys are talking about your greater than 100 million expectation for revenue next fiscal year, how many 10% customers, you know, are you assuming in that guidance?

Let me try and fill that one. Maybe almost better. I don't have it in front of me because I don't want to get too specific on it, but I think we expect several, maybe three or four. So there will be, you know, we're obviously very heavily focused on our lead silicon carbide customer this last year and we expect while they will continue to be a great customer and certainly a 10% customer for years to come that there'll be less of a focus in terms of concentration with them.

Excellent. And in that three to four, I assume that will be, you know, we've talked about before, obviously, our lead customer. We've gotten orders from our second major silicon customer. Should we assume that the third large silicon customer -- should we expect business from that customer in the next fiscal year as well then?

Yes.

Excellent, excellent. And then as we think about mix for the quarter, Ken, I know we have 40 million in backlog as you stated you know do we expect mix you know as we think about the shape of the quarters for next year, should we assume roughly 40% in the first half and 60% in the second half again or would that makes me something different?

You should see his eyebrows raised right now. But let me feel that one maybe for Chris and I, because, you know, Ken's going to be riding off in the sunset here and won't have to live with it like this. I actually do think that's probably fair. We think that the second half is going to be stronger than the first half. Maybe a little less dramatic as it has been in the last couple of years, but that may be a fair way of thinking about it. Now, for everybody on the call, we don't give quarterly guidance. So I need to be careful because I'm guessing your next question is going to be about next quarter. So please don't.

All right. I'll save that. I'll save that for offline. And then my last question is, were there any shipments in Q4? It sounded like there was one, but a dollar amount of shipments in in Q4 '24 that weren't recognized in revenue that should be recognized?

We did. We had teed that up pretty hard, right before at the last call because we were anticipating shipping the Aligners as well as an Aligner tied to an FOX-XP system. And so we did get the revenue for the couple of NPs that we had with the high voltage option, but the integrated FOX-XP and Aligner pushed into this quarter as we expected. And in fact I think we shipped it right literally right after I think it was on June 2nd or something like that. So it didn't ship yet, but it was right there. We had customer acceptance during the quarter, but we would expect to see revenue for this quarter upon its acceptance. The first Aligners were actually shipped during last quarter for the standalone Aligners. And they, like you said, we just got acceptance on the first one of those this week. So we're pretty happy about that.

Great. And then just if I could slip one last question in. The difference between you said at least 100 million, what should we be looking for monitoring throughout the course of the year to say that revenue goes 100 million, 105 million? What would it take for revenue to be 120 million or 130 million? Is there one or two things you could point us to that you're thinking about or is it just too early to think about that?

Yeah, I mean, it's too early. A lot of this is just still uncertainty and timing of customer ramps themselves. That's one of the challenges with this thing, I mean, an ASP of a system with a set of WaferPaks at $4 million plus or minus a couple of days is a big number, right, on a quarter and on a year. But for us to be able to look out there and try and understand what it was, I think, we're confident that's why we use at least $100 million. But, you know, as things firm up and we get a little bit more visibility and we believe that we will, you know, it gets a lot stronger. We'll let you guys know. But we're starting off with a great backlog. We have great forecasts of current and prospective, which we believe are likely to be customer wins this year. And as those things firm up, I mean, it's boding well and we think that it's -- we're just right at the start where a lot of these companies are starting to kick in the silicon carbide plans. This last year was kind of a big number for us in terms of just sort of the initial progress got us to test our wheels to be able to ramp up our production and things like that. But we're just going to be continuing to ramp as we go into the end of into this year and certainly into the next year.

Fantastic. No other questions. Thanks.

Thanks, Christian.

Thanks, Christian.

The next question comes from Jed Dorsheimer with William Blair. Please go ahead.

Hi. Thanks for taking my question. Congratulations on the quarter. Ken, I hope you have some good travel plans and, Chris, welcome. It's been a while since the AeA days at meeting with you at Trident. So welcome to Aehr.

Thank you.

And then I'd be remiss, Gayn, thanks for the technology primer. So I appreciate that. I guess just want to dig into basically what Christian was kind of coming to and maybe just take a different, a slightly different angle, which is around the sausage making for this -- for your -- your full year guide. And specifically if we look at this past year and your largest customer being 52 million based on the 79% and their targets of growing 300% over the next few years. I would assume that creates a solid base for your -- for your business. So as you look at already having 8 million to 10 million booked on that, number two, you're really talking about a 30 million incremental number to hit that minimum threshold and you've already got three customers. So could you just walk us through sort of how when Vernon brings the spreadsheet of the customers, how you're thinking about the puts and takes for that level of confidence in terms of that guide? And then I have a few follow-ups.

Sure, Jed. As I hear you talk through that, I felt like you were going to end it with why we're such sandbaggers but anyhow.

I would never say that again.

So we actually -- we -- if you were to look at Vernon, Vernon, by the way is our VP of Sales and his team, if you were to look at their funnel, it's pretty impressive. There are a very large number of companies that are expressing interest and leaning forward with us for our wafer level test and burn-in products across several markets. It's going to be a very busy year for us. The forecast does include a good number. I'm not sure we want to start putting numbers on it of new customers both for bookings as well as turns, but customers that are expect to book and ship within the year. We still have a wide range of forecasts from people. It's interesting even with current customers candidly their ability to forecast is all over the map. And so I think we've taken a conservative stance here. But it provides us with confidence to be able to hit that number. And we don't need any miracles to happen, if you will. I don't want to get into talking about how much upside there is to it. I will say that we have considerable upside in terms of capacity and the ability to serve the market. The old adage, what if you invite everybody and they all show up? And so we're looking at it that way. We want to make sure that if the customer select us that we will be able to ship them in shortly times and high volumes with the level of confidence that they would want. And so hopefully that gives you a little bit more color. Again, it's not all about one, one or even two companies. As we go forward, we're going to see a lot of breadth. Many of those will just be starting. The classic they take their first system and there's a little digestion, which I think will bode well for us as we head into the following fiscal year as well.

Gotcha. That's helpful. I guess just as a follow up on sort of number two through number four of the -- or number five, I guess, of the incremental customers. In terms of the discussions, so as you ship out these two systems or as you've shipped the two systems, you recognize the revenues. Are the conversations that such that if this tool hits this specification, we expect to come back with five tools or ten tools or 20 or three or what level of visibility. I know as you mentioned, there's a bit of movement amongst your customers, but what level of visibility are they providing you so that you're making your decision?

Yeah, Jed, I mean, I don't mean to be vague or illusive, but it really depends on the customer. But I would say even within one thing in common with all of them is, there's still some pretty broad ranges. It just they're trying to figure out the timing of their customer wins or their customer capacity needs. There's certainly an element of test times and what quality requirements will be needed for different customer levels. The higher the quality requirements, the larger the test times, which have a direct linear impact on us. We've heard customers talk about, well, you know, different markets can get away with lower quality than others. That's very odd or interesting to me, but those are clearly things we keep to ourselves about who's saying those type of things. But you know it -- we hope to make it get easier. I mean one of the challenges that we face is, we're very -- there's customers can be very lumpy and there's these variabilities. The nice thing is, we do expect to wake up here in the not too far distant future with a lot more customers. And so while it may seem like we're better at planning, we're probably just averaging a bunch of random uncertainties if you will. Random is way overstated. We have pretty darn good visibility to what people are doing. The one of the things we look at the most candidly is what their actual plans are. You go look at their buildings, you watch them being built. You look at their public statements about the capacity they're putting in place. We have a pretty good idea of what the average test times are amongst the OEMs around the world. And we do our back of the envelope numbers. Sometimes those numbers are bigger than what the customers are saying. And candidly, that has happened in the past where we built when a customer said we're going to buy X, we were building 2X and they came back and said, I need 3X. So and we were able to actually quickly ramp to them. So I know you're looking for better color. I hope that gives you some, but it's not that clear to you I realize.

No, no, listen, it's helpful. I know I'm going to be asked these questions. So I just wanted to get it from the horse's mouth. I guess just before I jump back in queue your high voltage product. Congratulations. That takes you into opens up a few doors for you.

It does.

I was wondering if you might just elaborate on that. I know you mentioned it for the silicon. You mentioned silicon photonics, but does that also change the calculus for trench in silicon carbide? And then how does that play for memory too?

Yeah. Okay. Well, for memory, it doesn't apply for trench or gallium nitride. There are different burn-in processes that can be used to accelerate different failures and depending on what the customer failures may be seen, this gives them all the tools for them to be able to apply it. And so candidly we're just there for them. A lot of people are trying to get away from high voltage. I mean, it's more expensive than the gate bias, even from us, even though we're a fraction of the other guys. But it's still cheaper to do the gate bias only. And so people are playing around with recipes and mixes of how much high voltage do they need, how much gate bias do they need and different things. And they're all trying to optimize. And of course, we can't share anyone else's secrets. So we're just giving them the tools and being supportive. The nice thing is, you can buy a system from us that can do all of the above. In fact, you can buy a blade that can do all of the above and one blade. You can optimize it depending on test times. Let's say your test time for high voltage is X, but your test time for gate is 10X. You can optimize the systems and you can reconfigure them in the field on. So it gives us a lot of, it gives customers a lot of flexibility and we kind of arm them with those tools and are supportive and we don't have to say no to anything that's key. And then things like gallium nitride where the primary, if not maybe only the only real failure mode has to do with the high temp reverse bias, which is a high voltage gate breakdown.…

Thanks. That's helpful. I'll jump back in the queue. Thanks, guys.

Okay.

[Operator Instructions] The next question comes from Larry Chlebina with Chlebina Capital. Please go ahead.

Larry is clearly -- Larry, are you there?

Yeah, I'm there. Gayn, you started to answer my question, my primary question, when you might have an evaluation tool to since you have a fully automated machine now, it seems like one of these memory guys might be interested in evaluating it for future fabs?

I agree. If I were a memory guy, I would want to evaluate our tool as well. So that is something that is important to us. I often tell people, be careful, don't assume, we're going to be having revenue anytime immediately, but it is absolutely something that we are that we're working towards. And for sure, our new WaferPak automated Aligner is a key piece of that. And we did get feedback from multiple memory companies on that configuration and its capability. I will share that with you. So I'm very for people that know me or have seen the picture of me smiling next to it before we shipped the first one. It's a passionate project for me and this team is very, very proud of that. So I'll leave it at that, Larry.

All right. Good. Well, I'll leave it at that also. But, hey, great guide. I appreciate how you did that. I think it makes sense. And having seen the full automation, I completely agree with you. I think it's a fantastic offering. So, hey, great job. Take care of you guys.

Thank you. Thank you, Larry.

[Operator Instructions]

Last call, folks. All right, operator, then. Are there no other calls?

Yeah, we have one more. The next question comes from Tom Diffely with D.A. Davidson. Please go ahead.

Yeah, good afternoon. I appreciate the chance to ask a question. I was curious about the leverage in the model itself and maybe this is a question for Ken, but I think in the past you talked about roughly a $30 million breakeven and then a 45%, 50% drop through thereafter. A lot's gone on over the last year. So I'm curious if you can give us an update on that now?

Yeah, I'd be happy to chat with you about it. Yeah, I think the number that you were talking about when I spoke previously was $36 million number and said [indiscernible] for every incremental dollar fell to the bottom line. And if you actually followed and compared to our revenue number that we came in at $65 million, it was within like $100,000 of that model. So I was pretty excited. And thank you very much for asking. We're going to incur some significantly higher expenses in this upcoming year. And just from a model standpoint, you know, our gross margin standpoint, you could see us ranging from anywhere from a 49% to 52% margin plus very similar to what we've recognized in the past. However, because and I think Chris could probably touch more on this is we're moving to a [indiscernible] holding company, a significant amount of cost associated with the G&A. We also have R&D initiatives that we are implementing also continuing during the year and we've added sales and marketing. So there is a significant amount of overhead and OpEx manufacturing spending. So that $36 million number is really going to go up by several millions of dollars on them and.

And then the same probably 50% dropping.

Yeah. So let me add on that what Ken just said, Tom, is as you know our market cap exceeds $1 billion. So the SEC requires anything over 700 million public float to be to report their financial statements and as a large accelerator filer that includes SOX attestation. So that means there'll be more work from internal control perspective from our auditors. And what it means is we need to beef up our resources, meet that compliance requirement. So as a result, our OpEx would increase accordingly.

There are downsides to a large market cap. One of them is, unless you're an auditor, then it's fantastic because they make so much more money, but okay.

Well, it seems like a pretty fair trade off. Appreciate your time.

Thank you, Tom.

Thank you, Tom.

[Operator Instructions]

All right, folks. Let me go ahead and take that. Thank you, everybody, for joining the call. And we really appreciate you joining us for we're very proud of how the year went. And I can tell you, we're on the edge of our seat excited about heading into this new fiscal year, with a great backlog, great bunch of customers, a great bunch of potential customers and a great team. And so we really appreciate you folks joining us. As always, we do try and make ourselves available. If you happen to be in the Silicon Valley Bay area to set up an appointment, come by and take a look. Our manufacturing floor is a buzzing and it is exciting to look at. It's another thing we're very proud of and so we appreciate everybody's I guess involvement and cheerleading that song as we head into this next fiscal year. And we will talk to you next quarter. Bye-bye.

The conference has now concluded. Thank you for attending today's presentation. You may all now disconnect.