Aehr Test Systems Poised for Continued Growth Across Diverse Markets

Published on September 24, 2024 | Ticker: AEHR

Aehr Test Systems (NASDAQ:AEHR), a leading provider of semiconductor test and burn-in solutions, has delivered impressive financial results in fiscal year 2024, with record annual revenue of $66.2 million and GAAP net income of $33.2 million, or $1.12 per share. The company's strong performance was driven by robust demand for its wafer-level test and burn-in solutions, particularly in the silicon carbide power semiconductor market for electric vehicles (EVs).

Despite some customer pushouts in the second half of the fiscal year due to softer EV demand, Aehr Test remains optimistic about its long-term growth prospects. The company is well-positioned to capitalize on a diverse range of emerging opportunities, including the rapidly growing artificial intelligence (AI) processor market, the NAND flash memory market, the hard disk drive (HDD) semiconductor market, and the silicon photonics market.

Business Overview

Aehr Test Systems is a leading provider of test and burn-in solutions for semiconductor devices in wafer, singulated die, and package part form. The company's innovative products, such as the FOX-P family of test and burn-in systems and the FOX WaferPak Aligner, FOX WaferPak Contactor, and FOX DiePak Carrier, have been widely adopted by semiconductor manufacturers across various applications, including electric vehicles, data centers, renewable energy, and consumer electronics.

The company's net revenue consists primarily of sales of its FOX-P systems, WaferPak contactors, DiePak carriers, test fixtures, upgrades, and spare parts, as well as service contracts and non-recurring engineering charges. Aehr Test's selling arrangements may include contractual customer acceptance provisions, with installation of the product occurring after shipment, transfer of title, and risk of loss.

Financials

In fiscal year 2024, Aehr Test reported record annual revenue of $66.2 million, up 2% from the previous year. The company's GAAP net income for the year was $33.2 million, or $1.12 per share, which includes a $20.8 million tax benefit from the release of the company's income tax valuation allowance. Aehr Test's annual bookings were $49 million, compared to $78.3 million in the prior fiscal year, primarily due to customer pushouts of silicon carbide device orders.

For the fourth quarter of fiscal 2024, the company reported revenue of $16.6 million, down 25% from the same period a year ago. WaferPak revenues accounted for 75% of total revenue in the quarter, reflecting the strong demand for new WaferPak designs from both existing and new customers. Gross margin for the quarter was 50.9%, down from 51.5% in the prior-year period, primarily due to lower revenue and higher overhead absorption.

Liquidity

Aehr Test ended the fiscal year with a strong cash position, with cash and cash equivalents of $49.2 million, up slightly from $47.9 million at the end of the prior fiscal year. The company has zero debt and continues to invest its excess cash in money market funds. During the fourth quarter, the company generated $1.2 million in operating cash flows.

Outlook

Looking ahead, Aehr Test is optimistic about its growth prospects, with the company providing guidance for fiscal year 2025 revenue of at least $70 million, including the contribution from the recently acquired Incal Technology. The company expects a net profit before taxes of at least 10% of revenue in fiscal 2025.

Silicon Carbide Remains a Key Driver

Wafer-level test and burn-in of silicon carbide power semiconductors for electric vehicles continue to be a key driver of Aehr Test's business. The company remains engaged with a significant number of new silicon carbide device and module suppliers and believes it is well-positioned to capture a significant share of this growing market as silicon carbide adoption in EVs accelerates in the second half of 2025 and into 2026.

Emerging Opportunities in AI, NAND Flash, HDDs, and Silicon Photonics

In addition to the silicon carbide market, Aehr Test is seeing traction with several emerging opportunities for its test and burn-in solutions in new target markets, including:

AI Processors: The company is working with an AI accelerator company to move their AI processor test and burn-in to the wafer level, leveraging Aehr Test's high-power FOX-XP system with up to 3,500 watts of power per wafer. This represents a significant opportunity as AI semiconductors are among the highest power consumption devices in the industry.

NAND Flash Memory: Aehr Test has secured an engagement from a major flash memory supplier to evaluate its FOX-XP system and WaferPak contactors for wafer-level test and burn-in of flash memory devices for high-reliability applications, such as enterprise storage.

Hard Disk Drives: A major customer in the HDD market, which had previously purchased Aehr Test's FOX-CP system for wafer-level test and burn-in, is now forecasting a production ramp-up in the current fiscal year, potentially becoming a 10% customer for the company.

Silicon Photonics: Aehr Test has shipped the first order from a major silicon photonics customer for a new high-power configuration of its FOX-XP system, enabling cost-effective volume production testing of next-generation photonic ICs for optical I/O and co-packaged optics applications.

Gallium Nitride (GaN): The company has received its first forecast for wafer-level production burn-in systems for GaN devices, which are expected to gain significant penetration in the onboard charging market, as well as other automotive, solar, and data center power conversion applications.

Acquisition of Incal Technology

To further strengthen its position in the high-power semiconductor test and burn-in market, Aehr Test recently announced the acquisition of Incal Technology, a manufacturer of highly acclaimed reliability test and burn-in solutions. Incal's portfolio of ultra-high-power test solutions for AI accelerators, graphics and network processors, and high-performance computing processors, combined with Aehr Test's industry-leading wafer-level test and reliability solutions, uniquely positions the company to capitalize on the rapidly growing opportunity within the AI semiconductor market.

Conclusion

Aehr Test Systems has delivered impressive financial results in fiscal year 2024, with record annual revenue and net income. The company's strong performance was driven by robust demand for its wafer-level test and burn-in solutions, particularly in the silicon carbide power semiconductor market for electric vehicles.

Looking ahead, Aehr Test is well-positioned to capitalize on a diverse range of emerging opportunities, including the rapidly growing AI processor market, the NAND flash memory market, the hard disk drive semiconductor market, and the silicon photonics market. The company's recent acquisition of Incal Technology further strengthens its position in the high-power semiconductor test and burn-in market, positioning Aehr Test as a leading provider of comprehensive solutions across the semiconductor value chain.

With a strong balance sheet, a diversified customer base, and a robust pipeline of growth opportunities, Aehr Test Systems is poised to continue its impressive performance in the years to come.

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