1Q24 revenue $20.6M vs. 1Q23 $10.7 (analyst consensus $19.25M)
1Q24 non-GAAP EPS $0.18 vs. 1Q23 $0.05 (analyst consensus ($0.16)
Yet, the stock is getting killed in after hours trading. This makes no sense.
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What also makes no sense: It dropped 10% a few minutes into after-hours, but their website did not display the press release until 25 minutes after market close. Then suddenly a press release shows up there. At the same time a GlobeNewswire release, time-stamped 5 minutes after market close shows up. It seemed like someone got the news before the public did.
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Is it possible to re-post Brittlerock’s post? It is showing up on my end as only “ignored content.” The content of the post doesn’t appear.
This was Brittlerock’s original post
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Thank you. It’s still not showing up.
There can be no doubt that the press was available to some folks prior to the general public. But given that, I’m still baffled as to why the stock price plummeted. I just provided a high level sketch, but I don’t see anything bad in the report - in fact it all looks good. True, they did not raise the guidance, but with only one quarter to go on and many predicting a recession some time in the near future, I can understand why they may want to hold back on that until they’re a bit further into the year.
Like I said, it makes no sense, at least not to me. If anyone knows what I’m missing, I would very much appreciate the enlightenment.
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Suggests the whispers were much higher.
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Here are my notes from the earnings call…
Aehr Test Systems (AEHR) Q1FY24 Prepared Remarks and Analyst Q/A
10/05/2023 4:00 PM Central Time
Gayn Erickson, CEO
Chris Siu,CFO
Highest revenue growth in the history of the company.
Designing testing machines that align with specific new product designs of their customers.
Adding capability/capacity in the Philippines to serve Asia.
New customers (all non-electric automobile vehicle). Last two customers did not need to see AEHR’s results/proof having seen the physical results.
AEHR has never lost a proposal to their competitors.
Presented at two conferences in Europe recently and met with potential new customers and are doing the same in Asia soon.
$8B market in SIC, and 30% will be in the industrial sector.
Moving from 400V to 800V wafers, which actually operate at 1,200 volts, which creates arcing that creates a significant problem for their competitors. The arc/spark permanently damages the SIC chip. AEHR’s proprietary system allows them to test wafers up to 2,000 volts. Competitors can do this only up to 900 volts. By 2026, the % of 800 volt EV/cars will be higher than 30%. Within 2 years, this will play out.
Galium Nitride (GaN) markets exists in these markets that was not reflected in their previously stated comments: Solar, industrial motor controller applications and 1 other application.
One of AEHR’s customers has decided to move forward with AEHR on
GaN chips faster than the group from the same company who purchases SIC from AEHR.
GaN market will be much larger (most likely) for other than EVs and there’s a larger TAM in these markets.
They expect the majority of their revenue, however to come from SIC.
Silicon Photonics is seen as a major market opportunity. AEHR received their first order last May for Silicon Photonics. May see chip to chip communication from this. It will likely be several years before they see significant revenue from this market, the company (largest chip manufacturer) requested an expedited shipment of the order for this that they recently placed.
Fully integrated ____ with lasers is the highest grade of chip available and they currently have +/-10 customers in different areas of usage for Silicon photonics.
At least $100M of revenue next year (non-GAAP), representing a 50% increase.
Wafer pack comprised 55% of revenue as compared to just 5% last year. (me here): Selling more revenue of wafer packs/cartridges currently than a year ago. This makes sense, since their customers who have purchased machines are now purchasing a significantly larger amount of cartridges than machines aka razors and blades model.
Continue to invest in R&D to introduce new products and expand within their existing markets.
Currently have $24M in backlog.
CFO said they expect to sell additional shares of stoicj during this fiscal year.
Monday, October 23rd will be the Annual meeting of the company.
Investor conferences at which AEHR will be presenting:
Craig Allen Capital Group Conference in November, 2023.
Annual NYC Summit in December, 2023.
Q With a GM of 40%, I would have assumed GM would be better than that. What’s going on?
A Aligners are the lowest margin product, and they had a couple automated aligners in there that impacted GM.
Q On a go-forward basis, would you expect going back to +50% GM.
A Still targeting 50% GM.
Q Current and new customers, as we think of the $100M in revenue, when should we expect you to increase revenue from here?
A Of their current 6 customers, the two largest will have new shippings this year, and they expect to have orders from their other customers this year as well.
Q Revenue starting from new customers. When?
A Right now there are 3-4 customers who are in the 6% range for revenue.
Q Aligners, should we look at this as taking the effective backlog and subtracting the bookings? How to look at this?
A Between the two of their customer, CEO thinks it’s close to $8M.
Q Aligners vs. machines revenue.
A The way revenue is recognized, AEHR will not score revenue until the first test is accepted by the customer. The only thing deferred to this quarter was the aligners. Once the aligners were accepted, than the machines are accepted as revenue. This was “better than expected” by the analyst.
Q More details regarding the large customer they’re courting?
A Generally speaking, orders are met by a little/smaller purchase followed by a larger purchase. Gayn’s message is that they can ship more than anyone else. Can ship up to 80-100 testers per month. They’re shipping more than all of their competitors combined.
Q 300 basis points declining margin growth, what drove this? Just the aligners?
A Primarily the aligners because they’re lower margin. They had some NRE costs that are not necessarily related to cost of sales (COGS), it was worse than expected.
Q What % was from their largest customer this quarter?
A Their largest customer who contributes 88% of AEHR’s revenue.
Q What is the test time for these systems and how many wafers can they test?
A If test time was 24 hours, 12 hours, you’d get 2 and 4 wafers tested respectively. The FOX system multiplies these numbers exponentially. Bathtub curve for reliability, as soon as they are functionally good, they have a likelihood of failure and as time goes on, their likelihood of failure drops and at some point, they stop failing. That is the length of time they test the wafers. The higher the quality, the further down the bathtub curve the wafer is.
An inverter may have 48 chips in a Tesla inverter, and they may have a total of 144 chips in the car overall.
Gayn would not drive a car that had less than 12 to 24 hours of burn in for their chips. EV manufacturers are VERY opinionated re: how much testing is “enough.”
Q Specific chip or device design requires different wafer packs.
A Power, acceleration, efficiency trade-offs depending on the chip specified by the manufacturer. If they all made the same chip, it would be more commoditized, however, there’s a much broader array of chip designs for each different application, especially in the industrial sector.
Q Different designs (more)
A 2-3 years might be aggressive. Every 18-24 months, the probe cards are switched out. To Gayn, there’s more activity in the next 5-7 years there will be a lot of change out re: the variety of wafers required for each manufacturer and for each manufacturer’s applications.
Q Do you expect a follow-on order from the group who you just sold the Fox machine to.
A They’re going to buy more systems.
Q Recent customer will start with GaN and then go to SIC.
A Yes
Q Will new sale with recent customer be shipped in February quarter?
A They’re attempting to expedite the order (customer is listening to this call too, so he/Gayn wants to be careful with his words)
Q Optical IO by Taiwan Semiconductor. Would they be sneaky enough to do their stabilization and perhaps reverse engineer your product?
A TSMC and Global Foundries, NVDIA and 1 other are very interested in AEHR’s products. This is going to drastically change with the introduction of Silicon Photonics. The new aligner was about much more than SIC. AEHR started the new aligner product before they saw the surge in SIC in the market.
Q Taiwan Semi would be serving AMD and NVDIA. Now that aligner is accepted, when are you going to get a memory maker to the big company in the US (being coy re: name)?
A This continues on, and includes meetings this client in the next few weeks.
Gayn reiterated the shareholders meeting on October 23rd.
sjo
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Although sales and earnings exceeded expectations, AEHR did not increase the its full year profit forecast. If business were following along the current trajectory, I’d expect AEHR to increase the full year projections. Also, Volkswagen is cutting electric vehicle production in Germany and Ford is delaying its EV production goals. Maybe the combination of these things are leading to the angst.
Best,
bulwnkl
Long AEHR
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I expressed my thoughts on guidance earlier in this thread. Maybe one quarter is too soon to make adjustments especially with a recession likely in the near future (I’m not an economist, just reiterating what I’ve read).
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AEHR (in it short history mind you) is just not a guide and raise company. They didn’t do it last year for sure. This was so predictable about 2 or 3 weeks ago I wrote that AEHR would slightly beat and reiterate guidance of at least $100 million. That is just how AEHR conservatively does things.
If you want positive news you can look at the last two years and relative strength per quarter.
Two years ago AEHR’s Q4 revs were around 3.5x more than its Q1. Last year the number was more than 2x. Q1 is their weakest quarter by far and yet Q4 (last quarter was $22 million) and yet sequentially Q1 (by far their weakest quarter) this year at $20 million is nearly on par with their strongest quarter - last quarter Q4.
Unless there was something special about Q1 this year that made it so strong relatively speaking we can expect Q4 this year to be materially higher than Q1. Using last year as a guide perhaps $40 million or more. If last year’s ratio holds.
Given current reiterated minimal guidance, the next 3 quarters will average at least $26.6 million to reach the minimum of this year’s reiterated guidance. Each Q with nice growth year to year with those numbers.
Without looking any further Q4 should be much higher than Q1 and Q1 is substantially larger compared to the usual trailing Q4 by quite a bit.
Extrapolation is not certainty for sure
but if you look at the historical numbers for last 2 years - which is not a large data set - this was a great quarter and Q4 this year should be materially larger than Q1.
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AEHR is not SAAS and their product mix is not yet tilted towards the razorblades part (wafers) of their model. They need to keep getting orders and wins for their machines/“razors” at this point of their growth to beat or even match projected revenue numbers. The reaction from the market seems to be pretty straight forward as there wasn’t enough of a concrete announcement on new customers/wins. Can’t analyze bookings or revenue growth like we do with SAAS. Just my two cents
Edit to add - the announced dilution, while not the main factor, probably also works against the stock price
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And they don’t provide quarterly guidance. The revenue stream is just too lumpy to know when a given order will be placed and the sale will be recognized.
Further, during the 4Q23 CC, Gayn all but admitted that the guide was a sandbag number. They are just very conservative about predicting the future. They don’t have a lot of customers. They will never have a lot of customers. What they do have is a virtual monopoly on a semiconductor niche which is anticipated to grow very large very rapidly over the next 10 years or more.
I have no explanation for the hit to the stock price post earnings. There was nothing I saw that could be interpreted as bad news. In fact, it was largely a positive report that exceeded expectations.
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I agree. I also believe Erickson’s nod-and-wink response in Q4 when asked about catalysts to potentially get to $120M instead of the guided $100M came back to bite him/us. Unfortunately, I thought that coyness showed up in his answers this quarter as well. Strong growth, positive profits/cash flow, and no debt is a strong business combo to own. However, our only firm hint of the future is a $100M guide that didn’t budge. Everything else is just spin. At some point “we’re not sure when it will hit but remain comfortable it is coming” is the succinct answer to repeat rather than telling any customers listening to get their orders in or walking us through a recognition delay because one machine component was bolted to another rather than being shipped as separate pieces (yes, these were actual answers).
In the end, I believe Aehr needs to get better at managing the extra investor attention. On the good side, Aehr added some non-GAAP measures and a more detailed cash flow statement to the release that wasn’t there in past quarters. On the downside, the earnings release hit my broker feed about 15 minutes before it landed on the company website, and it still hasn’t shown up in my inbox despite being signed up with IR for all company press releases. While I’ve always tended to let the numbers lead the way, I do believe the best companies craft a narrative that cleanly augments them. Aehr can improve in this area.
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The whole carrot here is a lot of furious action now but next gen EVs other than Tesla (who forecasts staying w 400 volt into the future for now and yet is feeding most of ON’s current product demand from AEHR even at that) doesn’t really start until 2024 and ramping into higher volume in 2025
and 2026.
Thus, a lot of “gossip” like talk at the earnings calls each quarter that really intrigue is because the numbers themselves are never outstanding it is the prospect of multiple other ON like customers.
Fortunately, this gossip is based in real world reality and likely to come to pass but the timeline has to work with auto OEM timelines - so we keep hearing this and we
Keep getting a little close to when someone other than Tesla takes off. But also keep in mind Tesla has a goal of 20 million vehicles a year. Stretch goal to be sure. But Tesla’s business is growing every year and their competitive advantage gets larger every quarter it seems. So ON’s business is not likely to slow much as they feed Tesla.
It is whether or not the Ford, GMs, BMW, Mercedes, Land Rovers of the world along with the Lucid and Rivian’s of the world can start selling volume quantities of next gen EVs that will spark these other EV customers. At present as Tesla lowers prices on cars competitors already have a hard time competing with on features, Tesla is making this more and more difficult.
At present you can get a Tesla Y with rebate for less than a Camry (or even Corolla I heard but that may be a stretch).
If so ON’s business w Tesla will continue to grow (benefitting AEHR) but the other customers may be slower to ramp as Tesla out competes everyone else for volume sales. If Tesla gets its autonomous driving - then game over.
So point is, not sure when this customer concentration with ON will become less of a thing. Tesla is simply killing it out there and getting more and more ahead of its rivals every quarter.
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