Thanks for this write-up. I took a half-size position in AEHR this past Monday, and the thing that convinced me was checking out management–specifically two videos with CEO Gayn Erickson.
The first video is 11.5 minutes, and there were two things I loved about this interview:
The first was Erickson’s ability to explain what they do and why they stand out from the competition in easy-to-understand language.
The second was the story of how he came to be CEO. Erickson is not the founder, but he has been in testing his entire career, and he talks about trying to acquire AEHR when he worked for another company, because he recognized their advantage. But before that company (where he was not CEO) could act, it was bought out by a Japanese firm. So Erickson left there and went to work for AEHR directly.
The second video is almost 40 minutes and this, naturally, gives a lot more detail about the company, the products, and importantly, how conservative they are in how they book revenue.
He didn’t say this directly, but the metric to watch, imo, is the number of bookings/backlog. While others might book when a shipment is made, Aehr waits until they hear the customer is satisfied and is clear that the product is working as intended. They offer a 100% refund if it is not. “Customer acceptance” is when they book the revenue, which could be a fair amount of time after receipt of the equipment. At least as of the above recording (8 months ago), no one has ever reported a failure (i.e. refused “acceptance”), but all of that leads to a long period from booking a sale to booking the revenue. I’m focusing on bookings/backlog more than received payments.
Erickson talked about his enjoyment in meeting with potential customers to watch them react as he tested their product in real time and their chips began to fail at a much higher rate than they had imagined. I’m not sure how much he’ll get to do that as they scale, but it was a fun window into who he is.
I don’t remember which video described it, but they test more than Silicon Carbide (SiC) chips. A chip he speaks about as a growing part of their business is gallium nitride (GaN). Here’s a Techradar piece about the advantages of GaN over SiC. China is about to restrict export of gallium on August 1, so it’s hard to say how that will affect that ramp up, but it seems clear that Erickson sees gallium as a next-gen chip material.
The above was written just before earnings this afternoon. I saved it as a draft to wait for the report and call. I was nervous about getting into a company that can be so volatile right before earnings, but so far so good.
Others are reporting on the numbers, which seemed quite good to me. What I’m better qualified to judge are the people, and, both in the above videos and on the call, I heard a stellar CEO.
Importantly, I heard the same person in all settings. Gayn Erickson is honest and transparent. He is also an excellent communicator. He takes time in all settings to explain the technology. On the call, twice he began a description with “For those who are new to us,” or “For those not familiar,” followed by helpful descriptions for those of us not in the weeds of semiconductors, their use, and their testing.
He also has a knack for explaining their secret sauce. When talking about their ability to test at high voltage without arcing, he said there was “no other [competitor] that can even test one [chip] at this level. We can do nine at once.” (approximate quote…don’t have the transcript yet.) He frequently throws in the adjective “proprietary” when talking about their wafer packs, which are the consumables that will be the recurring revenue part of their business.
Lastly, Erickson is a visionary leader with deep expertise in the field. He saw Aehr coming a mile away, working to acquire the company when he worked elsewhere. He knows that SiC chips are the thing of the moment, but he also sees the next thing on the horizon (GaN chips) and is already testing them. On the call, he talked about how memory applications will be knocking on his door in a decade, if not before. He’ll be ready for them. On the call he talked about knowing the needs of his customers before they did.
At market close today I had a 6.1% position. Shares were up almost 6% from when I bought on Monday and are up now about 5.5% more. We’ll see what tomorrow brings. Thanks to Saul, @ExponentialDave, and all who have been holding and posting about Aehr and convinced me to give it a closer look. I’ll be adding more when the market gives me an opportunity.
JabbokRiver