At the end of October I put out some thoughts on AEHR after reading the transcript from ON Semiconductor, their 80%+ customer. ON had just lowered their Q4 revenue expectations for their silicon carbide automotive business, and they would be lowering their capex in 2024 as well. Now AEHR is feeling those effects.
While revenues in Q2 2024 were slightly above analyst expectations, AEHR slashed guidance for the back half of the year. Rather than expecting another $60M of revenues in the back half of the year in order to hit their $100M+ target, they are now expecting Q3 and Q4 will be closer to $38M which would be no better than the front half of the year and essentially flat with the prior year periods. They slashed expectations by 25%-40% to a range of $75M-$85M, which equates to $33M-$43M for the remaining quarters.
Bookings and Backlog likewise took a huge hit.
Bookings declined from $18.4M at the end of Q1 to $2.2M at the end of Q2.
Backlog declined from $22.3M at the end of Q1 to $3.0M at the end of Q2.
Effective backlog? They did not provide a number, and nobody seemed to question it on the call. In fact, nobody questioned any of this on the call.
Why is effective backlog important? It would supposedly be the backlog as of January 9th, the day of their press release, so it would provide a bit of insight into how the front part of the quarter was shaping up. By not providing that number, it lends to the belief that Q3 is not starting out on a particularly strong note.
The company’s comments on the conference call tend to support that thought. When asked about the revenue breakdown for the rest of the year, they are expecting about 40% of their remaining revenues to come in Q3 and 60% to arrive during Q4, for a truly back-end-loaded second half of the year.
On the conference call, by the way, the company blamed the last week or so as the reason for the dramatic cut to expectations, and said they started feeling the rumblings of something coming since the end of the quarter, or 5-6 weeks. Nobody seemed willing to point out that both bookings and backlog were hugely depleted at quarter end so they must have felt something much sooner than that. Maybe going back to the end of Q2? But nobody did.
Finally, nobody asked about my personal favorite metric, which is what percent of revenues came from ON Semiconductor and how many other customers were serviced during the quarter. Guess I’ll have to wait for the 10Q to get that number.
Given the severely depleted levels of Bookings and Backlog, the next couple of quarters may wind up being really messy. If you go back to their May 2022 quarter, the company had just reported a $20M revenue quarter, but backlog was slashed from $26.9M down to $11.1M; bookings also declined from $6M to $4.4M. Their August 2022 quarter subsequently showed a close to 50% decline in top line revenues. Is Q3 2024 shaping up to follow a similar pattern? I guess we will all have to stay tuned to find out.