Aehr Test Systems Inc. - AEHR
Now we know the real reason for the Incal purchase
While I’m not officially following these folks at this time, there were a few tidbits in the current earnings release, conference call, and 10Q that I thought worth pointing out.
There’s only so much talk about customers both new and old conducting tests and trials and burn-in sessions before even the most forgiving analyst or institutional investor starts to question whether or not any of it actually exists. AEHR is heading into their fourth year of relying on mostly a single customer for upwards of 90% of their quarterly revenues, and we have been hearing about these wonderful meetings with additional potentially meaningful customers for such a long time now, that even the analysts covering them appear unwilling to believe everything the company is telling them.
In their last quarter, 90.8% of their revenues, which is basically all of their systems revenues, came from a single customer. That’s gotta make some people nervous.
From their Q1 2025 conference call:
“This is Christian. Gayn, so can you, on the silicon carbide, the additional customer commentary about getting two additional customers this year. Are these customers that you've been working with in the past? And alongside that, can you give us an idea of how you would anticipate that ramping in near term and then over time? I mean, could they become as material as your current largest customer in silicon carbide.”
Then after not answering the analysts question, there came this back-and-forth:
Christian Schwab
I guess it still wasn't clear to me.
Gayn Erickson
Order size.
Christian Schwab
5 of your potential or 6 potential customers, can you give us like real color?
Gayn Erickson
Yes, the size.
You're right. I forgot to say that. I didn't -- I actually didn't mean to drop that.
But it was this little jewel further along in the conference call which really stood out.
Another analyst was noting that AEHR typically puts out a press release and announces any decent orders and had failed to do so except for an order regarding their Incal business.
“On the Aehr business, I haven't seen previously you would press release wins. And I know that you did on the WaferPak that kind of flowed through this quarter. But I was wondering, in the $16 million of backlog, could you give any further detail in terms of the contribution of mix there as we haven't seen any press releases that -- to get an idea of what that constitutes.”
Which was followed by a total fabrication by the CEO.
“We haven't -- in fact, for those -- someone had to have noticed, I think this is the first quarter in 8 quarters, we didn't do the effective backlog. I don't know if everybody else noticed, we're really struggling with that.”
I have pointed out in the past that AEHR failed to provide an “effective backlog” number on a few occasions, and each was followed by a disaster of a quarter and lowered estimates.
But it was this part of his rambling response which should catch the average AEHR investor’s eye.
“But anyway I will share that actually a reasonable chunk of that backlog is from Incal. And Incal's forecast is looking, I'll call it, in the bag if and with a reasonable amount of upside, we'll see as we get closer”
So of the $16.80M in Bookings and Backlog that they announced, a big chunk of it was due to their recently closed Incal acquisition. The last time orders for any of the actual AEHR systems was this low, back in the November 2023 quarter when they announced bookings of only $2M, the following quarter, which was February 2024, was a total revenue disaster which caused the implosion of the company’s stock.
But I thought Incal wasn’t supposed to be that meaningful for guidance or estimates?
“We expect approximately 85% of our forecasted annual revenue to come from wafer level burn-in and around 15% from packaged part burn-in driven by our acquisition of Incal.”
So if 15% of the $70M was supposed to come from Incal, that leads to a number in the $11M range. If that is still the number they are sticking to, that would mean backlog for actual AEHR systems would be in the $5M-$6M range, similar to what they were heading into the current quarter.
But is the turnaround time for Incal systems the same as their own?
“But they have much longer lead times than us. We'll probably tighten that up a little bit, but they typically have about a 6-month lead time.”
So while AEHR was able to take an order delivered mid-quarter and turn it into revenue for that quarter, the same is not true for the Incal backlog.
What does this mean for their ability to avoid disaster come quarter end?
Not great.